Running heading: Strategic 1

Jessica Couture

Bellevue University

MSM 520

February 23, 2015

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Market Assessment

The start-up coffee shop will solve the problem of students, staff, and faculty at a local

University not having a coffee shop. The value that the coffee house will bring to the market is

that the closest competition is five miles away. The five mile distance means that the majority of

consumers must leave campus and drive in order to get coffee.

By choosing to put the location of the coffee shop near the University, it will allow the

consumers to walk a short distance to get coffee. In addition, having a drive-thru at the location

will allow the consumers to get coffee on the way to the University, such as before class or

before work. Being within walking distance allows the students to take advantage of meeting for

group projects at the coffee house or having a place to hang out during breaks.

By targeting University students, staff, and faculty this creates a large customer profile.

The age range would be anywhere from 18 years of age upward. The income of the target

market would also include a very large range, since it would include both full-time students and

individuals with full-time jobs. The lifestyle and marital status of the customers would be varied

as well because of the wide range of the target market.

“A fundamental question faced by all entrepreneurs when founding a new venture is how

broadly to serve the market they are entering – to start up as a generalist or as a specialist,”

(Jiatao and Weiping, 2013, p. 1402). It is one of the biggest decisions that an entrepreneur asks

themselves, because it affects the direction that the company will take. After much research, the

expected market for this product is the staff, faculty, and students of the University.

New companies can use a variety of strategies, it has been decided to use “a focused or

niche strategy whereby they may avoid direct competition with large economies-of-scale

oriented firms,” (Jiatao and Weiping, 2013, p. 1402). By narrowing the target market to

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individuals associated with the University, it allows for the opportunity to discuss negotiations to

open the location on the campus, versus near the campus. The market size of this University

includes approximately 500 staff, 200 full-time faculty, and 600 residential students.

The products I will take sales from include gourmet coffee and pastry items. The menu

will range from a cup of black coffee to a delicious cupcake. There will also be beverages other

than coffee offered, such as tea and soda. The main item, coffee, will be offered in a variety of

options like lattes and iced coffees.

Currently the nearest competitor is five miles away. However, if this company becomes

successful, other coffee shops may see the success and want a piece of it. As mentioned above,

if the coffee shop is located on the University, then it could have control over the market.

Therefore, the sooner this coffee shop can be built, the better. This will prevent another

competitor from seeing the potential and taking the location.

The market environment for this coffee shop is full of potential. In order to build and

maintain relationships with the consumer we plan to offer staff, faculty, and students discounts

on purchases made at the coffee shop. Also, daily specials can be run that promote specific

drinks or eatery items. An article discusses how “a coffee brand needs to be consistent and

selective not only across the counter, but across media as well,” (Russell, 2013, p. 21).

Marketing a small coffee shop will most likely be done through social media outlets, such as

Facebook and Twitter. Therefore, we have to ensure that the word-of-mouth marketing created

from inside the store is reflected through the media outlets.

The usage of Facebook and Twitter leads us into discussing the existing market trends.

One marketing trend that the coffee shop will want to avoid is posting the same message on the

various social media sites. For example, Twitter is known for the use of hashtags, while

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Facebook allows users to update statuses by sharing what they are doing or how they are feeling.

The business would want to be sure that the social media sites target the audience by using the

language that each specific site communicates with.

A company doesn’t just rely on the brand of the company but it’s “the sum of everything

you do to create this mental impression in the minds of your customers, prospects and

influencers that can help people think favorably about your business,” (Russell, 2013, p. 20).

Since the target market of the coffee shop is the staff, students, and faculty of the University, the

coffee shop should be supportive of the University. This could be done by using the social

media sites to promote University activities such as sporting events.

Competitive Assessment

The competition of my start-up coffee shop would include Starbucks and Scooter’s,

which are both coffee shops. They are located approximately 5 miles from the University where

I plan to open the coffee shop. The product lines of the competition are very similar. Both

locations offer a variety of drinks, but specialize in their coffee drinks. Both coffee shops offer a

variety of teas along with smoothies.

In addition to the drinks, each coffee shop offers an assortment of food choices.

Starbucks has expanded its menu to include sandwiches for both breakfast and lunch. There is

also a wide assortment of pastries that are offered all day. Scooter’s also offers food for

breakfast, lunch, and dinner because it is located within a restaurant.

