Establishing a Coffee Shop in the Vicinity of Sydney Opera House - Case Study Example

Small Business Management Feasibility Study on the Establishment of a Coffee Shop in the Vicinity of Sydney Opera House Table of Contents Small Business Management 1 Table of Contents 1 Industry description March 2010 Sunday Morning Herald report revealed that tea sales in Australia were trailing and coffee sales picking up in a trend that is expected to make Australians a nation of coffee drinkers (Rose, 2010). Not to speak of how much Australians spend on coffee outside of their homes, the at-home figures are mindboggling. Whopping $773.5 was forecast to be spent by Australians on instant coffee and coffee beans at home in the same year. Tea, on the other hand, is only a little over this figure’s half at $452.6 million, according to a Datamonitor research. By 2013 the figure on coffee consumed at home was expected to touch $800 million. That is probably expected; but what is not is that this figure does not include Australians' spend on coffee outside of their homes in, for example, takeaway coffee or the coffee gulped down in cafes. That brings one to a strong coffee culture prevalent in Australia. The culture has so pervaded Australian lifestyle that the coffee market is flooded with many specialised types of coffees. This is enough to fuel this sector's growth. Of all coffees that Australians consume at home, instant coffee is a hit at 80 percent. It is like having a coffee boom in Australian households. In 2010 Australians bought approximately 23 million kilograms of coffee or products related to it, which grew to 23.4 million by 2013. That means, as on date, Australia's coffee consumption both in and out of home is showing an upward trend and according to trade analysts there has been a strong 6 percent increase in off-trade value sales. Coffee is becoming a very popular drink and consumers are becoming more discerning in their tastes while selecting the types of coffee to appease their taste buds, which include but are not limited to organic, sustainable, single-source, micro-roasted, carbon-neutral and many more artisanal types. This has turned Australia into a competitive coffee landscape with many international brands making inroads into this land of coffee lovers. In October 2013, Mondelez International, the global food manufacturer, entered into Australian coffee market with the launch of its famous Carte Noire, one of the premium brands which it is known for. Thousands of miles away, elsewhere in France, people swear by this brand. Mondelez launched only its instant coffee segment in Australia, probably eyeing a pie out of Nestlé’s share and hoping to slice 5 percent of its market. Given the fact that every second Australian dreams of coffee, even 5 percent would be a lot to bank on. The prospect, thus, for Australians’ "coffee addiction" looks promising and expected to increase by 3 percent in case coffee companies begin to understand the discerning taste of coffee lovers further (Euromonitor International, 2014). That is an impressive figure. And that actually transforms into the potential the coffee business holds across length and breadth of Australia. There are many key determinants that can hold promise for a coffee shop if opened at a place where both Australian and tourist footfalls are more than anywhere else. The most important factor for the success of a coffee shop is the apparent visibility of a customer; there is a pre-determined segment that would be interested to buy coffee. Success factors and key driving forces In Australian context the greatest success factors and key driving forces can be derived from the available statistics that support the upsurge in the coffee market and sales of coffee products. It is, in other words, the business in this segment is brewing up. According to a IBISWorld research report on cafes and coffee shops market the success of coffee business is owed to a large extent to Australians' love for coffee. The nation has developed a very vibrant coffee culture particularly after influx of European immigrants post World War II. This is one reason why the nation has European-style cafes. Given the present demand that the industry is witnessing, the report says that the trend is to likely continue for next half-a-decade. Small coffee shops and speciality cafes have resulted in the mushrooming of this business almost everywhere in Australia. There are low barriers to entry, which aid the spread of this culture further. Another determinant of the success is that the business is not too heavily capital intensive. What is more promising is that for every dollar paid in wages, operators spend an estimated $0.06 on capital investment. The jobs also are not that much skill-intensive; anyone with a basic knowledge of coffee and coffee making and interest to make some money can get started after an initial crash training on the same. As a result of this the start-up costs on establishing the coffee shop is drastically reduced (IBISWorld, 2014). According to the same report the silver lining in the business is that no company can be said to be having a dominant market share in the industry; everybody is doing business and everybody is earning. Total revenues amount to $4bn, annual growth between 2009-2014 has been at 5.3 percent, total employment in the segment is 84,867 and approximately 6,613 big or small businesses are working in the segment. All these statistics add up to the encouragement that one, who is willing to open a coffee shop, can get to boost morale. There, however, are other factors that are equally important to make the coffee shop business a success. This is very tricky and needs great deal of marketing strategy and promotional work. Some of these are given below briefly: Product description Coffee is nearly the same everywhere but still the biggest factor for success in this venture is being able to make and substantiate the claim that this coffee is better than the other one just around the corner. This could be achieved by having a special proprietary blend, matchless baristas or even best on-site roasters. And the ultimate benchmark, of course, is giving the customers just that coffee so rightly which they have dropped in for. Customers Australia already has a lot of them; the key to ones success is to only how one finds them or even how and where one places the business that has a