project scenario of mcei - course.sdu.edu.cn
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Scenario of Project
Mysterious Chinese Education Institution
(MCEI)
Team 5: Zhang yingwei , Liu guangqiang ,Cao luzhen
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Framework
1. Outline of business
1.1 Product;
1.2Tech
1.3Service
1.4Location
1.5Target Country
2. Market analysis
2.1 Market demand
2.2Opportunity
2.3Competition
2.4Potential customers
2.5Possibility of competitors
3. Mentality of Pioneering work
3.1Personal background
3.2 Project development
3.3 Management
3.4 Advantage analysis and competition
3.5 Possible risks
4 Return
4.1 Firm size;
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4.2Devoted capital budget
4.3Get financing
4.4Firm’s expected return (value maximization)
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Text
1. Outline of business
Name of our company: Mysterious Chinese Education Institution(MCEI)
1.1 Product;
Our product is intangible product---education of Chinese , Chinese
culture and tradition, Chinese etiquette and knowledge about how to
contact with Chinese businessmen. WANT to apply the language as a
native speaker ? WANT to learn the centuries-old, mysterious and diverse
culture ? WANT to enhance your business with the “World’s Factory”?
We offer everything you want to know about Chinese!
1.2Tech
To begin with, we aren’t in need of highly developed or complex
technology in contrast with producing manufactures, but we will make
use of computers and projectors to assist teaching. Multimedia-textbook
is a useful concept to many of us who work in the field of language
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learning. A good and carefully planned use of this technique may be of
great help to our teaching.
Secondly, we need to apply another kind of intelligence
technology----diverse methods and techniques of teaching ----to achieve
good results of grooming.
1.3Service
We will establish foreign subsidiaries in target countries and expand our
size.
As to concrete operation, we will adopt diverse styles:
①Open language and culture classes for different-aged customers. It’s a
normal and useful pattern of teaching language. We will set diverse
classes to satisfy different demands of different-aged learners.
②Offer home tutor. We can offer personalized teaching class for
customer. For instance , a businessman who is trading with Chinese
people is probably more interested in skills to communicate with their
business partner.
③Organize summer camps and tours to China to travel and study at the
same time, as an example , summer camps to China’s universities for
students, to offer their chance to communicate with their peers,
And we have many other special forms of service for customers.
1.4Location
As we firstly start our business in France and our main target market is
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Europe market, we will set our headquarters in France. In fact, our
headquarters carries the duty of setting strategy, training staff ,
coordinating business and so on.
Besides we set subsidiaries in the local to carry on business in the local
markets.
1.5Target Country
We have two different targets at diverse process.
At first ,We target at European countries, France, Germany and Belgium,
as there is a large market there and European Union has become the
biggest trade partner with China.
Secondly, when our business is processing successfully in European
countries, we begin our business in the Arab world , especially in Saudi
Arabia.
2. Market analysis
2.1 Market demand
Chinese craze has made great strikes around the world, we analyze the
huge demand from two perspectives.
Firstly, China’s international trade is developing really fast. People
from different countries are doing business with China ,as a result ,more
people are eagering to learn Chianese and techniques of communincating
with Chinese people. With investing, trading and co-operating developing
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Growth rate has been above 8% in last ten years.
As we can see, China’s gross export&import amount increases by 105
times ,from 20.6 billion US dollars in 2007 to more than2 trillion in 2009.
Rapid increase in export&import amount continues to raise importance in
world’s economy, ranking from 23rd
to 3rd
. China’s trading amount
proportioni in world’s total amount raises from 1% to nearly 8% in 2009,
with China extensively being called “World Factory”.
Secondly , In many coutries, such as France , Germany and
Belgium ,there is Sinomania (China’s craze )rising, many people are
interested in Chinese culture and in favour of learning language and
even more about it. WOW, Mystical Chinese medicine and acupuncture
seems amazing. With more commucation in culture, confu attracts large
amounts of foreigners, many of which are familiar and crazy about Bruce
Lee, Jackie Chan and the Shaolin Temple.
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Thirdly, Many language schools only focus on college students market,
but we focus on larger scale of customers who have different ages and
different professions.We’ll offer diverse classes for them to choose
according to their own circumstances and aims..
Fourthly ,We have diverse and convenient forms of teaching, language
and culture classes,summer camps or home tutor and so on ,so we are
more flexible and competitive than rivals ,which gives us more
opportunity.
2.3Competition
There are mainly three kinds of competitor in the market,and each of
them have different advantages and characters .So we’ll adopt different
competition strategy to the three kinds .
Firstly ,our biggest competitor is Confucius Institutes
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Secondly ,education institutes in universities also offer Chinese
teaching,but they only teach students and we can also stisfy other kinds of
customers.
Thirdly, Chinese teaching institutes .According to our survey,there are
not big teaching institutes with good brand in market ,most of them are
small and irregular.Some teachers are ordinary Chinese people withoust
certificate, which cannot guarantee the quality of teaching .
We use Porter’s five force model to describe industry competition
situation (Appendix2)
2.4Potential customers
There are four kinds of potential customers we regard as our potential
customers.