My goal is to offer a lot of the same product lines that both Starbucks and Scooter’s

offers, however I want to create an environment that will encourage student, staff, and faculty to

spend time at the coffee shop. I want to create a place that all of these individuals can gather at a

convenient location.

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According to Starbucks’ website, the first Starbucks opened in the 1970’s and continues

to grow to this day. That is over 40 years of experience and history that this coffee shop has with

its consumers. Scooter’s doesn’t have as much experience, but it has also been around a long

time and has built a consumer base. One of the biggest challenges that this coffee shop has is to

compete with the loyal customers of these two competitors. For instance, Starbucks has a loyalty

program that rewards its customers for purchasing items from their store.

It will be a challenge to show customers that we can compete with their favorite coffee

shop. Location will be a huge benefit, because it will attract individuals that spend all of their

day or part of their day on campus. It is recommended to “complete one or many exchanges

with its prospective customers, members, or constituents drives every organization,” (Cooper &

Schindler, 2014, p. 8). This is an important factor that the coffee shop will have to keep in mind

when trying to build the customer base.

Overall I think it is critical to understand your competition, “improving its competitive

priorities enables a firm to create superior value for its customers while achieving its business

financial objectives,” (Dror & Barad, 2006, p. 3879). There are so many benefits to knowing

and understanding your competition. Although there are two great coffee shops within miles of

the University, I feel that having a coffee shop on the campus of the University will be a great

success. There is so much untapped potential in this location and I cannot wait to start seeing

this potential come to life.

Market Strategy

There are many different types of marketing strategies to choose from. The first

marketing strategy that I want to use for my start-up coffee shop would be word-of-mouth.

Although word-of-mouth can be used many different ways, the biggest opportunity to use word-

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of-mouth would be through the Internet. “The Internet provides numerous venues for consumers

to share their views, preferences, or experiences with others,” (Trusov, Bucklin, & Pauwels,

2009, p. 90).

The coffee shop would be located near the University, with hopes of word-of-mouth

traveling to staff, faculty, and students. In order to get the word-of-mouth started, the coffee

shop could have a soft opening for the staff at the University. This soft opening would include

free samples of the beverages available at the coffee house for the staff to try.

The second type of market strategy that will be used for the coffee house is promotional

marketing. An article discusses the results of doing a comparison between word-of-mouth and

promotional marketing. “The results demonstrate a substitute relationship between the WOM

volume and coupon offerings,” (Xianghua, Sulin, Lihua, & Yue, 2013, p. 596). By using both of

these marketing strategies, I feel that the combination will cover all bases.

The competition of my start-up coffee shop would include Starbucks and Scooter’s,

which are both coffee shops. They are located approximately five miles from the University

where I plan to open the coffee shop. Both of these locations offer a loyalty program for their

customers. A punch card would be the best promotional item for this coffee house to offer

customers. For example, for every 10 beverages purchased, a customer will receive a free

beverage.

The final marketing strategy that will be used for the coffee shop is one that will be

challenging, but I think will be worth it. It is called reverse marketing. Instead of spending time

marketing our products, we can market the location to the staff, faculty, and students as an

environment designed with them in mind. This can be done with by providing free Wi-Fi and

enough outlets and tables for them to get work done, while relaxing.

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Overall I think the above marketing strategies will help to achieve the goals of my coffee

shop. Each one is strong on its own, but I feel that by combining all three strategies, it will

strengthen them even more. Before implementing the strategies I think that there should be some

quantitative research done to discover more about the potential consumers. “In business

research, quantitative methodologies usually measure consumer behavior, knowledge, opinions,

or attitudes,” (Cooper & Schindler, 2014, p. 146).

My initial market targets include the staff, faculty, and students at the University. I plan

to target them immediately, since the coffee shop will be located near the University and many

of the things will be tied into the University. The products and services that I will focus on are

the beverages and providing an environment for the target market.

Marketing Plan

“In today’s incredibly cluttered, competitive environment, you need a truly great

marketing message” (Kennedy, 2011, p. 1). Kennedy goes on to explain that the message “better

truthfully represent what follows behind it: the prospective and actual customer’s experiences,”

(Kennedy, 2011, p. 1). This is great advice to fully understand how important a marketing plan

is for a business. You are in control of the message that gets out to your potential customers, and

you want to do everything you can to ensure that the message “says” what you want it to.

