What Can Turn the Company into a Prosperous Business - Case Study Example

The Business Environment Assignment Table of Content I Introduction II Case Study III Main characteristics of the market structure for BBB IV Impact of market structure on profitability in the short and long run time period. V Business strategy for increasing total revenue VI Impact of E.U. Health and Safety legislation (coming into effect 1st Jan 2006) VII Analysis of Hypothetical Sentence VIII Conclusion Introduction Relaxation time is enjoyed by everybody as cities grow in terms both of people and incomes, more people will want to enjoy a greater range of recreation activities. Few people may like a unaccompanied evening with books or Television. But Many of us social like to get involved in eating, drinking and merry making. Most of young people visit bars and pubs in evening with their friends. They may be served fast food and beverages that are the choice of new generation. The fast food culture is expanding very fast in modern societies. Most of the people prefer fast food to traditional food while eating out. Although this food is not very good for health and Governments are advising people to avoid this food through media yet people are more interested in it. There is tremendous increase in the sales of fast food bars as compared to restaurants revealed by recent surveys. People are still very much interested in fast food. (Mintel Report-March 2004) Case Study Barry’s Burger Bar (BBB) is a business in a busy university town in England. BBB operates in a very competitive environment. The market structure within which BBB operates dictates the pricing policies, advertising strategy and profitability potential. Barry has been considering changing his prices in order to increase his sales (total revenue). In this assignment we would determine the Business Strategy for BBB as consultants. Main characteristics of the market structure for BBB The BBB is situated in a busy area and his most of customers are from low earning groups as university students and staff. The main character of the market are: There are many other such small bars and restaurants in the area so there is tough competition. Although he can increase the price at his will but then he may consider various factors. He can formulate his own advertising campaign on limited scale because of his limited resources. The profitability can be increased by adopting self-suited market strategy. Although Barry is quite free to make his own policies regarding marketing and pricing but he should have to consider the main factors that are influencing market. For this purpose he need to conduct a brief survey on his own or with the help of his associates to collect the data about his competitors and market forces. By collecting reliable data correct business strategy can be formulated. For this purpose analysis and scenarios Model can be employed (Lynch Richard Corporate Strategy 2003) For doing this analysis some evaluation should be done. i) Evaluate the performance of the company performing now? ii) Evaluate the strengths and weaknesses and the chances of growth available and eminent challenges posed by competitors. iii) Evaluate the cost of the expenditures and income in terms of prices and costs It will help in understanding business position, challenges and prospects. By doing this type of analysis one can collect a reliable data that will be helpful in making business strategy. After doing analysis of market it is necessary to evaluate and predict short term and long term prospects of profitability. Brief Analysis: BBB is situated in a busy area and its frequent customers are students and University staff. As it is understandable that purchasing power of students is comparatively low. As they have to finance their studies and their day to day expenses either with the support of parents or by doing low paid part time jobs. These conditions reduce the purchasing power of the students. So if Barry is planning increase the price then he may loose the customers. His regular customers may switch over to another cheaper bar. Moreover demand elasticity of every item should be evaluated by using demand elasticity determining method. For this purpose one brief cue is given in Case Scenario in the form of demand elasticity of a hypothetical customer Kevin. Some conclusion can be sought from the data given about this customer. After determining the demand elasticity. Kevin’s cross price elasticity of demand for the Mega-Burger with respect to the Wow-Burger is equal to +7. According to Elasticity revenue relationship if the elasticity is greater than 1 and price increases then ultimately revenue will increase. In this case increasing price will be beneficial. It will ultimately increase the revenue. On other hand Kevin ‘s cross price elasticity of demand for the Mega-Burger and the Super-Salad is equal to 0 (zero). In this case the demand elasticity is less then 1. According to Elasticity revenue relationship if the elasticity is less then one and price increases then revenue will decrease. Impact of market structure on profitability in the short and long run time period. The consumer, raw material and profit margin are main factors in determining the profitability of the market, this factor has decisive influence on marketing strategy and profitability. Following factors may help in determining profitability for short and long run period. - Contest among close competitors in the market & levels of competition - Cost of raw material and prospects of purchasing cheaper raw material without compromising the quality. - Fluctuation in number of customers on account of holidays or vacations as it is a university town. - Quality of service, attractive slogans and conducive atmosphere for customers play decisive role in determining profitability Business strategy for increasing total revenue: 1. Increasing Revenue by increasing price As the demand price elasticity exercise done above shows that increase in price will be beneficial for some items whereas the increase will not be helpful for other items. This type of exercise to be done for all the items offered at BBB. It will give a clear picture that which increases will be beneficial and vice versa. It will help in selecting the items for prospective price increase. 2. Increasing Revenue by increasing Sales The other option for increasing revenue is increase in sales by advertising campaign. The first step could be to send some posters classes and staff room in order to make sure most of students and teachers know about the BBB. If they know about BBB it would serve as a reminder. The second step could be to offer discount for some food, which are not very popular. The data collected by above analysis will help in determining such food items. The third step in could be acquiring Neon signboards on suitable places. The finances for this hoarding or Neon sign could be arranged from some beverages company. It will divert the attention of people towards BBB and will help in increasing the number of visitors. 3. Reduce the price of some items Decreasing the price of unpopular items and attaching popular items with them can also increase the revenue. These popular and unpopular items may be presented in form of package attracting the low-income customers. Impact of E.U. Health and Safety legislation (coming into effect 1st Jan 2006)Recent E.U. Health and Safety legislation (coming into effect 1st Jan 2006) may have both advantages and disadvantages impact on the business of the BBB. Drawback: For complying with EU legislation Barry will have invest some amount for providing the required facilities. This investment may have a negative impact on already limited resources of BBB. These fund could have been used for other purposes Advantages: The EU legislation and restriction could prove beneficial for BBB in some ways. After abiding by these legislation, these can be used for enhancing and boosting the image of BBB by advertisement campaign. It can also widen the circle of his customers. The Health conscious people especially academic staff of university may also become the customers of BBB. Analysis of a Hypothetical sentence Kevin’s cross price elasticity of demand for the Mega-Burger with respect to the Wow-Burger is equal to +7, whereas his cross price elasticity of demand for the Mega-Burger and the Super-Salad is equal to 0 (zero). Analysis of Hypothetical Sentence The above hypothetical customer Kevin shows actually the market structure and elasticity in price . Some conclusion can be sought from the data given about this customer. After determining the demand elasticity relationship. Kevin’s cross price elasticity of demand for the Mega-Burger with respect to the Wow-Burger is equal to +7. According to Elasticity revenue relationship if the elasticity is greater than 1 and price increases then ultimately revenue will increase. In this case increasing price will be beneficial. It will ultimately increase the revenue. On other hand Kevin ‘s cross price elasticity of demand for the Mega-Burger and the Super-Salad is equal to 0 (zero). In this case the demand elasticity is less then 1. According to Elasticity revenue relationship if the elasticity is less then one and price increases then revenue will decrease. Conclusion BBB is located in a very business friendly place. The prospects of growth in business are really good. The proper market strategy and sound business techniques can turn BBB into very prosperous business. It is more appropriate for Barry to get involved with some Business students and get their support as apprentice. This apprenticeship will be beneficial for both Barry and the particular group of students. The business students would love to have a chance of practical work while being paid. This will not cost great deal of amount and it would not be a burden on BBB. Bibliography/References “Burger Bars” Retrieved on www.reports.mintel.com Richard Lynch, “Corporate Strategy” 2003 Read More