business plan for Kau Travel Agencies

 business plan for Kau Travel Agencies

1. Executive Summary

This paper seeks to present a business plan known as Kau Travel Agencies located in Kaula Lumpur, Malaysia, and specializing in airline ticketing, hotel reservations, tour guiding about specific destinations, and creating itineraries among other services. Kau’s mission is to serve the Malaysians and the growing number of tourists coming from China and India and other foreigners who frequently visit the country. The vision of the agency is to provide high, quality, and standard services that will maintain the reputation that Kau is enjoying from the customers. The plans are to partner with major airlines in Malaysia, which will enable the customers to enjoy exceptional services with more quality and value creation and to establish a five-star hotel that will accommodate a number of its customers and offer quality services. Additionally, the firm will provide online travel services where the customer will have the privilege to choose from any of the partner airlines to ensure customer quality service. The company expected to establish an Estimated annuals sales turnover of the agency is RM29,842 in the first year, after which the company will break even in the second year. Kau Travel Agency will open a bank account with Banks of America Malaysia Berhad, where the personal savings are banked so access other opportunities that the bank can offer. Kau Travel Agency is calling upon investors to invest in its operation as it has good prospects.

2. Background information.

According to Shaharuddin, N.A. (2017), millions of tourists are visiting Malaysia, which is estimated to be 20% of visitors. Also, Shahabuddin added that the tourism industry is the seventh most significant contributor to the Malaysian economy with a Gross National Income (GNI) of RM 37.4 billion in 2011, which is expected to have risen due to ICT advancement. Though the number seems to be increasing annually, Malaysia is yet to explore the innovation of technology in the travel industry, and this is where Kau Travel agency comes in to bridge the gap and provide innovative services to its customers. Kau Travel Agency is a start-up business that is venturing into tourism activities, intending to bridge the gap and provide a solution to both local and international tourist that most travel agencies are facing, by making the agency services accessible. This will result in the attraction of more customers since the clients will be able to view and choose the services online. Kau Travel Agency will invest mostly in internet services and building a quality website that will ensure customer attraction. As per Razak, N.S.A stated that several increased tourism customers had experience in purchasing travel agency services online. And he concluded that covering more extensive geographical regions in the travel agency business will spin-off from customer repurchase of services to loyalty concept, which Kau Travel Agency aims to undertake to grow its sales. Consequently, the company is looking for investors or financiers to fund its operations.

2.1 Industry Analysis

Industry analysis enables a company to understand the competitive forces in the industry and develop strategies to defend it. Kasim, A. and Ling, L.C., (2019. 5), highlighted that the tourism industry is the second largest foreign exchange earner for Malaysia’s GDP after manufacturing goods, meaning the industry is one of the best to invest in. Kau Travel Agency has a good potential for growth since one of its aims is to invest in technology, which will focus on branding and implementing quality destination images. Technology is one of the critical factors that will affect competition and profitability of businesses in this industry, and Kau Travel Agency has already factored that in its strategic plan thus making it possible to penetrate the market. The company will also employ qualified staff who will provide quality services and earn customer loyalty, which will benefit the company in its growth.

2.2 Competitors Analysis

Competition is everywhere in the business environment, and no industry doesn’t face challenges from its rivals. Therefore, for a company to service in competitive situations, it needs to come up with strategies that will help in the growth. Kau Travel Agency needs to work on ICT and the high competition in the industry, and it will achieve this by focusing more on market specialization, online marketing, establishing new distribution services as highlighted by Zare, S. and Chukwunonso, F., 2015.

According to Shaharuddin et al., with good ICT in place, travel agencies can market more online. Since Kau Travel Agency will invest majorly in this, it will gain a competitive advantage against other service providers in the tourism industry.

3. Market Analysis and Research

Kau Travel Agency is targeting the Malaysian country tourism industry, aiming at both locals and foreigners planning to visit different places for holidays and business meetings either as an individual, family, or group of people. Therefore, we are eyeing for tourists who visit the country from a different destination. According to Shaharuddin et al., 2018, there was an increase of 5.6% of registered travel agencies with the ministry of the tourism industry in 2015, meaning the number is increasing year after the other. Thus one of the challenges that Kau Travel Agency will face is competition from the increasing number of entrepreneurs in the industry. But this should not scare the investors since the company has laid down procedures to face its competitors.

