Business Analysis for Coffee Shops

This assignment delves into the multifaceted aspects of operating a successful coffee shop. Students will explore various revenue management strategies, examine the importance of sustainability and social responsibility in the industry, and investigate how technological advancements can enhance operations and customer experience. The analysis will encompass key concepts like value chain analysis, fixed and variable costs, and the impact of technology on business growth.

Engineering Management
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Executive summary
The objective of this article is to make a project plan in order to make the coffee shop of locality
with higher level of output to be produced by the specific time frame. This article will also
emphasize on the intervention of latest technology in the business of coffee shop to make this
coffee shop bigger in size with efficient management style. Any successful organization runs
with the mission statement which is comprised of vision, mission, objective and value. This
article will also highlight this issue in order to make this coffee shop look more professional with
the help of latest technology along with a constructed plan for future improvement so far its
business performance is concerned.
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Table of Contents
Introduction....................................................................................................................................................4
Vision.............................................................................................................................................................4
Mission...........................................................................................................................................................4
Objectives......................................................................................................................................................5
Values............................................................................................................................................................5
Proposed Business Model Canvas.................................................................................................................5
Revenue......................................................................................................................................................7
Cost of Goods Sold....................................................................................................................................7
Gross Profit................................................................................................................................................8
Expenses....................................................................................................................................................8
Profit before tax, tax and profit after tax....................................................................................................8
Introduction of technology- value chain analysis........................................................................................10
Diagrams - Impact of strategic plan.............................................................................................................11
Environment Awareness and Corporate Social Responsibility...................................................................13
Conclusion...................................................................................................................................................15
References:...................................................................................................................................................16
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Introduction
The coffee shop of Christchurch, Refresh with Coffee, is located in the business place with good
number of regular customers with the occasional customers who passes through the place. The
coffee shop has a standard level of turnout of visitors on regular basis and the customers visited
the shop has good level of satisfaction with the coffee shop regarding the quality of food and
beverages offered. They also feel that the shop should be bigger in size with the objective of
catering of more customers. The owner of the shop has a sincere feeling of making the shop
bigger in size by introduction of more capital and latest technology. To make this coffee shop
more professional, mission statement of the organization is to be set along with the strategy for
long term sustainability (Friend, 2004). Latest technology in the form of social media is to be
introduced to raise the awareness among the people of the locality. The owner has to find the
viable options of increasing the business through introduction of different latest technologies and
the comparative analysis of cost for those introductions (Ungureanu, Pop, & Ungureanu, 2016).
For this purpose a five-year project plan is to be made with the anticipated income plan and this
could be the best guide for future roadmap of the shop. Being a responsible business
entrepreneur, the owner cannot deny the role of protector of environment as well as its
contribution to the society. The following article will emphasize on the above points to make this
project plan complete and good guide for future improvement (Vitez, 2016).
Vision
The vision of the shop would be- Habit of quality Coffee to make life longer.
Mission
Mission of the shop would be- To find Refresh with Coffee as the best coffee provider of the
locality and ensure sustainability in business.
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Objectives
 Satisfy the target audience with the product and service
 Prove as responsible business stakeholders for environmental balance maintenance
 Ensure quality of the products for regular and committed target audience
 Make a loyal customer base for the shop to prove it as a brand of this segment.
 Reach the customers at their options
Values
 Ensure ethical business
 Ensure customer convenience
 Treat customers as the main supporters of this shop
 Ensure future sustainability through quality product and service
 Create satisfied loyal customer base
 Ensure environment maintenance with service to the society through CSR program
Proposed Business Model Canvas
The proposed business model for next four years is to emphasize on using the full capacity of the
shop with the application of suitable technologies. Latest technologies can have different level of
contribution towards improvement of coffee shop business. The introduction of online sales
through mobile app will be the new introduction to the marketing strategy of the coffee shop.
This inclusion can give enough impetus on the sales of the coffee shop (Alexandercowan, 2016).
Given below the projected income statement of the coffee shop with consideration of
introduction of online sales apart from traditional counter sales:
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Proposed business model canvas
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Heading 2017 2018 2019 2020 2021
Revenue:
Counter sale 500,000 525,000 546,000 562,380 579,251
online sale 50,000 200,000 224,000 257,600 296,240
Total 550,000 725,000 770,000 819,980 875,491
Cost of Goods sold
Coffee from Brazil 220,000 290,000 308,000 327,992 350,197
Other materials 100,000 145,000 154,000 163,996 175,098
Total 320,000 435,000 462,000 491,988 525,295
Gross Profit 230,000 290,000 308,000 327,992 350,197
Expenses:
Salary 50,000 65,000 70,000 75,000 75,000
Communication Expenses 2,500 3,000 3,000 3,000 3,500
Rent 10,000 10,000 10,000 10,000 10,000
marketing and promotional
expense 15,000 20,000 25,000 27,500 30,000
Power 3,000 3,500 3,500 4,000 4,000
Licensing Fees 1,000 1,000 1,000 1,000 1,000
Total 81,500 102,500 112,500 120,500 123,500
Profit before tax 148,500 187,500 195,500 207,492 226,697
Tax @15% 22,275 28,125 29,325 31,124 34,004
Profit after tax 126,225 159,375 166,175 176,368 192,692
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To elaborate the above projected income statement for next four years with comparison to
present status of 2017 has been appended above. Different financial information about projected
business model is given with justification:
Revenue
Projected revenue has been divided into two components- traditional counter sales and online
sales. While traditional counter sales will be generated through the customers visit the counter
regularly, the Gen Y customers would prefer to adopt the facility of online sales through app.
