Hank’s and Patty’s Coffee Shop Expansion Case Study

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BUSINESS ESSENTIALS ADVANCED: CASE STUDY
OF HANK’S AND PATTY SHOP COFFEE SHOP
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Table of Contents
Introduction...................................................................................................................... 3
Question 1........................................................................................................................4
Question 2........................................................................................................................6
Question 3........................................................................................................................9
Question 4 [Refer to Appendix 1]...................................................................................11
Question 5......................................................................................................................13
Reference list................................................................................................................. 14
Appendix 1: Financial Statement................................................................................... 16
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Introduction
Effective market research is required in order to expand business in the market. It is
noticed that Patty and Hank established a coffee shop in Wandsworth in London and
they want to extend their business in another place. For this reason, Manchester of UK
will be selected. Therefore, the reason of selecting this place will be described by
focusing on the culture, location and customers of this place. Apart from it, 4ps of
marketing mix will be conducted. The challenges and issues that can be faced by Patty
and Hank in order to expand business in the new location will be negotiated. Financial
evaluation will be elaborated for understanding the profit range of the coffee shop if they
expand their business in the location of UK.
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Question 1
Justification for selecting UK in order to expand business
The economic status of UK is quite stable. It is evident from the report of world GDP
ranking; UK holds seventh position (statisticstimes.com, 2019). Hence, the continuous
growth in GDP rate indicates the stability in the economic aspect of the country. As
commented by Marcouse et al., (2015), Brexit is not able to ruin the business of the
country of UK. Continuous development in the industries helps country to uplift its
economic status. Therefore, as Patty and Hank’s coffee shop is able to earn success in
the area of Wandsworth in London, they are popular in this area and people of other
places in this country prefer to use their service. Keeping this in mind, they have
selected Manchester of UK in order to expand their business along with profit
generation. No such issue is found out for running business between Europe and
Manchester.
Figure 1: World GDP Ranking
(Source: statisticstimes.com, 2019)
In Manchester, many popular coffee shops are noticed such as Takk, North Tea Power
and Bonbon. It indicates that people are fond of having coffee and cafe culture is found
in this place. In addition to this, being an industrialised city, Manchester is the most
liveable country of UK. The employment rate is high and people lead luxurious lifestyle.
Therefore, Patty and Hank’s coffee shop will be able to increase their sale in this
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market. People have 95 million cups of coffee in a day in UK and among them; most of
the people live in Manchester (independent.co.uk, 2019). This is another reason of
selecting this place of UK.
Figure 2: Employment rate in Manchester
(Source: manchester.gov.uk, 2019)
In UK, government has focused on the discrimination free business and as a result,
coffee shop will be able to operate their business properly. They will be able to adopt
fair-trade policy properly. The below-mentioned graph shows that UK follows fairtrade
policy for purchasing coffee and Patty and Hank will apply it. On the other hand,
“Equality Act 2010” is followed in the workplace, so that all employees are treated
equally in the workplace. Thus, staff welfare is maintained in the location and this is
another reason for choosing this place of expansion. It helps the organisation to
increase its reputation from the new market.
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Figure 3: Fairtrade adoption in UK
(Source: Market-inspector.co.uk, 2018)
In context of location, Manchester is the heart of UK and it is the developed and
industrialised country. Therefore, by expanding business in this Location, Hank and
Patty will be able to communicate with their suppliers easily. TFGM is the official public
transport body of Manchester and continuously guide people in their transportation.
Free bus service, trains, airlines are also available in this location. Airport of Manchester
is an international airport and it makes the transportation system quite easy. In case
layout, as many other coffee shops are there such as Bonbon, Takk, Hank and patty
will be able to complete with them by providing their unique services.
As Manchester is the sixth largest city in UK, the population is high. More than 2.55
million people are there and they prefer to have coffee along with its unique taste
(worldpopulationreview.com, 2019). Therefore, as Hank and Patty provides the taste of
Gumutindo coffee along with gaming facilities, they will be able to attract customers
towards their outlet. The luxurious nature of customers is another reason of selecting
this place for business expansion.
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Question 2
Present a tailored marketing mix in relation to the coffee shop expansion plan
As per the viewpoint of Datta et al. (2017), marketing mix can be taken as the
combination of various factors that can be implemented in order to attract customers
towards the venture. By developing strategy, organisations are able to increase their
number of customers in the new market. 4ps of marketing mix have been included in
order to discuss the strategy of Patty and Hank’s coffee shop for expanding their
business in the market of Manchester in UK.
