A Coffee Kiosk: Element
Questions:
Task 1
Your proposal should outline the key elements of your chosen product or service and explain the reasons why you have chosen it. You should also give an overview of the country in which you intend to market it and outline the reasons behind your choice.
Task 2
You are required to carry out research relevant to the first stages of the marketing planning process. You must then evaluate your research and present it in report format. For Assignment 1, you are only required to present your findings based on the first three elements of the SOSTAC model.
Answers:
Task 1
Key element and background of the product
A Coffee Kiosk business at the US
US market is one of the fastest-growing markets of the world. So in this market there is huge opportunity to launch new products or services. The name of the new business will be “The Daily Café”. It is a beverage store that mainly provides hot and cold beverages and specialized in custom blended teas and specialty coffees. Beside these two products, it also provides domestic soft drinks, baked pastries, and other confections. Occasionally this will provide some added beverage like frozen coffee, hot chocolate or more. The Daily Café (TDC) provides a drive through facility or mobile cafes to its customers. It has the ability custom different orders of blended items as per the customer specification. The staffs of the TDC will be trained in blending, brewing and serving the good quality of cold and hot beverages by keeping the requirement of the consumers in mind. It will penetrate the daily as well as the captive consumers in the most accessible areas. Also the company will provide a good quality product and services to ensuring customer loyalty. The company is also planning to make a charity of 9% of their revenues in charitable institutions as per the choice of the consumers. The financial plan for the company is quite good. The business is mainly operated by cash so the initial or startup costs will be much less than any other start-up business. Moreover, the company has to incur a huge cost because it has to hire some people who have skill and knowledge in coffee and tea blending activity (Borzoni and Poole, 2011). It will play the role as a retail coffee house industry. Coffee is the widely used beverages around the world. The whole coffee market at the US is segmented into three areas grower, retailers, and rosters. The world largest coffee producing country was Brazil as per the report published in 2012.From a statistic, it is found that American consumers spend 21.32 USD on coffee per week on an average. Over the past few years, this product is becoming very popular among the consumers and the US coffee market has occupied almost 50 percent market share all over the world. If the retail level sales is considered then it is found that the coffee retail business at the US took the largest share of 36 percent of retail sales. All these above mentioned factors are the main reason for selecting the product and the country as it seems to have enough opportunity to grow (Villalón-Soler, E,2010)..
Task 2
Situational and Environmental analysis
Mission statement for the company
The business “The Daily Café” has segregated its mission statement into three phases, the Economic Mission, the Community Mission, and the Product Mission.
The Economic mission includes growth through effective operations and by taking sound economic decisions. Product mission involves providing good quality and finest beverage in most efficient time. Community mission is to create an environment of customer support by involving customers in various activities (Business plans that work,2011).
Key trends in the market-
There are several areas or key aspect that is useful for the business to develop. Some of these are mentioned below-
The suitable locations- high traffic pattern, convenient access, and visibility.
The friendliness of servers- The servers will be very professional, cheerful, articulate and skilled.
The best quality of products- Cleanest equipment, Fresh coffee beans, consistent flavor.
The reputation- if the company can provide the services as per the consumer choice then it will not be very difficult to build their reputation in the market. The promotion can be made by word of mouth advertising, the donation in the charitable institutions etc (Sherlekar, S. and Gordon, E,2010).
PESTLE analysis
PESTLE framework is the analysis of the external and internal environmental factors on the company that includes the identification of Political, Environmental, Social, Technological, Economical and Legal factors. The following table represents the PESTLE analysis for “The Daily Café”.
|
Political factors The stability of the US government |
Environmental factors Disasters of the environment in coffee bean producing countries. |
|
Social factors Population patterns in the US. |
Technological factor The Introduction of the latest technology.Development in agriculture of coffee. |
|
Economical Factors The level of taxation. |
Legal factors Licensing regulation related to this industry. |
Political factors – the countries of Africa and Latin America produces coffee beans that can be imported for the business. The international relationship between the US and those countries provide the company a good opportunity to market their products. Each and every coffee bean importers has to register them with the FDA authority. There are also some federal regulations in the country that affects the coffee business, but it does not have any adverse effect. Moreover, the US government is in a stable position (Dess, G,2012).
Environmental factors- these factors provide a challenging situation for the company. Now days there are many preservation rules that US country is following for coffee production. So the company has to follow those rules. It may cause some reduction in the profitability, but as all these are the part of the social responsibility so the business will follow the relevant rules in to sustain in the market (Reinecke, J., Manning, S. and von Hagen, O,2012).
Social factors- the change in the preferences and lifestyle among US consumers has a positive impact on the business of “The Daily Café”. This business uses the technology of mobile café and mainly selling their products through Kiosk so it will be more convenient for the consumers as they can get it any time they want (Woodman, P,2008).
