Business Overview

City M has a population of 7.7 million people and 281,000 businesses. The region's GDP in 2013 was approximately $560 billion (US), making it one of the largest economies in North America, with impressive innovation and tech hubs. The business community in City M is diverse and robust, with some of the biggest knowledge-based industries in Canada. These sectors include advanced manufacturing, financial services, information and communications technology, life sciences, smart logistics, etc.

City M is a rapidly expanding municipality comprising well-established and newly developed communities. Over the past two decades, there have been significant changes in City M's families and children. The city has a relatively young population, with 16% children, one of Ontario's highest percentages. City M's total population was 103,425 aged 0-12 years, expected to grow by 10% between 2016 and 2026. Research shows that public investment in early years and child care can drive regional economic development. The need for child care has increased due to the rise in dual-income earner families over the past three decades. Access to child care is an economic driver that allows more people, especially women, to participate in the workforce or attend school, increasing Gross Domestic Product and income from taxes.

The service that I am proposing for City M would be assisting parents in finding reliable childcare for parents outside of daytime hours. There are various options available to parents during the day, such as drop-ins and traditional daycare, but those services typically close around 6:00 pm with strict policies around being late. In City M, the only options for childcare in the evenings would be a nanny, babysitters, or family and friends. People do not always want to impose on their families; nannies and babysitters can be expensive. Parents can also feel uneasy about not knowing if the people they leave their children with are good caretakers.According to city statistics, only 63% of the demand for care for children under four is being met, which is a cause for concern for families. This suggests a strong consumer base for a solution to this issue. Access to a wider and more flexible range of programs, including extended hours and weekend care, is needed. However, parents often need help finding suitable programs that meet their needs. To address this issue, this business aims to provide local parents with the best evening care solution.

The main concept of the business is that it would offer those who currently work in daycare the opportunity to work evenings and weekends watching children. They could be known entities to parents if they were proven resources for daycares. If not, then they would at least be viewed as more reliable. The workers could set their prices, and the parents could decide if they could abide by them. Therefore, the elasticity of demand for some daycare workers could be more than for others. When the business first launches and fewer workers are available, higher prices could be dictated as the supply would likely be lower than the demand. However, the goal would be that with more available daycare workers, the cost would eventually regulate depending on their experience. They would have the option to change their prices depending on whether people are contacting them for work. They may need to adjust depending on their desire to work additional hours. The parents would only see the bill rates, including the markup for business operations and the rate to the worker. As the business continues its operations, we will track workers' rates. We would eventually use this data to advise new workers on what rates they could dictate based on their experience and when they can work. This system would only support workers who have been confirmed to work at a daycare facility currently. Potential customers would be parents seeking evening child care, whether the children attend daycare or have already started school to expand the demand. We would look to partner with local daycares and schools to advertise the service, which is likely to be successful should their workers choose to leverage the opportunity. As we would target the local population, it is less likely to make commuting an issue unless demand outweighs supply at a given time and a worker is willing to travel.

Given the recent inflation in the market, daycare workers may be more open to an easy way to increase their income. In general, 85% of Canadians worry that their earnings do not match the growing cost of living. Therefore, it makes sense that 63% of gig workers have opted for a side job in 2023 due to the surging costs and inflation. While workers could inform parents about the offering, having a daycare advertise the service would help parents with the peace of mind that their children would be in good hands. It also has the benefit for the daycare that they are supporting their workers in taking on additional hours if they choose to do so.

Having dependable child care during evenings and weekends can be a luxury for some but a necessity for others. It is difficult for those working in some industries to work those hours to find affordable child care. While this service would not qualify for subsidies as it is not a licensed daycare, there may be opportunities where a discount could be discussed between the worker and the parents if it were a regular job. However, it would be at the discretion of the worker.

The business would not have a brick-and-mortar location but would operate solely via phone and a phone application (app) to save operational costs. Payments would also be completed via the app, allowing workers and parents to review each other to promote accountability. While some parties may be tempted to circumvent the business, it could lead to avoidable negative tax implications.

Review This

As a new business, this childcare service in City M would require various resources and inputs to operate efficiently. We must first identify and discuss the impact of these resources on production costs.

Labor

The most significant cost driver for the business would be the labor costs. Based on their experience and availability, the flexibility of pricing for workers will play a crucial role in determining the overall expenses. If workers demand higher prices due to scarcity, it could initially lead to higher production costs. However, as the worker base expands and the market stabilizes, the costs will likely be regulated, benefiting both parents and the business.

