Establish a Profitable and Sustainable Business Sheng Kee Bakery - Essay Example

Sheng Kee Bakery- Strategy to establish a profitable and sustainable business and number submitted Contents Executive Summary 3 Parameters of the report 3 Research Project Statement 3 Methodology 3 Summary of Conclusion and Findings 3 Summary of recommendations 3 Section I- Introduction 4 Section II- Statement of the problem/research project 5 Section III- Methodology 6 Section IV- Findings 7 Section V- Conclusion 7 Section VI- Recommendations 8 References 9 Appendix 10 Executive Summary Parameters of the report Sheng Kee bakery is one of the upcoming bakery chains across California. The bakery chain has established multiple branches across the area and overall popularity has increased substantially over the years. The purpose of this research study is to determine and establish a sustainable and profitable business strategy for future growth and development as well as evaluate competitors in the Bay area and subsequently frame strategies to gain competitive advantage. Research Project Statement The research statement is basically an opportunity that the researcher has realized and formulated while working in bakery as a cake decorator. Two major opportunities surfaced in terms of wedding cake business and competitor analysis. The first project statement was to expand the bakery chain’s customer base through extending the business. This would be done by opening an exclusive wedding cake business, which at present is integrated within the bakery business and produces average revenues. The second research statement was to perform a market research on Sheng Kee’s competitors in the Bay area, which was further used for making strategies for competitive advantage. Methodology The methodology included both secondary and primary surveys. Secondary survey included researching upon the company’s website as well as other websites providing information about the company, its brand awareness and overall popularity among the target customers. These included social media websites such as, Facebook and Twitter and consumer forums. Primary survey was done by observing the average number of weddings occurring in the region on a weekly and monthly basis. Analysis of the competitors was done through close observation of the competitor bakeries in the Bay area. Summary of Conclusion and Findings The findings suggested that although Sheng Kee has gained popularity and brand awareness in the California area, it is a comparatively new and unknown brand for the profitable customer groups. The findings obtained also suggested that the wedding cakes are known only to the middle income group customers. The findings from the competitor analysis revealed that competition is becoming intense with increase in new bakeries and addition of new flavors and variants by the competitors. Summary of recommendations The recommendations were given based on the findings and analysis of the same. Overall, it was suggested that the bakery chain should carry out personal marketing strategies in order to target upper-middle class and upper class customers of the age group 24-35. As far as competitors in the Bay area are concerned, it was suggested that promotional schemes such as, feedback cards and discounts, should be adopted so as to gain competitive advantage. Section I- Introduction Sheng Kee’s origin can be traced to Taiwan, where it had begun almost 40 years ago. The main purpose for opening the bakery was to support the family of Mrs. Kao. This can be well-understood from Sheng Kee’s original meaning, “for a living.” (Sheng Kee, 2014a). However, as the pastries and cakes became famous owing to superior taste and flavors, the bakery caught attention of most local individuals and outsiders therein. Customers started to travel miles for visiting the shop. The most unique selling proposition of these cakes and pastries were the special ingredients, which created a distinct taste and instilled uniqueness compared to other bakeries. As a result, the bakery moved out of Taiwan and stated establishing its branches in various regions (Sheng Kee, 2014a). In order to transform the small bakery shop into a profitable and sustainable business, Mrs. Kao’s sons had studied specifics of food business from some of the world’s finest chefs. They were able to gain substantial experience and knowledge, which helped in fostering the bakery business. Currently, Sheng Kee bakery is one of the world renowned bakeries and is famous for its unique ingredients. The company sources its chocolate exclusively from Denmark, the creamy butter is imported from south France and the tangy and fresh fruit fillings are exclusively brought in from Germany (Sheng Kee, 2014a). The company was formally established in California, United States, in 1989 and since then, it has opened several branches across the state. The branch under study is located at 1941, Irving Street, San Francisco, California. It