1 Franchisee

Candidate :Abhijeet Kaji B&M HL
Candidate number: Internal Assessment
INTERNATIONAL BACCALAUREATE DIPLOMA

PROGRAMME 2007-09
Business and Management, Higher Level

Internal Assessment
Candidate Name: Abhijeet Kaji
Candidate Number:
School: Dhirubhai Ambani International School
SHOULD ABCL (OWNED BY MR. RAJEEV

SHAH), BECOME A FRANCHISEE FOR
Smokin’ Joes or US Pizza
Question must be from an organisation’s point of

view. Simplify the question yet it must be forward
looking – give more details in the research proposal
Read sample attached at the end of this document
(pages 10-38)
1
Table of Contents
Research proposal can go up to 500
words - ?????
Format
Research question
Theoretical framework
Methodology
Anticipated difficulties
Action Plan
Format for written report
Title page
Acknowledgements
Contents page
Executive summary
Introduction
Research question
Procedure or method
Main results and findings
Analysis and discussion
2
Conclusions and recommendations

Bibliography references
Appendices
Introduction
Mr. Rajeev Shah is a professional cook, and owned a ‘pizza restaurant’ in Pune, till 2007.
Due to personal commitments he had to shift to Mumbai, hence he had to close his
restaurant. When he came to Mumbai he realized that it would be easier for him to open a
franchisee than to open another ‘pizza restaurant’. After conducting extensive research
and considering various franchise opportunities, Mr. Shah is finally considering to
franchise with either US Pizza or Smokin’ Joes.
Smokin’ Joes:
Smokin’ Joes is a well recognized pizza chain in India, it was started by Parsi
entrepreneurs in the 1990s, today they have outlets in 17 different cities in India. Now,
having withstood multinational and local competition over the years, Smokin’ Joe’s is
looking to expand operations all over the country. They hope to do this mainly, with the
help of their franchisee partners.
US Pizza
US Pizza is a relatively new chain that has recently started in India. On their prospectus
they say that Franchising is at the core of their expansion strategy. At U.S.Pizza, they
have been engaging with franchising partners through proprietary models which are
based on their experience over the past years. In this franchisee model, the franchisee will
have the territorial right to sanctions other franchises. Generally covering a state, where
they can own a number of outlets in the particular territory and can even sub-franchise
these outlets. These outlets in turn can be operated by professional outlet managers or by
sub franchisees. Hence can share the franchising revenue earned.
3
Statement of Objectives
The ultimate objective is to advise the Owners as to which Franchise

opportunity to choose, and present a recommendation with a SWOT
Analysis in the concluding phase.
This will be done through:
1 Determination of Financial Feasibility of Franchisors:

1.1.Break Even Analysis
1.2.Payback Period
2 Consideration of the Marketing Mix of Each Franchise:

2.1.Product
2.2.Price
2.3.Place
2.4.Promotion
3 Conclusion: SWOT Analysis for Recommended Franchise:

3.1.Strengths
4
3.2.Weaknesses
3.3.Opportunities
3.4.Threats
Elements being used
The ultimate objective is to advise the Owner as to which Franchise opportunity to

choose, and present a recommendation with a SWOT Analysis in the concluding phase.
This will be done through:

4 Determination of Financial Feasibility of Franchisors:
4.1. Break Even Analysis
4.2. Payback Period
5 Consideration of the Marketing Mix of Each Franchise:

5.1. Product
5.2. Price
5.3. Place
5.4. Promotion
6 Conclusion: SWOT Analysis for Recommended Franchise:

6.1. Strengths
6.2. Weaknesses
6.3. Opportunities
6.4. Threats
5
Limitations:
1. It could be hard to collect primary data from the two franchisees as they may
refuse to give any financial information.
2. Also some of the secondary data which will be collected may be outdated, hence
may not be of much use.
3. Also when Mr. Shah is questioned, he may not answer the whole questionnaire
with full honesty and may not disclose his financial objectives he may be have.
B.1. Marketing Mix: Product
‘A global product with local flavor’. That’s what US pizza describes themselves as.
Apart from pizza US pizza and Smokin Joes also offer garlic bread, pasta, soup, salads
and desert. They also serve some unique ‘creative juices’. But compared to Smokin Joes
US pizza is relatively new to Mumbai. Therefore Smokin Joes has a lot of brand loyalty
in Mumbai Compared to US pizza. Both guarantee that the pizza’s will be served hot and
fresh. Hence looking at just the product mix Smokin Joes is at an advantage as their
product has a larger brand equity.
6
B.2. Marketing Mix: Price

Smokin Joes is relatively more expensive, compared to US pizza. Like the garlic bread
Smokin Joes is Rs. 50, but in US pizza it is Rs. 40. Also Smokin Joes is asking for a
greater royalty compared to that of US pizza. Also the average amount spent by each
customer is more in Smokin Joes than in US pizza. The average spent in Smokin Joes is
Rs.300, but in US Pizza it is Rs. 245. The average is taken into account by adding the
selling prices of one drink one pizza and one starter. There fore just looking at the price
US pizza and Smokin Joes both seem balanced. As in Smokin Joes the profit margin is
greater, but in Smokin Joes less amount of money will go into the firm as the royalty is
higher.
B.3. Marketing Mix: Place

Mr. Rajeev Shah has acquired a place at Nepean Sea Road which is an up market area in
South Bombay. Also there are very few restaurants in this area. The closest pizza
restaurant’s are a Dominos (competitor) at Peddar Road (10-15 min away), a another
Smokin Joes franchisee at Altamount Road (10-15min away) and a Pizza Hut at Kemps
7
Corner (8-10 min away). Therefore if Mr. Rajeev Shah chooses Smokin Joes then one of
his competitors would be his same brand. But US pizza will definitely benefit as there is
absolutely no US pizza restaurant in South Bombay and the closest is at Bandra (45-
60min away) therefore the people of South Bombay would love to try a new brand. But
Mr. Rajeev Shah will definitely face some amount of competition. Also Nepean Sea Road
is a place where the richest people in the city stay. So the food will have too be of high
quality and have excellent service.
B.4. Marketing Mix: Promotion

Smokin Joes has a vast array of promotional techniques to reach out to the general public.
They advertise regularly using flyers, brochures, the internet, newspaper, and
commercials on television. Also Smokin Joes is very well establishes in India and has
also opened another restaurant in the Chinese cuisine, called ‘Smokin Lee’s’ Hence
automatically Smokin Joes gets publicity.
In comparison, US Pizza is relatively lacking in its own promotional techniques.