According to a textbook, you should “start your marketing plan with your end goal in

mind,” (Luke, 2013, p. 20). Based on this advice, my end goal for the start-up coffee shop is to

bring provide an environment for students, staff, and faculty at the local University where they

can take a break and enjoy a variety of items including beverages and snacks. In order to

achieve this goal, I need to focus my marketing around the University.

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After establishing my end goal, the textbook goes on to suggest that I “choose the three

goals and objectives that will be most impactful on your business,” (Luke, 2013, p. 20). At this

point, I only have two goals that I have identified as being the most impactful on my business.

My first goal that will be most impactful on my business is to become a business partner with the

University. By establishing a business partnership with the University, I can use their marketing

to help my business. For example, the University could advertise the specials at the coffee shop

on the University’s Facebook page, so that it reaches a wider market. This is my biggest goal,

because it will have a huge impact on my business if I cannot get the University as a business

partner.

My next goal would be to create pages on social media for the coffee shop. I do not want

to have too many social media pages, because I don’t want to have to monitor all the pages.

During the start-up of this business, I plan to only utilize Facebook for social media. In the

future I hope to add other social media pages, such as Twitter, but not until the company has

become more established. The two goals that I have identified will only cost my business the

amount of time it takes to monitor the social media site and keep up with the customers’

questions and comments.

The timetable for this marketing plan is to reach the goals described above before the

opening of the coffee shop. I want to establish a business partnership with the University before

the opening so that I can set-up a soft opening for the staff of the University. In addition, I want

to have the social media site set-up prior to the opening so that I can create ‘hype’ about the

opening of the coffee shop and promote the specials.

Overall I think that marketing is essential to business. “A marketing plan is like a route

map for your business,” (Jay & Sealey, 2012, p. 5). If a business doesn’t create a marketing plan

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it’s doubtful that the business will be successful. “Ultimately marketing should support revenue

growth,” (Luke, 2013, p. 20). Therefore, if a business does not create a successful marketing

plan, then it will negatively impact the revenue growth. By following the marketing plan

discussed above, my start-up coffee shop will have its marketing under control.

Operational Requirements

“Operations consist of whatever an organization does to make inputs become outputs,”

(Brennan, 2011, p. 1). That is a broad definition of what operations is in business, but it covers

many of the parts of operations that will be discussed in this paper. Therefore, there are many

aspects that need to be defined when discussing the operational requirements for the coffee shop.

One of the first things that need to be discussed is the organizational division in my business.

The divisions/areas in my business will outline who is responsible for each area and how they

interact.

There will be an owner of the coffee shop and a store manager. The owner will be the

one in charge of the store manager, but the store manager will be in charge of the coffee shop

part-time employees. Together this team will run the coffee shop. The owner will be in charge

of paying the bills, such as rent for the location and electricity. The store manager will be in

charge of hiring employees and setting the work schedules for the part-time employees.

According to a textbook about operations management, “operations management is a

branch of study that is evolving day after day,” (Franco & De Toni, 2011, p. 1). This change is

due to a number of things including technology. The operations requirements for the start-up

coffee shop in this paper have taken the constant change in technology in mind and how the

change will affect operations for the coffee shop.

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One area of the operational requirements that needs to be discussed is the Board of

Directors. I don’t believe that my start-up coffee shop needs a Board of Directors; therefore I

have chosen not to establish one. Instead, I will be the owner and in charge of those types of

decisions that a Board of Directors normally handles in companies. However, the question that

our project asks is how the business operates when the owner is out of the office or on holidays.

In addition to having an owner, I plan on hiring a full-time store manager. The contingency plan

for when the owner is out of the office or on holidays is for the store manager to be in charge and

take care of the coffee shop.

There are many costs associated with opening a coffee shop. The first major cost will be

the equipment needed to prepare the gourmet coffee. The equipment according to a coffee house

web page would be espresso and coffee grinders, blenders, refrigerator, and espresso machine. I

estimate the cost of the equipment to be approximately $5,000. In addition, we will need to

purchase the ingredients for the coffee and treats that are served at the coffee shop. I will

estimate the costs for the ingredients and food items to be approximately $1,000. The cost for

the ingredients will fluctuate each month depending on the amount of products that are sold

during each month. Another big cost for the coffee shop will be the payroll for the employees at

the store. It is planned to have one full-time store manager and approximately 6-7 part-time

employees. The website estimates that the payroll should be about 35% or less of the total sales

each month. Therefore, I am not sure of what the payroll will be, since there are no past sales to

base the estimate, but I will say the payroll will be about $2,500.