is a private help bakery chain in California. According to the current financial estimates, annual revenue of the bakery chain is around 2.5 to 5 million dollars and employs approximately 50 staff. The company has 12 branches located in California in various locations (Sheng Kee, 2014b). Some of its famous bakery products include Leches Cake, Coconut Cake, Yellow Cake, Gourmet Cake and Wedding Cakes. The newest products entries are Peet’s Coffee, Custard bun with pineapple raisins and pure milk tea (Sheng Kee, 2014c). Sheng Kee bakery has also been offering multiple discounts and packages and promotional freebies in order to increase customer awareness, thereby increasing footfall in the bakery shops. For instance, one of the latest promotional tactics of Sheng Kee bakery has been that over Facebook. The bakery chain offered a 99cents discount for every Facebook like on the Sheng Kee’s Facebook page. This discount offer has been hugely successful among the young adults who are major target customers for the bakery chain. Apart from the above promotional strategy, the company is also adding a star on Five Star membership card of the consumers on every purchase of bakeries worth 5 dollars or more. The position of the researcher in the bakery shop was that of a trainee Cake Decorator. The major duties of the cake decorator involved preparing sandwiches, refilling and preparing the ingredients before preparing sandwiches, decorating cakes with fruit or cream and cleaning the entire area after the task is finished. The normal work timing was 9 am to 5 pm, but the schedule changed according to shifts and requirements of the bakery shop. Also, the trainee worked for three to five days in a week. While working in this department of the bakery, the researcher obtained firsthand knowledge about the preparation and selling strategies for the cakes. The researcher was able to gain knowledge about various aspects of the business such as, best selling items, revenues and customer patterns (Johnston & Bate, 2003). At present, Sheng Kee is a growing bakery shop in the state of California. It is comparatively new and inexperienced compared to other cake and bakery shops, which are established in the state as well as in the US (Sheng Kee, 2014b). As a result, it is extremely important for the bakery chain to evaluate competition and assess strategies for fostering future growth. Even though Sheng Kee has achieved substantial popularity and brand awareness in the California region, yet it ranks significantly low in terms of volume and revenue compared to other successful and established cake and bakery shops across the state. In the Bay area alone, where the bakery shop under study is located, there are 18 other competitors selling similar products with similar strategies (Sheng Kee, 2014b). As a result, it is critical for the bakery chain to properly understand and evaluate its customers and make strategies for gaining sustainable competitive advantage in future. Currently, the marketplace is becoming saturated with big and small bakery chains and if Sheng Kee does not address the issue by creating strategies for growth and expansion, it might incur huge losses. Section II- Statement of the problem/research project The research department was cake making while the researcher was working in the bakery as a Cake decorator. On the basis of my job role, the department assigned to me and present market situation of the bakery, two major goals were identified for the project. The first goal or objective of this research is to expand the customer base by entering into an established and formal business of catering wedding cakes. At present, Sheng Kee sells wedding cakes, but the numbers are small. The bakery chain is famous for its unique ingredients and taste, which renders them special and desirable. Similarly, wedding cakes are prepared for a special and auspicious occasion, generally occurring once in a lifetime of a customer. As a consequence, demand for wedding cakes can be aptly met delivering a wedding cake with unique taste, ingredients, quality and design complementing the special occasion of wedding. At the same time, entering into the wedding cake business will boost revenues and sales of the bakery chain as wedding cakes are expensive compared to normal ones. The current opportunity came into light while the researcher was working as a cake decorator. The current opportunity can be extremely beneficial if the bakery chain successfully brands itself as a premium and qualitative wedding cake provider. The research findings will help in understanding the competition, purchase and demand patterns in the region and present popularity of Sheng Kee wedding cakes, which will further contribute towards framing strategies for new business establishment (Vaughan, 2000). The second goal or objective of the research is to evaluate competition in the present market. Sheng Kee is known for its cakes and bakeries. Competition