unit 33_small business enterprise

1.1 Produce a profile of a selected small business identifying its strengths and weakness.

Introduction

Caffè Finix Coffee shop is a local coffee shop in Stratford . Near the Stratford college and Westfield

Shopping Centre. Caffè Finix Coffee shop Opened in 2009.

Caffè Finix coffee shop is a famous daily necessity for local coffee addicts, a place to dream of as you

try to escape the daily stresses of life and just a comfortable place to meet your friends or to read a book, all

in one. The shop owner is MrKhan. The shop is operate in a 1500 square foot shop within a

walking distance

from the Stratford college. The coffee shop start up fund £ 25000. Theiremployees 7, all are part time

worker. Caffè Finix coffee shop provide coffee, tea and breakfast.

SWOT Analysis:

SWOT is the first stage of planning and helps decision makers to focus on key issues. SWOT

method is a key tool for company to officials to formulate strategic plan. SWOT stands

for Strengths, Weaknesses, Opportunities, and Threats. SWOT model analysis factors that are

internal to the business and also factors that affect the company from outside. Strengths and

Weaknesses in the SWOT matrix are internal factors. Opportunities and Threats are external

factors. SWOT is the very popular tool in marketing because it is quick, easy and intuitive.

SWOT analysis provides information that is helpful in matching in the firm’s resource

and capabilities to the competitive environment in which it operates

Strength:

Strengths refer to the firm’s capabilities or aspects of the business that the firm does very

well. Strengths are resource advantages relative to competitors and the need of the markets a

firms serves or aspects to serve. It is a distinctive competence when it gives the firm

comparative advantages in the market place. Strengths arise from the resources and

competencies available to the firm.

Example of strengths include the following:

Unit-33_Small_Business_Enterprise_Nayemul_Haque_Khan

Company Strengths

Coca-cola ------ Strong Brand Name

Apple ------ Products Innovation

Tesco ------ Broad Product Range

Strengths of Caffè Finix are given bellow:

1.Excellent, fresh & quality food and coffee.

2.Broad product range.

3.Doing business in very good location (high street, shopping centre).

4.Good reputation among customer.

5.Sales turnover is growing up .

Weaknesses:

Weakness is a limitation deficiency in one or more resources or competencies relative to

competitors that impedes a firm’s effective. Weaknesses are aspects of the firm’s operations

or activities that it does not do very well. For example, Primark Sales the low quality product

and so many British Airways passengers have lost their baggage frequently. So, here low

quality product and lost baggage of the example of weaknesses for the both company. As a

Business Executive I find out some weaknesses of Caffè Finix those are given bellow:

1.Weak food sector than other competitors.

2.Most brand names are little known

3.Rent is very expensive

Opportunities

Opportunities are aspects of the environment that the firm can take advantages of or capitalise

upon. The firm’s success probability depends on whether its business strengths not only

match the key success requirements for operating in the target market but also exceed those

of its competitors. For example Tesco have an opportunity to open a new store in China. To


analysis the external business environment, I found some opportunities for Caffè Finix .

If Caffè Finix will take following opportunity, I think their profit will be maximising in

future:

1.Selling the brand name can earn more profit i.e. can start franchising business.

2.Give the competitive price if directly contract or invest in the developing countries those

are cultivate and produce tea, coffee and any other food.

3.More capital invests in UK because coffee and sandwich shop market is growing rapidly.

Threats

Threats are aspects in the environment than can hinder a firm from achieving its objective

and goals. An environmental threat is a challenge posed by an unfavourable trend or

development that would lead in the absence of defensive marketing action, to deterioration in

sales or profit. Threat should be classified according to seriousness and probability of

occurrence. Examples of Threats are:

1.Competitors

2. Government new policies, taxation

3.Political instability- wars etc.

