Feasibility Research Plan for Associated British Foods

feasibility enquiry Plan for Associated British FoodsTop attention of AB Mauri, a air unit of Associated British Foods, is planning to establish bakers yeast and bakery ingredients manufacturing plant in Bangladesh. Before drop in Bangladesh, the company needs a feasibility overlay. This outline report will introduce the aim and objectives of the main feasibility question. The paper will also define the query st identifygy including requirement of selective nurture, data collection methods and methods of analysing data for achieving the research objectives. The report also includes, how to analyse collected data to achieve the objectives and how to take decisions based on the findings of the research.1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .After the rebirth of industrial globalisation back in 1980s, Asian, Afri shadower and Latin Ameri dissolve least developed countries became hotspots for relocating labour intensive industries by developed economies. The natural reason was capacious availability of cheap labours in those countries (Bradford 1925). Foreign direct investment in agriculture and the pabulum industry, according to FAO (2004) as cited by Pingali (2010) grew significantly in Latin America and in Asia between the mid-1980s and mid-1990s. In Asia, FDI in the food industry nearly tripled, from $750 million to $2.1 billion during the last three decades and during the same period food industry investment grew exponentially in Latin America, from around $200 million to $3.3 billion (Pingali, 2010). The major Asian investment destinations were China, Thailand, Malaysia, Indonesia, Sri Lanka, Pakistan and India. However, countries like Bangladesh, Vietnam, Nepal and Maldives were ignored by the international investors. Especially Bangladesh despite having one of the biggest population bases and cheapest labour forces could not attract FDI in food or different sectors due to political instability, arch power shortage and bureaucratic complexities. Nevertheless, recent development in the Bangladeshi economy has lifted the international confidence and the economy has become wide centripetal for foreign direct investments. The objective of this paper is to outline a research plan to fall upon the feasibility of establishing a factory of AB Mauri business unit which will produce bakers yeast and bakery ingredients.2. Aim and Objectives of the feasibleness Research. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The aim of the research is to identify whether establishing an AB Mauri plant in Bangladesh for producing bakers yeast and bakery ingredients is a feasible option for Associated British Foods Plc. To reach its aim the research team would require achieving the following objectives search on-line(prenominal) political and scotch situation of Bangladesh and identify sustainability of politica l and sparing stabilityInvestigate the supplies market to mildew availability and cost of raw materials, labour and power and compare cost of production with contemporary average cost of AB Mauri plantsExplore the local financial system and determine the impact of interest rate, inflation and exchange rate on incoming cash flowEstimate and analyse the financial feasibility of the flip considering five, ten and fifteen years of investment duration.3. Research Questions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The findings of the research, in sequence of its objectives, should respond the following questionsHow stable is political situation in Bangladesh for international businesses?What would be the cost of land, labour, materials and energy in Bangladesh?What government benefits are available for FDIs?What impact the frugal variables can put on the business profitability?Is the realize financially v iable in various investment horizons?By answering all these questions, the research will be able to answer the main research question Is it feasible to establish AB Mauris manufacturing plant in Bangladesh??4. Critical Literature Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The research team would require four areas of knowledge to conduct this research. First of all, the team must have very good idea of hoidenish economics. Johnson (n.d.) defined agricultural economics the study of allocation and utilization of resources and commodities by farming. Johnson in his contributory article Encyclopaedia Britannica raised concern about falling agricultural outputs in developing economies and pointed factors like price and income instability, government intervention and some former(a) issues as main constraints of agricultural industry. Pingali and Evenson (2010) in their Handbook of Agricultural stintings discussed a wide range of issues including production and supply, agricultural stake management, innovation and research in agri-business, marketing and distribution, storage and price stabilisation of agricultural products and many other issues worthy to be reviewed by the researchers before starting the research work.Secondly, the researchers must have very good understanding of Associated British Foods business philosophy, depict expectation, humane resource policy and strategic issues. ABFs corporate website and annual reports can be very good source of these information. The