in any business is inevitable and necessary for maintaining a healthy market and avoiding consumer exploitation (Pettigrew, Whittington & Thomas, 2006). However, competition also results in loss of market share, market volume and customers, thereby leading to a less profitable business. Hence, Sheng Kee must evaluate its competitors and realize their strategies and tactics of attracting and retaining customers. Monitoring customers will also help in analyzing why customers prefer other bakeries and tend to switch over. Given that retaining a customer is comparatively more profitable than acquiring new ones, it is imperative for Sheng Kee to satisfy its customers in exchange for loyalty and repeat purchase. The research findings will help to recognize different competitors and their unique selling propositions. In summary, two major research statements for the current project are; 1. Expanding the customer base by entering into the business of catering wedding cakes. 2. Market research on the competitor bakeries in the surrounding area and analyzing the competitive advantage of Sheng Kee’s bakery. Section III- Methodology The process of data collection was facilitated through various primary and secondary sources. For instance, background information of the company was obtained through personal knowledge about the bakery shop as well as secondary analysis through company websites. At the same time, personal and informal talks with senior members of the organization helped in understanding the organizational values and long-term orientation. The job profile of the researcher was that of a cake decorator, which helped in gaining important facts and data regarding the department. In addition, the researcher frequently asked questions about the company’s business functions as well as daily, weekly and monthly revenues, which were adequately documented. In order to gain more information about the cakes, the researcher started tracking the sale of wedding cakes on a daily basis. Also, the researcher surveyed the town for about a month in order to record the number of weddings occurring in the area. With some difficulty, the researcher was able to gain critical information about different bakeries, which catered the wedding cake during these weddings. In order to identify the resources available for starting an exclusive wedding cakes department, the researcher enquired regarding the total revenue, sales and profit of the bakery on a monthly basis. The researcher also obtained information on the monthly budget allotted to various departments and the return on investment of each department. Finally, for better and more qualitative evaluation of the wedding cakes sold by Sheng Kee, a feedback card was created that was sent over with every wedding cake delivered. The filled card was retrieved after a day or two. Competitor analysis was difficult and tiresome. In order to understand the competitor strategy and behavior patterns of the competitor’s consumers, a day was spent on assessing the competitor’s bakery (Marieke, 2004). During this observation, data was recorded on the average daily customers, their purchase patterns, items bought and average sale on that day. Finally, competitors’ were also evaluated through social networking sites such as, Facebook and Twitter, wherein their overall popularity, brand awareness, complaints and other feedback were gathered (Sophia & Zyl, 2009). Section IV- Findings The research methodology approach was helpful in gathering important information, which would fulfill the research statement. Daily tracking of the product sales revealed that the major selling product on an average day was cakes, closely followed by pastries. This is because cakes and pastries are available in more varieties than other items. The research on weddings yielded good results. On an average, there were 5-8 weddings occurring in the California Bay area every week. Also, it was found that average expense of a couple in a wedding was approximately 33,000 dollars, where the average budget for wedding cake was 546 dollars (Moody, 2014; Nguyen, 2014; Figure 1 and Figure 3). A majority of the wedding cakes were ordered on word-of-mouth basis such as, from their friends or relatives. Sheng Kee, on an average, prepares wedding cakes for different customer segments. While orders for premium wedding cakes were the lowest, most of the orders came for middle-segment wedding cakes. This finding suggests that although the bakery chain is famous among middle –segment group customers, it lacks proper brand awareness and brand strength among high-end and premium customers. Sheng Kee sold a total of 15 wedding cakes in the month of internship. Out of these, 11 cakes were for mid-segment and only four were premium cakes. Then again, it was observed that of the total weddings occurring in the Bay area, nearly half involved premium customers (Marieke, 2004). The competitor analysis for Sheng Kee also revealed many