Business Description and Justification
‘Refresh Corner’ is a refreshment outlet, primarily based in Harrow. Opening hours would be from 9am to 12pm, everyday; 7 days a week, and working all days a year. Refresh Corner would be serving the purpose of a Fresh Juice Centre; giving fresh juices made then and there in-front of the customer most of the times. Alongside this, tea and coffee of different forms would also be in the menu, just to add a diversified touch. It would be a small place to sit for people belonging to all age and income groups who want to stop over and refresh themselves quickly by having fresh juices.
Guiltinan, Paul, and Madden (1997) agree that in most organizations, strategic decisions are guided by statements of corporate mission and/or objectives. A corporate mission describes the broad purposes the organization serves and provides general criteria for assessing long-run organizational effectiveness.
To provide juices that refresh the soul and gives pleasure to the drinker …
The mission of the business is to serve the masses through providing generic services such as fresh juices, soft drinks, and hot beverages. The target is every individual who wants to kill his/her thirst through beverages. In the future, other line or product extensions can be added but for the moment, this is what the business serves.
Following are the aims and objectives set by the Refresh Corner:
– Providing friendly service to all customers
– Offering wide range of juices and other beverages
– Providing quick customer service, best quality and break-even within first 10 months.
– Expand the penetration in the market by opening new outlets and increasing the line of services offered.
Primary Research Analysis
There can be a certain degree of errors that may be associated with the primary research analysis. Some are:
– The sample size may not be a true representation of the population sample of Harrow.
– While selecting the sample, psychographic and demographic variables were not taken into account
– Closed ended questions were used for ease of analyses, might have hampered the true reflection of opinion
– Questions might have been wrongly comprehended by the subject
Questionnaires were used as a primary source of research. Around 200 questionnaires were filled by respondents from Harrow to evaluate different and determine different variables of service and competition. Following are the questions asked, and the brief analyses of the outcome:
Q1: Which is your favorite hang out place for drinks and juices?
This question was purposely left open-ended to determine the true competition, rather than giving options and restricting the person’s view. It was found that there wasn’t any concentration to a particular competitor. This wide-spread customer choice led to the fact that there was hardly any brand loyalty in this regard. Secondly, many respondents quoted that it just depends on the distance and mood. If mood is of a drive, then probably the one that is far most away but generally the one that is easily accessible. Convenience was the key word that came out of this.
Q2: Which aspect is your priority?
Respondents were asked to rate Lead-Time, Availability, Price, Quality and Service. Surprisingly, Lead-Time and Availability were the highly rate variables, while prices were the lowest rated. This showed that the consumers are highly price inelastic or an inelastic demand.
Q3: What advertisement methods attract you?
Insertions, Morning and Evening Radio Shows, Newspaper Advertisements, Posters and Billboards were found to be the most common method for attracting the masses. TV advertisements, however, were not considered as an attractive mode.
The above mentioned questions gave an over-view of how things should be and how they should be initiated. The other questions in the survey led to determining the health-consciousness of people, the average spending, the normal edibles accompanying the drinks, etc. These analyses are helpful in designing different packages, customized in accordance with the spending levels and drinking habits of customers.
Market Factors Secondary Research
Juices, Soft-drinks and Hot-beverages, can be classified as the necessities of today. The concept is similar to Moslow’s Hygiene Factors. Their presence is felt mandatory, their absence would be un-avoidable. The health and hygiene factor of course remains the highlighted point. Refreshment is the natural demand from all customers varying from school going kids to working executives. The rise of youth affairs and hangouts has increased the importance of such businesses. With economy of the UK growing at a fairly decent pace, the demand for such places has increased drastically. Apart from economic growth factors, there are other factors as discussed later.
Society and Community Trends
The westernized style of a household has gained its reach far and wide, whereby, all the family members are working, so there is lesser time for anyone to make a cup of tea or even food for that matter in the house. The westernized style of a household has increased the ratio of women in employment force, when compared to the same for the past year trends.
