The Coffee Company Report - Essay Example

The Coffee Company Report Table of Contents The Coffee Company Report 1 Table of Contents 1 Introduction: 2 Location Analysis: 4 Primary Findings and Interpretation: 9 Secondary Data evaluation: 10 Customer Service Improvement: 12 Primary Data for Kimmage and Ballsbridge: 12 Secondary data analysis: 19 Present Financial Condition of The Coffee Company: 20 Selection of appropriate Option: 22 Conclusion: 24 Reference List: 25 Introduction: The report is based on the given case of The Coffee Company who are looking to enhance their business growth scope by expanding to multiple locations based on appropriate analysis and research. The Coffee Company operates with a library theme that allows their customers to borrow and donate books while having a hot sip of coffee. The Coffee Company was founded by three partners and is currently operating with 5 shops in Dublin. The management of the company had to bring down the number of shops from 8 to 5 because of the recession effect. The decrease in the number of outlets has also influenced the profit earning process and the concerned firm is just able to achieve the breakeven point. Out of the 5 running stores two are not able to generate any profit and the managers believe that this is because of the locations of the stores. One of the partners suggested consulting a marketing research firm however, the other partners think of it as a costly endeavour. The concept of using GIS technology for combining the business information with the demographic data for assessing the proper location for the stores is also being considered by the business partners. However, balancing the financial issues with the strategic planning problem is complex process for the firm which urged the partners to cancel the bespoke software development and other IT projects of The Coffee Company. The primary aim of this report is to assess the decisions of moving the locations of the two stores or improving the customer service process in the stores for The Coffee Company. Analysis of Probable Options: Based on the given case, the partners of The Coffee Company have selected two options for generating their profit earning process. The first option is to focus on re-location of the two stores that are not operating in a profitable manner and the second option is to improve the customer service process of the concerned stores for increasing the volume of customer footfalls. In the words of Reid and Hinkley (2006), location of a business house has a major influence on the operational and strategic decision making process of a firm. Newby (2009) specified that factors such as consumer convenience, presence of target consumers, market competition, transpiration for procurement of resources, demography and cultural background can the help the business in assessing the contribution of a location for business sustainability. Changing the location of the stores for The Coffee Company has to be conducted based on proper information that would allow them to make quick decisions and implement them. They are considering conducting a location analysis with the help of GIS analytics that will provide The Coffee Company with data on customer behaviour, needs and requirements of the existing location of the stores and the potential locations for shifting the stores. However, the financial situation of the company is creating barriers for the process. Apart from this the ongoing IT projects have been cancelled in order to facilitate the use of GIS analytics. The second option for the company is to improve their customer service in both the selected stores for increasing customer visit and the sales of the stores. The contemporary theme of the business is a library based coffee house where the customers can borrow and donate books. The addition of the library theme has included an extra service for the customers of the business process. However, this is not helping in increasing the profit earnings of the concerned stores. Newby (2009) noted that often stores fail to generate profits even after having sufficient customer dealings because of unnecessary costs. Balaram and Adhikari (2010) observed that there is no exact definition or set parameters for designing customer services and is solely based on the expectation of the customers and the organisational capability. In case of The Coffee Company, the customer nature, demographic, taste and preferences have to be analysed for assessing the appropriate services that will appeal to the customers. On the other hand, implementing new customer services will also include additional expenses which can hamper the financial situation of the company. Newby (2009) opined that the outcome of customer services on business growth cannot be measured instantly and is based on the customer experience over a long period of time. The Coffee Company may need to change their overall theme, pricing, promotion or internal ambience of their for suiting the consumer wants however the decision will be based on consumer and market analysis and the financial capability of the concerned firm. Location Analysis: Pearson (2007) stated that the location of a business influences the entire supply chain functions of a business and also creates the scope of streamlining the logistics of a firm with market demands. Bennison and Hernandez. (2000) focused on the influence of location on the overall business process and stated that factors such as customer and business convenience, competition, customer awareness also depend on the location of a firm. In the case of The Coffee Company, the suitability of the location of the business will depend on the existing growth of the company and changes in the customer behaviour. As suggested by one of the partners of The Coffee Company, the location analysis will be conducted with the help of GIS analytics process. The expected outcomes of analysis will reveal the location information and the demographic data of the consumers. This information can then be combined with the existing database of the company and used for making quick decisions to improve the business conditions. The location analysis for The Coffee Company will include Geographic Information System (GIS). The location analysis will include various factors such as financing and labour utilities for cost analysis, geographical factors such as roads, rails, etc, environmental, demographic and cultural aspects of the people. Apart from these, the location analysis will also focus on the market stability by assessing the competitor status and the average footfall of the customers towards the respective industry. The initial steps of the GIS will begin with the spatial mapping that reflects the suitable locations for setting up the business stores based on measurement of some set parameters. The setup of the GIS process will also be developed on the basis of the customised needs of The Coffee Company. According to the partners, the existing location of the business is not suitable as the demographic and cultural backgrounds of the customers are not aligned with the service offerings of the business. The outcome of the GIS analysis will be based on data collected from the selected locations with both primary and secondary means. The data will help in assessing the customer behaviour and other factors that are mentioned in the GIS parameters. The below given diagram reflects the parameters set for primary data collection from the selected locations: Figure 1: Parameter Setting for the GIS of The Coffee Company (Source: Created by Author) In order to gather primary data for GIS calculation, the basic parameters considered are cities, roads and markets. The related sub-parameters were roads-distance, cities-population, market-crowds. This information will be collected from the concerned spots and the final calculations will be done. The locations where the GIS analytics will be installed and measured have been categorised in three groups: Existing stores earning profit: Bluebell, Ballymount and Churchtown Existing stores not earning profit: Ballsbridge and Kimmage Location options for new stores: Donnybrook and Rathfarnham The below given geographical representation reflects the position of the stores: Figure 2: Geographical mapping of the locations (Source: Created by Author) Existing Stores earning Profit Existing Stores not earning Profit Locations options for new Stores Primary Findings and Interpretation: The data collected from the GIS has evaluated the geographic considerations of all the seven locations which have been presented with the help of the below graph: Figure 3: GIS data Collected for the selected locations (Source: Created by Author) From the above graph it can be observed that the three profit earning location of The Coffee Company are not the necessarily the most populated or having the largest market size In terms of the population Ballsbridge is having the highest population, market size and the largest road distance. However, the store has been marked as a no-profit store by the business partners. On the other hand, Bluebell ranks 4th among the 7 locations in terms of the market size and is considered as a profit generating store for the company. This point of view reflects that population and market size are not the sole decision making factors for deciding on the business location. However, looking at the data of Kimmage, a no-profit generating store, has the lowest population, road distance and the market size. Focusing on the two potential locations being considered by The Coffee Company for relocation of their stores, Donnybrook and Rathfarnham have a generous population, road distance and market size. According to the results of the GIS, both the locations are suitable for business purpose of The Coffee Company. Considering the primary data collection, it can be stated that the store situated in Kimmage can be relocated to Rathfarnham based on the bigger market size and population. However, the deciding factors still cannot be based on the primary data alone as the parameters covered did not include factors such as culture, purchasing power and the demographic data of the consumers. Secondary Data evaluation: The secondary data collected for the location analysis was mainly related to the background details of the selected locations. The following section reflects the cultural, demographic and consumer aspects of the potential locations and the no-profit stores of the Coffee Company: Ballsbridge: Ballsbridge is having the highest population among the locations for The Coffee Company stores. Ballsbridge is also among one of the most posh areas of Dublin with establishments such as Lansdowne Road Rugby Stadium and The US embassy. The consumer purchasing power is high as the average monthly income of the people rests between £1700-2000 (Keating, 2009). The village is also being transformed into a commercial zone for Dublin and also is a renowned tourist location of Ireland. The primary occupation is business and hospitality sector based on the growing tourist visits in the village. Kimmage: Kimmage is a suburb situated on the south of Dublin. The place is famous for Kimmage Manor, Kimmage Cross Roads (KCR) and its historical role in the 1916 Easter rising (Keating, 2009). The people of Kimmage have strong attachments with their historical significance and religious beliefs. Most of the business houses are formed with an occasional entertainment segment for instance, a barber shop will also have a small roulette table. Pubs and theatres are also listed among the city attractions. The consumer purchasing power is low. Donnybrook: Donnybrook is a district in south of Dublin, the people follow civil parish and is famous for the Donnybrook fare. People are mostly occupied with farming, media as national television and radio broadcasting are located in the place (Keating, 2009). The consumer behaviour is reserved in context of spending and are mostly engaged in religious activities in their spare time. Rathfarnham: Rathfarnham is mostly known as one of the initiation grounds of the Industrial Revolution. The Rathfarnham castle is also among the top tourist attractions of the area along with many other sites such as The Whitehall, Beaufort House, etc. increasing the number of visitors in the place (Keating, 2009). With pubs, music and film events being the major entertainment sources, people are lively and the consumer buying power is also high. Customer Service Improvement: The option of improving the customer service process depends on indentifying the needs and expectations of the consumers. The marketing agency has conducted a feedback survey in the concerned stores for the above stated purpose. The feedback form was provided to the customers with their bill amount and was asked to mark the options they think is relevant to the service of The Coffee Company. Over a period of 7 days the data was collected in both the stores and 50 responses has been considered from each store as the study sample. The primary data for Rathfarnham and Donnybrook were collected with face to face survey from 100 respondents from each location regarding their preference and choices. Primary Data for Kimmage and Ballsbridge: Q. What do you think of our service? Figure 4: Service response in Kimmage Figure 5: Service response in Ballsbridge In response to the service quality of Kimmage and Ballsbridge, the numbers of customers satisfied or comfortable with the services of the stores are more in Ballsbridge where 11 respondents have marked them excellent, 23 good and 15 with average. On the other hand for Kimmage store, 9 respondents selected excellent, 17with good and 21with average. From the acquired data it can be evaluated that the customers of Ballsbridge store are more satisfied in comparison to that of Kimmage. Q. What sections of service should be improved according to you? Figure 6: Service Improvement in Kimmage Figure 7: Service Improvement in Ballsbridge In context of Kimmage, most of the respondents (38%) suggested for including discount packages in their services while 28% of the respondents asked for improving the billing process. The customers are not much dissatisfied with service delivery time, sitting arrangement or the book borrowing segment which is an essential part of the entire business services. The pricing seems to be the problem for the customers of Kimmage store. On the other hand in Ballsbridge, 34% of the respondents suggested improvements in the order response time and another 24% in the book borrowing segment. Only 18% of the respondents asked for discounts in Ballsbridge store and 4% asked for changes in billing process. 16% of the customers of also suggested for changing the sitting arrangements of the Ballsbridge store. The face-to-face surveys conducted in the potential relocation spots revealed the following the customer response: Q. What facilities attract you toward a coffee house? Figure 8: Factors attracting customers in Rathfarnham Figure 9: Factors attracting customers in Doonybrook The response of the participants reflected that majority (34%) have opted for the book borrowing theme, while 29% selected taste and another 14% selected the ambience of the store. On the other hand, the respondents of Donnybrooke were more attracted towards the ambience of the store (26%), 24% selected range of beverages offered and 21% selected the taste of the services offered. However, the respondents of Donnybrook were not attracted by the book borrowing theme of the store (11%). From the responses, it can be evaluated based on the choice of the participants that Rathfarnham would be a more suitable spot for relocation. Q. What is the frequency of your visits to coffee house? Figure 10: Frequency of visiting coffee stores in Rathfarnham Figure 11: Frequency of visiting coffee stores in Donnybrook The responses gathered from the participants reflect that the frequency of visit in coffee shops is more in Rathfarnham in comparison to Donnybrook. The number of participants who visit coffee shops twice a day in Rathfarnham is 19 while it is 13 in Donnybrook. Again in case of daily customers visiting coffee house once a day in Rathfarnham is 37 and 29 in Doonybrooks. However, in Donnybrooks most of the customers prefer to visit a coffee house once or twice a week. Q. With whom do you visit coffee shops mostly? Figure 12: Companion to coffee store, Rathfarnham Figure 13: Companion to coffee store, Donnybrook In Rathfarnham most of the participants stated that they visit coffee stores with their friends (33%), girl/boyfriends (29%), family (7%), alone (20%) and colleagues (11%). In case of Donnybrook, participants selected with friends (41%), girl/boyfriends (23%), family (11%), alone (16%) and colleagues (9%). The response reflects in both the spots the visitors of coffee houses are friend groups followed by couples. However, an inspiring number of single customers visiting in Rathfarnham can be an influential factor for the book borrowing theme of The Coffee Company which is limited in Doonnybrooks. Secondary data analysis: As stated by Anderson and Kerr (2008), customer service is not based on any specific process and can shift based on any changes in customer behaviour and needs. The process of developing customer service is to have a constant and near accurate system for identifying the consumer needs and expectations. Buchwald (2011) argued that in the contemporary scenario, business firms are creating the needs for the customers which is dominating the consumer decision making process and the consumer behaviour. For instance, brand attachment and status of a product or service are being promoted in order to create consumer awareness and engagement with the company. Corstjens and Lal (2008) assessed that business process of a firm also influences the facilities that can be provided by the company to their customers. Bhote. (2009) added that customers have to be engaged in the business process for being attracted and loyal to the service process. Most of the service providers in the prevailing business scenario are trying to add extra services in their customer offerings for assessing the business process of the firm. The aspect of service marketing with additional features has been considered as the new trend in achieving customer satisfaction. On the other hand, Buchwald (2011) stated that consumer satisfaction may depend on various factors but the process of achieving it is always to identify the needs and wants of the business process. Present Financial Condition of The Coffee Company: In order to evaluate the present financial condition of The Coffee Company, the net present value will be evaluated. The Net Present Value of a company is evaluated by assessing the difference between the cash inflows and outflows considering the present value of the company. Net present value helps in defining the success rate of a project or investment (Valerie, Cook and Ali, 2010). In the given case of The Coffee Company, two NPVs will be calculated based on the options they have selected for improving the profit earning capability of the firm. The financial stability of the company has fallen since the global recession and they had to close down three stores. In order to accommodate the marketing research process for assessing the most suitable solutions, they had stepped the ongoing IT projects. Thus, it can be observed that the financial capability of the firm will not allow it to pursue both the options. Based on the results of the location analysis, Rathfarnham and Donnybrook are the two most suitable places for relocation of the Kimmage and Ballsbridge store. Both the locations have a generous population of coffee drinkers. The prospect of relocation of both the stores have been evaluated in given NPV calculation based on estimated future returns: From the above calculations it can be observed that the business returns in case of relocation of the both the stores is high however, the initial expenses associated with the procedure is also high which may not be suitable for The Coffee Company in the contemporary scenario. Apart from the business relocation, the operational expenses, the on-hold IT projects should also be kept in mind before investing a huge amount based on the estimation. The discount factor for the relocation process has been considered at 10%. The higher population of the selected locations is a scope for enhancing the business process and profit earning capability of The Coffee Company. Also, the competition factor has not been considered in the analysis which can reduce the efficacy of the cost benefit analysis of the firm. The below NPV analysis has been developed for The Coffee Company in consideration of the option of including new customer service aspects in the concerned stores for