The Coffee Industry: Business Models and Sustainability

This assignment delves into the intricacies of the coffee industry. It investigates various business models employed by coffee companies, focusing on both traditional and innovative approaches. The analysis also scrutinizes the role of sustainability in the coffee sector, examining fair trade practices, environmental impact, and consumer preferences for ethically sourced coffee. Further, it explores consumer behavior patterns within the coffee market, including brand loyalty, pricing sensitivity, and purchasing motivations. Finally, the assignment considers global market trends shaping the future of the coffee industry, such as technological advancements, evolving consumer demands, and international trade dynamics.

New Zealand Diploma in Business
Economics and Finance
ASSESSMENT 1
Individual Assignment
[Type the document title]
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Task 1
Analysis of macro environment for economy
Part 1
 The key growth indicators and development sources: - The project is under taken to
open a coffee shop at the location near to colleges and schools in New Zealand. Just best
coffee will be unique in nature from all other competitive firms as it will serve different
flavours at its location to attract more crowds from schools and colleges. Lower cost with
a variety of product will be an effective tool to attract youngsters to spend more time in a
coffee shop. A wide range of products from espresso to latte blend will be served at
coffee shop at a very reasonable price (Barham and Weber, 2012). As the country is
offering more and more courses to attract international students, so it is expected a rapid
increase in more international students in coming 3 to 5 years which will be the
permanent customer base for the coffee shop due to its nearness to colleges and schools.
The atmosphere of the coffee shop will be very entertaining and upscale, which will
attract more customers and facilitate growth to the business. The interior design of the
coffee shop shall be focused to create more relaxed and entertaining atmosphere. For
serving the customers, a technical system with skilled and knowledgeable people will be
used, which would cause an increase in the service efficiency. The coffee shop will be
open 8AM to 10PM, 365 days a year (Burbach, 2005).
 To improve their potential for future growth: To become a continuous growing
business, the company will come with a unique idea of “Creating your own coffee”. In
this process, the customers will be allowed to make their own flavour of coffee. This
unique concept will definitely attract more customers and make a unique position in the
coffee industry (Zealand, 2014). The customized product will be very effective in gaining
knowledge of customers as the business will get to know that which type of flavours are
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more popular and is in demand among the customers. Expertise will also help the
business to grow further and make a loyal customer base.
Part 2
Effect of factors like Inflation, public finance management, fiscal policies, exchange rate,
debt level management: - Food prices in New Zealand are increased by 2.3% year on year in
August 2017, following a 3% rise in previous month. The prices of non-alcoholic beverages
could see an increasing trend from last few years (Wilkinson, 2015). The average inflation rate
of food and beverage industry is 2.48% from 2000 to 2017. So, the prices of the products should
be set keeping in view the inflation trend.
The country net foreign debt is one the highest in developed world at nearly 90% of GDP. Many
countries with this level of debt are experiencing severe fiscal and economic stress. The debt
level of the country is not in a good position, so, there is always a high risk for operating any
business in the country (Stratton andWerner, 2013). Country does not have sufficient assets to
pay off its debts which are an unfavourable situation for any business to invest in the New
Zealand.
Exchange rate is defined as the rate at which the country’s currency is exchanged with the other
country currency. Traders are betting that the New Zealand dollar will drop against US dollar.
But New Zealand (NZ) dollar currency is still one of most traded product in the world.
The public finance is controlled by management when they introduced fiscal policies and
changing the expenditure and structure of doing expenses by the people and the government also
can manage the money and there will be more disposable income among people to spend on their
food and related items and for their personal consumption which is a good indicator for just best
coffee company.
Part 3
Critical key indicators that can affect the business: - The Company shall emphasis on strong
demand of customized high quality coffee. The owners will provide sufficient start-up capital.
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With aim of establishing loyal customer base and high quality coffee, the company will
hopefully be seeing its net worth doubling in 2years.The expected gross margins would be 65%
approx. which will allow business to operate smoothly and provide enough cash for its future
growth (Shang and Wang, 2013). The company can also target to open more branches near to
other school and colleges and can target new markets like corporate office and other cultural
events to achieving high profits. These tools can be of great help to survive in the stiff
competition market.
Part 4
Globalization and Technology: - In the modern era, technology plays a very important role in
growth of any business. The use of technology in coffee making is the necessity now days as
people are demanding more and more variety of products and they do not want to wait for long
to get coffee served, so only modern technology can help in speeding up coffee making process
with high quality (Reinecke et al, 2012). The technology can be imported from other countries
with the help of globalization. Globalization helps in removing barriers of bringing different
country cultures together. Since, NZ has many migrants from countries like India, China,
Australia etc., so, the country can import technology of types of coffee likeable by the said
crowd and serve them their favourite flavours according to the customer’s taste and preferences.
So, with the help of globalization and technology, Just best coffee can directly link themselves
with the international students.