But interestingly, most of these agencies are facing a technology challenge, which allows Kau Travel Agency to venture into by providing online booking systems for their customers. Therefore, as advised earlier, the company will invest majorly in ICT to ensure growth and increased business performance. As per the above data, the number of foreigners visiting the country is increasing yearly, thus expecting the trend to continue to date.

4. Products and Services

Tourism has various products and services that a company can undertake to ensure its survival. There are several choices that a customer in this industry can choose from, which include; – transportation, accommodation, tour operation, tourism information center, food and beverages, shopping centers, among others. Kau Travel Agency will diversify its operation to ensure that it gets the best from the industry. The company has put strategies and partnered with several transport services providers on airlines, surface, and sea transportation and will also; provide tour guide services to the customers along with ensuring the best accommodation services that offer the best food and beverages. The company have plans for establishing its hotels and a resort that is aimed to increase the company revenue. Additionally, the company will provide Residents Oriented Products (ROP), which include, offering some loyalty programs through investing in public sectors.

5. Value Preposition

The value proposition is a statement of a clear picture of what the company will offer for projections. Kau Travel Agency understands that there is a gap in marketing strategies that other agencies are offering and what the customer wants. The company comes in to bridge the gap by ensuring that the client gets the best services from online services. There are well laid down strategies on how the company will develop its website and provide sufficient information that clients are looking for daily. Customers should expect to get various services from one click on Kau Travel Agency websites. The travel agency will provide information to customers and consultations regarding destinations, attractions, and other activities. The company aims at making bookings on behalf of travelers for travel services needed. However, the customers will have the opportunity to gather information on prices, schedules, destinations, etc., by investing considerable time on the internet. Kau Travel agency will recruit professional staff that will provide varied services to the customers. Therefore, the customer should expect to receive exceptional professional services and customer satisfaction from Kau Travel Agency.

6. Strategic Manpower Plan

Kau Travel Agency appreciates the fact that for the company to grow, they will need to forecast staffing needs and determine the actions to fulfill those needs. The organization’s objective is to provide exceptional services to its customers, and this calls for a qualified and professional staff that will handle customers professionally and ensure customer satisfaction. The structure of human resources will consist of;-

• Company director- who has sufficient experience in the tourism industry, strategic decision making, regarding operations, acquisition, financial, investment, among others. He is the overall boss and the final decision maker after consulting with the shareholders.
• Manager- has management and business skills that will help him to manage and supervise the firm’s resources, including the human resource and the firm’s day-to-day operations. He will head other departments and ensure quality service delivery.
• ICT manager- will have skills and experience in ICT, blogging, and providing internet solutions to the entire firm. He will work along with the marketing staff to ensure quality service delivery in terms of marketing and customer support services. Also, he will provide all company information, services, and products are accessible on the companies website and that customers can access them easily.
• Sales and marketing manager- this person will have marketing skills and experience to enable the firm’s products to reach the broader market and generate more sales. He will be responsible for all sales and promotional strategies.
• Administration staff- Kau Travel Agency will have administrative staff that will provide ground transport, customer hotel bookings, and transfers, among other services. They will have excellent customer relationships to handle complains, and any other issue in a polite way hence helps in building customer loyalty.

(Source: Author, 2020)

7. Sustaining the Business

It’s clear that after the initial business opening, companies face a lot of ups and downs that may affect the growth. Kau Travel Agency has set up strategic growth factors that will see it survive in the market. First, the firm has professional employees whose primary focus is on productivity on their work. The director will delegate some of the duties to save time and focus on other opportunities.

The company will also ensure customer loyalty is developed through employee-customer relations. It will be achieved by setting employee recruitment standards and ensuring that they are well trained to deliver quality services. Also, the company will keep in touch with the client and gather their opinions, which enable the company to better its products and services and improve based on customer views. Kau Travel Agency will keep connected to the community within its operation to ensure economic growth; this will be achieved through ensuring that the company becomes part of the community. Also, the company will be involved in taking care of places and things that the community value, e.g., existing infrastructure, street lighting, among other community needs. Therefore, through maintaining local employment and increasing the living standards of the local community, in line with its requirements and priorities, the company will develop domestic tourism hence the sustainability of the company, Norhafiza Md Sharif, 2017.

8. Financial Projections

As per the appendices, one on sales projection, the projected sale for the first year is MR 290,842, and the firm will incur a start-up cost of MR 325,000. Some of the star-up prices are as highlighted on Appendices 3. Kau Travel Agency has the potential of making profits in the new future, which is assumed to be from the second year of operation. However, at the moment, the company cannot meet all its finances as the amount of capital cannot cover the total start-up expenses hence the need for external financing.

