Coffee Break Business Plan

Course

: Business Policy 093115 083151 083145 093111 091112 082165 : Salman khan : Amber Batool : Sana Tahir : Najma Sultana : M Asad ur Rehman

Group memebers : Nazma Feroze

Submitted to

: Sir Faisal Awan

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Table of Contents
Table of Contents................................................................................................... 2 B. Business definition goals and objectives: .........................................5 C. Summary of financial needs and application of funds............................5 Porter Model:.......................................................................................................5 B. Industry trends:.......................................................................................6 Porter's Generic Competitive Strategies (ways of competing).................................6 1. Cost Leadership...............................................................................................6 2. Differentiation.................................................................................................7 3. Focus............................................................................................................... 7 The focus strategy has two variants.......................................................................7 Porter's Competitive Advantage.............................................................................7 Competitive Advantage ......................................................................................8 The danger of being 'stuck in the middle..........................................................8 Risk of generic competitive strategies....................................................................9 Risks of overall cost leadership:..........................................................................9 Risks of differentiation:......................................................................................10 Risks of focus:...................................................................................................10 Choosing the Right Generic Strategy....................................................................11 Use the following steps to help you choose.......................................................11 B. Proprietary position: patents, copyrights and legal issue.................13 IV. Manufacturing Processes (If Applicable) .................................................13

A. Materials.........................................................................................13 B. Source of supply.................................................................................13 C. Production methods.............................................................................13 V. Marketing strategy.......................................................................................13

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A. Market segmentation strategies..............................................................14 B. Target Market.........................................................................................14 C. Hot Drinks Forecast Largely Positive..................................................14 D. Pricing policy.............................................................................14 E. Distribution strategies.................................................................14 PETS Analysis.......................................................................................................15 C. Officers: organization chart and responsibilities:................................16 VII. Other Pertinent Information, Plans..................................................................18 TOWS Matrix.........................................................................................................22 Why use the tool? .............................................................................................22 How to use tool: ...............................................................................................22 Strengths/Opportunities: ..................................................................................22 Strength/Threats: .............................................................................................22 Weaknesses/Opportunities: ..............................................................................22 Weaknesses/Threats: .......................................................................................22 Forecasting techniques.........................................................................................22 Income Statement ...............................................................................................24 Balance Sheet...................................................................................................... 25 Financial Ratio......................................................................................................26 Statement of Equity..............................................................................................27 VIII. Exit strategy..................................................................................................28

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I. Summary
A. Business Description
1. Vision:
To become the coffee supplier of excellence to its customers throughout the region, by consistently delivering exciting products sensational and experiences to an increasing no of admires.

2. Mission:
To earn the loyalty of customers and grow the business by developing and marketing coffee products that are leader in quality and customer enthusiasm.

3. Name
Coffee break
Slogan : Fun for Break

4. Location
Liberty market Gulberg Lahore

5. Product(s)
Coffee

6. Market and competition

Consumer market(Lahore liberty market) It is potential market as there are only 4 outside shops coffee points According to season it is a demanding product.

7. Management experience
Coffee break is owned by our six boards of directors holding master Degree in Business Administration from the Institute of management sciences. We all are starting new business. No experience in relevant field but get experience from the other existing person.

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B. Business definition goals and objectives:

To become best coffee point in Lahore Turn in profit in first month of operation Maintain 65% gross margin

C. Summary of financial needs and application of funds

Legal expenses 3000 Marketing promotion expenses for the opening of no expense Insurance (general liability, workers' compensation and property casualty) coverage at a total premium of 1000 Premises remodeling in the amount 3000. Other start-up expenses including stationery (43200) and phone and utility deposits (50000). The required start-up assets of 22000 and Operating capital in the total amount of 180134 per year, which includes all the expenses Start-up inventory of 4800, which includes Coffee beans (12 regular brands and five decaffeinated brands) 240/day Coffee maker 22000

II. Market Analysis

A. Description of total market:
Liberty market is attractive consumer market .Although there are many Food and drinks points and restaurants located in and near liberty but still It is a potential market. This is a good place family week-end dine out bonanzas and tourists and foreigners roaming in Lahore. The winter season also enforce people to have coffee, when they are shopping. And, the office workers are also need to have coffee as per their work load and the youth in colleges also.