Although it too possesses attractive brochures and does extensive promotion through
flyers, internet and newspaper, it cannot capitalize on the massive outreach that is
provided by television due to the high costs associated. It does present commercials on
television, but these are few in number. They call upon the franchisees to conduct their
own promotion in their own areas that results in extra costs for the franchisee that are
definitely unfavorable.
8
Appendix 1
Projected Break-Even Information for Each Franchise for 2008-2009:
Smokin Joes
I Fixed Costs: Figure (in Rs.)
1 Land Rent:
2 Administrative Costs:
3 Personnel Costs:
4 Flat Royalty Payment:
5 Miscellaneous:
II Revenues: Figure (in Rs.)
6 Annual Tuition Fees:

7 Annual Registration Fees:
III Variable Costs: Figure (in Rs.)
8 Registration Kit per Student:
US Pizza
I Fixed Costs: Figure (in Rs.)
1 Land Rent:
2 Administrative Costs:
9
3 Personnel Costs:
4 Miscellaneous:
III Revenues: Figure (in Rs.)
5 Annual Tuition Fees:

6 Annual Registration Fees:
II Variable Costs: Figure (in Rs.)
7 Royalty @ 12.5% of Tuition Fees:

8 Registration Kit per Student:
Appendix 2
Projected Initial Expense & Profits from 2006-2009 for Each Franchise:
KIDZEE:
I Initial Expenditures: Figure (in Rs.)
1 Land Rent Deposit:

2 Equipment for Nursery:
3 Renovation of Interiors:
4 Legal Expenditures:
5 Miscellaneous:
II Profits: Figure (in Rs.)
6 2006-2007
7 2007-2008
8 2008-2009
EuroKids:
I Initial Expenditures: Figure (in Rs.)
1 Land Rent Deposit:

2 Equipment for Nursery:
3 Renovation of Interiors:
4 Legal Expenditures:
5 Miscellaneous:
10
II Profits: Figure (in Rs.)
6 2006-2007
7 2007-2008
8 2008-2009
Appendix 3
Questionnaire, Abhijeet Kaji questioning Rajeev Shah
Q1 Where do you plan on setting up this restaurant?

A1 We have already bought land on leave and license on Nepean Sea Road, which is an
up market district of South Mumbai. Such plots have become very rare to find as most of
the land has been taken up as residential housing in South Bombay.
Q2 Why do you plan on setting up this nursery?

A2 As in Nepean Sea Road there are absolutely no pizza chains. Also there are very few
restaurants and also absolutely no restaurant that does free home delivery.
Q3 In how much time do you expect to break even and make your business
profitable?
A3 At this point I guess that, I hope to cut costs within a year or so. Therefore in 2009
hopefully I should be running a profitable business.
Q4 What is your main objective in starting this business?

A4 To offer good quality pizza’s to the residents of Nepean Sea Road and South
Bombay. Candidate name: Liisa Toompuu
Candidate no: cbb794 (1408-019)
School: The Regent’s School
Supervisor: Mr. A Kendrick
Should Ragn-Sells ASWord expand

count: its market
....... wordsto 11
Latvia or grow within Estonia?
* THE INFORMATION IN THIS IS CONFIDENTIAL FOR RAGN-
SELLS AS
Contents Page
ABSTRACT..........................................................................................................................................4
ACKNOWLEDGEMENTS.................................................................................................................5
INTRODUCTION................................................................................................................................6
METHOD..............................................................................................................................................7
DATA COLLECTION AND ANALYSIS...........................................................................................8
LATVIAN MARKET...........................................................................................................................8
SUMMARY OF THE SWOT IN TABLE 1:...............................................................................................8
COMPETITORS IN THE LATVIAN MARKET............................................................................................9
L & T Hoetika:...............................................................................................................................9
Nehlsen:.........................................................................................................................................9
Cleanaway:....................................................................................................................................9
DIFFERENT POSSIBILITIES FOR ENTERING THE LATVIAN MARKET....................................................10
Acquiring the other major hazardous waste company:...............................................................10
Acquiring one of recycling paper companies in Riga:................................................................10
Acquiring 3 or 4 household waste companies in South Riga region:..........................................10
Acquiring 2-3 household waste companies in Southeast industrial region:................................11
Negotiating to take over household waste collection in North of Latvia.....................................11
Establishing small market presence to gain local knowledge......................................................11
ESTONIAN MARKET......................................................................................................................12
SUMMARY OF THE SWOT IN TABLE 2:.............................................................................................13
SUMMARY OF THE PEST FOR RS IN THE ESTONIAN MARKET:.........................................................13
WASTE DISPOSAL MARKET IN ESTONIA............................................................................................13
Total market:................................................................................................................................13
Competitors by area:...................................................................................................................14
Customer activity compared to different types of customers:......................................................14
Customer size compared to the revenue received:.......................................................................15
Customer preferences:.................................................................................................................15
CONCLUSION...................................................................................................................................16
12
RECOMMENDATIONS...................................................................................................................17
EVALUATION....................................................................................................................................18
APPENDICES....................................................................................................................................19
APPENDIX 1: GLOSSARY...................................................................................................................19
APPENDIX 2: PEST ANALYSIS FOR ENTERING THE LATVIAN WASTE DISPOSAL MARKET
..........................................................................................................................................................20
Political and legal aspects:..........................................................................................................20
Economic aspects:.......................................................................................................................20
Socio-cultural aspects:................................................................................................................20
Technological aspects:.................................................................................................................20
APPENDIX 3: COST-BENEFIT ANALYSIS FOR ENTERING THE LATVIAN MARKET..............................21
Private Costs:..............................................................................................................................21
Private benefits:...........................................................................................................................21
Social costs:.................................................................................................................................21
Social benefits:.............................................................................................................................21
APPENDIX 4: PEST FOR RS IN THE ESTONIAN MARKET..................................................................22

