Business Evaluation of Coffee Shop - Five Forces and SWOT

Competitive Analysis

When engaging in business it very important to a company to determine what they have to offer, compared to what their competition have to offer (Competition, BUS 340). An analysis can be conducted to determine how surroundings and activities impact a business' strategy. Several tools can be used to evaluate a company's competitive environment, environments faced by the business, and steps to take to address restrictions within the company's business model.

Five Makes Model

Michael Porter determined several causes in the surroundings that are potential threats to an organization. It is important to pay attention to these forces because they are the major threats the organization will encounter and also have to react to in order to generate profits (Five Makes, BUS 340). The existing industry Mystic Monk can be categorized into is area of expertise coffee.

Level of Rivalry - High

Level of Rivalry refers to the quantity of competition within the industry. It could be said that the more competition within the industry, the hard it will be generate profits. There are various competitors within the industry who have fierce commitment among consumers. The espresso industry has high industry focus ratios, low levels of product differentiation, relatively low production cost, and high tactical stake. What reduces the rivalry a little in specialty coffee is that it has fast market growth, low inventory storage cost, and will be offering low leave barriers.

Entry Potential - High

Potential for Accessibility identifies the ease of access to stepping into a market or industry. The simpler it is to enter in, the lower the values will have to be which makes it harder to generate a profit. Because of many consumers making their own espresso and purchasing package deal coffee for home brewing, danger for new entrants is high.

Power of Suppliers - Very High

Power of suppliers refers to just how many suppliers are in the market. The greater suppliers on the market, the lower the source costs will be. Mystic Monk deals with one broker who's unable to secure low charges for the long run, but overall the industry has had explosive expansion, allowing suppliers to be able to control the marketplace.

Power of Customer - High

Power of customers indicates how many potential buyers there are and the size of them. It could be said that if there are only a few large potential buyers, that customers can bargain down prices. Due to many suppliers being able to meet the demand, buying electricity is high.

Substitute Products - High

Substitute products make reference to the ability to buy other products that are similar and can replace the item. A lot more substitutes available in market, the lower the costs will be rendering it harder to create a profit. There are various competitors that offer warm/hot liquids (i. e. - tea, hot cocoa, cider), creating a big threat. Also, nearly all espresso drinkers brew their own coffee with packaged caffeine for home brewing, creating a high menace for substitutes.

The five forces model analysis demonstrates Mystic Monk is part of an extremely competitive industry where source and rivalry ability is high. The business has the potential to increase and grow its operations all together tapping into product differentiation and customer loyalty characteristics.

SWOT Analysis

The SWOT analysis looks at both internal and external environments experienced by a business. This research allows a business to give attention to their strengths, minimize dangers, and take advantage of opportunities that are available (SWOT Evaluation, BUS 130).

Strengths

As can be seen below, Mystic Monk has many strengths. Mystic Monk has a market market, Catholics, which they market their products to. The company may have the lowest prices compared to their opponents, $2. 99 or their sample luggage and $9. 95 for his or her 12-ounce luggage online. Through online sales, the business offers free shipping with the purchase of at least 3 hand bags and the choice regular monthly delivery of six totes, to provide special treatment with their recurrent customers. Along with advertising their espresso online, Mystic also offers other products like shirts, gift credit cards, CDs, and coffee mugs. Mystic palm makes their caffeine with organic Arabica beans, providing superior quality with lower overhead expenses.

Weaknesses

Mystic Monk also faces several weaknesses. A lot of the weaknesses the company faces originates from their spiritual followings. Since they reside in a monastery, they face a sheltered environment, where they may not be as proficient from what all happens within the espresso industry. The business also does not have any business history, therefore have never establish any goals or aims to help them reach their objective of purchasing the new service. Because of living the Catholic Monk style, there are several limitations the company faces. The first one is the limitation on labor hours anticipated to praying, meditation, and worship. Another limitation is capital as the get the majority of their money for business extension from donations. There is also a limitation on capacity as the existing location only allows creation of 540 pounds per day. Mystic presently uses organic and natural beans which can result in a weakness if organic and natural is merely a trend. They also purchase their beans instead of growing them which has an impact on the expenses. These Arabica beans that are being used have a high level of levels of caffeine which can create an habit of their consumers.

Opportunities

There are a few opportunities that exist to Mystic that would help them to attain their perceived goals. Mystic has the opportunity to broaden in other related marketplaces and integrate new products. These marketplaces to give attention to other hot drinks like tea and cider, or cold coffee drinks. Although the company does almost all of its sales through online, the have the ability to start franchising. This might create the chance to have small retailers set up that sell the carriers of caffeine, and potentially new products. They may possibly also collaborate with large companies like Folgers or Starbucks to be able to get their products out there. One major opportunity Mystic has is to increase their advertising efforts in order to increase their sales and income. The final opportunity available to Mystic is to possess their products offered in grocery stores.