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service of our company.As we investigate, very few education institutes
are doing this business, so we are competitive.
For this kind of potential customers ,We can make classes more
interesting and attracting for childrens, using films , songs and games to
teach.
④Merchants
Many businessmen are trading or looking forward to doing business with
Chinese companies.
For this kind of potential customers, we will pay more attention on
teaching commercial terms ,introducing Chinese etiquette &tradition and
how to deal with Chinese. We will imitate the commercial situation to
practice.
After a period of teaching ,we will find new opportunity and develop new
business and new market. We can use Ansoff matrix to analyse our
common and new business . (Appendix 3)
2.5possibility of competitors
As the language teaching market is booming in temporary society,there
may arise many small Chinese teaching institutes,especially set by
individuals. To compete with them, we have three strategies.
Firstly,we will hire qualified and brilliant teachers to assure our quality .
Secondly,We also use multimedia, computers and other techniques to
assist our teaching.
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What’s more ,we will form our own features (such as summer camps in
cooperation with travelling companies) and gain good reputation.
3. Mentality of Pioneering work
3.1Personal background
We three college students are going to establish a business using our
passion,knowledge and experience.
We have learned classes and gained knowledge from many other channels.
We have learned international trade, so we know how to carry on a trade;
We have learned International Corporate Finance, so we know how to
manage a multinational corporation and deal with exposure; We have
learned management,so we have knowledge about administration of
enterprises.
We also learn about local laws in the market.Besidesl,We have the
experience of doing little business.
We don’t have much experience,but we have passion and learning ability.
Churchill once said"Courage is going from failure to failure without
losing enthusiasm." This will guide us to try our best to set our
business.True genius resides in the capacity for evaluation of uncertain,
hazardous, and conflicting information,so we cannot wait to do better in
our business.
3.2 project development
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it. With the cooperation with travel agencies, we can get opportunities
for our students to travel in China in a low price. Give the chance for
the people who want to know China in a zero distance.
B. Hold theatrical performance with Chinese characters.
We can invite some performers or singers to hold theatrical
performance with Chinese characters. It will helpful for speeding
traditional Chinese cultures and exciting interest of local people for
Chinese and Chinese cultures.
C. Advertise on TV or Internet. As a new company, we must expend
our popularity by investing in advertisement. We should build our
own network station to provide detail information of us for people
who want to know us all-around.
D. Promise our quality of teaching.
It is the teaching quality that determines our success. We must
provide high teaching level to win the public praise, which is most
sufficiency for publicizing.
Contrasted with our competitors, the most outstanding character of
MCEI is providing special serves for individuals. We can treat
every individual who what to be a VIP as it. That is to say, we will
provide one-to-one tutors for people who need it. As for the normal
class, we design our curriculums for different potential costumers
as follows:
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a. Chinese culture fans
They are fascinated about Chinese traditional cultures and its long
histories, while don’t expect to speak a fluency Chinese. We will set
up History and Culture class for them. In class, they can know the
mysterious histories of China step by step. What’s more, they don’t
have to learn Chinese, because we will teach them in their local
language and introduce Chinese characters as only one part of our
teaching contents. As they all learn it based on their interest and for
fun, both the intensity and the fees of the class will be low. They can
learn it three hours each weekend with a low price. We will invite
some local scholars who research in Chinese to teach this class
assisted by some Chinese people.
b. Children and infants
Most of their presents want them to learn Chinese as a skill to win in their
future competition. Combined with characters of children, we will
provide Children Chinese Class, teaching them from the basis of Chinese,
such as Chinese phonetic alphabet and strokes with many interesting
stories and daily habits of Chinese people. We will use films, songs and
games to arise their interest. They can learn once or twice each week with
2 hours one time as they like.
c. Foreign citizens of Chinese origin
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Teachers involve concurrent university profesionals, local trained
Chinese teachers with language certificate
3.4 Advantage and competition analysis
S W O T
Strengths
·Professional in Chinese teaching and
culture introduction
·New teaching methods, such as
net -based instruction
·Special design for ordinary person
·Be familiar with Chinese trad itions
cultures
·High profit margin in our business
·Low price in our products ( 待议)
·Opportunity to travel or study in China
Weaknesses
·New business with few
experience.
·Limit professional people with
both good teaching skills and
Chinese knowledge.
·Under huge cost control
pressure and financial risk.
Opportunities
·Large demand for Chinese and
Chinese cultures. Relative lacking in
provide of the Chinese education.
·New market with only few new rivals
to enter �³ less competition.
·An increasing market which may
bring large consumers in the future
·New busi ness will bring satisfactory
SO
·Provide language or culture education to
satisfy the local people
·Provide high quality education to win
reputation and get popularity
·Do marketing and sales presentation to
attract potential cust omers
WO
·Summarize experience in the
process of building new project.
·Attract more skilled person by
building close relations with local
organizations
·Control budget strictly when
invest in a new project
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3.5 Possible risks
Commercial risk: the budget control. Forecast and analyze the
investments and revenues in the future. Make cash flow analysis about
each grogram. Control the budget strictly.
