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BSBINM601 Assessment 1

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Introduction

This report is aimed to the owners of CoffeeVille coffee shops, Rufus and Emma Belcastran, who recently have asked for the business to be analysed to identify potential reasons for their declining sales and review the business actions for potential issues.

Since the first coffee shop started in 2009, the business has grown into three more coffee shops around Melbourne CBD and they have been profitable until the last 3 months in which expenses has increase and sales revenue continue to fall.

CoffeeVille offers high quality, fair trade coffee and gourmet food and beverage. Its costumers are office workers who are close to the shops and keep regularly eating out. The company proposes are to increase the revenue, provide high standards in quality and service, increase marketing campaigns and place the brand ethically and environmental responsible. However, these objectives are not being achieved and this is the report objective to make a complete case study.

Brief Description of Business Problems/Issues

CoffeeVille has been stable and profitable in the marketplace since it started 4 years ago, but lately it has shown a critical increase in the expenses costs as the sales revenue are dropping and it has end up affecting significantly the profit of the business. The company has invested considerable money to establish the brand in four different shops, and the largest one, which is the last one opened has taken more effort and money. Due to business and offices are closing down and moving to a different zone, CoffeeVille has been also affected, plus nowadays people are worried about their job security and prefer cheapest options not to get affected by the economic crisis.

Currently there are some problems that the company is facing and they listed as below:


  • Sales categories and profits are decreased for the first 6 months of 2015. Food sales are down 10%, beverages 12% and catering 17%. The rising expenses made CoffeeVille drop the incomes by 19%, in comparison with the earlier year.
  • The business expenses are increasing; higher wages up to 15% for qualified and skilled baristas, the rent of the properties has raised between 10% to 18% and fast increase in products prices such as coffee beans and meat, which went up to 20% in the last months.
  • The normal business’s busiest periods are not as busy as they expected, in November and December the external catering sales were down 21% and 23% respectively.
  • Due to high rent prices, some consistent customers are moving far from the city and some offices are closed permanently, which means fewer visitors in the shop.
  • A big effort is being put and focused on the fourth shop with no successful outcomes.
  • Financial crisis is concerning people, so they try even more to save money and keep their job stable, besides in summer season some costumers want to stay healthy and prefer not to spend money.
  • The foot traffic for the business is low despite the fact that 67 percent of the customers to have visited the store at one time. The business is losing on the level loyalty by the customers as evidenced by the loyalty club membership. Store one, store two and store three are both performing dismally when it comes to foot traffic despite the fact that this stores have been in existence for some time. This could be partly because there is no marketing effort directed towards these stores, and most of the marketing initiatives have been directed towards the newly established store that has marginally improved in its foot traffic

Explanation on How Business Issues Were Identified.

Once the data and information was collected and analysed from the entire appendix given from CoffeeVille, it is possible to identify potential problems and issues by evaluating customers’ feedback, general statics and the staff point of view.

Finally, we found that the clients are overall very happy with the experience that CoffeeVille offers regarding staff, coffee and food. It has also been found that the financial crisis is one of the most important factors, which makes costumers hesitate to spend much money, the rental expenses, job instability and some other aspects that are affecting the business.

The analysis revealed that is higher the percentage of customers who used to visit the shop and only a 33% continue going. As we know the efforts of the marketing campaigns is not having a positive outcome, and they are only focusing in the fourth shop opened.

These conclusions have been reached courtesy of both the qualitative and quantitative data obtained. The assessment resource giving details about the general performance of the business in terms of profitability gives more insight on how the business is having some hard time to leverage its resources to curb the expenses that are running out of hand. The data clearly indicates how the business strives to make profits, though at a diminishing rate because of the expense upsurge. The ratio of the annual income to the total expenses in the year 2015 is almost 1:1, hence suggesting that the company should embark on a cost reduction strategy by cancelling some of its initiatives such as training and development. The customer and marketing information have also assisted in determining the extent to which expenses are playing a dominant role in the business performance rather than the purchasing patterns of the customers. Data from action marketing survey also provides very critical information concerning customer attitudes and perceptions ion quality and prices at Coffeeville.

List of the Types and Sources of Data and Information

The major sources of data used in this case include the income statement outlining the sales revenue and the expenses of the business, together with the profitability levels, the customer, and marketing information, the action marketing survey, and analysis of the external environment of the business.

  • Company performances such as financial reports, balance sheets, profit and loss, evidence for sales, food traffic and others.
  • Internal and external business environment
  • Customers Feedback and comments in social media sites (Facebook, Instagram)
  • Feedback methods such as feedback forms, social media, word of mouth, surveys
  • Current patterns of the costumer spending
  • Membership of the Loyalty club
  • Gathering reviews

How the Information Sources Support Decision-Making

The information has been completely proved to ensure its validity and trustworthiness, so that company is aware of the existing situation and it can step up in a proper process to make future decisions. The techniques used to check internal and external information involve different relevant factors for business issues. The economic information sources were tested and linked with 3 sales reports, beginning from July 2014 to July 2015, which was the previous one.

The majority of trends and variances were considered and they exposed a decrease in sales, particularly on November and December 2015. Staff and customer’s feedback was another source considered, which is fundamental for the business as they are the core of CoffeeVille. It is also a way to guarantee that the communication method is working correctly and all possible issues are going to be solved to keep customers (internal and external) pleased. Either way there is some non-relevant information too, which needs to be dismissed for the analysis.

The income statement and information provided on expenses assists in determining the expenses that have to be controlled. These include the wages, food and coffee prices and rent. It shows the expenses are a lot, hence reducing the profitability. The Action market survey also points out the phobia that the customers are developing for the prices charged by Coffeeville as it tries to pass the costs to customers by charging higher prices. The validity and reliability of the sources could be determined by tracing various costs to the individual cost centers and cross checking the survey outcomes and the actual trends recorded by the business (Dumanovsky et al., 2011). No data was deemed contradictory in this analysis. Rufus and Emma can use these sources to determine how cost can be absorbed in such a way that the customers don’t feel the direct impact of upsurge in expenses.

The Formal and Informal Networks

Both formal and informal networks are allowed to identify and study the issues; the collected research support to establish the problems and define the most correct way to undertake a specific situation. As part of the formal networks used to this report were formal meetings in Australia, workshops, Melbourne Chamber of Commerce and workplace team. On the other hand informal network includes Social network, teleconferences and the connexions set with others. We also used communities of practise such as associations like the Australian Retailer, Cafe owners and Baristas.

Other copies of data and information researched

The relationship between costs or expenses and profitability for the business

http://www.accountingtools.com/questions-and-answers/what-is-the-impact-of-expenses-on-the-balance-sheet.html

  • http://www.abc.net.au/news/2016-01-22/global-coffee-shortage-could-cause-melbourne-cafe-closures/7107110
  • http://www.cafe-coach.com.au/make-a-massive-profit-buying-building-managing-and-selling-your-cafes
  • https://www.linkedin.com/pulse/definition-difference-formal-informal-networks-chantal-van-kempen
  • https://www.quora.com/What-is-the-average-profit-margin-of-a-coffee-shop-in-Australia
  • http://www.hr-guide.com/data/G362.htm
  • https://books.google.com.au/books?id=_mhnAgAAQBAJ&pg=PA80&lpg=PA80&dq=informal+and+informal+networks+coffee+shops&source

Conclusion

Coffeeville should prioritize the above three issues in an attempt to boost its financial performance namely expense upsurge, foot traffic and trends such as the seasonability of the business activities. Sources of information such as income statements and Action survey data can assist the business to rationalize such trends and counter them. Rufus and Emma can also rely on formal and informal networks such as social media forums to try and analyze the appropriate courses of action for Coffeeville.

This problem has been solved.


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