Political and legal aspects:..........................................................................................................22
Economic aspects:.......................................................................................................................22
Socio-cultural aspects:................................................................................................................22
Technological aspects:.................................................................................................................22
APPENDIX 5: THE LOGO OF RAGN-SELLS AS...................................................................................23
References / Bibliography....................................................................................................................24
13
Executive Summary
In the 21st century people have started to pay closer attention to the environment around
them. Furthermore, as the world is now facing the various effects of centuries of
exploiting nature and resources, the regulations about recycling and waste disposal are
becoming much stricter, especially in the developed countries. Estonia is one of these
countries. Thus, when I, while working there during summer, heard about Ragn-Sells
AS’s expansion plans to Latvia, a country with very little if any eco-friendly waste
disposal and recycling systems, I became immediately interested.
To begin with, Ragn-Sells AS had three options: expand to Lithuania, Latvia or within
Estonia. For a more detailed investigation, I only considered the last two options, which
allowed me to have a closer look on the two countries’ waste disposal markets. The
customer types, the competition, PEST, SWOT and CBA analyses for both markets all
helped me to get a clear picture for objective decision making.
Consequently, I found that it is more beneficial for Ragn-Sells AS to expand to Latvia, a

new and growing market with even more opportunities now as it has joined the European
Union. There is very little or weak competition as opposed to Estonia’s well-established
and strengthening market. Its multinational nature (it has branches in Norway, Denmark,
Poland, Sweden and Estonia) gives Ragn-Sells AS the advantage of plenty of skill and
expertise in the area. Due to the high level of corruption in Riga, before being able to
properly start operating, Ragn-Sells AS needs some relevant connections in the
government, which should then aid with the set up of the branch. There connections will
be acquired over a period of time. Finally, with its international experience, Ragn-Sells
AS has great potential in succeeding in filling the waste disposal market gap existing in
Latvia.
14
Acknowledgements
I would hereby like to thank the whole of Ragn-Sells AS’s team in Haapsalu, especially
the finance department and the Financial Manager, whose guidance and information was
greatly valued.
15
Introduction
Ragn-Sells AS is a daughter company of Ragn-Sells AB in Sweden. It started off as a

one-man business and now is a family owned multinational with branches in Sweden,
Estonia, Norway, Denmark and Poland. In 1992, Ragn-Sells Läänemaa was set up in the
Western province of Estonia. Its success encouraged the owners to set up another branch
by the name of Ragn-Sells Eesti in the country’s capital, Tallinn. In 2001 the two
businesses were merged to form the current Ragn-Sells AS.
In 2003, Ragn-Sells AS had a turnover of 147.1 million EEK with a profit of 18.3 million
EEK. The firm treated 1.4 mln/m3 of waste material out of which 6292 tons were
recycled1. By now, the total amount of investment, turnover and profit increases each
year. According to the financial manager Ivi Õunapuu (2004) this is due to good
economic results and a favourable European Union legislation that was put into action
since 1st May 2004.2
Due to its obvious success all over Estonia, Ragn-Sells would now like to grow more as
at the moment, the potential for growth is there – it has enough capital and a good
reputation. Also, the market in Estonia is becoming more saturated every year, meaning
the most secure way to keep the business growing, is through investing into new projects
overseas. So, after careful consideration, the firm came up with three attractive
investment projects:
 Start operating in Lithuania

 Start operating in Latvia
 Find a way to increase market share within the Estonian market
Living in the 21st century during the time when nature is becoming more and more brittle
and yet important for the people who have been exploiting it for centuries, I thought it
would be very interesting to investigate how and what businesses do to help preserve our
ecology. This investigation will give me an opportunity and reason to look into different
countries’ waste disposal markets and see their nature. I will hopefully find out much
more about keeping our environment clean, getting rid of hazardous waste and recycling
waste. As comparing all three options at once would be far too complex, I chose to look
at the last two, thus my research question is as follows:
Should Ragn-Sells AS expand its market to Latvia or grow within Estonia?
However, in order to avoid too much sensitive material getting out from the business, I
have left out the names of some businesses and referred to them more generally.
Furthermore, the whole essay is confidential for Ragn-Sells AS.
1
BNS, 2004. Ragn-Sellsi möödunud aasta käive oli 147.1 miljonit krooni. Eesti Päevaleht. 6th February.
p.9
2
see reference in Footnote 1: Article in Eesti Päevaleht
16
Method
To carry out my investigation, I questioned the employees in the firm while I worked
there during summer, I also listened out for any information concerning the expansion
plans to Latvia and in Estonia. Interviews with the financial manager Ivi Õunapuu were
extremely helpful, and she also sent me lots of secondary information from the firm’s
archives. Keeping an eye on the Estonian newspapers for any news or changes in the
waste disposal market and listening out for any changes in laws resulting from the recent
joining with the European Union (EU) has also provided me with useful background
knowledge about the topic.
To examine the issue, the following business theory will be or have been used: market
share, multinational companies, reliability of market research, PEST, SWOT, cost-benefit
analysis, growth, international marketing, acquisition, take over, merger (see Appendix 1:
Glossary for a detailed explanation of the terms).
17
Data Collection and Analysis
Latvian market
Table 1: SWOT Analysis for entering the Latvian waste disposal market
Strengths: Weaknesses:
 Ragn-Sells (RS) is dedicated to its  As of yet, there are no clients,

cause so it will give its best in order to office, license, staff, trucks nor equipment
achieve the aims it is reaching for – they would have to start from scratch in
 RS has a lot of industrial experience Latvia
from the past and from the branches in the  RS does not have any inside
other countries contacts in Latvia as of yet, but in a country
 RS has a strong international with such high corruption, these are
trademark which makes it easier to start up essential to operate
new branches in new places
 There are businesses in Latvia
which are already RS’s clients in Estonia
and Sweden (e.g. Statoil), and are therefore
likely to be so in Latvia as well thanks to
the trust and good relations established in
other countries (‘Business-to-business’)
Opportunities: Threats:
 Entering a new market brings in  There are some big competitors