Another trend on the rise is of the bachelor life or single-person house hold. In such a scenario, it is difficult for a person to totally depend on his own skills and abilities to make drinks for himself or for a crowd that has gathered at his place. This leads to increased demand for fresh drinks places or cafés, increases. Also gives birth to the concern over a nutritious diet. The nutritious diet mix can be obtained by consumption of fresh juices.
The youth demanding such products those are particularly hygienic and healthier, has led to such demands anywhere and anytime.
The competition is extensive for such products and services. There are restaurants, fast food places, and food courts that are providing the same or similar sort of services. Even if such services are not a part of their main menu, it is being introduced as a line-extension to cater to the masses that demand these products. The market size for these products and services is huge, and is expected to grow even farther in the future, primarily due to the life styles and growing trends. This may attract further competition, thus shrinking the market shares in the growing market.
Survey results show that there would hardly be any single person left out from the entire population that cannot be considered a potential customer. Segmentation, therefore, may take away any segment that can be potential profit gainer. In a nutshell, none of the segments based on any of the demographic or psychographic characteristics can be considered as an excluded segment.
Since London doesn’t offer a very hot summer, the demand for hot-beverages is likely to outperform that of fresh drinks or soft-drinks, as it turns to be the consumer favourite most of the times. Tea and Coffee (and their derived forms) are the most commonly consumed hot beverages.
A survey conducted lately by a similar service provider, an existing direct competitor, revealed that there was need of such focussed distributors that cater to the precise target market rather than offering a whole bundle of products and services.
Another survey, a couple of years ago, revealed that more than 75% of the consumers in the age bracket of 15-30 years old, prefer having hygienic and healthier drinks outside their home, pre-dominantly on their way to work or schools, etc. This survey is one of the very upsetting outcomes for soft drink manufacturers i.e. the rise of demand for health conscious drinks. These have either increased set of disposable income or allowances that lead to large eating out habits.
Guiltinan, Paul, and Madden (1997) agree that market segmentation capitalizes on differences in consumers’ tastes and preferences by targeting segments with a product and marketing strategy consistent with their unique requirements.
The beverages business caters to everyone; therefore, it can be considered a business that possibly has the largest chunk of the market particularly with the kind of services offered at Refresh Corner. None of the market segments, as mentioned earlier, let them be based on any level of demographics, can be left out from the target market. However, certain considerations need to be accounted for, while deciding upon the market segments:
The competition catering the target market, the competition expected to jump into the wagon and the substitutes, collectively form the competition that would be competing for the market share with Refresh Corner in near future. It is, therefore, important to build-up brand loyalty among customers; otherwise, it would be easier for any other competing firm to take away the market. This can only be done by maintaining a quality of services. When loyalties are built, it would be difficult for the competition to take the market away, primarily because advertising cannot perform as big of a job as word of mouth. And word of mouth can only be derived from satisfaction, which in-turn comes from quality.
The best way to reach the customers would probably be through posters and leaflets. This would prove to be a cheaper medium to reach the masses.
The organizational strengths and core-competencies are the ones that lead to sustainable market position. The quality of services is the only factor that can lead to attaining and maintaining the market share, primarily due to the product being highly homogenous. Comparing the target market with the mission statement, it can be easily derived that the masses that are selected are the segment to target precisely match the mission statement of the businesses, therefore, selection of this target is by no means deviation from the mission of the organization.
Secondary research in the form of statistics have shown that the rate of personal disposable income has increased leading to a rise of national expenditure; therefore, seeing the products and services offered as a normal commodity, it can be assumed that people will feel inclined towards purchasing the service.
Ansoff Matrix is considered a Strategy Maker for Diversification. Here, it is used to show position of the products and services offered by Refresh Corner.
