Entrepreneurship: Managing Human Capital for a Coffee Sachet Business

This report analyzes the human capital management aspects of a proposed coffee sachet start-up business in Sri Lanka. It begins with an introduction highlighting the importance of various factors for start-up success and the need for strategic human capital planning. The report then details the proposed business idea using Ansoff's matrix, identifying market penetration as the most suitable strategy. It explores required core competencies like analytical, critical thinking, financial management, and communication skills. The external environment is assessed using Porter's five forces, and the report suggests ways to mitigate threats. Porter's generic strategy is used to identify cost leadership as the best approach, and it suggests ways to exploit this opportunity. Finally, the report concludes by summarizing the key findings and recommendations for the coffee sachet business's human capital management strategy.

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Contents
Introduction......................................................................................................................................3
Business Description.......................................................................................................................4
Proposed business idea................................................................................................................4
Required Core competencies.......................................................................................................5
External environment...................................................................................................................6
Strategy............................................................................................................................................7
Porter’s generic strategy..............................................................................................................7
Suggested ways to mitigate threats..............................................................................................9
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

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Introduction
Start-up business has to consider various aspects and factors to make the business successful.
There are various issues faced by a company entering into an industry, which would be discussed
in the report. A small coffee sachet business to start up in Sri Lanka would be seeking investment
requirements from private investors. The private investors would prefer to analyse the business
opportunity through a deeper understanding of business idea and planning regarding
management of human capital would be developed (Ahlin, 2014). For this purpose, various tools
and model would be analysed in this report supporting the private investor’s requirement.

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Business Description
Proposed business idea
The proposed business idea of the company would be better understood with the help of Ansoff’s
matrix model. This model would be helpful for the investors to assess the start-up growth
strategic plan and a better understanding of the business idea (Bruns, 2013).
Figure 1: Ansoff's matrix ( (Aksoy, 2018)
From this Ansoff’s matrix, an organization may have four different ways to grow the business, it
has to be decided which way is better for this start-up of the coffee sachet. The most
approachable strategy as per the grid for this company would be market penetration. The
company is offering the product that is already available in the market that is the coffee sachet to
be offered in an existing market that is Sri Lanka. The company would be focusing on brand
recognition and brand awareness for this product. As per this strategy, it is considered that the

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company would be targeting the existing market with the existing product, which is most suited
to the start-up. The target market for this product would be all age group residents of Sri Lanka,
although specifically this product would target the travelers, and the office-going people of Sri
Lanka, the reason being it is instant 3-in-1 coffee sachet that would be easy to carry and prepare
coffee instantly (Pansari & Kumar, 2016).
Required Core competencies
For a start-up one of the major success factors would be its human resource and their
competencies to be applied to the proposed business, some of the required competencies are as
follows in this coffee sachet start up:
 Analytical skills for business planning – One of the most relevant competency is the
ability to develop a business plan which should be realistic, and feasible as per the
internal and external environment. This would be the base for the initiation and growth of
the company (Bombiak, 2018).
 Critical thinking skills for product development – Another competency would be the
critical thinking ability of human resource for developing products using the latest
technology while keeping the cost to a minimum (Abdulraheem Sal, 2016).
 Financial management skills – for managing the financials of the company in near future
and allocation of the physical asset would require these skills by the company to earn
profit and strategy planning to reduce the cost to the company.
 Communication skills – These are one the most important core competency required by
the company, a company strategy is market penetration strategy which would require
good promotion and building relations, and brand positioning which would not be

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possible without good communication skills and way to use various tools (Akkermans et
al., 2015).
External environment
For analysing the external environment of the business, one of the models used for this would be
porters five force model to assess the industry in which the company would enter.
The five forces that would be a threat or opportunity for the company in the industry and would
reflect in a change in the business decision of the coffee sachet business are as follow.
1. The threat of new entrant – Considering this force, entering into the industry is not too
difficult as the investment involved is not too high, which could make this force as one of
the major threats for the company in near future. Moreover, the new company can enter
with better technology or in this case the threat of offering a lower price for a similar
product (Amara & Traore, 2016).
2. Bargaining power of suppliers – The suppliers are large in number for coffee production,
which makes the bargaining power to not in the hands of suppliers to a large extent.
However, in the case of some major supplier, the risk of losing bargaining power in their
hands as they can affect the cost of production for the company. It can be said that there
is a medium threat to the company considering this force (Ogutu & Mathooko, 2015).
3. Bargaining power of buyers – The buyers are demanding a lower price for better quality,
the reason being an increase in options for the customers. Moreover the switching cost
for the company is negligible, reflecting that there is a great threat of losing customers
and the threat of customer retention has been observed.

