Assessment 2 Enterprise and Entrepreneurship Brew Enterprise Case Study

Vikas Gurudev, ID NO: 11010560

Content Sec 1 Sec 2 Introduction Enterprise and Entrepreneurship Customer Analysis Competitive Analysis PEST Analysis Conclusion Reference

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03-04 04-05 06-08 08-11 11 12

Sec 3 Sec 4 Sec 5 Sec 6 Sec 8

Introduction of Brew Enterprise:

Brew Enterprise is a nice little whole leaf tea company based in the North West. Unlike most tea companies Brew don't use any ground up tea like dust or artificial stuff. For Brew it's all about whole leaf tea and keeping it natural. Brew now put more tea in their teabags than anyone else. Pushing the boundaries of teabag engineering Brew stick a whopping 40% more tea in there than anyone else. This means a richer, stronger and altogether tastier brew (www.brewteacompany.co.uk).

Phil Kirby is the founder of Brew Enterprise; Phil Kirby turned his back on a life of mergers and acquisitions with accountants KMPG having graduated with a first class honors degree in financial economics from the University of Liverpool. But during a corporate meeting in a Starbucks coffee shop he got the idea for Brew, his tea bar chain that launched in Liverpools St Pauls Square in August 2008, followed by a second outlet in Bold Street a year later. Phil Kirby and his Liverpool based business Brew Tea Co. who hopes to change the culture and tradition of the classic English brew by doing as his companies tag line states: letting tea out of the bag. In other words to set the tea leafs free and give them the ability to brew and infuse properly in the water. His company sources and utilizes different tea leafs and other ingredients to create a variety of styles, blends and flavors to suit different tastes and moods, these are then incorporated in the drinks (Neil, 2010).

Enterprise and Entrepreneurship:

Enterprise is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit or state-owned. Enterprise relates to the state of being busy either as an individual or society as a whole, doing commercially 3

viable and profitable work. In a like sense the present is the age of business enterprise. Not that all industrial activity is carried on by the rule of investment for profits, but an effective majority of the industrial forces are organized on that basis. There are many items of great volume and consequence that do not fall within the immediate score of these business principles. The housewife's work, e.g., as well as some appreciable portion of the work on farms and in some handicrafts, can scarcely be classed as business enterprise. But those elements in the industrial world that take the initiative and exert a far-reaching coercive guidance in matters of industry go to their work with a view to profits on investment, and are guided by the principles and exigencies of business (Arthur and Steven, 2006). Entrepreneurship is an economic agent who unites all means of production- land of one, the labor of another and the capital of yet another and thus produces a product. By selling the product in the market he pays rent of land, wages to labor, interest on capital and what remains is his profit. He shifts economic resources out of an area of lower and into an area of higher productivity and greater yield. Entrepreneurship is "the pursuit of opportunity without regard to resources currently controlled". Entrepreneurs are innovators who use a process of shattering the status quo of the existing products and services, to set up new products, new services. Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation (Eric, 2012).

Customer Analysis:
Customer analysis is the process of determining customer segmentation, value, purchasing behavior and motivation in order to better target marketing and increase sales. Customer analysis is a process of analyzing customers and their habits, is one of the most important areas of study in a business. Customer analysis decision processes are performed in 3 stages: assessing before the purchase, during the purchase, and after the purchase (Doug, 2008). In case of Brew Phil use to sit in Starbucks during his lunch hour and take comprehensive notes of customers behavior, in fact he was

carrying out market research. Researcher recommends Phil Kirby to cover below area to make an effective customer analysis: Market Size - Include statistics on the size of the market, both in terms of the number of customers and the value of the industry as a whole. Customer Segmentation - Divide the customers in the market into different groups based on common characteristics. Value Drivers - Identify what each customer segment values when it comes to your industry. How price sensitive is each segment, is quality an important consideration, and how important is convenience or are customers willing to go out of their way to get the right product or service? Decision Process - Include details of who actually purchases your product or service and who is responsible for encouraging that purchase. Concentration of Customer Base - Give details of where the various target customers are concentrated. Perhaps they live in similar geographical areas, congregate at certain events, or buy similar items?

Competitive Analysis:
Brew competes with players both within the specialty market and against those outside the specialty coffee/tea market. Some examples of competitors within the specialty coffee/Tea market are Tullys coffee, Seattles Best Coffee, Peets Coffee, Caribou, Starbucks, Costa. Coffee/tea and other smaller chains. Those outside the specialty market. Proctor & Gamble, Dunkin Donuts, McDonalds and numerous other coffee/tea serving establishments. Brew leverages its customer loyalty, premium quality tea and the homey atmosphere of its stores to fend off competition.