Porter Model:
There are 6 forces in the porter model their affect on our coffee shop is as follows:
1. Threat of New Entrants: As we are managing small business so any company with more finance can take over us easily so it is high threat. 2. Threat of Rivalry: It is major threat as there are many direct and indirect competitors are in the market with more products assortments and good store or hotel atmosphere. 3. Threat of Substitutes: Coffee is included in beverages category and it can be cold or hot and in our market there a number of beverages . 4.Threat of Buyers: Buyers are price sensitive so they are more conscious about that and they are hesitate to buy coffee.

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5. Threat of Suppliers: Supplier are more demanded they change their supply process 6. Threat of Stakeholders: Government policies are one of threat for our product

B. Industry trends:
Lahore is famous for its food liking and trend for coffee is increasing day by day in adults ,youngs, students ,employees etc.

Porter's Generic Competitive Strategies (ways of competing)

A firm's relative position within its industry determines whether a firm's profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage. There are two basic types of competitive advantage a firm can possess: low cost or differentiation. The two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation, and focus. The focus strategy has two variants, cost focus and differentiation focus.

1. Cost Leadership
In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. if a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average.

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2. Differentiation
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.

3. Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.

The focus strategy has two variants.

(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on differences between a focuser's target segment and other segments in the industry. The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments. Cost focus exploits differences in cost behavior in some segments, while differentiation focus exploits the special needs of buyers in certain segments.

Porter's Competitive Advantage

Competitive advantage (CA) is a position that a firm occupies in its competitive landscape. Michael E. Porter posits that a competitive advantage, sustainable or not, exists when a company makes economic rents, that is, their earnings exceed their costs (including cost of capital). That means that normal competitive pressures are not able to drive down the firm's earnings to the point where they cover all costs and just provide minimum sufficient additional return to keep capital invested. Most forms of competitive advantage cannot be sustained for any length of time because the promise of economic rents drives competitors to duplicate the competitive advantage held by any one firm. A firm possesses a Sustainable Competitive Advantage (SCA) when it has value-creating processes and positions that cannot be duplicated or imitated by other firms that lead to the production of above normal rents. An SCA is different from a competitive advantage (CA) in that it provides a long-term advantage that is not easily replicated. But these above-normal rents can attract new entrants who drive down economic rents. A CA is a position a firm attains that lead to above-normal rents or a superior financial performance. The processes and positions that engender such a position are not necessarily non-duplicable or inimitable. Analysis of the factors of profitability is the subject of numerous theories of strategy including the five forces model pioneered by Michael E. Porter of the Harvard Business School. In marketing and strategic management, sustainable competitive advantage is an advantage that one firm has relative to competing firms. The source of the advantage can be something the company does that is distinctive and difficult to replicate, also known as a core competency -- for example Procter & Gamble's ability to derive superior consumer insights and implement them in managing its brand portfolio. It can also be an asset such as a brand (e.g. Coca Cola) or a patent, such as Viagra. It can

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also simply be a result of the industry's cost structure -- for example, the large fixed costs that tend to create natural monopolies in utility industries. To be sustainable, the competitive advantage must be: 1. Distinctive 2. Proprietary

Competitive Advantage
Competitive Advantage: a company is said to have a competitive advantage over its rivals when its profitability is greater than the average profitability of all other companies competing for the same set of customers.

Sustainable Competitive Advantage

Sustainable Competitive Advantage: a company has a sustained competitive advantage when its strategies enable it to maintain above-average profitability for a number of years. Competitive advantages vary from situation to situation and from time to time. Some basic examples of CAs can be divided in 4 main global areas:
Cost: Low-cost operations Quality: High quality, Consistent quality Time: Delivery speed, On-time delivery, Development speed Flexibility: Customization, Volume flexibility, Variety

The danger of being 'stuck in the middle

Make sure that you select one generic strategy. It is argued that if you select one or more approaches, and then fail to achieve them, that your organization gets stuck in the middle without a competitive advantage.