new workforce which in turn brings either already in or just about to come in to
different thinking and new ideas to the firm the market
 RS can create a change in  Bureaucracy in Latvia could cause
household waste collecting system from difficulties in operations and set up
bags to containers  There is a lack of any internal
 There is lots of potential to create a control over the market so far
trend for recycling in Latvia  There is corruption in the country
 Hazardous waste collection could which closes down many possible paths as
be started RS has no contacts yet
 Opportunities for entering the
market through the acquisition of other
Latvian companies
Summary of the SWOT in Table 1:
Ragn-Sells has a high level of experience and an international trademark, which could
help it overcome the obstacle of high level of corruption that exists in Latvia (especially
the Riga region). Additionally, the threat of other competitors looking to achieve the same
18
as RS, gives further proof of the fact that the market, despite its bureaucracy, has lots of
potential to create trends in recycling and hazardous waste collection.
Summary of the PEST analysis for entering the Latvian waste disposal market 3:
 Laws in the Latvian waste disposal market are about to change

 Impact of competition is very relevant
 5-6% increase in GDP of Latvia gives potential to market growth
 Increased standards of living create more waste per person
 Recycling is not very popular yet
 More technologically advanced landfills will be created
Summary of the CBA for entering the Latvian market4:
 Estimated total costs for setting up will be about 6.3 million EEK
 Latvian potential market is greater than Estonia’s
 Environment will potentially suffer due to increased landfill sites and space taken up
by new offices and factories
 Due to increased competition, quality of waste disposal could increase and prices
decrease
 Recycling will have a positive effect on the environment
Competitors in the Latvian market
L & T Hoetika:
Even though L & T5 took over Hoetika already in October 2003, there is still no active
management of it from L & T in Finland. There are only two L & T managers working
with the business, so the business is still controlled mainly by its previous owners and
managers. This however means that there is no strong and active leadership for modern
changes and the company is being run rather backwardly, decreasing the strength of its
competition. However, it has invested 3 million Euros (about 47 million EEK) in
recycling equipment and also put a lot of money into a massive PR project for the
recycling. This means that despite being a relatively new firm in Latvia, it will
immediately get media coverage and is likely to be known in the country.
Nehlsen:
3
For a detailed PEST, see appendix 2
4
For a detailed Cost-Benefit Analysis, see appendix 3
5
Lassila-Tikanoja, a Finnish waste disposal company which took over a Latvian Hoetika waste disposal
company in October 2003, to start off operating in Latvia
19
Although L & T Hoetika does most of the waste disposal in Riga, Nehlsen services about
15% of the city’s population. However, the only way this can be a strong competitor for
RS is that it is already in the market and has some connections there, because its
collection methods are very time consuming and hence financially not very profitable,
therefore if RS was to succeed in entering the market, it would not be difficult to weaken
Nehlsen’s power as a competitor on the market.
Cleanaway:
This is another Estonian business like RS which is trying to enter the Latvian market,
however their advantage is a very active PR program in both countries to get the business
going. Thus, even though there is nothing but heavy promotion (no actual waste
collection) seen in Riga yet, this is enough to let people know about the business and get
some important contacts in the area. The PR program includes having aggressive job
adverts up everywhere in Latvia and Estonia, which will speed up its process of breaking
into the market even more. This makes Cleanaway as dangerous competitor for Ragn-
Sells in Latvia, as it is in Estonia.
Different possibilities for entering the Latvian market
Acquiring the other major hazardous waste company6:
It could be difficult, as 83% of the company is owned by private individuals, who earn
dividends on the company’s shares, and are therefore not interested in selling.
Furthermore, the business does not have its own treatment facility, which is the most
profitable part of a business like Ragn-Sells. Consequently, if going ahead with this
particular project, RS would have to build its own treatment plant, which would be very
costly, or use another firm’s services, which would make RS dependent on someone else
– another undesirable option. Nevertheless, the company has doubled its turnover in
2002, when its EBIT (Earnings Before Interest and Tax) reached 15%, which makes it a
good investment, but then again very costly to buy. If the company was acquired, RS
would also have to do a lot of promotion about hazardous waste treatment, meaning
many extra costs for the business.
However, there has been some interest in selling the company. Furthermore, this option
brings an opportunity to get hold of majority of hazardous waste treatment market and
expansion to other waste areas using a local base, which would make breaking to the
markets a lot easier.
Acquiring one of recycling paper companies in Riga:
The problem with this option is that the recyclables market in Latvia at the moment is
very open to competition, for example, collection with press containers in Riga is already
controlled by Hoetika and Nehlsen.
6
Some names and businesses have been taken out in order to maintain privacy
20
Nevertheless, entering the recycling market in Latvia is a very appealing opportunity, as

it could be a good platform for further expansion in Riga and its surroundings.
Furthermore, in this case, RS’s experience of recycling in Estonia and Sweden can be
used to maximise the chances of success in the market.
Acquiring 3 or 4 household waste companies in South Riga region:
This will be problematic also, as the initial data RS has about that area is not sufficient
enough to base a decision on it. Secondly, the companies there, as far as RS knows, are
well established so the acquisition may be costly. The primary reason is there are a
number of parties to negotiate with, making it also very time-consuming. Timing
however, is critical, because there are competitors who could be trying to use the same
tactics in breaking into the market, and they must not be given any advantage in that
field.
The benefit of this option is that some interest in selling the companies has already been
shown. Furthermore, even though it could be difficult to achieve, it would bring with
itself the possibilities to have shares in 1 or 2 new sanitary landfill projects west and
south from Riga, giving a good start for a newly set up business in the country. It would
also directly be a deeper expansion within Riga. If there would be a business on sale
which already operates in that capital, then this would be a good entrance point of which
RS would be interested in.
Acquiring 2-3 household waste companies in Southeast industrial region:
The difficulties with this option are that firstly, it is distant from Riga market, so even
though it could help RS to get in and start expanding from there, the business’s real aim is
further away. Apparently, those companies also have ‘too close’ relationships with the
municipality officials, suggesting to the corruption problem in Latvia (see Table 1: SWOT
Analysis). As they are possibly also negotiating with a competitor of RS’s, the takeover
could become very costly as well.
Conversely, taking over such a business would give RS the monopoly rights which apply
in that area, and would then help the firm in gaining control over the whole market.
Negotiating to take over household waste collection in North of Latvia
It could be a good deal, but apparently it takes a long time to negotiate. In addition, the
company is now building a new sanitary landfill, so their will to sell it is even less likely.
Nevertheless, there are some possibilities of taking over the waste collection parts and
then extending the platform to Riga so that RS could achieve its main aim through
starting off somewhere there.
Establishing small market presence to gain local knowledge
21
This is not such a good idea as the competitors could move faster, causing RS to lose
even the existing opportunities.
However, after getting to know the market, RS is more likely to make the right decisions
at the right time, and thus it is more likely to react when it is most beneficial for the firm
itself, consequently increasing the chances of success for Ragn-Sells
22
Estonian market
Table 2: SWOT for RS in the Estonian market