Overall I believe that the operational requirements are an important part of establishing a

business. It helps to understand how you plan to run your business and who will be in charge of

what tasks. It also helps to estimate the costs of the business. By breaking down the costs for

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the coffee shop it has shown that it will take a significant amount of money to begin to build the

coffee shop. There are no available buildings near the University to have a coffee shop, so a

building will need to be built and land will need to be purchased.

Financial Requirements

“Whether you’re launching your first business or have years of experience as an

entrepreneur, the importance of having a budget cannot be overstated,” (Benoit, 2009, para 1).

This is great advice when having to create a budget for a start-up company. A budget is “a

formal written plan used to allocate scarce resources and to evaluate our success with

performance goals,” (Porter & Stephenson, 2010, p. 26). When creating a business plan for a

start-up coffee shop, creating a budget is one of the most important aspects of the business plan.

This paper will discuss how to create a simple budget for the start-up coffee shop and what it

includes.

When creating a budget there are two types of expenses that need to be identified. The

first type of expense is fixed expense. Fixed expenses are expenses that do not vary from month

to month. Examples of fixed expenses include items such as rent and loan payments. The

second type of expense is variable expense. Variable expenses are expenses that vary from

month to month. Examples of variable expenses include items such as the employees’ payroll

and utilities.

The article discusses how you should create a chart with a list of the budgeted amounts

for both fixed and variable expenses. At the end of the specified time, such as a month, the

business should then record the actual results. You should then “calculate the difference

between the budgeted figures and the actual numbers,” (Benoit, 2009, para 5). Once the

difference is calculated, you should then decide what your next steps are based on the results.

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The article suggests that “after determining the reasons for any differences, revise the next

month’s budget with your new-found information in mind,” (Benoit, 2009, para 6).

The website discusses how a location with a drive-thru will cost roughly $450,000. I do

not have that much money set aside for this venture; therefore, I will need to apply for a business

loan. I plan to take a loan out for around $250,000. I predict that it will take around 6 months

to a year before this business begins to make a profit. Although it seems like a long time, I

believe that starting a new business requires patience and that predicting 6 months to a year is a

realistic timeframe.

Another big cost for the coffee shop will be the payroll for the employees at the store. It

is planned to have one full-time store manager and approximately 6-7 part-time employees. The

website estimates that the payroll should be about 35% or less of the total sales each month.

Therefore, I am not sure of what the payroll will be, since there are no past sales to base the

estimate, but I will say the payroll will be about $2,500.

Overall I believe that the financial requirements are the most important part of

establishing a business. The financial requirements help to understand what steps need to be

taken to start-up a coffee shop. For example, as discussed above, I will need to take out a

business loan in order to start my business. Therefore, I will need to have a solid business plan

to show the bank, so that my loan will be approved.

Management Processes

According to the BPP Learning Media, “It is the interaction of people, in order to achieve

the aims and objectives, which form the basis of an organization,” (2013, p. 4). Without a good

team in place, a business will have difficulty succeeding. Therefore, my aim is to build a team

that is dedicated to my start-up business and members that have the same passion towards

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customer service that I do. I want to create a management process that outlines the team of the

coffeehouse and what the expectations for each staff member is.

In this start-up coffee shop I plan to be the owner. In addition to myself, there will be a

full-time store manager and at least 3 part-time associates on staff. Because the University is our

main focus, the business hours will be situated around the peak hours of the University. In the

beginning of the business the hours will be Monday-Friday, 6 am – 7pm. I don’t see there being

a need to being open any later than 7 pm or on weekends, due to the campus being empty on

those days. Also, having limited hours will help us to keep a minimum number of employees.

For my full-time store manager, I plan on hiring someone that has management

experience. Since this is a start-up business and I cannot be at the store around the clock, I need

to have a store manager that I am confident will make decisions with the store’s best interest in

mind. I prefer to hire someone with a Bachelor’s degree and who has previously been an

Assistant Manager or Manager. “The key to managerial success is learning and practice, over

and over, although you probably will never get it exactly right,” (Tracy, 2014, p. 1). Although

having managerial experience won’t guarantee that the applicant will be 100% ready, they will

have experience that they have learned previously.

As the owner, I plan to be in charge of the marketing, product development, and financial

aspects of the business. I want my store manager to be in charge of payroll and administration. I

want the store manager to be the one creating the schedule for the part-time employees. In

addition, I want the store manager to be the one to create orders for items that we need. I plan to

monitor the performance of the business by comparing the current sales with past sales and

making adjustments based on those results.

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Another big cost for the coffee shop will be the payroll for the employees at the store. It

is planned to have one full-time store manager and approximately 6-7 part-time employees. The

website estimates that the payroll should be about 35% or less of the total sales each month.

Therefore, I am not sure of what the payroll will be, since there are no past sales to base the

estimate, but I will say the payroll will be about $2,500.

Overall I believe that the management processes is one of the top parts of establishing a

business. “A process is a set of interrelated activities designed to transform inputs into outputs,”

(Berman, 2014, p. 1). As discussed above, there are many sections of the management process,

but when you combine all the parts, the goal is to be a successful business. In previous weeks,

we’ve found that there many important aspects of a business plan, such as the financial

requirements and operational requirements. However, after discussing the management

processes this week, I now believe that the management processes are the most important part of

the business plan. You can have the perfect business plan with all the equipment and finances

needed to have a successful business, but without the right management plan, then the business

can fall apart quickly.

Business Risks

Many organizations have Effectively Managing Risk programs. “ERM ensures that

structured conversations occur regularly about seen and anticipated risks that have the capacity

to derail the organization’s strategy,” (Leavitt & Driscoll, 2011, p. 9). For this start-up company

I do not plan to create an entire program to ensure that conversations about risk take place,

however I do agree with one of the goals of these programs. The goal “to ensure that acceptable

risks are properly assessed, monitored, and mitigated,” (Leavitt & Driscoll, 2011, p. 9) is the

goal that I want to apply to my company. Since my company will include myself, a full-time

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store manager, and part-time employees there are not a lot of individuals that will need to be

included in the discussions. Out of these employees I only plan to communicate with the full-

time store manager about risks associated with the company.

The first type of risk that I want to discuss is internal risk. Internal risk can include a

number of different things ranging from equipment to employees. A big internal risk for a start-

up coffeehouse is the employees who represent the brand. For a new company, we will need

employees who treat the customers like they are the biggest, most important priority. We need to

establish customer loyalty, and in order to be successful in this endeavor, we need to build

relationships with the customers that will last. We also need these relationships to be strong

enough for those customers to recommend the store to friends and family.

This brings up another risk for this business, reliance on a small customer base. Even

though the University has staff, faculty, and students, not all of those individuals will enjoy or

want the items that our menu offers. Therefore, the risk of reliance on a small customer base will

be a risk that will most likely be a continued risk for this type of business. In addition to the

reliance on a small customer base there will also be a reliance on a few key employees. To help

prepare for these risks, the company should create programs that reward customer loyalty. One

example of a customer loyalty program would be a punch card. Once a customer purchases ten

beverages, the eleventh one is free.

The next category of risks for this business is external risks. External risks can range

from customers to suppliers. In addition, external risks can include what happens on the

company’s property, such as a customer slipping on the sidewalk outside. One definition of risk

states, “risk has two characteristics: it is related to uncertainty, and it has consequences,”

(Hillson & Murray-Webster, 2012, p. 5). I believe that this definition applies well to external

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risks, since these risks are mostly unforeseeable such as the example of slipping on the sidewalk.

Another external risk for this business would be insurance provisions. We would want to ensure

that our insurance policy covered external risks such as the example of the sidewalk.

It is a safe assumption that all companies will experience some sort of risk. The key to

managing risks is to prepare for them. As noted above, some companies go as far as to establish

programs to help decide what to do if the potential risk occurs. Some companies opt to establish

processes, instead of entire programs. “By implementing risk management process management

organization shall ensure that resources are used properly and effectively, yielding at least planed

results,” (Croitoru, 2014, p. 21). For my business plan I am choosing to use the processes

discussed in this paper to deal with the risks for this business. There are a number of risks

associated with this company, however, by following the processes in this paper I believe that we

will be prepared and informed of the risks.

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References

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Russell, B. (2013). Reaching the target audience. Specialty Coffee Retailer, 20(8), 20-22.

(n.d.). Retrieved December 21, 2014, from http://gr.starbucks.com/en-US/_About Starbucks/History of Starbucks.htm

http://www.crimsoncup.com/coffee/how-much-does-it-cost-to-open-a-coffee-shop

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