Business Plan Proposal: The Great Wall of China

Subject: Management
Pages: 7
Words: 2585
Reading time:
11 min
Study level: Master

Introduction

The formation of a thorough business plan is critical for guaranteeing economic success, as it allows not only to summarize the key theses of the future project but also to identify in advance the weak points necessary for additional refinement. Within the framework of this essay, it is proposed to discuss a business idea aimed at preserving a monumental heritage site, namely the Great Wall of China. It is easy to see that this proposal is relatively large-scale and fundamental, so careful consideration of business strategy and financial planning plays a fundamental role.

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It should be emphasized that the choice of such a site was due to at least three independent reasons. Firstly, the Great Wall of China is of undoubted historical value for the Chinese people and the world, being the most significant monument of ancient architectural thought. Second, the Wall is culturally significant because it reflects the ability of the Chinese to unite and be united to defend their lands against interventions. Third, increasing the sustainability of the monument is necessary for the context of general capitalization because it is very likely that as long as the Wall is profitable, it will be popular. It is necessary to ensure the permanent identity and sustainability of the Wall, independent of the intentions of the government, business people, tourists, and the public.

Business Proposal

For this essay, it is necessary to dwell in more detail on discussing the business proposal in question. The critical importance of the Great Wall of China to the world in general and the Chinese people, in particular, should be emphasized first. This cultural site is one of the oldest surviving artificial structures, demonstrating the military successes of Chinese civilization: in fact, the Wall is over 2,700 years old (TCG, 2021). In addition, the overall size of this structure, which is equal to half of the Earth’s equator, cannot help but surprise (Pines, 2018). Even the two facts described above are enough to justify the high tourist interest in visiting the Wall. According to statistics, at least 10 million people have visited the Great Wall every year (except in 2020 in light of obvious reasons), and it should be expected that this number to trend upward again as the world stabilizes (Lieberman, 2017). Thus, the preservation and reconstruction of the Wall, combined with its overall modernization, have important sociocultural significance and thus can be viewed through business planning.

More specifically, the central goal of the business strategy is the implementation of works to preserve the cultural and historical heritage of the Wall, taking into account the dynamic world. This means using advanced construction materials that will last for many more decades and modernizing the exterior appearance and tourist experience in a way that reflects the current social agenda. The choice of this solution would not have been feasible if no financial benefit was expected from such works.

Three factors at once confirm the profound economic benefits of this plan. First, construction work creates additional jobs, which improves the unemployment situation in the region. Secondly, it attracts more tourists, even among those who have visited the Wall in the past. The third reason stems from the first two and determines GDP growth while stimulating construction work on the site. The profitability of this business is also justified in terms of sociocultural goals since the audience of the Wall is generally expected to be more intelligent than the people who visit mass parks. As a consequence, the proposed business plan also has social significance for government agencies.

Finally, implementing the solution described cannot go entirely smoothly, as there are very likely to be accompanying complications. For example, it is necessary to take care of the sufficiency of competitive advantages (Akter et al., 2020). It is essential to stimulate visits to the Wall among the audiences of central parks and municipal museums: to do this, it is acceptable to use preferential offers for visits and to improve the appearance of the Wall in the perception of the consumer (Thomsen, 2021). This includes creating a line of branded clothing and products that will serve the promotional purposes of the tourist attraction (Roggeveen et al., 2021). In addition, the attendance of the Wall is highly dependent on the degree of international relations and the global situation. As shown, compared to 2019, tourist traffic to the Wall (although remaining consistently high) decreased by 18.5 percent (Pitrelli, 2020). Consequently, it is important to consider the dynamic component of visiting the Wall when carefully designing.

Income Generation Model

The initial investment in the reconstruction and modernization of the Great Wall of China is justified by a guaranteed income differentiated into several categories at once. Primarily, it should be emphasized that the range of services realized by the project is not narrow but rather allows for a model of vertical integration in terms of the industrial economy. Ticket sales are the critical vector of profit, and this can be expanded. Thus, it is advisable to create package tours and transfer tickets to increase customer engagement in addition to primary entry tickets. So, in addition to selling tourist entrance tickets, it is also proposed to sell branded products (be it t-shirts, or bottles). Creating a line of branded merch is known to be necessary for a business because it dramatically increases its revenue (Bozhuk et al., 2019; Kumar, 2021). In this sense, it is fundamental that the Wall will profit from the sale of merch and a component of active advertising in which people use the merchandise they buy to spread the word about the Wall around the world.

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Finally, profits can come from strategic partnerships, including funding from private investors. While investment alone is difficult to construe as profit, strategic partnerships also include entering into agreements with related institutions, be they hotels, transportation companies, retail stores, and restaurants (Arifin, 2019). Each of the described stakeholders receives an increased tourist flow when partnering with a wall enterprise, and thus there is an increase in profitability. In order to detail the differential profitability model, Table 1 was created. This data shows that the annual estimated profitability for the project will exceed $3169200.00. Given the sustainability this business is striving for, the project is estimated to bring in at least $31.69 million over ten years: this figure, indeed, is attractive to the project.

