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Case Study: Life Church Child Development Center

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Analysis & Strategic Recommendation Phase
Team 2: Life Church Child Development Center

I. Porter’s Five Forces Model:

a. Threat of new Entrants
The threat of new entrants is an important concept to understand as new entrants can change the competitive landscape. Defining this category helps to analyze the new entrant competitors in current existing Life Church Development center area.
In 2013, estimated new establishments are as follows:
(a) 1 – 4 Employees: 1538, 5 – 9 Employees: 1164, 10-19 Employees – 1723, 20-49 Employees: 1086, 50-99 Employees – 99, 100-249 Employees – 21, 250-499 Employees – 3 and Unknown employees 47. Total establishments and new entrants in 2013 year Texas are 5681. (Source: Barnes Reports – US Child Day care Industry) …show more content…
Total estimated establishments as of 2013 year are 425. (Source: Barnes Reports – US Child Day care Industry)
(c) After analyzing 5 years trend in child care industry number of new entrants observed that showed-up for year 2011 – 454, Year 2012 - 1192 , Year 2013 – 1211 and Year 2014 – 1602. (Source: Barnes Reports – US Child Day care …show more content…
Staff to Child Ratio: 109/25 = 4.36%
h. Staff to Child Cost = $261,092.36/109 = $2395.34
i. Tuition fee per child = 480*8 = $3840
j. Tuition per child - Staff Cost Per Child: $3840 - $2395.34 = $1444.66
k. Net Profit per Child - Staff: $1444.66 * 109 = $157,467.94
l. Fix Expense (Rent + Insurance): $66,054
IV. Income Statement and Balance Sheet
a. Analysis:
i. Currently our day care total of 109 students enrolls with 25 staff member to look after them including director, cooking and nurse. Total Revenue for the day care year to date (Jan 1st to August 31st 2014) is $512,172.51. Total Revenue includes the tuition fee for Childers, Fundraisers, and Child and Adult Care Food Program (CACFD) aid from government. Total expense for the day is $486,861.11, which includes salaries and wages, rent, insurance, advertisement, food, maintenance and repair cost. Due to high total expense, the net income for the day care is $25,311.40. Profit margin for the day is 4.94%, this number represent the total net income per $100 revenue. The average childcare profit margin ratio for US is 10.43%. There are many factors behind the low profit margin, but the main one is high number of staff members. Staff to child ratio is 4.36%, which mean for 4.36 child there is one staff member devoted to them and this would come out to Staff to child cost at $2395.34 per child a total of 62% of tuition fee is going toward the staff. If we take the staff cost for each child and subtract from the total tuition

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