Strengths: Weaknesses:
 RS has a good trading position in  Low market share in the

Estonia construction industry
 Position in industry and offices is  Low market share in east Estonia
strong (Narva)
 Households in Tallinn tend to prefer  Waste source separation is only
RS carried out in the beginning
 100% market share in north west  There is no landfill in Tallinn,
Estonia which is controlled by RS
 Quality of sorted waste compared to  Volumes of garbage are presently
competition is very good too low to justify processing equipment
 RS has a large sales force with a investments
good geographical coverage  Due to low density, there is low
 Loyal driver force and good profitability from southern rural parts
feedback on field conditions is also  Lack of information on contribution
apparent of profit by customer segment or product
 Customer service team has the which could help establishing which areas
potential to take on new or expanded tasks need immediate improvement
 Lack of coordination between
production and sales departments
 Low proactive activity level from
sales and limited sales management to
change it
 Lack of imagination concerning
cheap ways to generate low end customers
 Slow computer support to optimise
collection routes
 Lack of coordination between
production and Tallinn waste treatment
plant on available capacity
Opportunities: Threats:
 Pressure from the government to  Organised local community

increase households to organise waste sourcing of waste management contracts
handling (30% of the household market) will increase price competition (if law is
 Producer responsibilities to recycle sharpened)
creates new business opportunities  Unequal competition in Tallinn on
 Increased awareness of the need of costs of landfill
waste separation and increased tax on  Cleanaway benefits from a strong
landfill increases raw material supply that position in parts of fast growing east
23
will justify investment in processing Estonia
equipment  Competition is increasing with more
 Growing (if slowly?) public control businesses coming in from other countries
of hazardous waste treatment to set up a waste disposal company here
 Fall out of low end competitors (Finland, Germany, Sweden), after the
who can only compete with transport boarders opened since the joining with the
services EU
 Possible new own land field in
Tallinn
 There is space in east Estonia to
increase market share, and hence increase
total turnover
Summary of the SWOT in Table 2:
RS has developed a good reputation within Estonia through the quality of its sorted
waste, the loyal driver force and good customer service team. Furthermore, they benefit
from a large sales force with a good geographical cover. However, there is room for
expansion in some areas of Estonia (e.g. the fast growing east Estonia) and certain
industries (e.g. construction), where RS only holds a small market share. Further
problems could be caused by the lack of some information needed for immediate
improvements as well as problems within certain departments (e.g. lack of coordination).
Nevertheless, there are opportunities in the country due to the changes in some laws
(which however could also increase the price competition), and the overall increased
awareness of the need for waste treatment. Even though some small competitors have
fallen out, the overall competition could be increasing as the joining with the EU also
opened boarders for foreign investors.
Summary of the PEST for RS in the Estonian market7:
 Competition is becoming more fair as similar EU regulations are being imposed on

all waste disposal businesses
 Changes in depony traditions and the distribution of the market are about to occur
 Recycling laws will create new markets and new technological needs, even though
customers are not very keen on it yet
 Joining the EU will also create economic changes which are not visible yet
 Even though increased living standards generate more garbage per person, the overall
amount of waste could even be larger if the population was not decreasing
 RS has high trust levels and good reputation all over Estonia
 RS has the reputation of the promoter of new, modern technology and attitudes, but
still things need improving
7
For a detailed PEST, see appendix 4
24
Waste disposal market in Estonia
Total market:
Figure 1:
Ragn-Sells Others
1/3 1/3
Cleanaway
1/3
As Figure 1 shows, RS’s market share is about 33% of the total Estonian waste disposal
market. Its main competitor is Cleanaway with the same percentage, and other smaller
competitors include Minu Vara, Adelan and Vaania, which make up the last 33% of the
market. This means in Estonia, RS’s position is quite secure, as it controls a third of it and
there is only one large competitor who can compete at the same level of overall market
share. Nevertheless, even this one could be a threat to RS’s incomes if it was to grow
further and faster than RS itself.
Competitors by area:
Table 3:
Area in Estonia Estimated market share No. of competitors
Tallinn 35-40 % 10
North west 100% -
South west 40% Minu Vara
South 50% Cleanaway
East 25-30% Cleanaway
Eastern Estonia is the fastest growing area in the country, therefore having less than a
third of the market there is not good for RS, thus this is an area to develop in. The fact
that there are so many competitors in Tallinn makes RS’s 35-40% comparatively rather
high, suggesting a high popularity there, just as in North west where it is the only
business providing the service, hence its success there is almost predetermined.
Customer activity compared to different types of customers:
Table 4:
Activity % Estimated Estimated market
customers market share development
25
for RS %
Private houses 58 40 Slow but steady growth
Apartment associations 10 20 Slow but steady growth
Real estate companies 1 20 Growing
State and municipal 4 30 Growing, maybe rapidly
agencies through legislation
Construction companies 1 10-20 Unknown
Service, trade, offices 10 608 Growing
Industry 5 30-40 Growing
Others 11 Not known Unkown
As Table 4 shows, RS has the largest share of customers from private households,
suggesting a strong trust on individual bases for RS. The market share in this area is
relatively large as well. Even though only 4% of the state and municipal agencies use RS,
this small amount makes up 30% of the total market share, so those customers RS should
definitely hold on to and if possible, try to get some more of. I would suggest the same
for service, trade and offices part of the market, as even though not used by a large
percentage of customers, it makes up a large percentage of the total market.
Customer size compared to the revenue received:
Top customers > 100 000 EEK