This provides evidence for assessment criteria 1.1

1.2 Carry out an analysis of the business using comparative measures of performance.

Caffè Finix PROFIT AND LOSS ACCOUNT

For the year ended 30 April 2012 and 30 April 2013

2012 2013


£ £

Sales 120,000 200,000

Cost of sales 80,000 150,000

Gross profit 40,000 50,000

Overheads 10,000 15,000

Net profit 30,000 35,000

Caffè Finix

BALANCE SHEET as at 30 APRIL 2012 and 30 APRIL 2013

2012 2013

£ £ £ £ £ £

Fixed assets 15,000 12,000

Current assets

Stock 7,000 18,000

Debtors 12,000 36,000

Bank 1,000 0

20,000 54,000

Less Current liabilities

Creditors 6,000 15,000

Bank overdraft 0 10,000

6,000 25,000

Working capital 14,000 29,000

Net Assets 29,000 41,000Unit-33_Small_Business_Enterprise_Nayemul_Haque_Khan

Financed by capital

Opening capital 22,000 29,00

Add net profit 30,000 35,000

52,000 64,000

Less drawings 23,000 23,000

Closing capital 29,000 41,000

Liquidity ratio: if we asses analyse company profitable we need to consider couple of ratio

a) Current ratio = current asset / current liability

2012 2013

CR = CA / CL = 20000/ 6000 = 54000/ 25000

= 3.33 times = 2.16 times

In 2012 company could pay their liability more than three times use their current asset. In

2013 company used their working capital efficient way. Company still pay their CA twice by

using current assets. Conventional wisdom has it that on ideal current ratio is 2.

2) QUICK RATIO (ACID TEST) = CURRENT ASSET – inventory / current

liabilities

2012 201 3

Q r = CA – INVENTOR / CL = 20000 – 7000/ 6000 = 54000-18000/25000

= 2.17 = 1.44


In 2012 company pay their liability twice by using CA. Which is good, but it’s indicate that

company cannot use their capital efficient way but in 2013 company use their working capital

proper way. Conventional wisdom has it that on ideal quick ratio is 1

ASSET UTILIZATION:

WORKING CAPITAL TURN OVER = SALES REVENUE / NET WORKING

CAPITAL

2012 2013

WCT = = 120000/ 14000 = 200000/25000

= 8.57 = 8

Profitability ratio:

2012 2013

ROCE = profit before investment / capital employed * 100

= 30000/52000 * 100 = 35000/64000*100

= 57.69% or 58 % = 54.68% or 55%

The company ROCE has decreased in 2013 .From capital investment the company earned

55% in 2013 compared with 58% in 2012.

Gross profit margin = gross profit / sales revenue *100

2012 2013

=40000/120000*100 =50000/200000*100

=33.33 % =25%

Operating profit margin = operating profit /sales *100


= 30000/120000*100 = 35000/200000*100

= 25% = 17.5%

The (33.33% - 25%) = 8.33% decrease in gross profit is not good news for the company. It

indicates a closer group between selling price and cost of sales. In 2013 company’s cost of

sales increased by comparing with 2012.

However the operating margin also decrease by (25% - 17 .5 %) = 7.5%. It indicate that

company expense have increased and may require tighter controls.


2.1: Recommend how to overcome the identified weaknesses in the business.

Although Stratford will generate a higher customer base, commercial rent is relatively expensive.

The high rent cost should be covered by the larger expectance of revenue, due to higher average

income in this area, compared to a less populous area or a higher rent area, such as Eastham. Locating

the business on the Caffè Finix in Stratford will mean that there are limited parking bays, so our

customers will face parking problems. To overcome this problem, the business can rent a small

number of bays directly in front of the shop to ensure that customers can access the business easier.

The business should expect a high inventory turnover rate due to raw materials having a short expiry

date. The business will use First In First Out (FIFO) method for sale and stock replenishment. Also an

effective restocking and reordering procedure needs to be developed to maintain and supply the right

amount of materials for daily operation. Quality control is very difficult to achieve as the cupcakes

and coffee will be made differently each time. To ensure quality control, procedures will need to be

established, ensuring the taste and decorations can remain as similar as possible.

The business idea is based on an increasing social trend, meaning that if the trend does not receive

well with Perth’s population the business could suffer a loss. However because the business will also

be a café, this will hopefully allow the business to avoid too much turmoil due to a trend downturn.



2.2.Analyses ways in which exiting business performance could be maintained and

strengthened.

The Caffè Finix coffee shop uses a strategy of total quality in product and service. Our promise is in our

location, the products we sell, the people we attract and the atmosphere we create.

People want a better-tasting coffee drink

Coffee drinkers want a more inviting coffeehouse environment

Coffee drinks are considered an affordable luxury

The coffee shop industry is largely unaffected by the economy and world events

The star coffee shop offers several unique advantages over all other coffeehouses

The Caffè Finix coffee shop compared to the other coffeehouses in the Stratford area includes the

following:

A significantly higher quality, better tasting coffee product.