teeming segment waiting for their favourite sip. Some people believe that busiest the street, greater will be the business. But that is not always the case. Most of the coffee lovers prefer places where they can drink at ease over a chat with a friend. Busy streets mean parking hassles and shoulder-to-shoulder human traffic that might actually spill bad taste over a comforting cup of coffee. Marketing Coffee shops are unlike any other business so the marketing is different. It cannot be as brisk as selling a consumer durable; it has to be subtle, as discerning as the customers. The key factor to marketing the shop to customers is earning their loyalty, retaining the same and creating a sense of belongingness in them. Another focus in the recent years has been that of customer orientation, which means involving customers in what the shop does. For this social media plays an important role, in which customers are encouraged to leave feedbacks on their own networks about their experiences at the shop. In turn, coffee shops can use the same media to promote themselves and announce new launches or schemes. In order to identify the key factors responsible for the success of a coffee shop, it is also important to understand the strengths associated with it. The strengths are the key factors and could include shops uniqueness to the area of its operation, committed employees, superior product quality, wide range of products and available options, a customer service that is outstanding, highlights on health benefits of coffee and a customer relationship that is just as great. On a sociological note the most important factor in the success of the coffee shop is the contribution that it is to likely make to the social, cognitive and emotional experiences of its customers. Unger and Wandersman (1985) have, long back, discussed the relevance of these three to the interplay of words that takes places among the community daily. Rivlin (1987) has remarked that a bond gets developed between a place and the people who visit it. Given what Oldenburg (1999) has said this being a coffee shop, it is likely that people start deriving their identity from what is served to them here. Pendergrast (1999) has remarked that historically coffee shops are meeting places which do not only provide coffee but also a platform for social conversation and intercourse. Even political debates are a part of it. The coffee shop, thus, invokes an attachment to a place and good coffee triggers a number of related phenomenons for the customers rather than a singular act of drinking coffee. Low & Altman (1992) have abundantly highlighted this phenomenon in their works. It has also been equated with temporal, social and psychological experiences by Stokols & Shumaker (1981), Brown and Perkins (1992) and Altman & Rogoff (1987). The requisite , however, in this case is that the shop must be marketed as such. Description of the intended coffee shop Coffee shops are nearly the same everywhere - selling coffee. But there are some that sell it with a difference. This one will be unique in the sense that it not only intends to sell coffee but also provide a meeting place for coffee lovers, particularly thousands of tourists that throng Sydney Opera House daily. This will be located within 2 miles of its vicinity and the idea is to cater to the local as well as international coffee lovers for whom The Opera House has become a meeting ground for several art forms. The shop will be spacious, having nicely done interiors and comfortable sitting spaces with central tables. There would be enough of room left for human movement; both guests and employees. This will be similar to the other coffee shops in the area having almost similar prices for its products but providing an atmosphere that would be matchless. The shop does not only intend to brew coffee but also sew relationships. As mentioned above, this would provide its customers a meeting place to be socially interactive. There will also be some add-on services like live performances from time to time, a small private conference room enough to accommodate 14 people and some books, preferably recent bestseller and newspapers. There will be multiple options in the way the coffee is served; it might as well include takeout cups, stoneware or the recent international rage. Operations plan Objectives of operation Objectives will be divided into three goals. Goal one will be to maintain customer relationship, more importantly during shift changeovers. Efforts will be made not to fluctuate the prices for a long time after the inception of the coffee shop. Goal two will be to maintain market share with effective communication plans and a 40 percent increase in sales will be envisioned in first year-and-a-half. In order to achieve this goal multiple strategies will be employed, which would include increasing the customer base, boost the sales size, encourage and plan such moves that increases repeat trade, and resort to aggressive marketing promotion from time to time. Goal three would be to generate 20 percent before tax margin for the next two years. This will be accomplished by keeping high cost purchases at bay, and improving stock and cost control. Proposed location Within 2 mile vicinity of the Sydney Opera House. The place itself justifies the location for the coffee shop. The city is a tourism hub and is at 42nd number in the world as most visited city. It receives both domestic and international tourists round the year. As per 2010 estimates as many as 2.7 million international and 7 million domestic visitors set their feet in Sydney. Not the opera house only, but the footfalls here are also on account of other attractions like Sydney Mardi Gras, Sydney Harbour Bridge, Luna Park, Royal Botanical Gardens and the Sydney Tower (Euromonitor International, 2012). Of particular interest, in terms of setting up this coffee shop with an eye on international tourists is the Sydney Opera House, which is a distinctive 20th century building. It is known as one of the most famous venues for performing arts and over the years has established an iconic Australian image. Anything around derives a slice from that image for its benefit. Ways to acquire premises This is a very important part of this plan as acquiring the premises will be no middle-class deal. The real estate market in Australia is very expensive and for those on budget, it actually is out of bounds. In 2013 the real estate prices rose by 10 percent in Australia's major cities including this place (Delany, 2014). So it will be wise to acquire the premises on a profit-sharing basis rather than on rent or lease. This is because in the former case, the owner of the premises will have affixed stake in the sales but in the latter it will be an instant drain on part of the coffee shop investor, which is not advisable for a start-up. Service or production process This will be like a typical order taking process. The customer requests for coffee, the order is received, accepted, invoice generated, payment accepted and order closed. Graphically it can be shown as under: Layout As mentioned above this has to be an interactive space, which must have enough room to breathe talk and enjoy. So attempts will be made to develop it in such an ergonomic manner that its ergonomics complements its overall atmosphere. Below is an arbitrary layout the like of which can be used: Facilities, equipment and their maintenance Drip coffee might be the last thing on customers' minds; they might want espresso shots, lattes, cafe mochas and even americanos. So the first requirement is an espresso machine; preferably a number of them. Then a special bean grinder, a tamp, demitasse cups, shot glasses and metal jugs. Since this will be a fairly medium-sized business, next equipment will be coffee brewers. Good coffee mugs are the next necessity and they must be such that they reflect overall image of the shop. Probably it will be a good idea to engrave name of the shop on each mug. On the other side, next best thing that the shop must have is impressive furniture - it should be very comfortable. If the space permits, there can be some outdoor furniture too. Annual maintenance contracts must be signed with the suppliers of these facilities, particularly the coffee-making equipment. Materials and supplies required Equipment and furniture are the first and foremost requirements. Then the basic materials like filters, coffee beans and paper goods. A speciality supplier, who has a reputation in the market, must be chosen to supply these materials on wholesale prices, so as to reduce cost on supplies. As the shop begins operations, more materials needed normally come to notice and the same can be procured as and when required. Contracts as required by the NSW law must be signed with all suppliers. Managing seasonal variations Sydney is all-season place having a temperate climate throughout the year. However, that is not to say that the place does not have any lean season. It has. It is abuzz with activity in summer and has a relative low activity during mid-May to mid-August. The high season is mid-January to mid-April and then October to mid-December. Other seasons are shoulder seasons. The corresponding business in low seasons is comparatively low, but not as much that must worry a coffee shop owner. The domestic tourists fill the gap. Regulatory and legal issues Opening of a coffee shop involves seeking of a number of permits regarding approval to discharge trade waste, outdoor dining permit, advertising signage approval, several permissions about business structure including company registration, name registration, trademark registration (if needed), partnership formation documents and approvals, and so on. Council is the point of contact for many of these approvals, and for the rest agencies like Australian Securities and Investment Commission (ASIC), Australian Taxation Office (ATO), and Intellectual Property Australia (IP Australia) etc. The shop is to follow health department rules and regulations. Requirement of employees, their training, remuneration, legal bindings and performance assessment Based on the size of the shop, there could be both full-time and part-time employees working in different shifts. One full-time manager responsible for overall operations is essential, who can be reported by 3 part-time managers working in three different shifts. Other part-time workers can work as customer service people. The remuneration will depend on the type of employment and package must be governed by the local government rules and regulations. They will also be bound by the legality of the place as applicable to employees. Performance assessment can be undertaken on quarterly basis and appropriate measures for training and education taken whenever found necessary. It must be a motivated team. References Altman, I. & Rogoff, B. (1987). World views in psychology: Trait, interactionist, organismic, and transactional approaches. In D. Stokols & I. Altman, (Eds.), Handbook of Environmental Psychology (Vol. 1). New York: John Wiley. Brown, B. & Perkins, D. (1992). Disruptions in place attachment. In I. Altman & S. Low, (Eds.), Place attachment. New York: Plenum Press. Delany, E. (2014). Australia Startled by Foreign Investment. Available: http://www.nytimes.com/2014/04/25/greathomesanddestinations/australians-startled-by-real-estate-sales-to-foreigners.html?_r=0. Accessed May 02, 2014. Euromonitor International. (2012). Euromonitor International’s Top 100 City Destinations Ranking. Available: http://blog.euromonitor.com/2012/01/euromonitor-internationals-top-city-destinations-ranking1-.html#sthash.wnSyhDVY.dpuf. Accessed May 02, 2014. Euromonitor Internatiiional. (2014). Coffee in Australia. Available: http://www.euromonitor.com/coffee-in-australia/report. Accessed May 02, 2013.. IBISWorld.(2014). Cafes and Coffee Shops in Australia: Market Research Report. Available: http://www.ibisworld.com.au/industry/default.aspx?indid=2015. Accessed May 02, 2014. Low, S. & Altman, L. (1992). Place attachment: A conceptual inquiry. In I. Altman & S. Low (Eds), Place attachment. New York: Plenum Press. Oldenburg, R. (1999). The great good place. New York: Marlowe & Company. Pendergrast, M. (1999). Uncommon grounds: The history of coffee and how it transformed our world. New York: Basic Books. Rivlin, L. (1987). The neighborhood, personal identity, and group affiliations. In I. Altman & A. Rose, D. (2010). Australia a nation of coffee drinkers. Available: http://news.smh.com.au/breaking-news-business/australia-a-nation-of-coffee-drinkers-20100305-pnbb.html. Accessed May 02, 2013. Unger, D. & Wandersman, A. (1985). The importance of neighbors: The social, cognitive, and affective components of neighboring. American Journal of Community Psychology, 13(2), 139-160. Read More