The projected sale is expected to be enhanced in substantial manner. Counter sales is expected to
be enhanced by 5% in 2018, 4% in 2019 and 3% in 2020 and 2021 respectively. Hence at the end
of four years, the projected counter sales of 2021 will find growth of 16% over 2017 (Kawamoto,
2017).
Online sales through App will be introduced in 2017 midway after necessary marketing research.
The sale on this segment is expected to be 50,000 in 2017 which will grow remarkably in
subsequent years. In 2018 projected sale through online App will enhance by 300% while for
2019 it will increase by12% over 2018, in 2020 and 2021 it will increase by 15% over 2019 and
2020 respectively. Overall sales will increase by 59% of 2021 over 2017 taking both segments of
sales in consideration, as projected (Siteminder, 2014).
Cost of Goods Sold
The costs of raw materials are projected for tow segments- Coffee from Brazil and other
materials. While the cost of coffee will be increased by 59& and other materials by 75% due to
varieties of products introduced in the menu, total projected cost of goods sold will be enhanced
by 64%
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Gross Profit
As a result of this projected business model, overall gross profit will increase by 52% at the end
of 2021 in respect of 2017 as a result of gradual increment of sales for both segments.
Expenses
The projected expenses for the business model will have two types- variable and fixed. Fixed
expenses in the forms of rent and licensing fees will not have any impact as the same will not be
changed (Peavler, 2017). For variable expenses, salary will be projected as 75,000 in 2021 in
comparison with 50,000 of 2017 due to manage the extra pressure of sales resulting to 50%
increase in 2021 over 2017. Communication expenses will increase by 40% in 2021 in
comparison with that of 2017 to match the enhanced need of online sales. Marketing and
promotional expenses need to be enhanced to meet the demand of the business and in 2021, the
same will be featured as 30,000 in comparison with 15,000 of 2017 which will be projected as
100% hike in 2021 over 2017. Cost of power consumption will hike by 33% for meeting the
increased demand of the business in 2021 in comparison with that of 2017.
Total expenses will be projected in 2021 as 123,500 in comparison with 81,500 of 2017, with the
impact of 52% to meet the overall increased demand of the projected increase in turnover of the
shop.
Profit before tax, tax and profit after tax
The bottom-line figures of the proposed business model will infer with profit projection for
current year and next four years (Investopedia, 2016). With the strategic change over the
business of coffee shop by introducing technology will give good impetus on the business. The
profit will increase as per the proposed business model by 53% from 2017 to 2021 which will be
treated as phenomenal achievement in a business of coffee shop.
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The variance analysis of different heads in the proposed business model is appended below for
reference:
Variance Analysis
Heading growth of 2021 over
2017
variance of 2021 over
2017
Revenue:
Counter sale 79251 16
online sale 246240 492
Total 325491 59
Cost of Goods sold 0
Coffee from Brazil 130197 59
Other materials 75098 75
total 205295 64
Gross Profit 120197 52
Expenses: 0
Salary 25000 50
Communication Expenses 1000 40
Rent 0 0
marketing and promotional
expense 15000 100
Power 1000 33
Licensing Fees 0 0
Total 42000 52
Profit before tax 78197 53
Tax @15% 11729 53
Profit after tax 66467 53
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Introduction of technology- value chain analysis
Value chain analysis is meant for finding the components in any business which can add value to
the performance of the organization. As per Michael Porter in his renowned book “competitive
Advantage: Creating and Sustaining Superior Performance”, value chain is described as a series
of operation processes or activities which is directed with the objective of creation and addition
of value to any business at every step of operation management. Technology has enough scope to
ensure value addition for any business when the same looks for improvement (Jurevicius, 2013).
For the industry of coffee shop, introduction of technology to reach the customer base through
online ordering and mobile ordering is to be implemented as a mode of best option to enhance
sales. This facility can be done through proper application of information and communication
technology. Online and mobile ordering will facilitate the scope of customized orders as well as
sending the message to the loyal customer base that the shop is upgrading to meet the
requirement of the customers (Arline, 2015).
