Project Scenario of MCEI - course.sdu.edu.cn

Scenario of Project

Mysterious Chinese Education Institution

(MCEI)

Team 5: Zhang yingwei , Liu guangqiang ,Cao luzhen

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1 Project Scenario of MCEI

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

Project Scenario of MCEI - course.sdu.edu.cn

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