Childcare providers available to work on the weekends and in the evenings make up most of the workforce in this company. The target workers for this app would be people currently working during the day at a licensed daycare and looking to earn more by expanding their workday into the evening and weekend hours. They would require a diploma in early childhood education and be a member in good standing with the College of Early Childhood Educators (ECE)(Labor Market Information, n.d.). They should also have first aid and CPR training(Labor Market Information, n.d.). The employees should be able to communicate well and work well with others to deal with both parents and kids(Labor Market Information, n.d.).

The availability and willingness of these workers to participate in the service would directly impact production costs. Ontario, City M's province, is estimated to be short 8,500 ECE workers by 2026 due to rising demand for childcare spaces (Jones, 2023). However, per the Ontario government website, the outlook for this skillset is average, with the most people in the Greater Toronto area where City M is located(Labor Market Information, n.d.). Seeing how City M is currently providing grants for people to obtain the necessary certifications for this field, there is a need to train people quickly to fulfil the demand in the market (Jones, 2023). The grants being offered will be good for the business in the long run as it will increase the supply of potential workers.Initially, when fewer workers are available, demand may exceed supply, allowing workers to set higher service prices. As the number of available workers grows, the cost of their services may stabilize or decrease due to increased competition. The business will look to incentivize workers to maintain competitive prices to attract more customers. We also look to provide opportunities to ECE workers for additional income outside their regular daytime jobs as we do not look to further exacerbate the current ECE shortage in the region.

Raw Materials

The primary "raw material" in this service industry is the availability of childcare workers. The business needs to establish partnerships with local daycares and schools to reach potential workers interested in taking on evening and weekend childcare opportunities. Building these connections and maintaining a steady pool of workers will be crucial to meeting the demand for the service. If the business establishes partnerships with daycares and schools for advertising and referrals, transaction costs might be involved, such as revenue sharing or marketing fees. These costs should be carefully negotiated to maintain a profitable business model.

Suppliers

The business also needs suppliers who can offer specific resources for the business. The company would need access to databases or platforms to manage employee profiles, parent reservations, and payments. Suppliers of background checks or verification services would also help ensure the dependability and safety of the workforce.

The company would also need several services to improve customer experience and streamline processes. These services could involve creating, hosting, and maintaining websites and apps. For conducting transactions securely and effectively, payment processing services are also required.

Additionally, the app and the technology infrastructure to support it would be an essential resource to the business. The cost of developing and maintaining the app would need to be considered in the production costs. The business would identify reliable and cost-effective app developers to keep this expense in check. Since we intend to operate solely via an app, outsourcing the development and maintenance to a specialized technology company would be wise, as we are not experts in this field. This would avoid the need to build an in-house tech team and reduce operational costs.

Business-to-Business (B2B) Services

The business must invest in marketing and advertising to promote the service and reach potential customers. Collaborating with local daycares and schools can serve as a B2B partnership, allowing the business to advertise the service to parents who may require evening childcare. These B2B collaborations could involve transaction costs, such as sharing revenues with the partner daycare facilities in exchange for advertising and referrals.

Environmental Conditions

The overall economic conditions in City M, including inflation and cost of living, population density, and the proportion of working parents, can influence the demand for the service and workers' willingness to participate. If inflation and living costs are high, more individuals may seek additional income opportunities, potentially increasing the pool of available childcare workers. A growing population with a high proportion of working parents and a robust local economy would indicate a more extensive prospective client base and increased demand for the service.

To conclude, the potential childcare service in City M would rely on an adequate labor force of experienced childcare workers, a user-friendly app, and strategic B2B partnerships for marketing. Careful management of labor costs and outsourcing app development can help optimize production costs and ensure the service's success in meeting the demand for reliable childcare during evenings and weekends.

I was informed that childcare workers would NOT count as raw materials here. I understand why, but can you advise on what could be seen as raw materials in this case? Instead, here we might think about all the other inputs that go into rendering childcare services, but it couldn't be snacks, toys, and so on as the parents of the children would supply it as the services would be taking place in their home.

The other important aspect for this assignment is to reflect on the importance of raw materials to production costs. It might make sense to reflect on the cost structurehow the relative sizes of fixed and variable costs compare in this industryand where there's potential to alleviate diminishing marginal product by increasing the limiting factors (capital/fixed costs). It makes sense to observe whether there are economies of scale and economies or diseconomies of scope.Can you help me apply that to this scenario? Thank you!!