Economic risk: the Chinese hot phenomenon has close relationship with
the rapid economic increasing of China and the increasing trade between
China and its partner countries. So if the economy of China decreases, the
profit once consolidated.
Threats
·Huge risk in economic and politics
·Be unfamiliar with the local laws and
cultures
·Ethic problems
ST
·Learn the local stipulations, cultures,
politics and ethics to operate the
company stably
· Insure our company will not take part in
local political, racial or ethical battles by
efficiency ma nagement
WT
·Avoid taking part in uncertainty
arias.
·Corporate with local
organizations to reduce cost and
know more about cultural
distinctions.
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Two points gonna be the way to find the optimal firm size.
The first key way is to grow in a controlled way. In some cases,
restraining growth is simply a matter of saying "no, " or turning down
new business. This is particularly true for service businesses like us that
depend on the personal attention of the founder. We may wish to provide
referrals in order to maintain good relations with potential customers.For
example, send out questionnaire survey to community so as to dig out
potential customers. It is important to note, however, that restraining
growth does not mean refusing to change. We are not likely to remain in
business long if we cannot be creative and adapt to changes in customer
tastes and competitors' tactics.
The other factor influencing the optimal size of a business is the
availability of workers and other resources in the surrounding community.
In fact, it is possible for businesses to outgrow the communities in which
they operate, particularly when we are located in a remote areas like
European countries. In this case, it may be difficult to attract talented
workers from outside the immediate area, forcing the company to pay
sharply higher wages to compete for labor. In addition, some
communities cannot afford to provide services to growing companies.
Finally, being too integral a part of a community can make it difficult
for a growing company to adapt to a changing business environment.
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The NPV is greatly affected by the discount rate, so selecting the proper
rate - sometimes called the hurdle rate - is critical to making the right
decision. The hurdle rate is the minimum acceptable return on an
investment. It should reflect the riskiness of the investment, typically
measured by the volatility of cash flows, and must take into account the
financing mix.
Internal rate of return
The IRR method will result in the same decision as the NPV method for
(non-mutually exclusive) projects in an unconstrained environment, in the
usual cases where a negative cash flow occurs at the start of the project,
followed by all positive cash flows. In most realistic cases, all
independent projects that have an IRR higher than the hurdle rate should
be accepted. Nevertheless, for mutually exclusive projects, the decision
rule of taking the project with the highest IRR - which is often used - may
select a project with a lower NPV.
Equivalent annuity
The equivalent annuity method expresses the NPV as an annualized cash
flow by dividing it by the present value of the annuity factor. It is often
used when assessing only the costs of specific projects that have the same
cash inflows. In this form it is known as the equivalent annual cost (EAC)
method and is the cost per year of owning and operating an asset over its
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Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13
1 Total Revenue 500000 650000 845000 929500 1022450 1022450 1022450 1022450 1022450 1022450
2 Rent 60000 60000 60000 60000 60000 60000 60000 60000 60000 60000
3 Water and Electricity Utilities 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000
4 Insurance Premium 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000
5 Office Expenses 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000
6 Salary 240000 300000 360000 360000 360000 360000 360000 360000 360000 360000
7 Welfare Expenses 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000
8 Employee Education Fund 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000
9 Telecommunication Charges 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000
10 Publicizing cost 60000 60000 60000 60000 60000 60000 60000 60000 60000 60000
11 Scholarships set for students 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000
12 Other Fixed Annual Expenses 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000
13 Total Expenses
=(2)+(3)+(4)+(5)+(6)+(7)+(8)+(9)+(10)+(11)+(12) 465000 525000 585000 585000 585000 585000 585000 585000 585000 585000
14 Before-tax Earnings
=(1)-(13) 35000 125000 260000 344500 437450 437450 437450 437450 437450 437450
15 Host Government Tax(30%) 10500 37500 78000 103350 131235 131235 131235 131235 131235 131235
16 After-tax Earnings 24500 87500 182000 241150 306215 306215 306215 306215 306215 306215
17 Net Cash Flow 24500 87500 182000 241150 306215 306215 306215 306215 306215 306215
18 PV of Cash Flows(10% discount rate) 22272.73 72314.05 136739.3 164708.7 190135.4 172850.4 157136.7 142851.6 129865.1 118059.1
19 Initial Investment 200000
20 Cumulative NPV -177727 -105413 31326.07 196034.8 386170.2 559020.6 716157.3 859008.8 988873.9 1106933
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Potential new rivalry
There may arise many small Chinese teaching institutes,especially set by individuals. So we
should keep up with the latest development.
3 Market strategy : Ansoff matrix
Existing Products New Products
Existin
g
Mark
ets
Market penetration
(Develop normal classes in
Europe market)
Product development
(Develop new products
such as summer camps)
New
Ma
rkets
Market development
(develop children market)
Diversification
(1develop trval to China
cooperating with travel
agencies 2compile and
publish teaching material)
We use Porter’s five force model to describe industry competition situation