Competing With 12 Corners Coffee: Business Strategy And Plan
Strategy for Competing with 12 Corners Coffee
Questions:
1. Craft a brief (1-2 pages) strategy for a business concept that would directly compete with the small business you selected. Explain the rationale for the strategy in detail.
2. Determine if it would make more sense to open the new business you describe or to purchase the existing business you selected. Explain your reasoning.
3. Discuss the most appropriate form of ownership for your new business (assuming your current financial situation).
4. Outline a business plan for your business. Visit https://www.sba.gov for tools and templates. ?
The cafe and restaurant sector of USA is occupied by both small as well as large organisations. However demand of customers in this market is still high. It indicates that opening a cafe in USA market will be profitable. The current paper contains discussion on business strategies for running a store in USA market. The paper also contains discussion on business strategies of 12 Corners coffee, a New York City based cafe. However the paper also contains outline of the business plan for running a cafe in New York City.
12 Corners Coffee is one of the most visited cafes in New York City. Management of the organisation gives importance on providing innovative product to the customers. However the management offers only coffee based products to customers. Customers of the new business can be provided with new deserts, cakes and pastries. The visitors of 12 Corners Coffee do not get opportunities for outdoor seating. In new business, the visitors will also be provided with opportunities for outdoor seating.
Rationale for the strategy: The strategy of introducing new deserts and cakes will be effective for attracting children to the cafe. However the opportunity for outdoor seating will also be effective to attract all types of visitors.
As the cafe and restaurant industry of New York City is highly profitable, competition among organisations is also high (Bosma, 2013). The industry comprises of both small cafes as well as large multinational organisations. Starting a new business in this industry may not be effective to earn high profit as availability of substitute products is also high (Bosma, 2013). 12 corners coffee is one of the most popular cafes in New York City. Acquiring an organisation will reduce the cost of setting new infrastructure (Chwolka & Raith, 2012). However management of the new organisation will be able to utilize infrastructure of acquired business (Decker, Haltiwanger, Jarmin & Miranda, 2014).
Analysis on strategy of new business indicates that the management is giving importance on acquiring 12 Corners Coffee. However partnership with existing owners of the organisation will be developed to run the cafe. As level of competition in market is very high, retaining customers will be difficult. Involving several partners with the business will enable the management to reduce risk (Hechavarria, Renko & Matthews, 2011). Apart from this development of partnership will also be effective to lower the start up costs (Lind, 2012).It is evident that development of partnership will be more suitable to run the business.
Choosing between Starting a New Business or Acquiring 12 Corners Coffee
Cover page:
Company Name: 12 Corners Coffee
Name of Owner:
City: New York City
State: New York
Zip code: 10013
Executive summary:
Company: 12 Corners Coffees
Products and services: Coffee, Espresso, Latte, Cappuccino and other drinks
Audience and target customer: Young people, working professionals, Teen agers, family
Future of business and industry: Although competition is very high in small cafe market in New York City, demand for such cafes is also high (Ács, Autio & Szerb, 2014). It indicates that running a cafe in New York City will be profitable.
Key employees of business: CEO (I), store managers, cooks
Mission statement: We offer customers with extra ordinary cafe experience along with superior products
Details about product and services: Currently we offer coffee, espresso, latte, ice-coffee and other drink to customers. In future we will offer cakes and pastries to other customers.
Qualities for success: We offer fresh products to customers. However we also give importance on offering innovative products to visitors.
Description of industry: The cafe industry of New York City is highly competitive. Several small coffee shops such as Abraco , Blue Bottle Coffee, Cafe Grumpy along with large multinational cafe chains such as Starbucks (Mariotti & Glackin, 2013, Román, Congregado & Millán, 2013).
Description of larger customer: At 12 corners coffee, mainly teen agers and young adults are focused. However the families and children will also be given importance.
Identification of competitors: The competitors of 12 Corners Coffee are both small firms as well as large multinationals. Competitors of the Cafe include Abraco, Blue Bottle Coffee, Cafe Grumpy, Joe the Art of Coffee etc. However the organisation also needs to compete with large multinational organisations such as Starbucks.
Competitive advantages: At 12 Corners Coffee, the customers are offered with fresh and innovative products. Along with traditional coffee, espresso and ice coffee, the customers of 12 Corners Coffee is also offered with innovative products such as Ice Pumpkin Pie Latte. Offering customers with innovative products of high quality enables 12 Corners Coffee to remain competitive in market.
Product / Service line:
Detailed description of product: At 12 corners coffee currently products made from coffee such as latte, cappuccino, espresso and ice coffee are sold. These products are manufactured at the cafe. In future customers of the cafe will also be provided with frozen desserts, cakes and pastries. The products which are going to be included in menu of 12 corners coffee will be prepared by chefs of the cafe. Raw materials required for making the products will be supplied by local suppliers.
Pricing structure: Currently price of the products are kept low so that sale of the product among target customers increase.
Meeting needs of customers: At 12 Corners Coffee, the management ensures that customers are being provided with relaxing environment. The management will also ensure that the customers are getting fresh and high quality products.
Benefits of product and service: The products offered by 12 Corners Coffee is available at lower prices. However the cafe also offers innovative drinks to customers. The customers are benefitted as they get fresh and tasty drinks at lower costs.
Form of Ownership
Competitive advantage: The cafe industry of New York City is mainly occupied by several small and large cafes (Renko, Kroeck & Bullough, 2011). The management of 12 Corners coffee gives importance on introduction of new products. It enables the organisation to remain competitive in market.
Current development stage: The organisation is currently operating in cafe industry of New York City. However the new products are launched on experimental basis. If these products are accepted by customers, cafe management will introduce these products on larger scale.
Intellectual property rights: As the cafe industry of New York City is highly competitive, management of 12 Corners Coffee will give importance on protecting their unique recipes such as Ice pumpkin pie latte.
Research and development activities: The management will give importance on introducing new items in menu. The research and development activities will be based on making new drinks from coffee.
Plans to grow: Although currently only coffee based products are available at 12 Corners coffee, later the management will introduce new desserts. Currently only two stores are available in New York City. Number of cafes will also be increased later. Size of the cafe will be increased so that sitting arrangements can be done outside of the restaurant also.
Communication strategy with customers:
Financial projection:
The financial projection focuses on the company’s financial position. This can be done by analyzing the financial statements, which involve the balance sheet statements, income statements and cash flow statements. It helps in explaining the financial stability of the company, which can be measured, from its profit position, capital structure, and asset liability proportion and cash availability.
Income Statement (All amounts in thousands)
|
Particulars |
Year 1 $ |
Year 2 $ |
Year 3 $ |
|
Sales |
$ 12,000 |
$ 16,000 |
$ 20,000 |
|
CGS |
$ 5,000 |
$ 7,000 |
$ 8,000 |
|
G P |
$ 7,000 |
$ 9,000 |
$ 12,000 |
|
Operating Expenses |
$ 4,200 |
$ 5,300 |
$ 6,400 |
|
Salary Expenses |
$ 600 |
$ 800 |
$ 900 |
|
Office Expenses |
$ 600 |
$ 700 |
$ 800 |
|
Maintenance Expenses |
$ 500 |
$ 700 |
$ 800 |
|
Rent Expenses |
$ 700 |
$ 900 |
$ 1,200 |
|
Payroll Expenses |
$ 500 |
$ 600 |
$ 700 |
|
Accounting Expenses |
$ 600 |
$ 700 |
$ 800 |
|
Legal Expenses |
$ 400 |
$ 500 |
$ 600 |
|
Telephone Charges |
$ 300 |
$ 400 |
$ 600 |
|
Operating Income/ EBIDT |
$ 2,800 |
$ 3,700 |
$ 5,600 |
|
Depreciation and Amortization |
$ 600 |
$ 800 |
$ 1,000 |
|
EBIT |
$ 2,200 |
$ 2,900 |
$ 4,600 |
|
Interest |
$ 300 |
$ 400 |
$ 500 |
|
EBT |
$ 1,900 |
$ 2,500 |
$ 4,100 |
|
Tax |
$ 200 |
$ 500 |
$ 800 |
|
EAT |
$ 1,700 |
$ 2,000 |
$ 3,300 |
CGS is the cost of goods sold. GP is the gross profit.
EBIDT is earnings before interest, depreciation and tax. EBIT is earnings before interest and tax. EBT is earnings before tax. EAT or PAT is earnings after tax or profit after tax. PAT is the net profit.