Another introduction of technology is to make arrangement for free I Pad kiosks for the
customers where the passers-by can order and have their coffee and food at the ease of no time
spent on the queue. Main objective of the coffee shop is to retain loyal customer base with
gradual increment and that can only be possible when more convenience and comfort can be
provided for the customers. Technology can help in exploring different avenues for this purpose
(Mindtools, 2016).
The scope of home delivery for the customers through any service provider can only be possible
through strategic alliance with them.
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Other concept of increment of customer base is introduction of customer loyalty program which
can be used as added attraction for the regular customers. The redemption of points earned
through such program may be considered as a good incentive for the customers.
The coffee shop can have their own website through which they can interact with customers
asking them about future scope of enhancement of service or any complaint related to the quality
of product or service. All these initiatives can be instrumental to accomplish the long term
objective of the organization which can be possible through the specific introduction of such
applicable technologies (Bajpai, 2016).
The above steps can ensure value chain analysis by the coffee shop through introduction of
proper and applicable technology to enhance its performance during future to justify
sustainability (Coffeeshopmanager, 2015).
Diagrams - Impact of strategic plan
The strategic plan of proposed business model can ensure improvement of business as per
diagram below:
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Counter sale
online sale
Total
Cost of Goods sold
Coffee from Brazil
Other materials
total
Gross Profit
Expenses:
Salary
Communication Expenses
Rent
marketing and promotional expense
Power
Licensing Fees
Total
Profit before tax
Tax @15%
Profit after tax
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2017
2018
2019
2020
2021
Graph 1- Proposed business model
Variance analysis of proposed business model as per strategic plan is also given below:
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Counter sale
Total
Coffee from Brazil
total
Expenses:
Communication expense
marketing and promotional expense
Licensing Fees
Profit before tax
Profit after tax
0
50000
100000
150000
200000
250000
300000
350000
Growth of 2021 over 2017
Variance of 2021 over 2017
Graph 2- Variance analysis of proposed business model
Environment Awareness and Corporate Social Responsibility
It is the duty of the organization to prove its worth by justifying their contribution towards
environment and society. Being a responsible stakeholder of the business community of
Christchurch, Refresh with Coffee has to perform its duties which can substantiate its awareness
for the environment and the society.
Being a responsible stakeholder of coffee industry, Refresh with Coffee should indulge in best
quality and environment friendly coffee available with the trademark of A1 coffee. This coffee is
grown following the basic environmental benchmark. Thus the use of this coffee by the coffee
shop can ensure environment friendly use of raw materials (Coffeetalk, 2012).
The wastes of the shop should be divided into two types- disposable and non-disposable.
Disposable wastes should be treated with the benchmark set by the government while the non-
disposable wastes should be treated with the guideline fixed by the authorities. The waste like
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disposable cups or plates can be dumped into the bin for easy removal by the municipal
authority. Non-disposable wastes like plastics are to be separated and given to the municipal
authority which they can treat in some recycle process.
The use of fuel should be converted into recyclable energy from fossil fuel. Insistence on use of
solar energy is always welcome for any purpose which it can serve. The use of solar energy in
keeping the shop warm will be the best option through which sustainable impact can be observed
through the effort of the coffee shop (Miratelinc, 2010).
For society, the coffee shop can perform certain activities which can justify their awareness
about the society. In micro level, the shop can perform certain social activities like facilitating
old age people and children with some unique activities. For old age people, the organization can
arrange for health camp with the banner of Refresh with Coffee by taking the help of nearby
health institutes like hospital or health centers. These types of activities can prove the worth of
the coffee shop so far its responsible attitude towards society is concerned. For children, the
organization can organize some activities like sports events in local area which can promote the
concept of social awareness of the coffee shop. In macro level, the coffee shop can tie up with
bigger stakeholders for any social events with their active participation and contribution to make
the events successful. Thus it can contribute to the society with its honest and sincere desire to do
something for the society.
The above strategic plans can ensure that coffee shop is aware of environmental and social issues
and has the ability to add value to the environment and the society for better life to the future
generation.
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Conclusion
The above article of strategic plan of the coffee shop can emphasize on the long term strategic
plan which can ensure its sustainability in the industry. The shop has its own brace of loyal
customers who want that the shop should grow, and the owner of the shop also thinks in the
same line with his special interest in technology. This can only be possible through proper
strategic plan with introduction of applicable technology which can make the scenario favorable
for the shop to attain its objective. At the same time the owner should not deny his role for
responsible attitude towards environment and society and should act at the best level of his effort
to comply with the guideline set by the authorities. A good business with proper mission
statement and clear vision can ensure its sustainability at long run with the available resources
and technologies. This coffee shop will flourish as per the strategic plan set for this purpose and
will prove its worth in the segment.
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References:
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Responsibility initiatives. Retrieved August 25, 2017, from Miratelinc:
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http://www.miratelinc.com/tim-hortons-brewing-more-than-just-coffee-with-corporate-social-
responsibility-initiatives/
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