Task 2
 Growth and performance: - The Just best coffee performance can be clearly reviewed
by comparing its sales with previous month sales and compare it with other coffee houses
of same level. Performance can also be measured in terms of no. of coffees sold in a
month, increase in customer base. The business will continuously grow if they will keep
attracting new customers by providing high quality standard product with best services
and variety in products. The only reason of underperformance of Just best coffee would
be poor or average quality of product served to customer or late serving of coffee, since
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nobody wants to wait for more than particular time for a coffee, so slow service is one the
key factor which can make this business under perform (Obstfeld, 2012). The coffee is
something which everybody drink every day, so it is very important to keep the taste and
flavours constant to regular customer to win their trust. Using low quality raw material to
cut production cost could also be one of the reasons for failing into business. Low quality
products and inexpert /unskilled labour are the direct reasons for underperformance and
low productivity.
One more reason for low productivity and under performance would be not
marketing/publicizing their product properly. If the front in charge manager is unable to
explain the product properly to customer, then the customer will not be satisfied and will
be in doubt for ordering that product (Narula, 2014).
 Area-specific constraint:-The target of Just best coffee would be to cover as much as
area as possible. Their aim would be to target more and more students, so they would
choose a space which is near to institutes, college, universities (Murphy and Jenner-
Leuthart, 2011). The space they would take near to college would have very high rents
because it would be a readymade market for them. Also, stiff competition would prevent
them earning their wilful returns. So, it is very important for business to select location
keeping in view all resources like capital, customer, area, target audience, availability of
resources, other competitive firms etc.
 Resource availability and utilization:-It is very important for any type of business to
utilize the available resources efficiently. While determining the capital requirement of
the business, keep in mind the utilization of that resource and generation of profit through
those resources. In this way, business can minimize the wasteful expenditures and assign
the resources in an appropriate level of priority (Mishra, 2013). Prioritize the machinery
to be used for production and how many man power resources would be required to run
business smoothly. Following resources can be considered while starting a coffee
business:-
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 Choose your location based on value, not price.
 Know your coffee, espresso machines before buying them.
 Trace your initial market and competition.
 Invest in your Barista.
 Pay yourself always.
 Always have an exit plan.
 For any successful business, flow of information should be crisp and clean at least in the
internal affairs of an organization. Proper channel of flow of information should be
available among working labour, managers, higher management. The goal of the
organization, market conditions etc. should be floated formally to everybody who is
involved to achieve it. The results, strategies of the companies should be in a formal
documented form so that there is no gap among anybody in the organization. Team
leadership can be instrumental in ensuring a successful project. It is crucial for the project
manager to be an effective leader, who could set project objectives and align them with
expectations of team members (Mahadevan, 2015). An effective leadership of manager
will help to communicate information related to tasks and procedures to team members in
order to work efficiently. He will be able to motivate them to bring out their maximum
outputs in the completion of project.
 Just best coffee will adopt high level standard in preparing its coffee due to stiff
competition of same product in the market. Many small, medium, large vendors may
offer same variety of coffee in different rates. So, it’s always advisable to keep a regular
check on the market (Matzler et al,2013). Using global technology may cost more or less
depends upon its usage and at which scale your business is running at.
 The business has to imply by so many rules and regulations of the present government.
They have to sign contracts and bonds related to property purchased, hire. They also have
to get products passed from government before serving it to the customers. Zealand, S. N.
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(2014) Company may also have to enter in contract with several raw material suppliers,
employees, government and several other legal bodies.
Task 3
Analysis of demand
Just best coffee would be serving variety of coffee like hot coffee, green tea, cold coffee,
espresso, latte and several other customized coffees. They have to keep updating their products
keeping in view the market demand and customer taste. They will develop their competitive
advantages by focusing on their quality and focusing on the differentiation of prizes and
customer experience.
 Demands of their products and services and size of their target market: - Target
market is something that a business decides to aim at to provide their services and earn
money from them. The product and demand also depends on what type of market the
business is targeting (Kolk, 2013). Like business will need to serve more healthy and
nutritious products of your target customers are children and old age group. If it is
serving to youngsters they heavy beans and coffee can be used since youngsters can
digest heavy products easily.
Just best coffee target customer base would be people from 17 to 30 years to age as these
age group people enjoy long talks and more coffees ones they are sited in an entertaining
atmosphere.
 Factors affecting demand of Just best coffee:-
1. Income level: - The higher the income, the more will be people eating and drinking
outside houses. Coffee is considered as a daily drinking item in New Zealand. So, the
demand for commercial coffee will totally depend on the income of an individual
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(Kim et al, 2017). The greater is the income level of customer the greater will be their
purchasing power for the production services in the market.
2. Prices of substitute products: - Since coffee has so many alternatives in the market,
so its demand depends on its substitute products also. Like the demand for coffee will
reduce if the price of tea will come down (Bell and Neill, 2014). More people will
shift to tea due to cheap and reliable than coffee.
