Overview of First Cafe
Option A: Case Study – First Cafe
Please read the Case Study – First Cafe, and then complete the tasks that follow.
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To complete the tasks, you will need to undertake research of the café industry, and refer to the marketing plan provided.
As First Café is a fictitious business, you can make any realistic assumptions and use any other relevant information in your responses.
First Cafe
A group of young entrepreneurs set up a café business in Melbourne in 2012. They named their business First Cafe, as this was their first business venture together. The First Café offers a range of hot and cold beverages, cakes, pastries and a few simple dishes for lunch. It is aimed at young, affluent residents and professionals from the surrounding area. They open from 7am (to serve coffee) until 3pm, five days per week.
The owners (who are jointly responsible for the management of the café) understand that they are competing with the other local café businesses, both independent and chain cafés and restaurant businesses. Despite the competition, First Cafe has enjoyed substantial business growth since its opening three years ago.
Before setting up their business, the owners did some informal research that led them to understand possible customers’ needs. These include environment, friendliness of staff, and the quality of food and service. They also relied on advice from friends who own a café that had been successfully operating for 3 years in a nearby suburb in Melbourne. Their friends shared with them their marketing plan for their established coffee shop. The First Café management team based their initial operations on this marketing plan. This marketing plan can be accessed by clicking on the following link:
https://simulations.ibsa.org.au/coffeeville/secure/docs/CoffeeVille%20Marketing%20Plan.pdf
The owners of First Café have created a warm environment in their café through the ‘homely’ decoration of the first outlet. The staff chat with the customers to create a friendly environment and providing personal service is a priority.
In terms of business results, they recorded $800 000 revenue in the last financial year, with a net profit of $100 000. Their P&L suggests a lot of money has been invested to build the brand through marketing activities and operational expenses that include rental of a prime location, and wages (27.5%). The P&L also suggests COGS are 60%.
The main source of current sales and profit is its coffee and pastries. These two products contribute 80% of sales and profit.
After such a good start, the owners now want to grow their business, initially through the introduction of new products or services in their existing cafe. Although financially they are now in a better position, they still need to justify further business investment. They know you are completing a marketing course at OTEN and have come to you to help them with ideas for expansion, justification and a business proposal. They are keen to hear your new ideas.
Access the Café and Coffee Shops IBIS World Industry Reports for external market data to assist with your analysis. The IBIS World Industry Reports are accessed online via the WSI Library, https://wsilibraries.tafensw.edu.au/ Log in with your TAFE username and password and click on IBIS World, then / Australia Industry Reports (ANZSIC) / then / Cafes and Coffee Shops in Australia.
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Option B: An organisation of your choice
Choose an organisation that you are familiar with and complete the tasks outlined in Assignment 1 and 2 for this unit.
You will be required to research this organisation and the market that it operates in to be able to successfully complete the tasks in these Assignments. Please ensure that you have access to information about:
• The market size, key competitors, market shares for key competitors and the organisation of your choice
• The organisational structure, goals, business plan, marketing plan, the management team
• Financial statement analysis – return on investment, profit and loss, break-even point
• Resources
Access the IBIS World Industry Reports for external market data to support your analysis. The IBIS World Industry Reports are accessed online via the WSI Library, https://wsilibraries.tafensw.edu.au/ Log in using your TAFE username and password and click on IBIS World, then / Australia Industry Reports (ANZSIC) / then the industry in which your organisation operates.
If you are considering undertaking the Assignments in this unit using Option B, it is highly recommended that you contact your OTEN teacher to clarify if you have access to sufficient information to successfully complete these assignments before commencing.
Task 1
a) Research the market that either First Café or your chosen organisation operates in and conduct an external analysis (include a PESTEL analysis). If you are using an organisation of your choice, include a description of it and its market.
b) Using a range of secondary sources of information and data, identify, at least, three (3) potential new products and/or services that you could suggest to the management team for either First Café or your chosen organisation.
Use the Task 1 b) template to capture your potential ideas.
Be sure to reference your sources of information and include them in a reference list at the end of this assignment.
Task 1 b) Template
Task 1
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Potential ideas
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Brief reason(s)
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Source of information
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Market potential
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estimate:
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(Estimate number
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of people who may
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buy X The amount
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of money spent in
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a week X 52)
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c) From your list of opportunities, choose two (2) that you believe will be the most successful. Justify your choices based on your research.
Use the Task 1c) Template to help with your responses to this task.
Task 1 c) Template
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Potential ideas (your
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Justification
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two choices from the
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list in Task 1 b):
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Task 2
There are a number of tools that can be used to analyse marketing opportunities. Analyse each of the two opportunities you have chosen in Task 1 c) using the following two tools:
a) Porter’s Five Forces model. This model helps the company to understand the attractiveness of the opportunities.
b) A SWOT analysis. This is a ‘fit analysis’ between internal and external elements of the company.
Use the following templates to help with your responses to this task.
Task 2 a) Template – Porter’s Five Forces model
Task 2 b) – SWOT analysis
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SWOT
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Opportunity 1:
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Opportunity 2:
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Strengths
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Weaknesses
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Opportunities
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Threats
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Overall assessment
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(a) PESTEL Analysis for First Café
First Café is started by the young entrepreneurs as a business venture that offers hot and cold beverages, pastries, cakes and delicious snacks and dishes for food to young students, professionals and residents of Melbourne. The environment analysis for First Foods is done through PESTEL factors which includes the following:
The company follows all the relevant legislations including food safety, environment laws, Health and safety laws and packaging and labeling laws which First Café ethically follows in its practices. The government of Australia focuses on the future legislations for skill growth and economic growth that provides the company with positive future prospects (Martin and Schouten, 2012).
The Australian economy is optimistic with its strong financial position with the retail and mining sectors. The unemployment rate is below 5 percent that is consistent and will gradually decrease (Levens, 2014). This indicates a growth forecast which is steady and Melbourne forecasts to grow. The marketing and consumers perspectives indicate a buying shift from the luxury item like cars and TVs; with the refreshment and pamper activities while having food and coffee with friends, family and colleagues.
The clients and staff both have friendly and cooperative conditions to increase social aspects in the working culture. First Café promotes the work culture by contributing to environment and social factors and are socially responsible while conducting the business (Kotler and Keller, 2012).
First Café provides the new opportunities for marketing by involving the internet usage by providing WIFI Zone in café, promotion through social networking sites, and is evolving a technology where the customer may order online and specify time for serving before coming to the Café; this will enhance quick service, spend time with others and also relish food with time. This is an effective use to reach all the clients through the website and social networking site (Kollmann and Suckow, 2012).
The company focuses on the business process that ensures the eco-friendly processes and practices that have minimal environmental impacts. The First Café looks at the opportunity for corporate social responsibility in its supply chain and looks for providing the products in recyclable packaging (Kotler and Keller, 2012).
First Café ensures to follow all legal requirements be it in product safety or staff safety and health and employment regulations and more. The company ensures its growth opportunities by improving its performance by satisfying all the regulations on product safety and employee’s health and safety (Grewal and Levy, 2012).
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Potential Ideas
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Reasons
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Source of Information
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Market Potential (no. of people buying x amount of money spent in a week x 52)
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New varieties of flavors of Pastry puddings and cookies
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The nearby restaurants lack in the bakery services for the clients, thus by providing the cakes, pastries and cookies in variety of flavors will enhance the sales of the products (Grewal and Levy, 2012)
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Past sales data of the bakery products
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25x50x52= $65000
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New snacks in the menu like- Pasta and Mayonnaise Sandwiches
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The new offering of the snacks and menu will help the customers with more choice in the snacks section
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Customer’s Feedback on the products and product range
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15x75x52= $58500
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Start the Catering Services in the events offering Coffee and pudding and pastry sections
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The position of store is near the colleges, university and corporate environment where there are various events which keep taking place, the prices and product offering by the First Café will make it as the first choice during the events.
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Market Research data (Burns and Bush, 2014)
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2x1000x52= $104000
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Potential Ideas
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Justification
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New varieties of flavors of Pastry puddings and cookies
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The company takes up bakery product offerings for its customers as the potential idea. This will ensure more
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Start the Catering Services in the events offering Coffee and pudding and pastry sections
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This business is the most practically sound opportunity as the position of store is near the colleges, university and corporate environment where there are various events which keep taking place, the prices and product offering by the First Café will make it as the first choice during the events. The new bakery products will enhance the coffee business during the events. So catering business is the best opportunity to start exploring the target markets and potential customers.
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Force
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Opportunity 1:
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Opportunity 2:
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Rivalry
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There is a high rivalry in the market for Coffee shops
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First Café faces competitions by Zelda’s, Café Verdi, McDonald’s McCafe, Subway and Coffee Mia which are in nearby places. Also the entries of the international brands like Costa Coffee, Tim Hortons, Starbucks and Gloria Jeans have contributed to the rivalry in coffee and related product offerings (Timhortons.com, 2015).
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Threats of new entry
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The new entrants in the market for coffee stores is potentially high (MONSHOUWER, VAN LAAR and VOLLEBERGH, 2011)
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The market is approaching in saturation in many areas due to influence of new entrants through there is still less competition in nearby area. The absence of international brand have given the company to attract more customers but the new entrants locally and internationally might influence the customers choices in coffee chains so it is considered as the future threat for the company.
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Threats of substitute
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There is little threat of substitution for First Café
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The company sells high variety of bakery food, high quality of coffee, tea, cold and hot drinks along with the best infrastructure, friendly atmosphere and with economical prices. The competition from highly developed coffee stores like Starbucks, McDonald’s, Costa Coffee, Gloria Jeans, Café Verdi and more will contribute to the threat of substitute (Pride and Ferrell, 2012).
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Buyer power
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The buyer power is high for the First Café
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The buyers have fewer substitutes and are loyal towards the products of First Café which has lead to high buyer’s power. The other reasons being the high variety of product range and variety of services with best infrastructure has contributed to high buying power.
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Supplier power
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The supplying power is low
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The Government regulations on exports of coffee from outside countries, backward integration has given a low supplier power for the company
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Overall attractiveness
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The overall performance of the company is dependent on the promotion and marketing techniques so that it may target more nearby customers (Yuan, Chang and Tzeng, 2012).
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The products and service offering must be focused to fulfill satisfaction of employees and the prices differentiation would help the company to face the global competitors from entering the area.
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SWOT
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Opportunity 1:
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Opportunity 2:
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Strength
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· Friendly, socially responsible and skilled staff,
· High quality of food and services,
· Best Infrastructure and
· Increasing customer loyalty (Pride and Ferrell, 2012)
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· Increase in health consciousness among customers,
· Growth in coffee culture, and
· Great locality
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Weakness
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· Increasing budget for promotions and new products,
· Limited area to serve more customers
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· Local competitor’s promotional strategies,
· New entrants in market with coffee houses
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Opportunity
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· Growing environmental friendly products,
· Business sustainability trend,
· Expanding the services through serving in events and corporate catering
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· Rising mobile purchases,
· Integration of markets,
· Improving government support for infrastructure (Yuan, Chang and Tzeng, 2012)
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Threat
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· Increasing employment regulation,
· Rise in availability of coffee machines specially for home use
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· Rising labor cost in suppliers’ countries,
· Lack in supply of worldwide coffee
· Competition from highly developed coffee stores like Starbucks, McDonald’s and more
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Overall Assessment
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The company focuses to improve the business opportunity by offering the products outside the coffee shop through catering business in the various events. It also focuses to increase the technological use and expansion of store area to serve more customers.
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The local competitor’s and brands are the threat for the company, so it focuses to provide a quality product and service at the economical prices that may attract the target group and also provide the best infrastructure with friendly atmosphere.
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References
1. Burns, A. and Bush, R. (2014). Marketing research. Boston: Pearson.
2. Grewal, D. and Levy, M. (2012). Marketing. New York: McGraw-Hill/Irwin.
3. Kollmann, T. and Suckow, C. (2012). Influencing User Attitudes by Managing Online Brand Communication in E-Shops. MAR, 34(1), pp.40-54.
4. Kotler, P. and Keller, K. (2012). Marketing management. Upper Saddle River, N.J.: Prentice Hall.
5. Levens, M. (2014). Marketing 2014 + mymarketinglab with pearson etext access code. [Place of publication not identified]: Prentice Hall.
6. Martin, D. and Schouten, J. (2012). Sustainable marketing. Upper Saddle River, N.J.: Pearson Prentice Hall.
7. MONSHOUWER, K., VAN LAAR, M. and VOLLEBERGH, W. (2011). Buying cannabis in ‘coffee shops’. Drug and Alcohol Review, 30(2), pp.148-156.
8. Pride, W. and Ferrell, O. (2012). Marketing 2012. Mason, Ohio: Cengage Learning.
9. Timhortons.com, (2015). Tim Hortons Language Selector. [online] Available at: https://www.timhortons.com/ [Accessed 21 Dec. 2015].
10. Yuan, B., Chang, H. and Tzeng, G. (2012). Evaluation of service quality continuous improvement in coffee shops. Human Factors and Ergonomics in Manufacturing & Service Industries, p.n/a-n/a.