Our current location can arguably be considered the best in the market in the heart of the downtown

shopping, dining, entertainment .

An ambiance superior to all other coffeehouses in the area with upscale "Cote d'Azur" look. It

features stained glass decorations, art glasswork, Mediterranean Riviera style furnishings and

outdoor dining.

The only coffeehouse downtown to provide regular weekend evening entertainment.

A wider variety of popular drinks than our competitors, including flavoured coffee drinks, tea


2.3. Recommend with justification, near areas in which the business could expand.

Our coffee shop is located in Stratford. Now we are suggest to open a new coffee shop in London City

airport. Because that is a very crowded area by travellers and workers .so that business will success.

The greatest locations - visibility, high traffic pattern, convenient access.


The best products - freshest coffee beans, premium serving containers, consistent flavour.

The friendliest servers - cheerful, skilled, professional, articulate.

The finest reputation - word-of-mouth advertising, promotion of our community mission

of charitable giving


3.1. Produce an assessment of existing business objectives .

Objectives:

Become selected as the "Best Coffee shop in the area" by the local restaurant guide.Maintain a 65% gross margin.Consistently providing finest coffee items.

Caffè Finix coffee shop is achieved the first objectives in now. Because their daily customer is 500 perday. So the star coffee shop best coffee shop in Stratford area.

Consistently provide finest coffee items : CaffèFinix coffee shop used the high quality coffee beans to coffee and speed service to the customer.

Caffè Finix coffee shop has:

Provided a customer with quality product at a competitive price.

Provided the customer with a more convenient method for obtaining their desired product.

Demonstrated how star coffee shop appreciates their loyalty and patronage by donating money to

their personal cause.


3.2.Revise business plans to incorporate appropriate changes.

The star coffee shop marketing strategy will be focused at getting new customers, retaining the existing

customers, getting customers to spend more and come back more often. Establishing a loyal customer base

is of a paramount importance since such customer core will not only generate most of the sales but also will

provide favourable referrals.

The star coffee shop position itself as unique coffee shop where its patrons can not only enjoy a cup of

perfectly brewed coffee but also spend their time in an ambient environment. Comfortable sofas and chairs,


dimmed light and quiet relaxing music will help the customers to relax from the daily stresses and will

differentiate the star coffee shop from incumbent competitors.

The star coffee shop barristers will handle the sales transactions. To speed up the customer service, at least

two employees will be servicing clients--while one employee will be preparing the customer's order, the

other one will be taking care of the sales transaction. All sales data logged on the computerized point-of-sale

terminal will be later analysed for marketing purposes.

In order to build up its client base, the star coffee shop will use banners and fliers, utilize customer referrals

and cross-promotions with other businesses in the community. At the same time, customer retention

programs will be used to make sure the customers are coming back and spending more at the coffee bar.


3.3.Prepare an action plan to implement the changes.

Market analysis

The Caffè Finix coffee shop focused the two markets

People living in the local area

Someone travelling to or from work, out shopping .

Market segmentation

The Caffè Finix coffee shop focused its marketing activities on reaching the University students and

faculty, people working in offices located close to the coffee bar and on sophisticated teenagers. Our market

research shows that these are the customer groups that are most likely to buy gourmet coffee products. Since

gourmet coffee consumption is universal across different income categories and mostly depends on the level

of higher education, proximity to the Stratford campus will provide access to the targeted customer audience.

Target market segments strategy


The Caffè Finix coffee shop provide to people who want to get their daily cup of great -tasting coffee in

relaxing atmosphere. Such customers vary in age, although our location close to the Stratford college means

that most our clientele will be college student & faculty. Our market research shows that these are discerning

customers that gravitate towards better tasting coffee. Furthermore, a lot of college students consider coffee

bars to be a convenient studying or meeting location, where they can read or meet with peers without the

necessity to pay cover charges. For us, this will provide a unique possibility for building a loyal client base.

Market needs General trend toward quality among U.K. consumers definitely plays an important role in the

recent growth in gourmet coffee. Additionally, such factors as desire for small indulgencies, for something

more exotic and unique, provide a good selling opportunity for coffee bars.


4.1.The impact of the proposed changes on the business and its personnel.

Businesses are affected by an external environment as much as they are affected by the competitors. Global factors influencing business are legal, political, social, technological and economic.