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4. Competition – The coffee industry is a competitive industry, where various companies
are offering customers with similar products. For instance, Nestle is one of the major
competitors as it is serving the customer with instant coffee in sachet packaging as well.
Moreover, it is a well established company which would be one of the biggest threat for a
start-up company (kapruka, 2019).
5. The threat of substitute goods – The treat considering this force is high for the company
to enter. One of the major substitutes would be tea, which Sri Lanka is the major
exporter. Moreover, various packed juices and readymade beverages could be a substitute
for the coffee that could be a threat to the company (Dobbs, 2014).
Strategy
Porter’s generic strategy
For identifying the opportunity for the company, Porter's generic strategy matrix can be used to
analyse the strategy of the company. According to this strategy, four suggested strategy is
provided considering the customer segment to be targeted and competitive advantage of the
company. The major competitor of the company that is Nestle would come under the
differentiation strategy as the company is targeting broad market segment and product innovation
and uniqueness being its competitive advantage (Amara & Traore, 2016).

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Figure 2: Porter's generic strategy ( (Betton, 2017)
Considering this model and understanding the matrix the most suitable strategy for the company
to gain opportunity would be cost leadership. The company to gain competitive advantage need
to provide the customer with low-cost product and must target narrow customer segment that is
targeting customers with lower to middle-income grope considering income level and status of
customers, moreover the travellers would be targeted, and college and office going people as
well (Ford, 2017). The ways through which the company can exploit this opportunity would
include
 Targeting the business instead of only individual customers, for example Sri Lanka
airline can be targeted to offer customers with sachet for coffee in an airplane.
 The company can target the hotel industry to provide customers with a personal sachet
of coffee, which customers can prepare on their own. The hotel could provide this
product as a complimentary in their rooms as additional service by hotels (Jaworski,
2018).

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 Minimum cost – The Company must use tactics to reduce the cost of the product
together extent in order to gain the opportunity of being cost leadership in the industry
while having the scope of expanding the business internationally.
 Economies of scale – One of the way that the company could be cost leader through
increasing the production to a greater extent and decrease the cost per piece and to gain
advantage from economies of scale (Betton, 2017).
Suggested ways to mitigate threats to the company and turn the weakness of the
company into its strengths.
 Increasing the switching cost for the customer – To mitigate the risk of new entrants, and
bargain power of customer the company through cost leadership and providing a
minimum price for the product can increase the cost of switching brands for the
customers. For instance the price for 30 sticks of nestle is US$ 10.46, and this company
must reduce the cost than its competitors to increase the switching cost (Gabriel, 2016).
 Promotional tools – The Company must use various promotional tools to increase brand
awareness and brand recognition to avoid the threat of competition in the market. The
promotional tools could be event organization, distribution of samples, advertisement
through television and printed form, and social media marketing would work for the
company to gain recognition among customers (Hudson & Roth, 2016).
 Unique taste – The taste of the coffee by the company must be very good and unique so
that the customers do not prefer to change, and they do not go for the substitute products.
The company can focus on quality and taste that makes the brand different from its
competitors or substitute goods.

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 Product innovation – The Company can be innovative while offering coffee to its
customers. For example, the company can increase the number of the sachet in a packet
while lower the overall cost of the packet. The company could also go for adding favors
to the coffee to provide innovation through the product in this case (Bailey, 2018).

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Conclusion
From the above piece of work, it can be concluded that the A small coffee sachet business to
start up in Sri Lanka would prefer to analyse the business opportunity through a deeper
understanding of business idea and planning regarding management of human capital would be
developed. The proposed business idea was analysed through Ansoff’s matrix. The most
approachable strategy as per the grid for this company was “market penetration.”
The required core competencies identified for the start-up business were analytical skills for
business planning, financial management skills, critical thinking skills for product development,
and communication skills. Moreover, the approachable strategy for the company considering
Porter's generic strategy was cost leadership strategy for the company to gain opportunity in the
near future.

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