Fictional Case Study: Cupcakes, Inc - Essay Example

If we consider Karl’s stores, the operating cost of the initial twenty stores was almost ten million dollars (Fictional Case Study), therefore, for one store, it would again be fifty thousand dollars (Fictional Case Study). Therefore, it can be concluded that the operating cost of a new store would be fifty thousand dollars (Fictional Case Study). New branches and chain stores can only be operated if the stores are self sufficient in terms of investment and profit. With the open market of the cupcake industry, and the huge potential of the market, it should be easy to manage a successful business if some innovative ideas in terms of the quality and design of the cakes are introduced.

For an average store, let us consider the Bangor Kake Co statistics (Fictional Case Study). The economic trends can be very varied. The operating costs keep on increasing (Fictional Case Study); however, without any serious competition, the net profits increase too (Fictional Case Study), therefore, the overall profit would either remain the same or would increase. There is, however, no guarantee that the profits would be increased or even incurred at all (Fictional Case Study). Given a competition by a giant enterprise like that of Karl’s, an average store would invariably suffer losses, just like Bangor Kake Co in the years 2008 and 2009 (Fictional Case Study). . This would be in accordance with the management theories of operations, and investment and corporate governance (EconomyWatch 2010).

Q2: Through the concept of a store within a store (Fictional Case Study), Karl has introduced a new trend in the sales of his cupcakes. This joint venture would mean increased sales of the product with the least investment in the building or the setting up of the stores. The cost of advertisement is also greatly reduced as the Target stores themselves are successful businesses (Fictional Case Study) and therefore, no additional advertising is needed. This means the profits are maximised, and the sales are further increased with the idea of eating cupcakes while shopping (Fictional Case Study), an idea that adheres to the American concept and appeals to the public (Fictional Case Study).

Q3: The stock market is valuing the return on the stores, which witness a return on the investment in the starting three months of the business, which is unforeseen and unprecedented in retail businesses. This means the net profits of the stores are extremely high in the first six months of the business, with at least 44% of the earnings as net profits (Fictional Case Study). The enterprise value of this operation is $2232.5 million (Fictional Case Study), a proof of its stock market success.

Q4: The cupcake market in which Karl is competing is apparently very open to new competition, as Karl has had a phenomenal success in his business venture (Fictional Case Study). However, to carry out an exact analysis of the competition, the exact number of businesses operating in this industry would have to be determined.