Threats

Mystic Monk encounters several threats that must definitely be overcome in order to best achieve their goal. The major threat is other brands and the availability of many substitutes. The current economic climate may also be a danger for Mystic as there is currently a downturn. This recession has impact consumer needs and decisions to begin brewing their espresso at home or convert towards other drinks. In the entire coffee market there is a lot of price variability that includes a lasting effect on Mystic.

Strengths

  • Clear defined goal market
  • Competitive Pricing
  • Preferential treatment to repeated customers
  • Homemade products
  • Superior product quality
  • Minimum overhead expenses
  • No taxes (religious establishment)
  • Healthy organic Arabica beans
  • Multiple product lines on web site
  • Online shopping and shipping

Weaknesses

  • Cloistered environment
  • Limited labor hours
  • Limited capital
  • Limited marketing
  • Organic is actually a trend
  • No business experience
  • Limited capacity at current location
  • Highly addictive
  • Beans purchased instead of grown
  • Poor revenues
  • No definite targets or performance targets

Opportunities

  • Expanding into related markets
  • Franchising
  • Increase marketing and advertising
  • Collaborate with large companies
  • Distribute in food stores
  • Integrate new products

Threats

  • Established brands
  • Market price variability
  • Changing consumer demands
  • Substitutes
  • Economy

TOWS Analysis

A TOWS analysis will go beyond the SWOT research. This analysis requires a organized and comprehensive diagnosis of exterior and interior factors that determine current competitive position and growth potential of the company (TOWS Research, BUS 340).

SO Strategies

These strategies turn to use strengths to increase opportunities. Because of Mystic's niche market targeting Catholics, it would be best to allow them to expand into markets in churches. This might include having their products being brought into churches to sell. Another strategy, predicated on their strong online existence, is always to create an online advertising plan. This plan would help Mystic increased consumers' knowledge on the brand and product offering.

WO Strategies

These strategies look to minimize weaknesses by firmly taking benefit of opportunities. Mystic has the opportunity to broaden into franchises and collaborate to decrease their constraints. Mystic can find people who are knowledgeable running a business aspects. They would also be able to increase their working hours, capacity, marketing, and capital by access a more diverse set of individuals.

ST Strategies

These strategies use talents to minimize risks. Mystic already has preferential treatment to regular customers, but could put into practice a program in which customers earn so many details for each buck spent and can use these factors towards espresso or other products in their web store. They can can also increase their marketing and advertising to market their brand and show why they will be the best. In order to maintain and/or increase customer base it's important that Mystic watches the economy and the best prices when open to their customers.

WT Strategies

These strategies minimize weaknesses and avoid dangers. Mystic should increase employees, worker knowledge, and their capacity and other resources. These activities will help to build brand commitment plus a stronger business.

STRENGTHS - S

  1. Clear defined aim for market
  2. Competitive Pricing
  3. Preferential treatment to recurrent customers
  4. Homemade products
  5. Superior product quality
  6. Minimum over head expenses
  7. No taxes (religious organization)
  8. Healthy organic Arabica beans
  9. Multiple product lines on web site

10. Online shopping and shipping

WEAKNESSES - W

  1. Cloistered environment
  2. Limited labor hours
  3. Limited capital
  4. Limited marketing
  5. Organic is actually a trend
  6. No business experience
  7. Limited capacity at current location
  8. Highly addictive
  9. Beans purchased instead of grown
  10. Poor revenues
  11. No definite goals or performance targets

OPPORTUNITIES - O

  1. Expanding into related markets
  2. Franchising
  3. Increase marketing and advertising
  4. Collaborate with large companies
  5. Distribute in grocery stores
  6. Integrate new products

SO STRATEGIES

1. Expand into chapel setting markets

2. Create online marketing and advertising plan

WO STRATEGIES

1. Expand to franchises with personnel who aren't as limited

2. Collaborate to increase capacity

3. Franchise to increase business knowledge

THREATS - T

  1. Established brands
  2. Market price variability
  3. Changing consumer demands
  4. Substitutes
  5. Economy

ST STRATEGIES

1. Provide other commitment programs

2. Increase knowledge to Catholics why Mystic is best

3. Provide best prices available

WT STRATEGIES

1. Increase worker knowledge

2. Invest in more capacity and other workers

Strategic Analysis

It is important to understand where Mystic is placed within its competition to craft a strategy to meet their targets. Several tools can be utilized in order to aid in this analysis.

Strategic Group Map

When participating in a competitive market, it's important to understand a company's position within its competition (Competition, BUS 376). To be able to examine different competitive positions of rival businesses, a strategic group map may be completed (Group map, BUS 485). These group mappings disclose close and faraway rivals in order to identify the attractiveness of the company on the market, and help analyze entry barriers a firm may face (Access barriers, BUS 376).

As is seen below in the first group map, based on geographic location and product line, Mystic Monk has a few rivals. These competitors include, but are not limited by, Folgers and Maxwell House. These three firms all give a narrow product line, but fluctuate in their geographic locations.