Refresh Corner falls in the Market Penetration quadrant of the matrix. This is primarily because an existing product is offered to an existing market. Therefore, a suitable extension and market strategies should be chosen in order to insure successful entrance to the market and gain market share. Refresh Corner needs to penetrate in the market, and make out a relevant targeting strategy. It needs to focus the most on its quality of service. Depending on core-competency reduces risk, and increases the chances of progressing. Though research needs to be done to determine what extensions can be made to the line of products and services to further attract customers and tighten the customer loyalty. Three techniques are used for maintaining and increasing the market share, and thus creating penetration:
Market Expansion: getting new customers
Stealing the Show: getting the customers of the competitors
Creating Brand Loyalty: assuring that the current customer base isn’t lost while pursuing the newer ones
Marketing Mix Strategy
Marketing decisions generally fall into the following 4 categories:
These are more commonly referred to as Marketing Mix because these constitute of marketing decisions.
While approaching an existing market, which is relatively mature as well, the product should differentiate based on non-price factors and other value added services. In beverages sector, quality of service is often considered as a prime attraction variable for customers. Reducing the lead time to the minimum can, therefore, lead to customer satisfaction. The quality here is measured in terms of speed of service. Customization should also be allowed within the beverages like fresh-juices with or without salt and with or without some fresh fruits in it. It is also profitable to have a customer database so that during the next visit, the previous visit order is repeated to show the customer the level of care for him. May be that way, he doesn’t need to repeat his order and just states his name and last visit date for an order re-call reference. These services can effectively create customer loyalty.
The analysis of the existing competition leads to different pricing strategies used by the competitors. Due to the elasticity of demand of the product stream, beverages, the main strategy should be market penetration though pricing. This implies that the prices have to be set lower to attract large customer base and increase market share. Pricing needs to be done appropriately as too low pricing reduces the impact of quality of products and services. And as mentioned earlier, the firm should compete on non-price factors. By any means, no such strategy should be used that targets the limited section of population; the masses should be targeted in such a way that everyone feels that it is for them.
Placement is about availability and reach, at times when the customer needs the product. Refresh Corner would operate in Harrow (London). This would keep it in sight of maximum potential customers, maximizing the chances of conversion to an actual transaction. The operational timings would be from 9am-12pm.
Promotion is about promoting or marketing the products or services. As mentioned earlier, the medium of advertisement would be posters and leaflets.
The current level of investments can reach £ 14,000 maximum, therefore, these would be strictly used as per requirements only. The rent of outlet, salaries of employees, utility bills, and inventory and advertising during the course of the business are assumed to be variable costs and would be financed through sales during the course of the business, and deducted from the sales/revenues to obtain the operating income.
The initial investments would primarily include:
– Advance Rent (6 months advance) £ 3,000
– Initial Advertising £ 4,000
– Initial Inventory £ 1,000
– Set up Cost £ 4,000
– Equipment for Operations £ 2,000
Following are the forecasted figures for the first year of operations:
Sales would be the source of revenue generation in this business. Following are the anticipated/forecasted first year revenues:
– Revenue from Sales £ 720,000
It is expected to make sales of at least £ 200 worth orders daily, and calculated as 30 days a month.
Following are the major expenses, and their annual cost estimates for the first year:
– Utility Bills (Assumed as £ 1,000 per month) £ 12,000
– Salaries (Assumed as £ 1,500 per month) £ 18,000
– Maintenance (Assumed as £ 500 per month) £ 6,000
– Advertising Cost (Assumed as £ 2,000 per month) £ 24,000
– Rent (Assumed as £ 500 per month) £ 6,000
– Inventory (Assumed as £ 5,000 per month) £ 60,000
The net expenditure for the first year operations are £ 126,000, leaving a contribution of £ 594,000.
A Pessimistic View Point
If the revenues are discounted by 25%, the revenues would be £ 540,000, and increasing costs by 25% would reveal the costs to be £ 157,500 still showing a contribution of £ 382,500.
The analyses shown above, particularly the financials reveal that this project is quite viable and feasible. On paper it seems an easy job, but the execution needs proper management skills and appropriate leadership with vision, that can lead the way into achieving the mission of the firm. Further enhancement of services can be added, but that can be late when the business is well established. Considering the establishment of this business as a project; for the moment, as it stands, it is important to hire an experienced project manager who can assist in the completion of this project. Different project planning tools can also be utilized to assist.
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