Cash flow (All amounts in thousands)
|
Particulars |
Pre Startup EST |
Year 1 |
Year 2 |
Year 3 |
Total Item EST |
|
Cash on hand |
$ 4,200 |
$ 4,800 |
$ 4,850 |
$ 4,350 |
$ 3,300 |
|
Cash Receipts |
|||||
|
Cash Sales |
$ 2,300 |
$ 2,400 |
$ 2,500 |
$ 2,600 |
$ 2,700 |
|
Cash Collections |
$ 1,800 |
$ 1,900 |
$ 2,000 |
$ 2,100 |
$ 2,200 |
|
Loan |
$ 1,700 |
$ 1,800 |
$ 1,900 |
$ 2,000 |
$ 2,100 |
|
Total Cash Receipts |
$ 5,800 |
$ 6,100 |
$ 6,400 |
$ 6,700 |
$ 7,000 |
|
Total Cash Available |
$ 10,000 |
$ 10,900 |
$ 11,250 |
$ 11,050 |
$ 10,300 |
|
Cash Paid Out |
|||||
|
Purchases |
$ 500 |
$ 550 |
$ 600 |
$ 650 |
$ 700 |
|
Gross Wages |
$ 200 |
$ 250 |
$ 300 |
$ 350 |
$ 400 |
|
Supplies |
$ 300 |
$ 350 |
$ 400 |
$ 450 |
$ 500 |
|
Maintenance |
$ 500 |
$ 550 |
$ 600 |
$ 650 |
$ 700 |
|
Advertising |
$ 400 |
$ 450 |
$ 500 |
$ 550 |
$ 600 |
|
Legal & Accounting |
$ 400 |
$ 450 |
$ 500 |
$ 550 |
$ 600 |
|
Insurance |
$ 300 |
$ 350 |
$ 400 |
$ 450 |
$ 500 |
|
Tax |
$ 200 |
$ 250 |
$ 300 |
$ 350 |
$ 400 |
|
Interest |
$ 300 |
$ 350 |
$ 400 |
$ 450 |
$ 500 |
|
Rent |
$ 200 |
$ 250 |
$ 300 |
$ 350 |
$ 400 |
|
Telephone |
$ 200 |
$ 250 |
$ 300 |
$ 350 |
$ 400 |
|
Subtotal |
$ 3,500 |
$ 4,050 |
$ 4,600 |
$ 5,150 |
$ 5,700 |
|
Loan payment |
$ 700 |
$ 800 |
$ 900 |
$ 1,000 |
$ 1,100 |
|
Other Costs (Startup) |
$ 400 |
$ 500 |
$ 600 |
$ 700 |
$ 800 |
|
Capital Purchase |
$ 600 |
$ 700 |
$ 800 |
$ 900 |
$ 1,000 |
|
Total Cash Paid Out |
$ 5,200 |
$ 6,050 |
$ 6,900 |
$ 7,750 |
$ 8,600 |
|
End cash Value |
$ 4,800 |
$ 4,850 |
$ 4,350 |
$ 3,300 |
$ 1,700 |
Projected balance sheet
Balance Sheet (All amounts in thousands)
|
Particulars |
Start Date Value |
End Date Value |
|
Cash in Bank |
$ 4,200.00 |
$ 3,300.00 |
|
Assets |
||
|
Inventory |
$ 500.00 |
$ 400.00 |
|
Deposits |
$ 800.00 |
$ 700.00 |
|
Accounts Receivables |
$ 800.00 |
$ 500.00 |
|
Total Current Assets |
$ 2,100.00 |
$ 1,600.00 |
|
Machines & Equipment |
$ 2,000.00 |
$ 1,500.00 |
|
Land & Buildings |
$ 2,000.00 |
$ 1,700.00 |
|
Total Fixed Assets |
$ 4,000.00 |
$ 3,200.00 |
|
Total Assets |
$ 6,100.00 |
$ 4,800.00 |
|
Liabilities & Equity |
||
|
Interest Payable |
$ 300.00 |
$ 200.00 |
|
Current Debt |
$ 800.00 |
$ 600.00 |
|
Accounts Payable |
$ 600.00 |
$ 400.00 |
|
Current Liabilities |
$ 1,700.00 |
$ 1,200.00 |
|
Bank Loans |
$ 1,000.00 |
$ 800.00 |
|
Long term Borrowings |
$ 800.00 |
$ 700.00 |
|
Other Debts |
$ 800.00 |
$ 600.00 |
|
Fixed Liabilities |
$ 2,600.00 |
$ 2,100.00 |
|
Total Liabilities |
$ 4,300.00 |
$ 3,300.00 |
|
Equity |
$ 1,800.00 |
$ 1,500.00 |
|
Particulars |
Fixed Costs |
Variable Costs % |
|
CGS |
$ 2,500 |
50% |
|
Raw Materials |
$ 500 |
20% |
|
Direct Labor |
$ 300 |
30% |
|
Salary Expenses |
$ 300 |
50% |
|
Office Expenses |
$ 150 |
75% |
|
Maintenance Expenses |
$ 150 |
70% |
|
Rent Expenses |
$ 280 |
60% |
|
Payroll Expenses |
$ 100 |
80% |
|
Accounting Expenses |
$ 300 |
50% |
|
Legal Expenses |
$ 200 |
50% |
|
Telephone Charges |
$ 180 |
40% |
References
12cornerscoffee.com,. (2015). 12 CORNERS COFFEE. Retrieved 8 July 2015, from https://www.12cornerscoffee.com/location.html
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