Large customers 25 000 – 100 000 EEK
Medium customers 5 000 – 25 000 EEK
Small customers < 5 000 EEK
Small customers make up 80% of all the clients, but they represent only 13% of the total
revenue. Top customers however, who make up only 1% of all the clients, represent 41%
of RS’s total revenue. This shows that in order to increase revenues, RS should try to
increase the number of its top customers rather than try to receive the attention of
individuals. Besides, they already have 58% of the private household customers anyhow
(see Table 4), which is probably what makes up a large amount of that 80% called ‘small
customers’. The fact that average revenue per year per small customer is only 1 026 EEK,
whereas the average revenue per year received per top customer is 253 000 EEK,
supports even further the suggestion that RS should try and increase the number of large
customers. (Ekman, I. Summary of interviews at Ragnsells Estonia performed 2003-01-
11 – 12.)
Customer preferences:
Research has shown that some things Estonian customers like about RS are for example
its attractive vehicles and neat and similar containers, which you can recognise from
8
Very high in service and trade(60%), lower in ofices (30-40%)
26
everywhere. Its eco-friendly behaviour is another point in RS’s favour, which helps in
creating an overall good reputation and impression of the business. New customers are
attracted by the logo9 of RS which is known all over Estonia. The employees of RS who
are also its customers, agree with the others, but in addition find that RS is the best in the
field of household waste disposal.
9
(see Appendix 5).
27
Conclusion
Based on my investigation, I believe Ragn-Sells AS should expand to Latvia because it is

a potentially good market in the sense that it is rapidly growing but has very few
competitors. Ragn-Sells AS has the advantage of being knowledgeable already about the
EU regulations and laws concerning the waste disposal and recycling which were
imposed on Latvia since 1st May 2004 as well when the country officially joined the
trading block. It also has lots of experience in entering new markets, since it is a
multinational company with branches already in five different countries. Hence, making
this another risk-reducing factor. The above mentioned ‘very few customers’ actually
consists of two firms which are dealing with the same type of waste disposal in the same
area as RS: Nehlsen and L & T Hoetika10. The first one only has about 15% of the market
in Riga, and even there it does not operate very profitably due to its time consuming
waste collection methods. The latter despite having been in the market for more than a
year, still operates it in an old-fashioned way because of lack of leadership from the
Finnish management. There is also Cleanaway11 which trying to enter the market just as
RS, and seems to be ahead of it, but even so has only done aggressive promotions, and no
actual waste collection has been noted yet.
In Estonia on the other hand, the business has many strong competitors and the market
could potentially soon become saturated. RS already has a third of the market share,
which only Cleanaway can compete with, and provided that RS’s reputation stays as high
as it is, the share could slowly be increasing. Nevertheless, it can’t only count on the
previous success and peoples’ positive opinions about it. RS has barely any share in the
Eastern part of Estonia (e.g. Narva), but as this is the fastest growing market in the
country at the moment and is dominated by Cleanaway, RS should try and get involved
there as well, while entering the Latvian market. Nonetheless, in Tallinn and Western
Estonia, Ragn-Sells AS is very well known, highly trusted and accordingly receives high
turnovers. There are certain features about RS that appeal to the Estonian customers,
which could also be used in Latvia, for example the uniformity of the waste containers,
the high technology and good-looking trucks, and its eco-friendly yet modern attitude
which RS extensively promotes and applies to all its actions.
10
see pg. 9, Competitors in the Latvian market
11
see pg. 9-10, Competitors in the Latvian market
28
Recommendations
I would recommend RS to go in as a completely new firm, and explore the market before
setting up itself. This is because as the discussion on all the different options 12 showed,
entering through acquisition of another company in Latvia will be difficult and in some
cases very costly and in addition, potentially more risky as well, mainly because of the
high levels of corruption in the country and an old-fashioned way of waste disposal. In
Sweden, Ragn-Sells AS owns Scandinavia’s best landfill area, and a good international
reputation overall. By filtrating the market and trying to start with ‘business-to-business’
selling to the familiar firms through the different nationality agents (Estonian agent
would find Estonian businesses, Swedish agent would find Swedish businesses, Latvian
agent would find Latvian businesses), RS can get its first customers. Afterwards with
time, as the business slowly grows, it could also attain contacts in Latvia, meeting new
people or firms and creating bonds with new institutions, which will then enable RS to
start fully operating in the country and increase customers. With contacts and new people,
trust and reputation can be built as well, and by maintaining its beliefs, RS has an
opportunity to stand out and enter the market. Making use of the factors which the
Estonian customers like13 could also decrease the risk of failure for Ragn-Sells.
12
see pg. 10-11, Different possibilities for entering the Latvian market
13
see page 15, Customer preferences
29
Evaluation
The research has shown that even though Ragn-Sells AS should focus on expansion to
Latvia, it should also pay attention to staying competitive in the Estonian market,
specifically trying to increase its share in certain parts of it (eastern Estonia).
Nevertheless, before entering the new market, the unreliability of the market research
should be considered. To start with, all the information has been gathered through various
different channels and countries, hence there could be misinterpretations due to
differences in translations (for example, some of the information could have gone from
Latvia to Sweden to Estonia, every time being translated to the respective home language
and then finally into English). Moreover, as the research suggests on many occasions, the
high level of corruption in Latvia, especially in Riga has made all the gathered
information even more unreliable as Ragn-Sells has no internal connections there, so
much of the information about the Latvian market could have been changed depending
on what the people in Latvia wanted RS to decide and think about the market.
The information about Estonia’s waste disposal market might not be entirely accurate
either, as the market keeps rapidly changing, but some information I received, was some
years old, i.e. gathered before Estonia joined the EU. However this step on the 1 st May
2004 brought many important changes to the market, some of which have not been
considered thoroughly as there is no research to prove them yet. Much of the financial
information is also more than a year old, which could make a difference since the joining
with the EU was supposed to result a rapid inflation throughout the country, which has
not been taken into account. Furthermore, events happen each day which can drastically
change the level of production for RS, e.g. the storm on the Baltic Sea on the 9 th
December created much more need for waste disposal in the seaside areas, where the
flood brought a lot of garbage from the sea on to the shore.
The problem with the secondary research is that most of the data (e.g. results for
questionnaires) that I got from the firm’s archives, were not gathered specifically for this
research, hence some of the facts could have been interpreted differently from how they
were meant to be originally.
In conclusion, any information gathered is always only as reliable as the collector and
accurate interpretation. Since much of the information gathered is third hand through
different translations this might be of concern. However I believe I have been meticulous
enough in this project to be confident in both analysis, conclusion and recommendations.
30
Appendices
Appendix 1: Glossary14
Acquisition/ takeover – the purchase of one business by another