Table 1. Total project revenues

No Service/Product Price Estimated Quantity (Monthly) Total Revenue (Monthly)
1 Ticket (Locals) $ 10.00 1000 $ 10000.00
2 Ticket (Foreigner) $ 20.00 500 $ 10000.00
3 Rent from hotel $ 50000.00 Nil $ 50000.00
4 Rent from shops $ 100000.00 Nil $ 100000.00
5 Income from ads $ 75000.00 Nil $ 75000.00
6 Merchandise (Bottle) $ 8.00 400 $ 3200.00
7 Merchandise (T-shirts) $ 12.00 700 $ 8400.00
8 Merchandise (Shorts) $ 10.00 450 $ 4500.00
9 Merchandise (Photos) $ 3.00 1000 $ 3000.00
Total Revenue $264 100.00

Analysis of Relevant Costs

The implementation of any business project is always inextricably linked to severe costs, especially in the initial stages. It should be particularly emphasized that costs cannot be considered as one-time, uniform payments since many of the cost categories are of a permanent nature (Voidonicolas, 2021). In other words, expenses such as salaries, rent, and utilities should be paid monthly (unless otherwise specified in the contract), whereas equipment repairs should be done once per reporting period. Consequently, the detailing of expenses should be considered comprehensively and when accounting for the different nature of these categories.

Moreover, one should distinguish between fixed and variable costs, which are relevant to the discussed business project. It is known that variable costs are commonly referred to as those expenditures that depend on the volume of products produced (Osome, 2020). Thus, the larger the volume of production, the more raw materials are needed for production. On the other hand, fixed costs are those expenditures that remain constant even as production expands (Nickolas, 2021). Fixed costs include executive salaries, interest, rent, depreciation, and insurance. Both fixed and variable costs should be considered separately, although one cannot ignore the contribution of each of these categories to total costs. Table 2 and Table 3 were created to provide an overview of the essential fixed and variable costs that are specific to the initiation of the Great Wall reconstruction and modernization project.

Table 2. Detail of fixed costs in the implementation of the business project

No Fixed Cost Monthly
1 Loan Repayment (10 years) $ 435000.00 $ 3625.00
2 Upgrading $ 5000000.00 $ 41666.67
3 Fixed cost of maintenance (10 years) $ 1000000.00 $ 8333.33
4 Salary of ten full-time employees (12 mounts X 10 years) $ 2400000.00 $ 20000.00
5 Additional costs $ 5000000.00 $ 41666.67
Total Cost $ 13 835 000.00 $ 115 291.67

Table 3. Detail of variable costs specific to the implementation of this business project

No Variable Cost
1 Variable cost of maintenance $ 100000.00
2 Utilities $ 1200000.00
3 Merchandise (bottle) $ 200000.00
4 Merchandise (t-shirts)
5 Merchandise (shorts)
Merchandise (photos)
Total Variable Cost $ 1 500 000.00

Based on the data from the two Tables, it is reasonable to draw certain conclusions about the general trends in project costs. First, fixed costs are much higher than variable costs. For this company, such a strategy may not be the best option, as it is known that for businesses with a large number of fixed costs, it is more difficult to survive an economic downturn (Nickolas, 2021). Second, a significant portion of fixed costs is Upgrading, which is fully justified by the focus of this project. Finally, the total estimated total of all costs is $15335,000. Given the amount of profitability, an additional analysis of the overall profitability of the entire project should be done.

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Financial Decision

Profit

In order to calculate the profitability of the project, it is necessary to determine the total monthly profitability amounts initially. The estimated profitability for the month is $264100, while the estimated costs do not exceed $115291.67 — not including the contribution of monthly variable costs because the pricing strategy is unknown. Consequently, using the benefits measurement formula, it is appropriate to note that the monthly benefit would be a maximum of $148K. This number turned out to be positive, clearly marking the present business as generally profitable (Lumen, 2021). Then within one year, the total profit — holding other terms constant — would be $1,785K. In addition, since the project is meant to be sustainable, after ten years, the total benefit would be $17.9 million. This seems like an excellent figure for a cultural heritage site, and therefore the final financial analysis approves the implementation of this business project to modernize the Great Wall of China.

Of particular note in this discussion is the justification for choosing exactly ten years as the time frame for this business. Thus, counting on the eternal relevance of the business is not appropriate (Jajja et al., 2017). The world and the external market are constantly changing, and these transformations are especially relevant to a professional field that is highly dependent on international connections. To put it another way, there is no guarantee that after ten years, the tourism market trends will not change, so a decade has been chosen as the optimal timeframe for the project’s existence. As it develops and expands, these estimates are supposed to be adapted to new agendas.

Cash Flow

It is also critical to conduct a cash flow assessment. It should be noted that the cash flow is commonly understood as the total of all accruals and deductions distributed in time, regardless of the source of their formation. Thus, it is advisable to use a tabular format (Table 4) to display the dynamics of cash flows. To calculate the discounted flows, a standard rate of 3.5 percent was adopted for China. The stability of cash flows throughout the life of the project is noticeable. This is due to the conclusion of strategic partnerships in the initial stages, which will create financial stability.

