The Feasibility Analysis of Unique Cake Bakers - Essay Example

The Feasibility Analysis of Unique Cake Bakers 1. The business idea This formal business feasibility involves the analysis of a family-home based bakery (Unique Cake Bakers) that I intend to take over. I intend to take over the family business as I had always had passion for baking as well as a unique artistic ability. In addition, I have been employed in a number of food bakery firms in the food services industry for several years. The family business has experienced a decline in sales over the past few years; I intend to expand it to engage in mass production (Kosseva & Webb, 2013: 34). Operating a successful bakery requires a mix of skills such as being experienced baker, as well as being as astute business person. Since I have all the necessary requirements, I will be able to create attractive products and run and grow the business with profit in mind. Since bakery is a popular business, the sale of baked goods is not significantly affected by economic factors; I intend to introduce other baked products other than bread, such as custom-order cakes, gourmet cakes and wedding cakes (Hui & Corke, 2006: 575). This will help in creating a wide variety of products thereby attracting more customers. This in turn increases sales volume. I intend to capitalize on the trends in consumer tastes in order to increase margins and stay in business because the business will have substantial revenue growth. I intend to offer handcrafted artisanal products in order to build a recognizable niche that competing businesses would not easily replicate (Gracia, 2008: 227). In addition, I intend to employ more efficient and effective employees aimed at reducing spoilage and wastages have been eating up the revenues of the company. This will also help the business in mass production thereby meeting the increasing customer demand. Finally, I also intend to use par-baked products, particularly for cakes, so as to cut down baking time in order to meet the increasing demand of customers for wedding cakes in a short period of time (Hui & Corke, 2006: 575). 2. Industry related issues The bakery industry in the UK is worth £3.6 billion in annual revenue. Sales are composed of buns and bagels, breads, pastries, sweet goods and cakes and pies. The bakery is divided into three principal segments or sectors namely in-store bakeries (ISBs) within supermarkets that produce approximately 17 percent of baked products, the larger (plant) baking companies that produce about 80 percent and high street (craft) bakeries that produce only 3 percent (Martínez-Monzó et al. 2013: 56) . The UK high street (craft) bakeries sector is highly fragmented and is very labour-intensive. It comprises stores that produces and sells bakery products onsite as it is typically operated in only one location. The increasing price of wheat which is a key ingredient for bakeries has created a higher raw material costs for businesses in the industry. Wheat prices spiked in 2011 as a result of pressure on global wheat supplies (Kosseva & Webb, 2013: 34). This has forced companies to increase prices so as to offset the higher costs. The UK high street (craft) bakeries sector, which the family business is in, has several independent bakeries as well as grocery stores that operate their own in-house bakery thus creating stiff competition (Mort, 2006: 146).  Over the past five years, the bakery industry in the UK has been under considerable pressure due to the waning of consumers’ interest in goods that are industrially produced. Bread that is produced by large plant bakeries is currently less attractive to consumers even though it accounts for majority of bread consumed in the United Kingdom. The consumption of plant bread has therefore been decline at the expense of high street (craft) breads. The changing consumer trends have therefore been the main challenge for industry operators (Martínez-Monzó et al. 2013: 60). The UK bakery industry has many small bakeries; however, the recent trend is towards consolidation as well as economies of scale. Firms in the industry compete on quality, price, differentiation as well as relationship with key suppliers. Many substitutes also exist for bakery products, for instance, rice, breakfast cereals and potatoes (Kosseva & Webb, 2013: 34). 3. Target market and customer related issues The business will focus on custom cake orders for the start by supplying friends and family with cakes sculpted into a variety of unique designs. It will also create cakes for all occasions including, baby shower, birthdays and retirement parties. Due to their unique designs, the cakes are intended to excite the customers and create plenty of word-of-mouth advertising. This will result in rapid growth and expansion of the customer base. The business will offer the best design and variety of cakes (Gracia, 2008: 227). The ideal target market for the business is in between 25-45 with families as well as steady jobs. This age bracket is financially stable and will be able to sustain the business. it is also large enough to support the desired expansion of the business. The bakery will appeal to such customer segment as the provider of unique cakes and the best design and variety of cakes. The business also targets senior citizens, college students as well as young professionals or office workers who constantly drop in for a sandwich during lunch, pastries to take home after work and breakfast muffin (Hui & Corke, 2006: 575). Customers have indicated fluctuation in tastes and preferences. Some customers believe in gluten-free diet while others are interested just in high-fibre rolls and breads. Some also turn to cupcakes or crullers as comfort food during periods of uncertainty and distress. Such customers want specialty items and quicker services to safe on time. 4. Founder (s) related issues There as several issues that affects the business from the founder perspective. For instance, change of recipes with an intention of improving the treat may get little or negative interest. In addition, there is an issue of failing to list ingredients for each item thereby resulting in confusion. In line with the expansion of the business, there are several that the business faces. The business has a few employees who can take part in mass production to better serve the market and increase customer base (Martínez-Monzó et al. 2013: 59). The prices charged by the business are relatively higher than some of its competitors. This presents a huge challenge because of fierce competition as customers can opt for similar quality at lower prices. There is also spoilage and wastages that have contributed to the reduction in revenues. This results in insufficient net profit since the business has not achieved its full potential in terms of net profit to sustain the family on a full-time basis. The rising price of raw materials especially due to a rise in the price of wheat which is a key ingredient for cakes is a great concern for the business. This may result in the increase of selling prices to offset the higher costs. This presents another challenge as the customers may switch to cheat and affordable alternatives thus reducing the sales volume. There is also a problem of increased competition due to many small bakeries in the industry. Dealing with this saturated and consolidated market requires automation or provision of other distinct value to the customers in order to be able to compete favourably (Gracia, 2008: 227). 5. Financial issues The business requires innovation to create a separate kitchen with a separate entrance for customers. The business has a sufficient space for renovation. The renovation requires that a building permit worth £450 from the local government. This includes inspections before and after the construction. The construction cost is estimated to at £24000 including new plumbing, electrical and gas hook-ups. Additional amount of £5000 will be used in purchasing new appliances including refrigerator, oven, freezer and dishwasher. £1500 will be spent on furnishings and decor for the space as well as £1200 on new signage. The renovation will lead to a £600 rise in sales per month particularly due to increased signage and more professional appearance (Hui & Corke, 2006: 575). Because of the renovation, current employees will be paid for 10 additional hours at £8.75 an hour per month to assist in meeting the increased cleaning and orders. Total annual utilities are expected to increase by £5850 for the renovated space. For wide coverage, the advertising expense will be increased by £300. The renovation will be financed partly by bank loan and partly by personal savings. The bank loan will finance 60 percent of the construction cost while the remaining expense will be financed by personal savings. 6. Overall business potential The business is able to attract and retain a substantial number of customers due to the best and unique designs and variety of cakes. This will result in rapid growth and expansion of the customer base because the cakes are consistent and are of high quality. Since the business has as friendly and active presence in social media sites like Facebook, it will be able to keep its customers updated on new items, discounts and specials. The unique designs of cakes will influence customers to continue buying from the business thus creating customer loyalty (Mort, 2006: 146).  References Gracia, J. J. E. (2008). Latinos in America philosophy and social identity. Oxford, UK, Blackwell Pub. Hui, Y. H., & Corke, H. (2006). Bakery products: science and technology. Science And Technology (p. 575). Kosseva, M. R., & Webb, C. (2013). Food industry wastes: assessment and recuperation of commodities. Martínez-Monzó, J., García-Segovia, P., & Albors-Garrigos, J. (2013). Trends and Innovations in Bread, Bakery, and Pastry. Journal of Culinary Science & Technology, 11, 56–65. Mort, D. (2006). Sources of non-official UK statistics. Aldershot [u.a.], Gower. Read More