improving customer footfall and increasing the profit earning process: Cost Benefit Analysis for Improving Customer Service of Two Stores Year Discount Factor Cash Flow Present Value 0 0.08 -30000 -2400 1 0.55555556 15000 8333.333333 2 0.30864198 17500 5401.234568 3 0.17146776 21000 3600.823045 4 0.09525987 24000 2286.236854 5 0.05292215 28000 1481.820183     NPV 18703.44798 The above analysis reflects that the initial cost estimated for the improving the customer service process of the firm is lower than the relocation process but the end results are also lower. The discount factor in this case has been considered at 8%. However, the process of installing new customer service systems for growth of profit earning capability does not provide specifications regarding the type of services most appreciated by the customers. The success rate of the customer service option is not as high as that of the relocation option. Selection of appropriate Option: The analysis conducted above reflected results for location analysis with the help of GIS analytics and assessed the consumer reaction for improving customer experience with the help of survey results. The analysis also included secondary data for ensuring the accuracy of the analysis process. The location analysis reflected that both Rathfarnham and Donnybrook are potential locations for business expansion; however the market size and population of Rathfarnham is bigger than that of Doonybrook. The GIS data also portrayed that among the no-profit stores (Kimmage and Ballsbridge) of The Coffee Company, the demographic, cultural and economic aspects of Ballsbridge can be aligned with the business prospects. In case of Kimmage, the lower sales and profit figures can be the result of small population and the difference in life style from that of the offerings of The Coffee Company. On the other hand, primary data analysis for customer reflected that the customers of Ballsbridge are not satisfied with the process of service delivery whereas the respondents of Kimmage are dissatisfied mainly with the pricing of the service. In response to the potential customers of Rathfarnham and Donnybrook, the respondents of Rathfarnham stated that they were more attracted towards the service provided and the library theme was appreciated unlike Donnybrook where the ambience of the coffee shop should be more enthusiastic. The financial analysis reflected that the expenses of relocation of both the shops were more in comparison to that of the customer service process. But the estimated scope of return was also high in case of relocating the shops as the selected spots for relocation had larger markets and population size. The internal information of the company reflected that the downfall in the profit of the two stores started after the recession. This also signifies that the reduction or decrease in profits and sales was a result of the recession and the financial instability of their consumer base. Thus, given time the business can improve in the selected stores based on the scope of economic growth and overcoming the after-effects of the recession. From the analysis, it can be gathered that the Ballsbridge store can be developed by improving the customer service process and enhancing customer behaviour. However, the scope of growth in Kimmage store is limited and thus it can be shifted to Rathfarnham for a better future prospect. The reason for selection of Rathfarnham as the relocation spot is the alignment of customer needs with the business offerings. On the other hand, the store of Ballsbridge can improve its profit earning process by providing the customer a superior experience. This option of relocating one store and improving the customer service delivery process in another will less expensive and provide a better chance for the partners to understand the aspects that influences their customer behaviour. Conclusion: The above analysis focuses on evaluating a suitable option for The Coffee Company in order to increase their profit earning process. The process of evaluation included the location analysis that included GIS analytics, surveys and secondary data analysis for assessing the suitability of the available options. The researcher had consulted both the primary and secondary data analysis results for identifying the suitable option but the accuracy of the results can be hampered as the financial estimates does not consider the external factor influencing the business process. Reference List: Anderson, K. and Kerr, C. 2008 Customer satisfaction: tools, techniques, and formulas for success. 5th ed. London: Chapman and Hall. Balaram, A. and Adhikari, B. 2010 Managing Customer Relationships in Service Organizations. Administration and Management Review, 21(2), 65-78. Bennison, D. and Hernandez. T. 2000. The art and science or retail location decisions. International Journal of Retail & Distribution Management, 28(8), 357-367. Bhote, K, R. 2009. Beyond customer satisfaction to customer loyalty. 3rd ed. New York: Appleton-Century-Crofts. Buchwald, B. 2011 Schweppes - how the Beverage Brand Affects UK’s Consumer Behaviour. 4th ed. London: Palgrave Macmillan. 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