Product
Figure 4: Wooden cup of Champor tree
(Source: Good-liver.com 2019)
In order to attract customers, it is necessary to set a premium price along with the
unique serving process (Dadzie et al., 2017). As Hank and Patty follow East African
Style, they will serve the coffee in the wooden cup of Champor tree. As it is the antique
item, it will help them to attract customers. These items will be purchased from the
outlet of the Good Liver and price is around £30 of four cups. Unique taste will be
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provided as fine coffee beans are used. The coffee, which has the label of fair-trade, will
be sold from this outlet. Attractive interior design and facilities will be provided in order
to attract customers to the outlet of Manchester.
Price
It is quite common that the price of products reflects its quality. As commented by Wu
and Li (2018), people believe that high-priced product should be the quality products. As
the customers of Manchester lead a healthy and luxurious life, they only want of receive
quality and hygienic service from the ventures. Keeping it in mind, Patty and Hank will
set high price along with its quality. They set £10 for a cup of coffee. Thus, the coffee
shop will meet the demand of customers. In addition to this, as many competitors are
available in the market of Manchester, discounts will be provided to attract customers
towards their outlet. The promotion of uniqueness of their services and products will
help Patty and Hank to secure their consumers in the new market. They will provide
equal attention to the requirement of customers so that customers feel satisfied by using
their service in the new market.
Promotion
In the opinion of Jackson and Ahuja (2016), by promoting the new service or products,
the company is able to make people aware of their new services or their new outlets. In
case of the coffee shop of Patty and Hank, it is suggested to spread leaflets in the area
of Manchester. Thus, people are able to know about their business expansion. In
addition to this, in the leaflets, they will add their services and products along with the
detailed direction of their new outlet. Thus, customers are able to visit the coffee shop
easily. For marketing purpose, £300 can be allocated and in return, it will help them to
increase their sale from the very first day.
Place
During the expansion of the business, it is necessary to choose the proper place for
earning profit from the new market (Filbert and Anthony, 2018). For business expansion
of Hank and Patty’s coffee shop, Manchester of UK will be selected as it is the sixth
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largest city of UK. In addition to this, being an industrialised city, the transportation
system is very good. Therefore, the place is the appropriate for running the coffee shop.
Moreover, they will follow the East African items in order to decorate the outlet in a
unique manner. This speciality in this place will help them to increase their consumers.
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Question 3
Identify key factors Marvin and Smith should consider as they expand into an
unfamiliar territory and show how arising issues or potential challenges may be
interlinked and managed
In order to expand business in the new market of Manchester in UK, various factors
should be considered such as organisational culture, management structure, human
resource management, supply chain, gaining competitive advantage, marketing and
many others. In this portion, two factors will be focused such as gaining competitive
advantage and organisational culture.
Gaining competitive advantage
Figure 5: Porter’s 5 forces
(Source: Bekhradi et al., 2016)
In case of Patty and Hank, for earning a position in the new market of Manchester in
UK, they will design their coffee shop in a unique manner. It is found that they will follow
the theme of East Africa in their coffee shop. It will help the company to maintain their
brand in the market. Gaming facility is another factor that makes them unique in the
market of Manchester. Along with them, they will use fine coffee beans for maintaining
quality of products. Thus, number of customers will be increased in UK market.
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In order to measure the competitive advantage in the new market, Porter’s five forces
will be used. It will help Hank and Patty to understand their market position in the new
location. In time of expanding business, they will focus on the bargaining power of the
buyers and suppliers. If many suppliers are found in the market, the price of law
materials can be high and it can leave negative impact on the business of Hank and
Patty’s coffee shop. As they will use Gumutindo’s coffee beans, it will be advantage for
them.
On the contrary, in time of introducing products, Hank and Patty should revise its
substitutes in the market. If the number of substitutes is high, customers will bargain in
time of purchasing the products (Namada, 2018). For example, if another company in a
cheap rate provides same quality of coffee, customers do not want to purchase it from
the Hank and Patty’s coffee shop. Therefore, maintaining theme of African style and
taste can be the bifacial notion for them in order to generate profit. Providing opening
discount is another strategy for avoiding the threat of new entrants.
By following proper steps of Porter’s five forces during marketing, Hank and Patty will
be able to increase their profit in the new market of UK.
Organisational culture
Organisational culture helps the company to develop their operation properly. For
example, in time of expanding business in a new market or country, the organisation
should provide value on the choice of customers as well as employees (Rashid and
Ghose, 2015). Thus, effective products or services can be offered. In case of Hank and
patty for expanding their business in the market of Manchester, they should conduct
research on the requirement of customers. According to it, work process of the
employees should be designed. Hank and Patty will need to research on the market of
Manchester for understanding trend related to coffee shop. Thus, the work culture of
coffee shop of Hank and Patty can be improved. In return, it will help the venture to earn
huge success from the new market. As the company will conduct effective market
research and complete the teamwork, they will be able to increase customers’
satisfaction level. By maintaining organisational culture, Hank and Patty will be able to
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develop their reputation in market. Thus, in an unfamiliar territory, team of human
resource management will help them to earn success.
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