TEMAR

Monday, 27 April 09

At this time, due to the Economic recession, the number of students coming from overseas is falling as not many families can afford for studying in Singapore. Studying in Singapore includes costs such as accommodation costs, school fees, transport costs etc. As parents cannot afford to pay these costs, the demand for studying in Singapore will fall. After the Economy recovers, parents will be more willing to send their children overseas as Singapore is always a promising destination. At that time, there will be a lack of accommodation for international students, and the demand for studying in singapore would increase. Hence, we would like to set up a hostel to provide a ‘homely’ environment for them to stay in.

Since there are only five of us to set up a young firm, in most critique situation, we will have to use our own property (houses owned by our parents) to get the loan from the bank so that the bank will
have more confidence on us. In addition, it is better to borrow in the long term as our firm can benefit from the low interest rates. However,because the economy has just recovered and we are still young firm, our ability to survive in this industry is not high. Therefore, it
should be difficult for the banks to lend us large amount of money as
we do not have credit worthiness.

The second way to get capital for investment is forming a joint-stock firm with other large companies.
The share will be divided among five founders: Tracy, Esther, Munisha, Alisa, Rita and members from investor companies.

The name of our hostel is TEMAR. We offer accommodation for 300
students. We will provide a canteen with a variety of food according
to the culture. This service will not be inclusive of the
accommodation fees. Other than basic accommodation, we also provide
facilities such as sport complex, minimart and a common television.

The market structure that our business is likely to fall under is Oligopoly. Oligopoly is where a few firms dominate an industry. As far as we are concerned, there are about 3000 schools in Singapore but there are only 20 hostels available. That’s why we have decided to set up a hostel. We classify ourselves as Oligopoly because there is interdependence. As mentioned above, there are a few large firms dominating the industry. Hence, each firm needs to watch each other’s actions carefully. Also, comparing to the number of students coming to Singapore each year, the size of the firm relative to the market is large.

Allocative efficiency occurs where suppliers are producing the best
mix of goods and services required by consumers .On the other hand,
Productive efficiency occurs when producers are producing their
product at the lowest possible unit cost.

Some of our competitors are Oldham Hall, Evan, and other hostels of
the various schools of Singapore (http://www.contactsingaporecompanies.com/index.php?action=cat&catID=2359&name=Hostels). In order to compete with them and to
prevent other new competition, we would like to offer some services:
Sick bay and part-time nurses
Free transport to cinema ( bulk buying tickets for a particular movie monthly)
Free supper every consecutive week day
Field trip ( students will have opportunities to work with farmers
and experience a different lifestyle)

Rather than the methods we have stated above, we also can apply some other forms of barrier to entry according to different kinds of economies of scale.

First , there can be marketing economies of scale via international schools from which the students have demand for accommodation. Spreading leaflets and posters is also a good way to advertise about our hostel.

Secondly, bulk buying can help us to save a lot as when purchasing in a large amount, the average cost will be lower than buying individually. Food catering is a common way of buying large amounts of food, and this is a good example of bulk buying. Bulk buying, in simple terms, is buying a large amount of goods at one go. In this scenario, there can be bulk buying economies of scale. For example, we can cater in 1000 packets of milo drinks and 100 boxes of fried noodles to be sold during meal times at the canteen in the hostel. It sure saves cost to buy many boxes of food at one time, rather than buying one box at a time!

Last but not least, we can apply economies of specialization. The work will be divided among five of us and each of us will be responsible for one department such as facilities, labour, food, discipline, office. Here, we can see division of labour. Division of labour is breaking a production process down into small activities that workers can perform repeatedly and efficiently. As the work is divided, each and everyone of us takes on a specific job to do and do that same job again and again. Specialization is when workers focus on a specific type of work that they do. Here, we specialize in the work we do as we are only doing that particular job. This also makes production becomes more efficient.

Price discrimination exists when a producer sells the exact same product to different consumers at different prices. There is a number of ways to practice price discrimination. We would like to suggest the most applicable 3 ways. Firstly, we will set up founder’s privilege for the first 50 students to come. They will have special rights and advantages such as lower accommodation fees than usual as they were the first batch of students to stay at our hostel. Secondly, students are charged accordingly to their education levels, for instance, the juniors pay less than the seniors. Lastly, we can offer 5% discount to boarders who introduce their friends to stay in our hostel.


Rita
Esther
Munisha
Tracy
Alisa

HL Econs one(: