Analyzing the Feasibility of a New Coffee Business

The assignment report presents a plan to collect primary and secondary data for a new coffee company. The plan involves using questionnaires to acquire primary data and conducting market research to gather secondary data. Microsoft Excel tools were used to analyze the data. The results show that investing in project A (coffee business) is more feasible, with a net present value of £5722 compared to project B's £1339.5. Therefore, it can be concluded that developing the new product is a viable business proposal for the company.

Business Decision Making

TABLE OF CONTENTS
INTRODUCTION .....................................................................................................................4
TASK 1......................................................................................................................................4
LO1: A, LO1: B ...................................................................................................................4
TASK 2......................................................................................................................................7
LO2: .....................................................................................................................................7
TASK 3 ...................................................................................................................................12
LO3: ...................................................................................................................................12
TASK 4 ...................................................................................................................................13
LO4.......................................................................................................................................13
CONCLUSION ......................................................................................................................17
REFERENCES ........................................................................................................................18

TABLE OF FIGURES

INTRODUCTION
Business decision making is the process of choosing and optimal decision among
various alternatives. In order to make effective decisions, organization requires the accurate
and reliable information from market (Romford, 2014). XYZ is the medium-size coffee
packaging company operating in London region and the company wants to develop a new
coffee-based drink for coffee shop customers. The senior management team wants to
indentify the emerging trends in this market. They also wish to examine the financial viability
of introducing this new product. In the present report a plan has been carry out to determine
the consumer profile, preference, attitude and buying behaviour related to coffee drinks.
Primary and secondary sources have been analysed to collect the information. Descriptive
statistics have been used to identify the financial viability of project.
TASK 1
LO1: A
In the given business scenario a medium-size coffee packaging company wants to
develop a new coffee-based drink for coffee shop customers. In order make optimal decision,
information such as consumer profile, preference, attitude and buying behaviour of users will
be required. The following points represent the data collection methods such as primary and
secondary data collection:
 Primary Data collection method -As per primary research, the data are
to be collected for the first time. In order to collect primary data, market survey will
be conducted in which a questionnaire will be prepared. The questionnaire includes
questions related to customer preference over coffee products and their expectation
from a new product.
 Secondary method of data collection- To invest in the development of new
project company will also require market information which includes size of industry,
market size, market demand and all. In order to obtain such information secondary
research will be used (Haynes, 2002). The trend within the industry, customer profile
and their expectation will be gathered by analysing secondary sources such as
business articles, books as well as journals. The information available on social
networking sites will also be useful in for making optimal decision. The size of the
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market for coffee drinks, competitors, and market structure and market shares of key
players can also be analysed using secondary sources (Hedgebeth, 2007).
Survey methodology used for the collection of primary data:
The foremost method to collect reliable and accurate data from the market is known
as survey. Before making a decision over developing a new product, business has to conduct
a market research and collect all the data that is relevant for the research purpose. While
using survey method firm can collect valid and authentic information on a topic. In respect
with present case, it will help business in identifying the needs and wants of customers and
the areas where services need to be improved. In present report, questionnaire method is to be
used to collect the information of customer preference.
Pros and corns of survey methodology
By using such method the data can be collected while following a standardized
procedure (Singh, 2007). It is an easy method for data collection and questionnaire are
designed as per the information that is to be collected. Through distributing a questionnaire,
right target group can specifically be targeted and specific answers can be derived from
respondents in a specific manner. This is easy way to collect and analysis the data and to
make relevant presentation. On the other hand, it is an expensive method of primary data
collection. Sometimes it will become very difficult to make a specific view upon a business
problem (Bulmer, 2013). The research has been conducted in the posh areas of London. The
respondents of the questionnaire will be the existing and potential customer who use coffee
and related product in a coffee shop. The Questionnaires has been sent to the customer via E-
mail and other social networking sites. In addition to that most of the customers were
approached in the coffee shops at various locations. Almost 60 questionnaires found filled
correctly therefore used for further analysis.
Sampling frame used for the collection of primary data and its advantages and
disadvantages
Sampling method is used to select the respondents from a large population. For the
present study, simple random sampling method will be used so as to collect the data from
respondents. In this sampling method every respondent of a specified size from the
population has an equal chance of being selected for the research (Moore, 2010). The major
advantage of this method is that the respondents are given equal chance to be selected in the
investigation. In respect with this study, use of such method allows every customer who uses
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the coffee product has been given a chance to take part in the research. However, the
disadvantage of such method is that it can be difficult to contact all of the chosen samples. In
addition, an unrepresentative sample may exist by chance. The Sample size of this
investigation is 60 customers of London city.
Target population Customer of Kitchen King restaurant
Sampling method Simple random sampling
Research instrument Questionnaire
Research location London city
Sample size 60 samples
Sampling unit Upper , middle and lower class customers
LO1: B
Size of the market for coffee drinks
As per the investigation made for 2014, total UK coffee shop market is estimated at
16,501 outlets along with this it continued to show strong sales growth of 6.4% with an
annual turnover of £6.2 billion in last year. In addition the findings of Allegra Strategies
definitive report, Project Café13 UK, there are around £2.6 billion branded coffee chain
segment have been recorded across 5,531 outlets. The need of coffee packaging company is
still needed to procure quality coffee. There is seen a huge growth within coffee shop sector
from last 15 years and now it becomes the most successful brand within the UK economy
(TWCC NUS Coffee Market Presentation, 2015).
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Competitors, market structure
Within UK there are major brands of coffee shops that provide a direct competition to
the proposed coffee shop. Annual turnover of existing coffee shops is 7.2 billion. The major
competitors of new coffee company will be Starbucks and Costa Coffee as both are having
strong brand value and are offering range discounts and other attractive offers to market
customers. In addition, the customers of UK are even more knowledgeable on the subtleties
of coffee preparation and delivery from bean to cup that increases competition in terms of
quality of products among existing and new retailers (UK coffee shop trends for market now
£6.2 billion – and growing, 2015).
Market shares of key players
Market share of leading European Branded Chains
This is to be noted that four leading branded chains have 40% of the market.
Some facts about UK coffee market
It has been identified that 80% of consumers visit a coffee shop regularly in UK. On
the other hand, over a half of the espresso consumed in South East, UK. From a secondary
investigation, it was found that on average men drink more coffee than women (1.7 cups per
day v/s 1.5 cups). The study conducted by a wicked coffee company found that 37% of
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coffee drinkers consume black coffee; while 63% add a sweetener such as sugar (TWCC NUS
Coffee Market Presentation, 2015).
Questionnaire
1. Personal information
Name: __________
Occupation ___________
Contact number: ___________
Email Id: __________
Gender
o Male
o Female
1 What age group would you fall within?
 18-29
 30-40
 41-50
 Above 50.
2. What is your current annual income?
o Less than $25,000
o $25,001 to $45,000
o $45,001 to $65,000
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o Greater than $65,000
3. Do you drink coffee?
o Yes
o No
4. How often do you visit coffee shops?
o Daily
o Weekly
o Monthly
o Less than once per month
5. On average, how many cups of coffee do you consume?
o One or less cups per day
o 2 to 3 cups per week
o 4 to 5 cups
o More than 5 cups
6. Which is your favourite coffee drink?
o Drip Coffee
o Cappuccino
o Iced/ Blended drinks
o Other
7. How much you are willing to spend at a coffee shop?
o Less than $2.00
o $2.00- $4.00
o $4 .00 - $6.00
o $6.00 - $8.00
8. What season do you drink the most coffee?
o Spring
o Summer
o Fall
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o Winter
o same for all seasons
9. What attracts you most to a particular Coffee shop?
o Ambience
o Quality of products
o Price of products
o Customer services
10. Give any suggestion for development of new coffee – drink?
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THANK YOU FOR THE TIME YOU HAVE GIVEN
TASK 2
LO2:
Summarise the data collected from primary research
Following table and graphs represents the data that are collected through primary research.
Table 1 Gender composition
Proposition of population
Number of respondents Percentage
Male 39 65 %
Female 21 35 %
Mode 39
.
Age group of respondents
Number of
respondents Percentage
18-29 20 33.33%
30-40 25 41.66%
41-50 10 16.66%
Above 50. 5 8.33%
Mean Sum X/F= 15
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60/4
Mode Highest value 25
Median
2thterm +
3thterm/2 17.5
How often do you visit coffee shops?
Table 2 Visits to coffee shop
Frequency of visit of customers
Number of respondents percentage
Daily 10 16.67 %
Weekly 25 41.67 %
Monthly 15 25.00 %
Less than once per
month 10 16.67 %
Mode 25
Which is your favourite coffee drink?
Table 3 Consumer preference for different types of coffee
Favourite coffee drink
Food Number of respondents Percentage
Drip Coffee 15 25 %
Cappuccino 25 41.67 %
Iced/ Blended drinks 14 23.33 %
Others 6 10 %
Mode 25
As per these figures of consumer preference for different types of coffee it can be said
that most of the people prefer Cappuccino and Iced/ Blended drinks in coffee shop. Thus
entity should consider these drinks in their menu to earn better revenue. The respective mode
value is 25 indicating that most of the people like Cappuccino.
How much you are willing to spend at a coffee shop?
Table 4 Average spending in coffee shops
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Average spending
X Number of respondents (F) XF
Less than
$2.00
1
10 10
$2.00- $4.00 3 20 60
$4 .00 - $6.00 5 20 100
$6.00 - $8.00 7 10 70
Mean Sum XF/F= 240/60 4
Mode Highest value 20
Median 2thterm + 3thterm/2 8/2=4
Range Highest value – Lowest value
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How often do you visit coffee shops?
Table 5 Consumer preferences for visiting coffee shops
Consumer preference
Number of respondents Percentage
Ambience 10 16.67 %
Quality of products 25 41.67 %
Price of products 20 33.33 %
Customer services 5 8.33 %
Mean Sum X/4 15
Mode Highest value 25
Median
2thterm + 3thterm/2
=45/2 22.5
On average, how many cups of coffee do you consume?
Cups of coffee do you consume
Number of respondents Percentage
One or less cups per day 8 13.33 %
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2 to 3 cups per week 12 20 %
4 to 5 cups per week 30 50%
More than 5 cups per
week 10 16.66%
Mean Sum X/4 15
Mode Highest value 30
Median 2thterm + 3thterm/2
=42/2 21
Analysis the results
On secondary data descriptive statistics have been applied that are helpful in making
optimal decisions. As per above calculation following conclusions can be made.
The value that is used to find out the value of frequency is called as mean value.
Mode value represents the value that has occurred for more than one time (Bryman and Bell,
2003).
The mean value of age of respondents is 15 that representing average age of coffee
consumers. The respondents aged between 30-40 have taken part in the respondents to a
higher number. The median value is noted at 17.5. The value that separates the whole data in
two parts is called as median value (Morato, 2013).
The mode value of visiting trend of people is witnessed at 25 indicating the most of
the people visit coffee shops on weekly basis. These figures, it can be concluded that
customers prefer to visit coffee shop on regular basis.
The mean value of average spending is 4 representing that people are agreed to spend
approx $4. On an average 4 to 5 cups per week is consumed by the population. Through this
fact entity can determine their production quantity.
Analysis data using measures of dispersion
There are three measures of dispersions that are used to make valid decision over
business problems. These are explained in below points with their significance in business
scenario:
The value that explains the difference between higher and lower value it the series
can be explained as range (Khan and Hildreth, 2004). However the range value is 10
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representing a upper and lower level of average spending. The value represents how much the
business can earns between the lowest and highest amount (Goddard and Melville, 2004).
Using quartiles the data can be divided into four equal parts. The data is useful in
identifying the income and profits for company per quarter. The difference between fourth
and first quartiles is known as inter quartile (Carroll, 2007). Percentile value divides the data
into 100 equal parts so that the significance of each value can be measured. 25th percentile
represent the lowest value on the other hand 100th percentile includes highest value for the
series.
TASK 3
LO3:
Tables, graphs, charts and other appropriate methods such as trend lines along with good
interpretations
Gender
Age
On the evaluation of responses it has been found that 65% of the respondents were
male and 35% were female. The mode value of gender demographic is 39 representing that
male customers were interested in research. Through this figures, it can be said that new
coffee shop should focus more on preference of male in comparison to female to provide
better services (Rice, 2007)
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The respondents aged between 30-40 have taken part in the respondents to a higher
number.
Frequency of visit of customers
By evaluating frequency of visit of customers it has been evaluated that 41.67%
population visit weekly and 25.00 % visits monthly to coffee shop. Only 16.67% of them go
daily in coffee shops.
Favourite coffee drink
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Average Spending
On the evaluation of pricing factor, it has been evaluated that most of the people pay
to prefer between range of $2-4 or $4-6. Entity should set prices of their products on the
bases of these figures to attract higher customers.
Consumer preference
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By evaluating the response of Consumer preferences for visiting coffee shops it has
been identified that 41.67% of the customer consider quality and taste of the food. 33.33%
considers price for the selection of the coffee shop.
Cup of coffee consumed
Formal business report
The present report aims to collect the accurate information so that the optimal
decision can be taken on a business problem. The various source of primary and secondary
data collection have been used in the report. In respect with present case questionnaire
method is used to identifying the needs and wants of customers and the areas where services
need to be improved. The data indicates that business has enough opportunities to attract
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customers with their different offerings hence; to invest in development of new coffee
business is a feasible project.
TASK 4
LO4
Prepare a project plan for an activity and determine the critical path
Table 6 Activity table
Task List of Activity Estimated time
(Months )
Preceding activity
A
Collection of Information 2 -
B
Screening The Idea 5 1
C
Testing The Concept 6 1,2
D
Conduct Business Analytics 3 3
E
Present Marketability Tests 4 2,3,4
F
Technicalities use to
Product Development 5 4,5
G
Commercialization 2 6
H
Post Launch Review 5 6,7
I
Set Perfect Pricing 1 7
J
Examine the results 5 7,8,9
K
Approval from board 6 9,10
L
Apply decisions 2 10,11
Table 7 Gantt chart
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Table 8 Critical path
Financial tools for decision making
In order to analysis the project various investment appraisal techniques are to be used
that are explained in below points with the relevant examples in context with medium-size
coffee packaging company (Fabrics, 2014).
Project costing
Funding Requirement Amount (£)
Fixed Assets 30000
Market Research 5000
Marketing and Promotion 5000
Working Capital 20000
Total Funding Requirement 60000
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Year Project A Project B
Investment -60,000 -60,000
1 100,00 150,00
2 20,000 175,00
3 21,000 155,00
4 22,000 18,000
5 15,000 15,000
Net present value
Table 9 Calculation of net present value
Year Project A Project B P.V factor
@ 10%
PV of Project
A
PV of
project B
Cash flow Cash flow
Investment -60,000 -60,000
1 10,000 15,000 0.909 9090 13635
2 20,000 17,500 0.826 16520 14455
3 21,000 15,500 0.751 15771 11640.5
4 22,000 18,000 0.683 15026 12294
5 15,000 15,000 0.621 9315 9315
Total present
value
65722 61339.5
Investment 60000 60000
NPV 5722 1339.5
In the above calculation it is cleared that the value for Net present value for project A
is higher than Project B with £5722 indicating that in is better for company to invest in
project A of coffee business.
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CONCLUSION
The above report represents the plan to collect the primary and secondary data in
respect with a new coffee company. In order to collect the primary data questionnaire method
have been used to acquire secondary data market research is conducted. Microsoft excel tools
have been used to analysis the data. It can be concluded that the company can develop the
new product as it is the feasible business proposal.
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