Sources of Finance

Kau Travel Agency can opt to get finance through debt or equity financing. Debt financing involves borrowing money from to be paid with interest while the equity financing entails selling part of the company shares to raise money. The equity finance, which requires the personal savings, will amount to RM251,000, while a loan of RM74,000 will can be acquired from the Bank of America Malaysia Berhad, which will be payable with 24 months. The loan will be an overdraft from Bank of America Berhad, where the personal savings have accumulated to RM251, 000.

Debt financing does not dilute the owner’s interest since it does not affect share capital, while equity will reduce the amount of ownership. Once the loan is issued, the lender has no future claims on the profits of the company as he is only entitled to the principal loan amount plus the agreed interest plus may be penalties in the case where the borrower doesn’t pay on time. Also, the borrower can plan for the debt financing charges as the principal and the interest payable is know in advance so he can forecast or plan.

Additionally, interest on the loan is a deductible expense, which reduces the amount of tax payable hence lowering the actual cost of the credit of the borrower. It is easier for Kau Travel Agency to raise money from borrowing as compared to selling shares because the procedures involved are not complicated. Therefore, no much involvement like meetings with the investors; hence, the directors can invest that time on running critical company operations or attending to other company matters.

Break-Even Analysis

Since the sales for the first year ended 31st March 2021 are lower than the total cost that the company will incur as the initial start-up cost. The company expects to break-even from the second year of operations in the assumption that the total cost will equal the amount of revenue to keep all other factors constant and that sales variation will not have a significant impact on the revenue collected. It is after attaining the break-even point that the company expects to expand its operations and venture into other opportunities.

APPENDICES

Appendices 1: Sales projection for the first year

SALES PREDICTION

FOR THE FIST YEAR ENDING ON 31ST MARCH 2021

Product/

Service

Apr

May

Jun

Jul

Aug

Sept

Oct

Nov

Dec

Jan

Feb

Mar

Air- ticketing

15620

15002

15181

13520

14250

14200

16980

14782

13583

15260

16320

14500

Taxi services

2500

2410

2600

2601

3600

3100

2500

2620

3012

2576

4005

5620

Itinerary

3650

3250

4200

3500

3650

3800

3890

3670

3900

4200

4105

4310

Commission from hotels

1200

1100

1800

950

1300

1250

1015

1750

1500

1300

1200

14010

Totals

22970

21762

23781

20571

22800

22350

24385

22822

21995

23336

25630

38440

The annual sales: Malaysian ringgit 290,842

Appendices 2: Start-up Capital requirement

STARTUP CASH REQUIREMENT

Source

Amount in R.M.

Personal Savings

251,000.00

Loan Overdraft

74,000.00

Totals

325,000.00

Appendices 3: Start-up costs

START-UP COSTS

Expenses

Amount in R.M.

Business registration

3,400.00

Lease rental

62,400.00

Promotion and marketing

80,000.00

Establishment costs

40,000.00

Labour

25,000.00

Utilities

10,000.00

Car hire-ground transport

57,600.00

General & Administrative Expenses

36,600.00

Petty cash/ Miscellaneous

10,000.00

Total

325,000.00

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2016. Kasim, A., and Ling, L.C., 2019. 5 Enhancing a Destination’s Marketing and Promotion: Lessons From Malaysia. Sustainable Destination Branding and Marketing, p.50.

III. Munikrishnan, U.T., Imm, N.S., Ann, H.J., and Raja Yusof, R.N., 2019. Disintermediation Threat: Do Small Medium Traditional Travel Agencies in Malaysia embrace ICT adequately?. Pertanika Journal of Social Sciences & Humanities, 27(1).

6. Norhafiza Md Sharif, Ku’ Azam Tuan Lonik, 2017, Sustaining the Entrepreneurship in Rural Tourism Development, vol 4, No 6.
7. Razak, N.S.A., Mahdee, J.M., and Ong, M.H.A., 2019, May. Does Repurchase Intention lead to successful Online Travel Agent? An Analysis of Consistent Partial Least Squares. In Proceedings of the 2019 5th International Conference on E-business and Mobile Commerce (pp. 46-50).
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VII. Zare, S., and Chukwunonso, F., 2015. How Travel Agencies Can Differentiate Themselves to Compete With Online Travel Agencies in the Malaysian Context. E-review of Tourism Research, 12.