company was first established in 1935 and took the defecate Associated British Food in 1960 and became a public limited corporation 1982. ABFs business is diversified into five segments sugar, agriculture, retail, grocery and ingredients. The group has at least fifteen companies under its umbrella. AB Mauri, the business unit which this research is concerned about, produces yeast and bakery ingredients and has more than 40 plants in 28 countries. AB Mauris vision is to be the premier bakery solutions business around the world. According to the companys financial statements its average ROE is around 10%. The researchers must know more about companys return expectations, attitude toward risk and other preferences to evaluate the potentiality of doing business in Bangladesh. ABFs corporate website is an excellent information house and almost all information essential to conduct this research is available there.Thirdly, the research would require gathering extensive information on Bangladeshi politics, society, economy and agricultural industry. Gathering political information for decision making is very tough. Bangladesh has a long history of political unrest. The countrys politics is led by two major parties Bangladesh Nationalist Party and Awami League. Bangladesh contrast Forecast Report? publishd by Business Monitor outside(a) can be used to have a deeper insight of political and economic tren ds. The report would also provide PESTEL and SWOT analysis of Bangladesh which would very useful information for this research. Publications of countrys central bank named Bangladesh Bank would be very useful to understand the economic paradigm of nation. On the economic data section of the banks website information of exchange, inflation and interest rate, money supply and national income are available. Average exchange rate of Taka against Pound Sterling is around BDT 120 and against dollar is BDT 70. Average interest rate is 5% and average annual inflation rate is around 8% to 10%. More valuable information about the economy is available in the banks website. To gather information on agricultural industry of Bangladesh website of Ministry of Agriculture can be very useful. According to the ministrys website total cultivable land in Bangladeshis is 8.44 million hectare and net cropped area is 7.8 million hectare. Contribution of agricultural sector to gross domestic product is 13. 44% and total manpower in agriculture is above 60%. Handbook of Agricultural Statistics published by agricultural ministry can be a smattering source of information to the researchers.Finally, the researchers must have very good idea of research, designing research and research methodology. Marczyk et al. (2005) termed research as cornerstone of scientific form which has the purpose to answer questions and acquire knowledge. According the authors of Essential of Research Design and systemology?, researches are used for describing, explaining, and predicting. Research can be of various types descriptive or analytical, applied or fundamental, quantitative or qualitative and conceptual or empirical. descriptive researches gather and present data to portray something that exists. On the other hand, analytical research collect and analyse data critically evaluate situation. Applied research tries to find out a solution for a detail problem and fundamental research builds up generaliz ed theories. Quantitative analysis works with numeric data and qualitative research is concerned with qualitative phenomenon. The feasibility research so far is a mixture of descriptive, analytical and quantitative research. The researchers should also have capacity of evaluating financial information to determine financial viability of images.5. Research Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Like all other researches, the feasibility research would collect data from various sources and apply methods to convert data to information that answers the research questions. The boilers suit research strategy can be summarised as followingResearch ObjectivesRelevant Data RequirementData Type and Probable SourcesResearch Method and Specific Techniques1. Explore current political and economic situation in Bangladesh and identify sustainability of political economic stabilityMajor political parties th eir philosophypolitical futureInterest rate, inflation rate, exchange rate etc.Secondary Bangladesh Business Forecast Report published by Business Monitor International Publications of Bangladesh BankDescriptive- Qualitative analysis on political data Trend/Time Series Analysis on economic variables2. Investigate the supplies market to determine availability and cost of raw materials, labour and power compare cost of production with current average cost of AB Mauri plantsLand area, productivity, labour availability and cost, materials availability and cost, power availability and cost Average represent of AB Mauri Plants WorldwideSecondary Handbook of Agricultural Statistics and Bangladesh Bureau of Statistics Publications AB Mauris costing reportsDescriptive and Quantitative Analysis (Need to identify cost trend and future availability of land, labour and power Comparison of new data and average cost3. Explore the local financial system and determine the impact of interest rate, i nflation and exchange rate on future cash flowBanking system, financial management practices andfindings of data analysis for 1st objectiveSecondary Publications of Bangladesh Bank and Analysis of this researchDescriptiveQuantitative4. Estimate and analyse the financial feasibility of the project considering five, ten and fifteen years of investment durationFinancial projects based on information gathered and analysed in previous sectionsSecondary, findings of this researchQuantitative- Financial Feasibility AnalysisTable 1 Research Strategy6. Research Data, Methodologies, Techniques and Tools. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Table-1 shows that the research will pursue varieties of methods to achieve different objectives. In following sections a abbreviated explanation of research methodologies are given.(a) Describing Political-Economic Scenario and Estimating SustainabilityFirst part of the analysis would be descriptive in nature. Data on political and ec onomical information would be collected from supplementary source and presented in meaningful way so that the overall scenarios can be analysed qualitatively. Also data collected on economic information would be placed in a statistical model to estimate future economic trend and sustainability of economic well organism of the country.(b) Estimating bring out Cost and AvailabilityThe research would require knowing the cost of producing bakery yeast and ingredients in Bangladesh. To get information on cost of supplies data can either be collected form primary or secondary source. Labour market information can also be found from secondary sources stated above. The research methodology to achieve this objective would be partly descriptive and partly quantitative. Descriptive section would identify average cost of supplies and current market availability. The quantitative section will predict the trend in cost and compare it with average cost of other AB Mauri factories.(c) Measuring clashing of Economic Variables on AB Mauris Predicted Cash FlowThe economic variables that might influence the estimated manufacturing cost in Bangladeshi plant are exchange rate, inflation rate and probably the interest rate. This part of the research, would require information collected and analysed on economic variables and cost of supplies. First section would be descriptive on the banking and financial system of Bangladesh. Second section of this part would be completely quantitative associating the findings of future economic trend and predicted cost estimates.(d) Estimate the Financial Feasibility of the New ProjectThe final section of the study would determine the estimated production volume, cost and expected price. The estimated financial information then would be used to conduct projects Net Present Value, Internal Rate of Return and Project Payback Period. The research methodology would be quantitative and would require complex financial analysis.(e) Formulating conclu siveness Accepting or Rejecting FDI in BangladeshAfter conducting all required analysis, the would finally formulate a decision about the feasibility of establishing an AB Mauri plant in Bangladesh using the following decision toolResearched AreaResearch FindingPointsPolitical StabilityStable/Not Stable2/0Economic StabilityStable/Not Stable3/0Agricultural Industry ConditionFavorable/Unfavorable5/0Supply CostBelow Average/Average/Above Average5/0/-5Impact of Economic Variable on Supply CostFavourable/ unfavorable5/0Financial Feasibility (IRR)Negative/Less than 10%/More Than 10%-10/0/10Total Score Range-15 to 30A negative course would automatically reject the investment meaning that establishing an AB Mauri plant in Bangladeshis is not a feasible option. A score between 0 and 10 would mean the investment is considerable. Finally, score above 10 would mean establishing manufacturing plant in Bangladesh is highly feasible.7. Research Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The research project would benefit ABF on few specific areas. The first benefit is to the ABFs strategic management as the company would be aware about the feasibility of investing in agriculture of Bangladesh. The research report can also benefit ABF if it is planning for investing in other sector in Bangladesh. Finally, the research project model can be used for feasibility analysis for other projects even in other countries.8. Ethical Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The research is not of experimental nature. Because of being an initial feasibility research it will collect questionnaire based data. All data will be acquired from secondary sources. Therefore it seems that there are no ethical issues involved with this research project.9. Research Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The research is however limited in few areas. These limitations are summarised as belowThe research is using only secondary data data would be collected from various sources that might be limited in qualityThe research puts more weight on cost and financial feasibility information rather than political and social issuesFor decision making, the research will weight the findings of financial viability analysis which is subject to riskNo techniques of risk management would be applied in predicting, forecasting and evaluating information gathered for this project.