interesting facts. For instance, cakes and pastries have been the major selling items in most bakeries, followed by hot beverages such as, coffee and buns. Sheng Kee products were considered a slightly premium compared to other average ranked bakeries situated at the Bay area. Section V- Conclusion The major objective of this research report was to find out feasibility and long-term profitability of the exclusive wedding business arm of the bakery chain. From the above extensive research, it can be concluded that wedding cake catering business would be a lucrative and profitable extension for the bakery chain, provided the company successfully establishes its brand among the target customers. Research findings on the wedding cake business as well as Sheng Kee’s competitors have led to numerous inferences. Sheng Kee wedding cakes are not known well among the premium customers. From the research and data collection and from figure 2, it is clear that although average priced wedding cakes were the highest selling ones, very few orders were placed for expensive wedding cakes (Hakulinen, 2005). Moreover, overall brand image and awareness of the bakery is low compared to the average number of weddings taking place in the Bay area. It has also been observed that most orders in case of premium and high-end weddings occurred through word-of-mouth advertising from close friends and relatives (Kotler, et al., 2002). Research done on the competitor business suggested that competition is becoming intense in terms of cakes and pastry business and competitor bakeries are coming up with new and unique variants of cakes and pastries so as to attract customers and expand business. Additionally, adjacent bakeries are devising unique promotional schemes such as, offering free pastries from 1 pm to 2 pm, for the purpose of increasing customer footfalls during slow traffic hours. From the above findings, it is clear that Sheng Kee must take immediate steps in order to gain sustainable competitive advantage over other bakeries in the Bay area. Section VI- Recommendations Based on the above analysis, the bakery chain can opt for various strategies to overcome intense competition and expand business for future profit and growth. Firstly, Sheng Kee will have to increase its brand image and brand awareness targeting niche group of premium customers. For this, the bakery chain can either hire an advertising and promotion agency or carry out in-house branding. The target customers for this business should be 24-35 years male and female belonging from upper-middle and upper class. The bakery shop can also choose personalized marketing tactics such as, sending online wedding cake brochures to prospective customers. Besides that, the bakery chain can also provide quick service wedding cakes in case of emergencies such as, within 12 hours. In order to hold off competition, Sheng Kee can include new variants of cakes and pastries. The company can also offer exclusive feedback forms wherein customers can write down their expected cakes and pastries flavors, which subsequently can be added to the bakery’s menu. For increasing consumer base, Sheng Kee can promote discount offers to visitors for inviting friends in the bakery shop. References Hakulinen, S. (2005). Wedding Traditions in Finland and the United States. Retrieved from https://www15.uta.fi/FAST/US7/PAPS/sh-bride.html Johnston, R.E. & Bate, J.D. (2003). The Power of Strategy Innovation: A New Way of Linking Creativity and Strategic Planning to Discover Great Business Opportunities. American Management Association, New York Kotler, P., Armstrong, G., Saunders, J. & Wong, V. (2002). Principles of marketing. Harlow: Financial Times Prentice Hall. Marieke, D. (2004). Consumer behaviour and culture: Consequences for global marketing and advertising. Thousand Oaks, CA: Sage Publications. Moody, D. (2014). What Is the Average Wedding Budget? Retrieved from http://www.acpwc.org/ Nguyen, V. (2014). The Average Cost of a Wedding in Each Region of the U.S. Retrieved from http://parade.condenast.com/294194/average-wedding-cost-america/ Pettigrew, A. M., Whittington, R. & Thomas, H. (2006). Handbook of strategy and management. California: SAGE. Sheng Kee. (2014a). About Us. Retrieved from http://shengkee.com/aboutusEnglish.html Sheng Kee. (2014b). Products. Retrieved from http://shop.shengkee.com/main.sc Sheng Kee. (2014c). Locations. Retrieved from http://shengkee.com/location.html Sophia, A. & Zyl, V. (2009). The impact of Social Networking 2.0 on organisations. The Electronic Library, 27(6), 906 - 918. Vaughan, R. (2000). How advertising works: A planning model. Advertising & Society Review, 1(1), 27-33. Appendix Figure 1 Average Cost of Wedding across America (Source: Nguyen, 2014) Figure 2 Wedding Costs over years (Source: Hakulinen, 2005) Figure 3 Break-up of wedding plans across America (Source:  Moody, 2014) Figure 4 Expensive weddings Across America (Source:  Moody, 2014) Read More