Karam Pizza and Samosa - Greatest Strengths and Weaknesses - Case Study Example

Karam Pizza and Samosa Case Study Karam’s objective: To expand and fully serve his s to the effect that he will nolonger turn his customers away in a way that is profitable for his business. Three greatest strengths a. Obvious demand for his pizza Karam’s pizza is obviously in demand. This demand is very obvious when his customers had to wait just to be served that others even had to be turned away because the pizzeria could no longer serve them. b. Highly differentiated product Karam’s pizza is one of a kind. His unusual menu choices of a fusion of Indian and Italian food which is prepared and cooked at high quality is very novel that there are very few similar food offerings in the area, if any, making competition less intense. In fact, in Karam’s case, his problem is not competition but attending to his unserved customers. c. Karam has greater control of the business Unlike big corporations where business decisions had to be scrutinized and approved by a series of board meetings, Karam can make decisive decision about the business that would make it more responsive to the needs of the customers and business because he owns 65% of the business. Three greatest weaknesses a. Operational inefficiency Karam’s pizzeria cannot accommodate the uptick of demand during its peak hours in the evening. Its oven cannot handle the orders of all its customers that they were either made to wait long or turned away. This operational inefficiency also affects other aspect of the business such as its delivery business because Karam could no longer promise 30 minutes or free. b. Lack of capital equipment One of the biggest culprit of Karam pizzeria’s operational inefficiency is its lack of capital equipment. One of the most obvious equipment that the business lack are ovens that could accommodate all the customers during its peak hours. Due to this lack of capital equipment, Karam is is incurring opportunity cost and is losing business with those customers that were turned away and straining the goodwill of those customers who were asked to wait long. c. Lack of knowledge in running a business Karam’s lack of knowledge in the business aspect of his pizzeria is evident with his dislike for business to business transactions and his lapses with credit card sales (invoice issues etch). This lack of knowledge translates to opportunity lost with businesses that could have been earned with those transactions that use other modes of payment. People, events or other situations that could provide Pizzeria Opportunities to solve its problem a. Financing institutions Karam’s retained earnings and his investors do not have enough resources or not willing to put in more resources for Karam’s expansion. Having this limitation, financing institutions such as banks may provide Karam the additional capital to expand the operation of his business and widen his customer base. b. Investors Karam may also look for white knights or investors who are willing to take risk in his business. This is very possible because Karam Pizzeria is very much in demand that customers are even willing to wait. The added capital or newly infused capital will not only expand the business but will also add experience and knowledge in the business with new investors coming in the business. c. Expansion of Karam Pizzeria in a new location may prove to be profitable for Karam because they will have a wider customer base. People, events or other situations that could provide Pizzeria with Threats to its business or even its survival a. Operational inefficiency that turns customers away The operational inefficiency of Karam pizzeria turns off customers because he is turning them away. Also, those unserved customers can be considered as lost opportunity because they could have been profits that were earned by the business but were instead turned away. This is not good for the business not only that it turns customers away but also it gives the business a negative image. Those customers who were not served will eventually look for other pizza outlets who could serve them well. b. Competitors Competitors are beginning to notice the demand for a fusion of Indian and Italian food that they are now incorporating it in their menu. These competitors can give a good alternative to Karam’s customers especially those who were turned away. This is not good for Karam because he may have created the market but his customers will go to his competitors because he cannot serve them well. c. Bad business decision/s Karam’s unfamiliarity to run credit checks with his credit card sales is a very big threat because he is losing revenue with bad sales. If credit card sales will take a big portion of the business sales and Karam still do not know how to do credit checks, the business will be in trouble. Alternative 1: Buy additional oven and retain current operation 2 pros Customers during dinner period will be served or will have minimal number of customers that will be turned away. Karam will not be straining his goodwill to his customers thus maintaining his customer base. In addition, other aspects of the business will not be compromised by inefficiency and his promise of 30 minutes delivery or free can be kept and thereby retaining the goodwill of his customers. 2 cons Potential revenue of the oven purchase is not enough to cover its cost per Karam’s computation. In effect, the business will lose money if Karam will buy new oven/s. New oven will be underutized during off hours such as lunch and making it idle incurs opportunity cost and depreciation. The new oven will also incur other attendant cost such as maintenance, additional staff or cook and thereby increasing the overhead of the Pizzeria that could affect its competitiveness because it will be forced to sell pizzas at a higher cost. Alternative 2: buy oven and explore other business opportunities 2 pros Customers during dinner period will be served or will have minimal number of customers that will be turned away. This would minimize if totally eliminate opportunity lost from customers that were driven away either by long wait, frustration or non availability of food. Also, having an additional oven would mean preserving other aspect of the business such as on time delivery which also contributes to the bottomline of the business. Equally important, the goodwill of the customers are retained that would make it harder for competitors to win them over. In addition to serving customers during peak hours in the evening, exploring other business such as catering to business functions, sales meetings and birthday lunches will optimize the use of the additional purchased oven thereby covering its cost. In effect the purchase will make the business profitable instead of incurring loss. 2 cons Karam do not like serving business functions, sales meetings and birthday lunches and he might do a sloppy job with catering business which could jeopardize the reputation and goodwill of the business. It is not yet certain if the added business of catering to functions, sales meetings and birthday lunches will be enough to cover the cost of the oven. In addition, Karam has already shown disliked for the idea of catering business which could affect its performance once it move into catering. Alternative 3: branch out to a new location 2 pros Karam liked the idea and he might do well in serving high quality pizzerias in the expanded branch. New menu might be added which will add interest to the business from the customers making Karam’s pizzeria more appealing to the customers. A positive image of the company toward the customers would attract investors or it would make it easier for the business to convince investors to put money in the business. Business presence will be increased with branching out to a new location and it follows that the business’ customer base will also widen opening opportunities for the business to earn additional revenue. The expanded customer base will have a ripple effect of opening new opportunities which could mean further growth for Karam’s pizzeria. 2 cons Existing investors are not willing or does not have enough money to give to Karam for the expansion of the business to a new location. This would handicapped Karam in his effort to expand should he decide to branch out. There are other avenues however where Karam could raise the necessary additional capital if his pizza will prove to be in demand. He can use the business model of software start ups in Silicon Valley where he could present his business to potential investors that his Pizzeria is in demand and has potential to expand for the investors to infuse money in the business. Karam’s operational problem might worsen if he opens another branch at another location because he has another branch to look after. Thus, it is imperative that Karam must first fix the operation inefficiency in the original store before considering branching out. At present, Karam is losing valuable customers everytime he turns them away. Read More