Technological factors- this is another factor that proves to be challenging for the company. The latest innovation of coffee making process and the agricultural activities improve the market of the coffee business. The competitors of the coffee market already have some competitive advantage in this area so the company has to spend more money in this segment and should concentrate on continuous research and development (Business plans that work, 2011).
Economical factors- it is the most important factor for a business that need to be considered. US economy had faced a market crisis in 2008-2009 which adversely affected almost all industries. Coffee producing companies were not excluded from that situation. The positive thing that can be mentioned about the economy of the US is the buying power of the consumers is in growing trend and an average American drinks almost 3.1 cups coffee per day. Almost $ 9 billion revenue is collected from the coffee industry. So the economic factors have a positive impact on the Coffee Kiosk business (Ramachandra, K., Chandrashekara, B. and Shivakumar, S,2010).
Legal factors- there are some new rules and regulations that have introduced in the US and create some impact on the coffee business. The Safety Modernization Act revised the fees for the coffee importers, and it is mentioned that the quality must be checked before it is used for the consumption (Hill, C. and Jones, G,2012).
SWOT analysis
SWOT analysis is a tool that is used for analyzing the opportunities, threats, strength and weakness of an organization. It is a best evaluation technique to know the current position as well as the future prospective of the company. Following is the key factors which represent the SWOT of the company-
Strengths
The business is based on the mobile kiosk technology so it gets the advantage of suitable locations for attracting the consumers.
The business is fulfilling has a valid copy right, trade mark, and logo.
It is operated in a retail store, and it does not have any franchises, so it is very easy to control and operate.
The employees are skilled and motivated.
The Daily café have used a well-established technology. The structural design of the mobile vans is very much convenient for sale the products.
The product is socially acceptable by all consumers.
The coffee industry at the US is one of the leading industries in the world (Prud'homme, A,2008).
The variety of products and their acceptable quality is the main strength for the business.
Weaknesses
The size of the business is not very large as it is in initial stage.
The number of competitors in this market is growing.
There is a lack of financial resource availability.
The implementation of new technology requires extra cost that may be burdensome for the company (Pitt, M. and Koufopoulos, D,2012).
Opportunities
The emerging coffee market in the US. Each American consumes almost 3.1 cups coffee per day.
The innovation of agricultural activities and development of new technologies.
The company is willing to introduce seasonal products that give them the benefit of product diversification.
The annual growth of the coffee industry is almost 3.2% a year, and it is predicted that this growth will continue for the next five years.
The cost of coffee beans is becoming low so the company can able to import it at a low cost.
The demand for the new type of product and services are increasing in the US market. All people are now running with the time. So they require readymade food items for consumption. As this business provides the product in a very convenient way as per the specifications of the consumers, it can be the opportunity for the business to grow in the US market (Howard, P. and Jaffee, D. (2013)..
Threats
The main threat of this area is the threat from its competitors. The Daily Café will be the first double sided drive through the coffee house in the metropolitan area. Still it has some significant competitors from the retailers and traditional coffee houses. Some of their competitors are-
The national chains The leader of the national chain store is the Starbucks, which has almost 10000 retail outlets all over the US (Jacobs, M. (2008).
Local café
The other main competitors of the daily café are the locally owned cafes. They have a strong customer base, and the quality of the product is so high they can suppress any brand.
The Daily Café believes that in spite of having this strong competition they will able to get the competitive advantage for the following reasons-
Mobile Cafes
Drive through services.
More convenient customer service.
Community benefit.
The other threat can be the obsolescence of technology and sudden change of consumer preferences.
Objectives
Each and every business activity must have some objective. On the basis of the objectives the strategy is formulated and the company performs accordingly to reach the destination. The Daily café has also established three objectives which it want to achieve within the next three years (Hudson, I. and Hudson, M. (2009).
Objective1. Fifteen drive thru locations and five fully booked mobile café for the next three years.
For achieving this objective, the company makes a detailed analysis of the market trend and locations which will be suitable for operation. At present, the company is operating with three drives thru location and has only one fully booked café.
Objective2. The company wants to achieve a gross margin of 40% and net profit after tax above 16% of sales or at the end of three years.
For this, the company first make an industry forecast. The business is operated by the company in the metropolitan areas which are having the population of more than 150000 people. The balance sheet estimation of the company shows that if it operates in fifteen locations then the estimated cash balance will be $ 823,526, and the earnings will be $960,846. The balance sheet forecast shows that if the company operates in the same way as it is projected then the net worth will be approximate $ 1,025,468. At present, the same type of companies is trading in multiples of five to ten times of earning. So will not be an unrealistic assumption to estimate the earnings and the cash flow on the same basis (Kotler, P. and Keller, K,2012)..
Objective3. To reach a wide range of consumers and established a brand image
In order to achieving this objective, the business has initiated several loyalty programs for the consumers. It has also planned to contribute a portion of their revenue to the charitable institutions. They have also ensured to provide a quality service at a low price (Lynch, R,2012).