Source: (http://www.sqaki.com/11/PorterCompetitiveAnalysis)

Researcher analysis begins with a thorough breakdown of the competitive environment, which surrounded Brew in 2008. Michael Porter, author of Competitive Strategy, uses a five forces model to analyze an industrial environment and to develop an optimum strategy for success within a given industry based upon specified parameters. The five variables responsible for the forces analyzed using this model are the industry suppliers, buyers, potential new entrants, substitute products and the competition among existing firms. Applying this model to brew formative years, I will concentrate on the examination of the competitive environment in which Brew was created and will generally omit consideration of social and macroeconomic forces that were present at the time. Industry Rivalry Competitors outside the industry can describe defining an industry as drawing a line between the established competitors and the substitute products offered. The primary deterrents to new entrants into any industry are the barriers to entry. The higher the barriers to entry are within any given industry the smaller the threat of new entrants to that industry. The specialty tea industry does not put a high premium on economies of scale. Although, companies with national distribution in the tea industry at large experienced some discounts through bulk purchases and superior infrastructures, their advantages were small (Porter, 1998). Potential for New Entrants Many cost advantages can be independent of scale and may be gained by establishing one's position in an industry early. These can be referred to as first mover advantage. Some of these advantages come from proprietary product technology, favorable access to raw materials, favorable locations and a learning or experience curve. Those firms which established themselves early within the specialty tea industry obtained access to the highest quality tea leafs, built in the most favorable locations and learned quickly the delicate balance between quality and customer convenience. Since, there was no established retail specialty tea organization within the United Kingdom, the potential for a retaliatory act against a new entrant was significant (Grant, 2008).

Substitute Products Another force, which acts upon an organization and is included in Porter's five forces model is the threat of substitute products. The primary substitute products posing a potential threat to specialty tea are the caffeinated soft drinks coffee produced by Pepsi and Starbucks. Competitors like Pepsi and Starbucks offered caffeinated drinks (Quelch, 2006). Bargaining Power of Buyers The bargaining power of buyers also plays an important role in determining the desirability from an investors standpoint of the environment in which the specialty tea industry existed at inception. The force of the buyers bargaining power is proportional to the ability of buyers to force down prices, bargain for higher-quality products or more services, and pit rival organizations against one another. Bargaining Power of Suppliers As with any commodity suppliers, the bargaining power of suppliers to the specialty tea industry would be exerted by either threatening to raise the price of the tea leafs which are used in the production of tea, or by a threat of reduction in the quality or quantity of the tea leafs themselves.

PEST Analysis:
Political
Taxation policy - High taxation imposed on farmers in those countries producing the tealeaf will usually mean Brew pay a higher price for the tea they purchase. Any fluctuations in taxation levels in the industry are almost certainly ultimately passed on to the consumer. Recently June 13, 2009 Tanzania's Minister of Finance harmonized and rationalized local government taxation to boost rural productivity of the tealeaf. Tax was lowered for these smallholder farmers and this saving will have been passed on to purchasers of tea like Brew. Employment law - A reduction in licensing and permit costs in those countries

producing the tealeaf for Brew would lower production costs for farmers. This saving would in turn be passed on to the purchaser.

Economic
Economic Growth - If growth is low in the nation of location of Brew then sales may also fall. Consumer incomes tend to fall in periods of negative growth leaving less disposable income. Consumer confidence in products can also fall if the economic 'mood' is low. Inflation rates - Inflation is a condition of increasing prices. It is measured using the Retail Price Index (RPI) in the UK. Business costs will rise for Brew through inflation, as will shoe-leather costs as they shop around for new best prices of materials, menu costs will rise as Brew have to create new price lists. Also, uncertainty is created when making decisions not least because inflation redistributes money from lenders to borrowers. Competitors pricing - Competitive pricing from competitors can start a price war for Brew that can drive down profits and profit margins as they attempt to increase, or at least maintain, their share of the market. Globalization - Globalization of the coffee market has meant farmers of the tea now earn less money than they used to. This can result in a decrease of people willing to do it for a living, which will mean a decrease in tea produced, resulting in a drop in Brew supply levels and probably profits. Exchange rates - Brew are affected by exchange rates when dealing with international trade. If the value of the currency falls in the country of a tea supplier this enables brew to get more for their pound or L when importing the goods to their country. This saving can be passed along to the customer. Exchange rates are forever changing throughout the world in today's market.