3. Prices of complementary products affect the demand of the company because some
products are related to each other and connected with each other and they cannot be
changed alone for any corruption for example if the company is manufacturing copy
products then they have to buy sugar also and milk also for making their coffee but if
they will not buy any one of these products send the coffee manufacturing will be
affected. So the prices of any one component is increased will affect the prices of
their overall product that is the prices of the coffee will be increased and the demand
will reduce (Jaffe, 2014).
4. Taste and preferences of people: - The taste and preference of the people keep on
changing with time. So, Just best coffee will make sure that they keep introducing
new types of coffee to attract customers or keep upgrading their current product
keeping in view customer requirement (Hildenbrand, 2014). Also, it has to keep
giving lots of discounts and schemes to its regular customers to ensure their loyalty.
 Customer satisfaction level: - Food and beverage industry fully runs on customer
satisfaction model. If the customer is satisfied with your product and service, he will
definitely visit again. To know the customer satisfaction, just best coffee will introduce a
system in which written/oral feedback would be taken from customers regularly. Mystery
shopper’s option will also be introduced to keep a check on the hygiene and service of the
house (Heizer, 2016). Using more and more organic or eco-friendly products also
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attracts more customers now a day. So, regular customer satisfaction level should be
monitored to run business successfully.
 Demand is affected by prices: - For coffee, demand is directly related to prices. The
demand for coffee will decrease if the prices of coffee products like milk, sugar, beans
etc. are increased (Gowrisankaran and Rysman, 2012). People will start finding
alternatives of coffee if its price will shoot up in market. So, demand is directly linked
with prices.
Task 4
Analysis of Investment project alternatives
For this project, functional organizational structure will be appropriate because all departments
in this project are interrelated to each other. On the basis of functional capability, all team
members will be departmentalized. Team members will report to only manager. This structure
will help the manager to control all employees effectively and to make decisions more quickly.
Along with this, in this structure, manager will be able to monitor and supervise the performance
of all team members efficiently (Daft, Murphy & Willmott, 2010).
1. They can introduce organic coffee for the customers which will need investment in
purchasing the raw materials which is organic and producing their products with
maintaining the organic quotient of the coffee (Elder et al, 2014).
2. They can introduce the vegetarian alternative for their customers and this will need
investment in purchasing the raw material like almond milk or soy Milk or coconut
milk or rice milk which is having less carbon footprint then there Dairy Milk products
(Daft et al, 2010).
3. They can also increase their investment for replacing their traditional cups for serving
the coffee into the disposable cups are reusable cups which will help them to reduce
the carbon emissions and these will be cheaper also for their business (Chaston,
2017).
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4. They can also invest in their infrastructure development by adding the Wi-Fi services
in their restaurants or cafes and adding the free coffee services for their customers
who become the member of their company
5. They can also invest in increasing their business by establishing more cafes in new
areas of Auckland or Wellington or other cities of the country New Zealand.
Location: - As already stated, the location of the business should be close to college,
universities, corporate offices and schools where more people can be entertained at
one location only with a vast variety of customer base (Buchholz et al, 2014).
Scale: - The business should start itself at a medium scale because of its nearness to
college and schools. At one time, company may have to cater so many students. So,
having sufficient space should be the 1st priority for Just best coffee (Beske et al,
2014). Medium scale business can entertain bulk orders also if given proper time.
Timing of Investment: - The coffee business should invest before starting of session
at colleges, schools near to it. As only then they will be able to fetch the expected
returns from 1st day only.
Policy change requirement: - It is essential for the business to keep updating their
employees and itself with the changes in any type of policies related to them. It will
guide its employees to provide best service to customers keeping in view industry
norms and standards being used for the said products.
 Benefits and costs of investment alternatives
The cost of investment in providing customized product to customers will be less since
the customized product will origin form the basic raw material only but it will surely help
a lot to the business in fetching good margins due to its uniqueness. Not only it will help
in earning good profits, it will also help business in winning trust factor of customers due
to their involvement in the coffee making process (Berry et al, 2013).There would be
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some overhead expenses also like delivery cost, purchasing material in bulk to save cost,
training and development cost, marketing schemes and promotional costs.
 Preferred alternative of Just Best Coffee company and reasons for selecting the
alternative
The preferred alternative would be providing customized coffee to its customers. The
reason for choosing this alternative is that the customer himself will be involved in
choosing the flavours and raw material of its coffee. This will help in winning the
customer trust as they will themselves be involved in the whole coffee making process; a
sense of personal touch always takes business further (Berg, 2014). So, they will happily
accept the product no matter how good or average it is made, since it would be totally
customer customized drink, so nobody can question on it. Also, the skilled man power
may also learn new coffee ingredients making techniques from the vast variety of
international customers. Also, customized product always helps business earn good
profits due to its uniqueness nature.
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