All the above objectives are formulated as the part of the SMART objective rule as these are
Strategies adopted by the business
Strategies are the tactics which that can be used for attaining the objectives. The management of The Daily Café has formulated different strategies to achieving the goals.
Promotional strategy:
This is the most important portion of the strategy formulation as the future success of a business to a large extend depend on this strategy. The business is planning to spend $1000 per month for public relations in the next year in order to generate awareness among the public (Marshall, G. and Johnston, M,2010).
It gives advertisement through different media especially on TV and radios. The company is also planning to promote their business through social media, so that they can attract more youth consumers. At the initial stage, they allocate more finance in advertising as they need to make people aware about the facilities they are providing.
Distribution Strategy:
The Daily Café makes the arrangements for the mobile cafes in schools, different business houses and events every year as many as possible. The objective of formulating this strategy is to attract those consumers who are coming from different areas where the TDC may not available, but it may increase the demand among those consumers (Murthy, P., Madhava Naidu, M. and Srinivas, P,2009).
Pricing strategy:
The pricing strategy of the TDC is based on their sales forecast. The company will initially try to provide their product at a low cost so to gain a competitive advantage over its competitors. Their main focus will be selling more units at a low price. In order to ensure high sales, it can give free coupons to those consumers who have purchased a certain number of cups in a day or week (Mussatto, S., Machado, E., Martins, S. and Teixeira, J,2011).
Apart from the above strategy the company can also try to implement some other strategies for boosting up sales like-
Organizing corporate testing events- TDC plans to host the different testing event at the end of each quarter. When a new season comes then the business will try to adjust their product menu and flavors as per the consumers taste and preference.
Strategic alliances- The Daily Café will make strategic alliances with the manufactures of the drive through facilities and with the consumable product providers. The business will also consider schools, nonprofit organizations for strategic alliances since they provide them the benefit of more exposure and thus providing them financial benefit.
It can be projected by the initial outline of the business plan that if all the conditions are favorable and the strategies can be properly implemented then it will not be very difficult for the business to continue their operation in the US market (Parthanadee, P. and Buddhakulsomsiri, J,2012).
References
Borzoni, M. and Poole, N. (2011). Sourcing strategies in the Italian coffee industry. Food Chain, 1(1), pp.71-86.
Business plans that work. (2011). .
Dess, G. (2012). Strategic management. New York: McGraw-Hill/Irwin.
Hill, C. and Jones, G. (2012). Strategic management essentials. [Mason, Ohio]: South-Western.
Howard, P. and Jaffee, D. (2013). Tensions Between Firm Size and Sustainability Goals: Fair Trade Coffee in the United States. Sustainability, 5(1), pp.72-89.
Hudson, I. and Hudson, M. (2009). Fair-trade Coffee: The Prospects and Pitfalls of Market Driven Social Justice: Brewing Justice: Fair-trade Coffee, Sustainability, and Survival: Fair-trade: The Challenges of Transforming Globalization. Historical Materialism, 17(2), pp.237-252.
Jacobs, M. (2008). Product complexity.
Kotler, P. and Keller, K. (2012). Marketing management. Upper Saddle River, N.J.: Prentice Hall.
Lynch, R. (2012). Strategic management. Harlow, England: Pearson.
Marshall, G. and Johnston, M. (2010). Marketing management. Boston: McGraw-Hill Irwin.
Murthy, P., Madhava Naidu, M. and Srinivas, P. (2009). Production of α-amylase under solid-state fermentation utilizing coffee waste. J. Chem. Technol. Biotechnol., 84(8), pp.1246-1249.
Mussatto, S., Machado, E., Martins, S. and Teixeira, J. (2011). Production, Composition, and Application of Coffee and Its Industrial Residues. Food Bioprocess Technol, 4(5), pp.661-672.
Parthanadee, P. and Buddhakulsomsiri, J. (2012). Production efficiency improvement in batch production system using value stream mapping and simulation: a case study of the roasted and ground coffee industry. Production Planning & Control, 25(5), pp.425-446.
Pitt, M. and Koufopoulos, D. (2012). Essentials of strategic management. London: SAGE.
Prud'homme, A. (2008). Business continuity in the supply chain.
Ramachandra, K., Chandrashekara, B. and Shivakumar, S. (2010). Marketing management. Mumbai [India]: Himalaya Pub. House.
Reinecke, J., Manning, S. and von Hagen, O. (2012). The Emergence of a Standards Market: Multiplicity of Sustainability Standards in the Global Coffee Industry. Organization Studies, 33(5-6), pp.791-814.
Sherlekar, S. and Gordon, E. (2010). Marketing management. Mumbai [India]: Himalaya Pub. House.
Villalón-Soler, E. (2010). Brewing Justice: Fair trade coffee, sustainability and survival. Political Geography, 29(3), pp.182-183.
Woodman, P. (2008). Business continuity management 2008. London: Chartered Management Institute.
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