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Risk of generic competitive strategies

Risks of overall cost leadership:

Cost leadership imposes severe burdens on the firm to keep up its position, which means reinvesting in modern equipment, ruthlessly scrapping obsolete assets, avoiding product line proliferation and being alert for technological improvements. Cost declines with cumulative volume are by no means automatic, nor are reaping all avail- able economies of scale achievable without significant attention. Cost leadership is vulnerable to the risks, such as relying on scale or experience as entry barriers. Some of these risks are
technological change that nullifies past investments or learning; low-cost learning by industry newcomers or followers, through imitation or through their

ability to invest in state- of-the-art facilities;

inability to see required product or marketing change because of the attention placed on cost; Inflation in costs that narrow the firms ability to maintain enough of a price differential to

offset competitors brand images or other approaches to differentiation. The classic example of the risks of cost leadership is the Ford Motor Company of the 1920s. Ford had achieved unchallenged cost leadership through limitation of models and varieties, aggressive backward integration, highly automated facilities, and aggressive pursuit of lower costs through learning. Learning was facilitated by the lack of model changes. Yet as incomes rose and many buyers had already purchased a car and were considering their second, the market began to place more of a premium on styling, model changes, comfort, and closed rather than open cars. Customers were

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willing to pay a price premium to get such features. General Motors stood ready to capitalize on this development with a full line of models. Ford faced enormous costs of strategic readjustment given the rigidities created by heavy investments in cost minimization of an obsolete model. Another example of the risks of cost leadership as a sole focus is provided by Sharp in consumer electronics. Sharp, which has long followed a cost leadership strategy, has been forced to begin an aggressive campaign to develop brand recognition. Its ability to sufficiently undercut Sonys and Panasonics prices was eroded by cost increases and U.S. antidumping legislation, and its strategic position was deteriorating through sole concentration on cost leadership.

Risks of differentiation:
Differentiation also involves a series of risks:
The cost differential between low-cost competitors and the differentiated firm becomes too

great for differentiation to hold brand loyalty. Buyers thus sacrifice some of the features, services, or image possessed by the differentiated firm for large cost savings; Buyers need for the differentiating factor falls. This can occur as buyers become more sophisticated; Imitation narrows perceived differentiation, a common occurrence as industries mature. The first risk is so important as to be worthy of further comment. A firm may achieve differentiation, yet this differentiation will usually sustain only so much of a price differential. Thus if a differentiated firm gets too far behind in- cost due to technological change or simply inattention, the low cost firm may be in a position to make major inroads. For example, Kawasaki and other Japanese motorcycle producers have been able to successfully attack differentiated producers such as Harley-Davidson and Triumph in large motorcycles by offering major cost savings to buyers.

Risks of focus:
Focus involves yet another set of risks:
the cost differential between broad-range competitors and the focused firm widens to

eliminate the cost advantages of serving a narrow target or to offset the differentiation achieved by focus; The differences in desired products or services between the strategic target and the market as a whole narrows; competitors find submarkets within the strategies.

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Choosing the Right Generic Strategy

Your choice of which generic strategy to pursue underpins every other strategic decision you make, so it's worth spending time to get it right. But you do need to make a decision: Porter specifically warns against trying to "hedge your bets" by following more than one strategy. One of the most important reasons why this is wise advice is that the things you need to do to make each type of strategy work appeal to different types of people. Cost Leadership requires a very detailed internal focus on processes. Differentiation, on the other hand, demands an outward-facing, highly creative approach. So, when you come to choose which of the three generic strategies is for you, it's vital that you take your organization's competencies and strengths into account.

Use the following steps to help you choose.

Step 1: For each generic strategy, carry out a SWOT Analysis of your strengths and weaknesses, and the opportunities and threats you would face, if you adopted that strategy. Having done this, it may be clear that your organization is unlikely to be able to make a success of some of the generic strategies. Step 2: Use Five Forces Analysis to understand the nature of the industry you are in. Step 3: Compare the SWOT Analyses of the viable strategic options with the results of your Five Forces analysis. For each strategic option, ask yourself how you could use that strategy to: Reduce or manage supplier power. Reduce or manage buyer/customer power. Come out on top of the competitive rivalry. Reduce or eliminate the threat of substitution. Reduce or eliminate the threat of new entry.

Select the generic strategy that gives you the strongest set of options.
C. Competition There are four direct competitors in that market and the indirect competitors are

Nescafe Tea, coffee Nestle tea, coffee Coffee stalls Tapal tea Supreme tea

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Vital tea Small and large hotels in Lahore

III. Products or Services

A. Description of product line

Simple cold coffee Cold coffee with ice cream Hot coffee Tea Choclate drink

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Star:Hot coffee Cash Cow:Cold coffee with ice cream and chocolate drink Dog: Tea Question Mark: Any new product

B. Proprietary position: patents, copyrights and legal issue

We ae registered and no legal issue.