Social factorsThese factors are related to changes in social structures. These factors provide insights into behaviour, tastes, and lifestyles patterns of a population. Buying patterns are greatly influenced by the changes in the structure of the population, and in consumer lifestyles. Age, gender, etc all determine the buying patterns and understanding of such changes is critical for developing strategies which are in line with the market situations. In a global environment it is important that business strategies are designed keeping in mind the social and cultural differences that vary from country to country. Consumer religion, language, lifestyle patterns are all important information for successful business management.

Legal factors These factors that influence business strategies are related to changes in government laws and regulations. For a successful business operation it is important that the businesses consider the legal issues involved in a particular situation and should have the capability to anticipate ways in which changes in laws will affect the way they must behave. Laws keep changing over a period of time. From the point of view of business it is important that they are aware of these changes in the areas of consumer protection legislation, environment allergisation, health & safety and employment law, etc.

Economic factors: These factors involve changes in the global economy. A rise in living standards would ultimately imply an increase in demand for products thereby, providing greater opportunities for businesses to make profits. An economy witnesses fluctuations in economic activities. This would imply that in case of a rise in economic activity the demand of the product will increase and hence the price will increase. In case of reduction in demand the prices will go down. Business strategies should be developed keeping in mind these fluctuations. Other economic changes that affect business include changes in the interest rate, wage rates,


and the rate of inflation. In case of low interest rates and increase in demand Businesses will be encouraged to expand and take risks. Therefore, business strategies should have room for such fluctuations.

Political factors: This refers to the changes in government and government policies. Political factors greatly influence the operation of business. This has gained significant importance off late. For example: companies operating in the European Union have to adopt directives and regulations created by the EU. The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. Business must consider the stability of the political environment, government's policy on the economy etc.

Technological factors: These factors greatly influence business strategies as they provide opportunities for businesses to adopt new innovations, and inventions. This helps the business to reduce costs and develop new products. With the advent of modern communication technologies, technological factors have gained great impetus in the business arena. . Huge volumes of information can be securely shared by means of databases thereby enabling vast cost reductions, and improvements in service. Organisations need to consider the latest relevant technological advancements for their business and to stay competitive. Technology helps business to gain competitive advantage, and is a major driver of globalisation. While designing the business strategies firms must consider if use of technology will allow the firm to manufacture products and services at a lower cost. Firms can select new modes of distributions with the help of technology. It has become easier for companies to communicate with their customer in any part of the world.


4.2. Plan how the changes will be managed in the business.

Employees:

People naturally do not like change, regardless of whether its positive or negative. The feeling of fear,

ambiguity, unknowns, loss of control and power, and the like result in people not feeling naturally

comfortable with making a change that could potentially put them in a better situation. These feelings result

in paralysis to act, and can often result in people acting irrationally and not in the best interests of an

organization. So, with any change initiative is the absolute and mandatory requirement that the change

initiators think through what the impact may be to the employee population, who ultimately have to adapt to

the new changes in order to best serve the customer.

Business:

Competition (what are they doing?)

Customer behaviour (needs, wants, and desires)

Industry outlook (local, national, global)

Demographics (the change populations, there density, etc.)


Economy (are we peaking, or moving negatively)

Political movements and/or interference

Social environment

Technological changes

General environmental changes


4.3. Monitor improvements in the performance of the business with time-scale.

Goals Period Review

One-Stop Tradition By the end of 2013 Coffee, Coffee machines, tea,

water, as well as perfect

ambiance and taste - all from

one source

To be number one in local

area

By 2013 Company is trying to be

number one.

Service By 2013 We strive to treat our

customers respectfully as our

guests; we intend to offer our

guests service that is prompt,

efficient, friendly, and

relaxed.

Create a model that is franchise ready.

By 2014 That will help to make a

chain in the business with

others

Increase clients in the

loyalty club

By 2014 Customers will be more close

with this company



References

Boddy, D. Management and Introduction. 3rd Edition

Cox, D. and Fardon, M. (2005) .Management of Finance .Worcester: Osborne Books Limited.

Kotler, P and Wong, V and Saunders, J and Armstrong, G.(2005). Principles of Marketing.4thEuropean Edition

Kotler, P.(2003)Marketing Management . 11th edition.

Kotler, P.(2000 ) Marketing Management.The Millennium Edition


unit 33_small business enterprise

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