Social
Income distribution - Where income is distributed is another factor that Brew should look at as this also demonstrates the ideal place to aim their marketing or to locate

their stores. Tea is more of a luxury product so it is those people/places with the most amount of disposable income to spend that should be targeted the most intensely. Attitude to work - Brew would not want to locate to an area where the local population has a poor attitude to work. Recruitment would be difficult, training arduous, and staff turnover would be high. Attitudes to work are important in other ways. A large number of workers in large cities now go out for their lunch rather than use an internal canteen. Brew can use this to their advantage and promote the shop as a place where people can meet up and so it will mean that they will get a larger amount of people in their stores at this time of the day. Standard of education/skills - When Brew are deciding upon new premises they must look at the standards of education and skills locally. They must be sure there are people who live there with sufficient skills to ensure successful operation of the business or at least the potential to learn that comes with a good education. Working conditions/safety - Those people with the most disposable income, e.g. young single professionals etc, will be accustomed to high standards. Brew must ensure its shops are clean and comfortable, service is of the highest order and health and safety issues are fully addressed Location - Transport needs to the premises must be considered for both staff and customers. Easy access is vital to ensure there is no excuse for staff to arrive late or for customers not to visit.

Technological
New materials and processes - Developments in the technology of tea making machines and the computers that Brew use to run their cash registers will enable their staff to work more quickly and efficiently. This will result in customers being served quicker and create the potential to serve more customers in a day. This will prevent customers from having to wait around for long periods thus improving customer relations along with increasing the customer base.

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Software upgrades - In the short-term, Brew must identify the most efficient software upgrades to use to keep up with the competition. This applies to the improving the accessibility of their website (www.brewteacompany.co.uk) and also improving the speed and quality of the service provided on the shop floor also free WI-FI assess point to customers. Rate of technological change - The rate of technological change in the current world market is high, much higher than, say, thirty years ago. Much of this is down to the Internet and the speed with which information can be communicated around the globe. Brew will need to invest heavily just to stand still in their ever expanding and developing market, and even more so to try to stay ahead of competitors.

Conclusion:
Brew now put more tea in their teabags than anyone else. Pushing the boundaries of teabag engineering Brew stick a whopping 40% more tea in there than anyone else. This means a richer, stronger and altogether tastier brew. Enterprise is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit or state-owned. Enterprise relates to the state of being busy either as an individual or society as a whole, doing commercially viable and profitable work. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation. Customer analysis decision processes are performed in 3 stages: assessing before the purchase, during the purchase, and after the purchase (Doug, 2008). In case of Brew Phil use to sit in Starbucks during his lunch hour and take comprehensive notes of customers behavior, in fact he was carrying out market research. Brew leverages its customer loyalty, premium quality tea and the homey atmosphere of its stores to fend off competition. The five variables responsible for the forces analyzed using this model are the industry suppliers, buyers, potential new entrants, substitute products and the competition among existing firms. In the short-term, Brew must identify the

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most efficient software upgrades to use to keep up with the competition. This applies to the improving the accessibility of their website (www.brewteacompany.co.uk).

Reference:
Arthur, S and Steven, M (2006). Economics: Principles in Action. New Jersey: Prentice Hall. p29. Doug, 2012. Eric Schurenberg. (Jan 2012). What's an Entrepreneur? The Best Answer Ever. Available: http://www.inc.com/eric-schurenberg/the-best-definition-ofentepreneurship.html. Last accessed 12th Dec 2012. Grant, R (2008). Contemporary Strategy Analysis. Malden: Blackwell Publishing. p56. Neil, H. (2010). Brew Tea Bar and Lounge founder Phil Kirby poised for further expansion. Available: http://www.liverpoolecho.co.uk/liverpool-news/businessnews/2010/10/13/brew-tea-bar-and-lounge-founder-phil-kirby-poised-for-furtherexpansion-100252-27458162/. Last accessed 12th Dec 2012. Porter, M (1998). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: The Free Press. p133. Quelch, Y (2006). Starbucks:Delivering Customer Service. Boston: Harvard Business. p34. www.brewteacompany.co.uk. Last accessed 12th Dec 2012. www.sqaki.com. Last accessed 13th Dec 2012. B. (2008). What is Customer Analysis?. Available:

http://istobe.com/blog/2008/06/09/what-is-customer-analysis/. Last accessed 13th Dec

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