IV. Manufacturing Processes (If Applicable)

A. Materials
Coffee Milk Sugar Disposable cups Disposable sticks Coffee maker(machine)

B. Source of supply
Our Distribution channels are, coffee beans comes from whole sale market to our H.Q in Lahore then distributed the quality coffee beans to each and every out let, they crush them selves and maintain the taste and serve the ultimate consumers.

C. Production methods
Automatic coffee is prepared through coffee machine.

V. Marketing strategy

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A. Market segmentation strategies

We make segments on the basis of demographics, behavioral and0 Geographical basis. This brand hits the segment of middle and elite class People between age 12 to 55 like to consume coffee near to their working area to get refresh and work again, so the most feasible place for coffee break is near to working areas like offices area, universities, shopping malls, and most of the people like to buy coffee from drive thru which is easier for them to get coffee.

B. Target Market
We targeted the market with an undifferentiated marketing; our coffee is available for all people. The most target market is people ages by us are young and adults. Target markets are office going people, students, house hold individuals, all ages of persons are targeted

C. Hot Drinks Forecast Largely Positive

Consumer price sensitivity in Pakistan is expected to hamper coffees performance during the forecast period. However, given that tea consumption in Pakistan is among the highest in the world, any slowdown in coffee volume sales is unlikely to have long-term consequences for hot drinks, with consumption expected to pick up as consumer spending power increases.

D. Pricing policy
The prices strategy of coffee break: cup PKR 50. this pricing strategy, is very prominent against coffee competitors in Pakistan, other cafs offer a cup of coffee for PKR 350 ($4), which is much higher then our brand.

E. Distribution strategies
We are offering coffee with consideration with the easier way to reach our consumers, for example we make out coffee break on the road side, coffee break, car thru. Our Distribution channels are, coffee beans comes from whole sale market to our H.Q in Lahore then distributed the quality coffee beans to each and every out let, they crush them selves and maintain the taste and serve the ultimate consumers.

We will attempt to inform, persuade and remind consumers directly or indirectly about our business

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1 first of all we will use word of mouth to get the good reputation for our business because word of mouth has become an even more powerful and useful resource for consumers and marketers so we will have the practical, hands-on guide to getting people to talk about our company, our cause, and our stuff we will use this strategy just like successful companies

2 we will advertise in print media like newspapers and magazines 3 we will do place advertising through billboards and posters 4 after that we will consider direct response advertising through mail and telephone 5 on line services(web sites and interactive ads and e-mails) are also included in our business plane because in this way we can get our company listed on search engines and advertise on other websites . Actually online services provide an infrastructure in which subscribers can communicate with one another, either by exchanging e-mail messages or by participating in online conferences (forums). In addition, the service can connect users with an almost unlimited number of thirdparty information provider 6 Basically we will focus on social networking like face book, you tube, and my space and we will increase use of internet as a communications plate form

PETS Analysis

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VI. Management Plan

A. Form of business organization:
Our business form is Partnerships unincorporated. We are six partners (unlimited liability for the business). We will distribute all profits and losses without regard for any profits retained by the business for cash flow purposes.

C. Officers: organization chart and responsibilities:

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CEO Nazma Feroz

HR Manger Najma Sultana

Financial manager Amber Batool

Managing Director Salman khan

Marketing Manager Sana Tahir

Operation Manager Asad

D. Operating plan for the next three years: We have to plan to expand our product lines and expanding our market not only in Lahore but also in other cities and more spending on promotions

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VII. Other Pertinent Information, Plans

Once your business plan is ready, you will want to go though it step by step and revise it. Once this is done, you may submit the business plan to investors to obtain the capital that is required for setting up the business. During the startup process, you will have to review and revise the plan again and again. Once your business is setup, your business objectives and other such specific details will change from time to time. Change the business plan to accommodate for these changes. Internal Factors Weight Rating Weighted Score Opportunities I. II. III. Boom in industry Demographic favor for mass customization Growth in the rural market .20 .15 4.0 3.5 0.80 0.53 End user awareness Comments

.10

3.0

0.03

Economy segment

Threat i. ii. iii. Total Strong caf stalls Jamin java and Gloria jeans New product advances 0.25 0.20 0.10 1.0 4.0 3.0 2.5 1.0 0.06 0.03 2.45 Well positioned Questionable

External Factors

Weight

Rating

Weighted Score

Comments

Strength I. II. Experienced management Taste 0.20 4.0 0.80 Know the food industry