As is seen in the next group map, based on quality and marketing work, Mystic appears to have some distant competitors. These competitors include, but aren't limited to: Starbucks and Dunkin Donuts. These rivals offer high quality specialty coffees along with higher use of marketing attempts. Mystic is the only person within its competitors that offers a superior quality product with low marketing work. These distinctions and distinctions will help to determine Mystic's place in the market and how they can start attaining their goals.

Key Success Factors

Key success factors are activities or business routines, defined by the market and seen by the client, that are critical to the vendor/customer romantic relationship (Key Success Factors, BUS 485). There are several factors that Mystic must avert their attention to including: differentiation, circulation channels, reputation, and customer support. Mystic needs to find a way to separate their products from the Starbucks and Dunkin Donuts that can be found on almost every corner. Simply retailing on their website and on location will not help them to accomplish growth, so they'll need to develop their channels of syndication. Mystic must also find a way to make their brand known and stand out among the top challengers. The factor that Mystic is the best at is customer support. They provide several devotion programs and are in a niche market that brings about their dedicated customer basic.

Competitive Advantage

Michael Porter has argued a firm's strengths finally fall into two categories: cost benefits and differentiation (Porter, BUS 130). A differentiation strategy allows an enterprise to develop a product that offers unique characteristics that are valued by customers and that the customers perceive to be much better than or not the same as the competition (Differentiation, BUS 340). Mystic Monk concentrate on its market specific niche market of focusing on Catholics plays a factor with their competitive benefit. Mystic provides specialty coffee to the clients that is manufactured with fair trade/organic and natural Arabica beans. They also give a variety of blends and roasts to fulfill different likes and preferences. There is also their free transport when purchasing three totes of espresso and their monthly six randomly decided on hand bags delivery. Their most significant advantage is the monastic romantic relationship between them and Catholic customers. Although Mystic has a strong customer value proposition, they don't have an expense advantage. This would help them to get access to cheaper inputs, successful processes, beneficial, location, skilled workers, and superior technology.

Financial Analysis

It is very important to a company to investigate their expenses and revenues to make a income (Expenses, Revenues, Revenue, ACT 161). Predicated on Mystic's current sales and 11 percent world wide web profit margin, they have difficulties making the $8. 9 million in income fast enough to purchase the property that they need. Even if Father Daniel secured a loan, supposing the loan would be for $8. 9 million less the $250, 000 donation at a 5% rate for 30 years, gains would not be sufficient to make the payment. The purchase of the new roaster would increase daily creation, but it could be limited since each monk can only just build up to 6 time daily. Predicated on current information, Mystic makes an average net profit percentage of $6, 215 monthly, which is a lot significantly less than their competitors. In the event the personnel could reach potential production with the current machine earnings could go up to $13, 500 monthly (540 pounds each day / 12 ounce bags = 45 bags of coffee per day * $9. 95 value = $448 each day).

The purchase of the new roaster would raise the development to 780 pounds per day based on the 6 hour workday (130 pounds each hour). This degree of production would allow Mystic Monk to increase its sales by one factor of 6. Since their current annual revenue is $75, 000, once multiplied by factor of 6, an gross annual earnings of $450, 000 is projected providing demand could increase to complement production capacity. This upsurge in production would allow Mystic to be able to negotiate with suppliers, shippers, and coffee agents to get the expense of goods sold to diminish from 52 percent to about 48 percent based on the quantity increase. Economies of level will play a role in reducing operating expenses from 37 percent to about 33 percent since overall cost per unit will be lowering with the new creation rate.

This upsurge in production would cause the web profit margin to increase from 11 percent to ranging from 15 and 19 percent, resulting in an annual income around $566, 000 to $717, 500. It might be good for Mystic to either stop employing the internet affiliate websites charging 18 percent commission or negotiate less commission ratio paid.

Critical Issues

In order for an organization to succeed, it's important to go over significant areas of opportunity and matter that must be addressed in order to keep or get started to grow and develop (Issues, BUS 130). Mystic Monk faces multiple problems in being able to produce enough to attain the profit needed to absorb the cost of the ranch.

Capacity Issues

The most notable problem for Mystic is their current capacity. This capacity along with current sales levels creating an 11% online profit margin are insufficient to create the $8. 9 million needed to purchase the ranch, even if Daddy Daniel was to secure a loan.

Labor Limitation

Mystic Monk manages under a cloistered monastic constraint that allow the monks to work only 6 time daily. Beneath the current business model this will not allow the company to totally explore possibilities. Despite the fact that Mystic generate income of 11%, it does not possess the resources to use a prosperous espresso roasting and sales business. Mystic was only reason behind current profit is that they don't face fees or labor costs.

Market Limitation

Mystic Monk currently focuses on a Catholic market. That is a sensible way to make profits for the present time, however in order to reach their goal the procedure will need to expand. They currently sell online and through infrequent phone calls, but will need to make decisions to further develop their business.

Mystic Monk has many decision they'll need to make in order to realize their goal of buying the ranch that they are considering.

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