Table 4. Distribution of cash flows over time with the NPV after ten years

No Cash flows in different years Cash flows Discounted cash flows
1 0M $ -300000 $ -300000
2 1M $ 22008 $ 21238
3 2M $ 22008 $ 20495
4 3M $ 22008 $ 19777
5 4M $ 22008 $ 19085
6 5M $ 22008 $ 18417
7 6M $ 22008 $ 17773
8 7M $ 22008 $ 17151
9 8M $ 22008 $ 16550
10 9M $ 22008 $ 15971
11 10M $ 22008 $ 15412
12 11M $ 22008 $ 14873
13 12M $ 22008 $ 14352
14 2Y $ 264100 $ 13850
15 3Y $ 264100 $ 13365
16 4Y $ 264100 $ 12897
17 5Y $ 264100 $ 12446
18 6Y $ 264100 $ 12010
19 7Y $ 264100 $ 11590
20 8Y $ 264100 $ 11184
21 9Y $ 264100 $ 10793
22 10Y $ 264100 $ 10415
NPV $ 19 644.00

Net Present Value to Evaluate the Project

Based on the table, it can also be seen that the NPV after ten years was $19644.00. Using the rule of assessing profitability by the NPV sign, it is essential to notice the positivity of the calculated NPV, and therefore the business project should be accepted (Cleartax, 2021).

Discounted Payback Period

Finally, since the project requires a significant initial investment, it is advisable to calculate its payback period. Taking on large sums of money entails serious risks, so it is crucial to consider them when calculating the expected payback period. Given a total period of ten years, the optimal solution would be to settle on a five-year payback period in light of the potential for a drastic change in global trends or a decrease in the project’s investment attractiveness (Monnappa, 2021). Thus, if one uses the calculation of the discounted amount over five years (by the beginning of the fifth year), the final amount would be $263652 (Kenton, 2020). Hence, the balance to be reached by the fifth year is $36348. To put it another way, this is the amount that must be collected in year five to cover the original investment amount. According to the calculations given below, a more exact period to cover the initial investment would be four years and eight weeks (4.2 years). As one can see, this number is well within the intended five-year payback period, which means that the criterion of discounted payback period is taken into account (Kagan, 2021). As a general result, the financial analysis showed the attractiveness of the project to be implemented in practice.

Formula

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Conclusion

After conducting an extensive financial and social analysis of the project under development, it is appropriate to emphasize the high attractiveness and profitability of implementing the modernization of the Great Wall of China over the next ten years. Thus, it has been shown that the project’s profitability at any point in time generally distinguishes covers the total costs. To be more specific, the reconstruction and modernization programs will achieve their goals and serve as an example of rethinking cultural heritage monuments in the light of the modern world. The business plan requires a significant initial investment, and it has been shown that this investment can be fully covered in four years and two months. A total project timeframe of ten years was outlined due to the potential volatility of market trends. If the project is still relevant and profitable after ten years, it is appropriate to consider strategies to expand the initial plan.

Reference List

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Arifin, M., Ibrahim, A. and Nur, M. (2019) ‘Integration of supply chain management and tourism: An empirical study from the hotel industry of Indonesia,’ Management Science Letters, 9(2), pp. 261-270.

Bozhuk, S., Krasnostavskaia, N., Maslova, T. and Pletneva, N. (2019) ‘The problems of innovative merchandise trade in the context of the digital environment,’ IOP Conference Series: Materials Science and Engineering, 497(1), pp. 1-13.

Cleartax (2021) NPV (net present value) – formula, meaning & calculator. Web.

Jajja, M.S.S., Kannan, V.R., Brah, S.A. and Hassan, S.Z. (2017) ‘Linkages between firm innovation strategy, suppliers, product innovation, and business performance: insights from resource dependence theory,’ International Journal of Operations & Production Management, 37(8), 1054-1075.

Kagan, J. (2021) Payback period. Web.

Kenton, W. (2020) Discounted payback period. Web.

Kumar, B. (2021) For the fans: how to make and sell your own merch. Web.

Lieberman, M. (2017) 17 secrets of the Great Wall of China. Web.

Lumen (2021) Calculating profits and losses. Web.

Monnappa, A. (2021) Top 11 Project selection methods for project managers. Web.

Nickolas, S. (2021) The difference between fixed cost, total fixed cost, and variable cost. Web.

Nickolas, S. (2021) How Are Fixed and Variable Overhead Different? Web.

Osome (2020) Variable costs. Web.

Pines, Y. (2018) ‘The earliest “Great Wall”? The long wall of Qi revisited,’ Journal of the American Oriental Society, 138(4), pp. 743-762.

Pitrelli, M. B. (2020) More than 600 million people traveled in China during ‘Golden Week’. Web.

Roggeveen, A.L., Grewal, D., Karsberg, J., Noble, S.M., Nordfält, J., Patrick, V.M., Schweiger, E., Soysal, G., Dillard, A., Cooper, N. and Olson, R. (2021) ‘Forging meaningful consumer-brand relationships through creative merchandise offerings and innovative merchandising strategies,’ Journal of Retailing, 97(1), pp. 81-98.

TCG (2021) Facts about Great Wall: 25 things you didn’t know. Web.

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