0.35

4.0

1.4

Recipe

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Weaknesses I. II. III. Product portfolio Process oriented research and development No sitting arrangement 0.10 4.0 0.40 Concentration on serving Slow in new product 0.05 4.0 0.20

0.25 Total 1.0

2.5

0.63 3.43

Financial issues

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Internal Strengths: Strong R & D Heavy Reliance Product on

Internal Weaknesses: Rising Costs in the market One New Experience in the market

Strong Sales and Service Efficient Production External Opportunities: SO: WO:

Growing market demand with many Strong brand image. option Providing superior products High pricing which cost not all kind Attractive offers to build and services. of market. High quality control. High quality of service. Cost sentimental issue for customers. Too focus on domestic market

The potential employees are Some employees complaints about educated people which make it the management. easier to train them. Self esteem and need to be love or to Could be able to change belong to community which is the negative image of coffee into major reason why peoples buy a positive one product. Employees which are easier to train them.

External threats:

ST:

WT:

Exposed to rises in the cost of coffee Feedback where customers High pricing. and dairy product. could send it by email. Complaints about the management. Many of the competitors are trying to Always treat the employees as follow the same taste of coffee. a partner not just as employees. People are not spending too much money on coffee. Always aim to help support Penetrate more market segmentation. environment. Limited number competitors. of strong Bad effect of coffee from society.

Low income people are not Page ready to buy coffee. 20

I N T E R M E D I A T E

S L O Most important strategic factors from EFAS & IFAS Weigh t score N G H O R T

Weights 0.20 0.10

Ratin g 4.00 3.50

I. II. III. iv. v. IV.

Boom in industry Demographic favor for mass customization Strong caf stalls Jamin java and Gloria jeans Taste No sitting arrangement

0.80 0.35

)( )(

0.10

4.00

0.40

) ( ) ( )(

0.20

3.00

0.60

0.20 0.20 1.00

4.00 2.50

0.80 0.50 3.45 )(

Slow Cycle Resources Strongly shielded

Standard Cycle Resources Standardized mass

Fast Cycle Resources Idea driven

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Brand name

production Economies of scales

TOWS Matrix
While we can use SWOT analysis as a framework for analyzing your strengths, weaknesses, opportunities and threats you face, this breakdown becomes useless if it is not applied to improving your competitive position. Two key points explain how to utilize this analysis:

Use strengths to capitalize on opportunities and to counter threats, Use opportunities to minimize both weaknesses and threats, possibly avoiding some altogether

Why use the tool?

TOWS Analysis is an effective way of combining a) internal strengths with external opportunities and threats, and b) internal weaknesses with external opportunities and threats to develop a strategy.

How to use tool:

To carry out a TOWS Analysis, consider the following combinations:

Strengths/Opportunities:
Consider all strengths one by one listed in the SWOT Analysis with each opportunity to determine how each internal strength can help you capitalize on each external opportunity.

Strength/Threats:
Consider all strengths one by one listed in the SWOT Analysis with each threat to determine how each internal strength can help you avoid every external threat.

Weaknesses/Opportunities:
Consider all weaknesses one by one listed in the SWOT Analysis with each opportunity to determine how each internal weakness can be eliminated by using each external opportunity.

Weaknesses/Threats:
Consider all weaknesses one by one listed in the SWOT Analysis with each threat to determine both can be avoided.

Forecasting techniques
Qualitative vs. Quantitative Methods:

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Qualitative forecasting techniques are subjective, based on the opinion and judgment of consumers, experts; appropriate when past data is not available. It is usually applied to intermediate-long range decisions. Example of qualitative forecasting methods:

Informed opinion and judgment Delphi method Market research Historical life-cycle Analogy Expert opinion

Quantitative forecasting models are used to estimate future demands as a function of past data; appropriate when past data is available. It is usually applied to short-intermediate range decisions. Example of Quantitative forecasting methods:

Last period demand Arithmetic Average Simple Moving Average (N-Period) Weighted Moving Average (N-period) Simple Exponential Smoothing Multiplicative Seasonal Indexes

These are different techniques of forecasting but we have used or implement EXPERT OPINION.

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Income Statement

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Balance Sheet

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Financial Ratio

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Statement of Equity

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VIII. Exit strategy

When we feel that know we make our business successful and our project will be done then we communicate to all our stake holders about our business nature and renewal of our contract if some of members want to continue he can continue business by giving all member rights

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