Business growth – increase in business size in terms of capital employed,
level of turnover, number of employees or the level of profit
the firm makes. There are two main methods of growth –
internal (or organic), and external (inorganic through
acquisition/takeover, and merging)
Cost-benefit analysis – a technique that is used to give a financial value to all of
the social – private and external – costs and benefits of a
project. It is usually applied to public sector investments
such as new roads or airports
International marketing – the business function that aims to link the business to the
customer and aims to get the right product to the right place
at the right time on an international scale
Market share – the percentage of total market sales held by one brand or
business
Merger – an agreement between business owners and managers to
join two firms together to form one united business
Multinational business – a business which has its main office in one country but
operating bases in others
PEST analysis – an analysis of changes which are taking place in the
environment around organisations all the time, involving
political, economic, social and technological changes
Reliability of market research– means how trustworthy is the information you have
gathered through various methods of data collection
SWOT analysis – An assessment of the internal strengths and weaknesses
and external opportunities and threats for a business in a
given situation. It clarifies issues and problems but it does
not take decisions for a business
14
Terms are taken from the three books mentioned in the Bibliography
31
Appendix 2: PEST Analysis for entering the Latvian waste disposal market
Political and legal aspects:
 Some laws are going to have to be changed to match with EU regulations, as

Latvia also joined the free trade zone on 1st May 2004
 Currently, waste management is controlled municipally, creating the question of
who in the end owns the waste and is responsible for making sure all gets disposed of –
there are no laws like there are in Estonia made about it yet
 Corruption exists and has to be dealt with, because RS is determined not to use
bribery to achieve its aims
Economic aspects:
 GDP increases 5-6% yearly, giving the potential customers each year more money
to spend. This in turn generates more thrash and as people can afford to employ a firm to
collect their waste, potential turnover could be increased for RS, provided they get the
clients
 Waste management market increases 10-15% yearly, ⅔ of which in Riga-region
 Market value which in 2004 is 16-20 million LAT (384-480 million EEK), is
estimated to be about 40-45 million LAT (960-1080 million EEK) by 2009, so the market
is rapidly growing.
Socio-cultural aspects:
 Decreasing population makes the relative total amount of waste smaller, because
it is people who create the waste
 The differences between countryside and city are noticeable and will remain,
making it more difficult to infiltrate to the whole of the country and in terms of profits,
more important to start from Riga
 Standard of living has increased, especially in urban areas, so more waste is being
produced per person
Technological aspects:
 Old landfills will be closed and new ones developed which will be more
technologically advanced
 Recycling is not very popular there yet, therefore cites for that will have to be
created
 There is a possibility of burning the garbage in incinerators to decrease the
amount of landfill and the areas of land covered up by landfill sites
 The current waste disposal methods are slow and not very profitable
32
Appendix 3: Cost-Benefit Analysis for entering the Latvian market
Private Costs:
 The set-up of the offices and premises in Latvia

 Providing transport, trucks and equipment for the Latvian business
 Recruitment process
 Legal costs for the laws and legislation that need to be learnt
 Estimated total costs are about 6.3 million EEK
Private benefits:
 Latvian market is much bigger in size than Estonian (there are 2.3 million people
in Latvia, and only 1.3 million in Estonia), creating many new opportunities for
increasing turnover and profits, especially as the market is not very advanced yet
 There will be larger international recognition, which could improve Ragn-Sells’s
overall reputation further and gain more customers in other countries as well
Social costs:
 As currently waste is disposed of mainly through landfill, RS will at first probably

use only the cheaper option of landfill sites also
 Environmental impact due to more land being taken up by buildings (the
premises), factories (e.g. for recycling or incinerating if those options will be chosen) and
landfill sites
Social benefits:
 The prices for disposing of waste could be decreased for the public due to an
increase in competition
 The quality of waste disposal could be increased as competition increases
 Recycled materials will have a good effect on the environment, and will also
potentially bring to the market new products made out of them recycled materials
33
Appendix 4: PEST for RS in the Estonian market
Political and legal aspects:
 Concerning the joining with the EU, many waste disposal laws are changing all
over the country, making the competition more fair, as RS had been operating
accordingly to the EU laws earlier as well, due to its Swedish origins15
 Household waste will be organised by the local governments resulting in the
redistribution of the market and a pressure on waste disposal prices
 Old landfill sites will be closed and replaced by new ones, causing a change in the
depony traditions so far
 New markets will be created because of new laws concerning recycling
biodegradable, electronic and rubber items. Also because of harsher regulations on
cleaning up the hazardous waste
Economic aspects:
 A rapid inflation rate is estimated due to Estonia’s joining with the European
Union
 From 2005, the prices for the collection of non-recycled waste will be higher than
the recycled ones, encouraging people to recycle and thus developing further the area
where RS already has a very strong base compared to its competitors
 EU also brought in many economic changes which are not noticeable yet, as
Estonia has not been a member even for a year yet, but which will affect the market
heavily in the future, even the opening of the borders for instance which lets in lots of
new workforce, makes the transporting of equipment from Sweden much faster and
cheaper, and also competitors which will come to get a piece of our market and could
potentially drive the prices for the customers down if they are to succeed
Socio-cultural aspects:
 Increased standard of living makes people want more comfortable waste disposal
opportunities
 Decreasing population, so even though the total amount of waste might increase,
people are the ones producing waste, so comparatively decreasing population leads to
decreasing waste
 There is pressure by the government to the people to increase their recycling, but
still many people don’t see the necessity for it
 RS has a good reputation and high trust levels all over Estonia
Technological aspects:
 Some systems (e.g. information systems) need changing to keep up with the
expanding market demands and make sure all the new legal demands are met with
15
Sweden has been an EU member since 1994
34
 To meet the new demands concerning increased recycling, new technology needs
to be put in place
 Has a good reputation internationally as well as locally concerning its modern
technology
 On the other hand, RS is perceived by customers as a business bringing in modern
attitude towards waste disposal and modern technology for it
35
Appendix 5: The logo of Ragn-Sells AS
36
References / Bibliography
Books:
CHAMBERS, I., HALL, D., JONES, R. and RAFFO, C., 1998. Business Studies. 9th ed.
United Kingdom: Causeway Press
DRANSFIELD, R. and NEEDHAM, D., 1997. Understanding Business Studies. 1st ed.
United Kingdom: Stanley/ Thornes (Publishers) Ltd.
STIMPSON, P., 2002. AS Level and A Level Business Studies. 1st ed. United Kingdom:
Cambridge University Press
Articles:16
BNS17. Ragn-Sells suspends Ääsmäe landfill project for public pressure. In Äripäev.
[online]. 2002 [cited 09-12-2004]. Available from World Wide Web:
<URL: http://www.aripaev.ee/2292/free/summary.html>
TOOMSALU, Ü. Eestlane tekitab aastas 340kilose prügimäe. SL Õhtuleht [online]. 2004
[cited 18-08-2004]. Available from World Wide Web:
<URL: http://www.sloleht.ee/18_aug.html>
BNS. Ragn-Sells asub majandama Rapla uut jäätmejaama. Eesti Päevaleht [online]. 2004
[cited 1-12-2004]. Available from World Wide Web:
<URL: http://epl.ee/bns_2389.html>
EEK, P., 2003. Ühisest tegevisest jäätmekäitluses Läti näitel. In The Bulletin, Bülletään.
Nr.3, p.6.
SESMIN, M.-L., 2004. Põlva linn osaleb Euroopa jäätmemajanduse projektis. Maaleht.
12th June, p.3.
BNS, 2004. Ragn-Sellsi möödunud aasta käive oli 147.1 miljonit krooni. In Eesti
Päevaleht. 6th February, p.9.
REMMELG, A., 2004. Jäätmete valikuline kogumine võtab hoogu. In Eesti Päevaleht.
18th November, p.9.
Additional Web Sites:
www.ragnsells.ee
www.aripaev.ee (online articles)
http://www.lassila-tikanoja.fi/ (about Lassila & Tikanoja)
http://www.ceroi.net/reports/riga/waste_things/household_waste.htm
Other Sources:
16
Some of the articles have not been directly used in the essay, but just read for background knowledge
about the busness
17
BNS is the Estonian news agency
37
EKMAN, I., 2003. Summary of interviews at Ragnsells Estonia performed 2003-01-11 –

12. Samkonsult
38

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Candidate :Abhijeet Kaji B&M HL

Candidate number: Internal Assessment

INTERNATIONAL BACCALAUREATE DIPLOMA

Business and Management, Higher Level

Candidate Name: Abhijeet Kaji

School: Dhirubhai Ambani International School

SHOULD ABCL (OWNED BY MR. RAJEEV

Question must be from an organisation’s point of

Conclusions and recommendations

The ultimate objective is to advise the Owners as to which Franchise

This will be done through:

1 Determination of Financial Feasibility of Franchisors:

2 Consideration of the Marketing Mix of Each Franchise:

3 Conclusion: SWOT Analysis for Recommended Franchise:

Elements being used

The ultimate objective is to advise the Owner as to which Franchise opportunity to

This will be done through:

5 Consideration of the Marketing Mix of Each Franchise:

6 Conclusion: SWOT Analysis for Recommended Franchise:

B.1. Marketing Mix: Product

B.2. Marketing Mix: Price

B.3. Marketing Mix: Place

B.4. Marketing Mix: Promotion

In comparison, US Pizza is relatively lacking in its own promotional techniques.

I Fixed Costs: Figure (in Rs.)

II Revenues: Figure (in Rs.)

6 Annual Tuition Fees:

III Variable Costs: Figure (in Rs.)

8 Registration Kit per Student:

I Fixed Costs: Figure (in Rs.)

III Revenues: Figure (in Rs.)

5 Annual Tuition Fees:

II Variable Costs: Figure (in Rs.)

7 Royalty @ 12.5% of Tuition Fees:

I Initial Expenditures: Figure (in Rs.)

1 Land Rent Deposit:

II Profits: Figure (in Rs.)

I Initial Expenditures: Figure (in Rs.)

1 Land Rent Deposit:

II Profits: Figure (in Rs.)

Q1 Where do you plan on setting up this restaurant?

Q2 Why do you plan on setting up this nursery?

Q4 What is your main objective in starting this business?

Should Ragn-Sells ASWord expand

APPENDIX 4: PEST FOR RS IN THE ESTONIAN MARKET..................................................................22

Consequently, I found that it is more beneficial for Ragn-Sells AS to expand to Latvia, a

Ragn-Sells AS is a daughter company of Ragn-Sells AB in Sweden. It started off as a

 Start operating in Lithuania

Should Ragn-Sells AS expand its market to Latvia or grow within Estonia?

Data Collection and Analysis

 Ragn-Sells (RS) is dedicated to its  As of yet, there are no clients,

 Entering a new market brings in  There are some big competitors

Summary of the SWOT in Table 1:

 Laws in the Latvian waste disposal market are about to change

Summary of the CBA for entering the Latvian market4:

Competitors in the Latvian market

Different possibilities for entering the Latvian market

Acquiring the other major hazardous waste company6: