Cafe Simulation

can you help me with a Management class (Entrepreneurship) ?

I was wondering if you can help me out with this type of assignment I have attached the manual and info below for you to look at.I got access to a website. I can give you my credentials if you want to take a look. You log in and plug in the numbers. It’s straightforward, and then you write a paper about it. I can confirm with you later.

Purpose:

The primary objective of this simulation is to immerse you in a practical setting where you can actively apply the strategies and concepts we’ve delved into during our lectures and from our readings. This experience is designed to mirror the journey of launching an entrepreneurial venture. By constructing and then operationalizing your own business models, you’ll deepen your understanding of the theoretical knowledge shared and gain firsthand experience in navigating the intricacies of entrepreneurship. It’s an opportunity to bridge the gap between academic learning and real-world application, enabling you to make informed decisions and develop resilience as a budding entrepreneur.

BizCafe
The Business Essentials Simulation
Stuart W. James, Interpretive Simulations
Michael Deighan, Interpretive Simulations
Charlottesville, Virginia, USA
ii
Copyright Notice
This manual and the simulation described in it are copyrighted with all rights reserved by
Interpretive Software, Inc. Under the copyright laws, neither this manual nor the simulation
may be copied, in whole or in part, without written consent of the authors, except in the
normal use of the simulation for educational purposes, and then only by those with a valid
license for use. The same proprietary and copyright notices must be affixed to any permitted
copies as were affixed to the original. This exception does not allow copies to be made for
others, whether or not sold. Under the law, copying includes translating into another language
or format.
Purchasing the simulation experience gives the owner the right to participate in a unique
learning event. Each student or participant must purchase the simulation to take part in the
event or the institution sponsoring the event must purchase for the entire group participating
in the event.
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In no event, will Interpretive Software, Inc. be liable for direct, indirect, special, incidental, or
consequential damages resulting from any defect in the software or its documentation, even if
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This simulation experience is sold, “as is,” and you, the purchaser, are assuming the entire risk
as to its quality and performance. The warranty and remedies set forth above are exclusive and
in lieu of all other, oral or written, express or implied.
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Interpretive Simulations
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Charlottesville, VA 22901
Phone: (434) 979-0245
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Website: http://www.interpretive.com/
Discover a Better Way to Learn. Active Learning through Business Simulations.
Copyright © 2007–2019 Interpretive Software, Inc.
All rights reserved. Printed in the United States of America. No part of this book may be used or reproduced in any
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© Getty Images and iStock.com, respectively.
iii
About the Authors
Stu James is the founder of Interpretive Simulations, one of the leading publishers and developers
of business simulations worldwide. Interpretive’s simulations are an integral part of the curriculum
at many of the world’s top business schools in the areas of marketing, strategy, management, and
international business. To date, over 400,000 people have experienced one of Interpretive’s
simulations, and many rave about how the simulation was one of the best learning tools they have
ever used.
On the academic front, Stu is currently Visiting Lecturer at the University of Michigan (EMBA), and
at the Colgate-Darden Graduate School of Business at the University of Virginia (MBA Core
Marketing and Custom Executive Programs). In addition, Stu has served at the Allen Center for
Executive Education at the Kellogg School of Business, the China Europe International Business
School (CEIBS), and the Cheung Kong Graduate School of Business (CKGSB).
Along with his academic work at the above business schools, Stu has also worked with American
Honda, CIGNA, The Davidson Institute, General Electric, Genworth Financial, Harvard Business
School, Navy Federal Credit Union, Pearson Prentice Hall, and McKinsey & Company. He is coauthor of a number of leading simulation products including StratSimManagement,
StratSimMarketing, StratSimChina, CountryManager, PharmaSim, HRSimSelection, MarketShare,
BizCafe, and ServiceSim, all used at leading universities worldwide. Stu has extensive experience in
facilitating simulation events, having directly worked with thousands of executive and MBA
participants over the past 25 years.
Currently, Stu’s primary focus is running Management by the Numbers, Inc. (MBTN), a new venture
that he co-founded with Paul Farris of the Darden School of Business. MBTN provides a self-paced,
on-line environment where students and executives can master the numbers side of marketing and
business metrics.
Stu and his family reside in Afton, Virginia at the foot of the Blue Ridge Mountains. In his spare time,
Stu enjoys playing and teaching Irish traditional music and competing in triathlons.
Michael Deighan is a coauthor on the web-based editions of Airline, Corporation, Entrepreneur,
and HRManagement. His expertise, insight, and creativity proved invaluable and made it possible to
convert these models to their current web-based versions. Michael joined Interpretive Simulations
in 1989 as lead software developer and has served as manager of technology and content
development.
He is coauthor on a number of Interpretive simulations: PharmaSim, BizCafe, StratSimMarketing,
StratSimManagement, StratSimChina, CountryManager, and MarketShare. In addition to developing
software, he has been teaching computer programming classes at Piedmont Virginia Community
College in Charlottesville, Virginia, since 1990. Michael received his B.A. in German and Economics
from Washington and Lee University, and an M.A. in German from the University of Virginia.
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Acknowledgements
A moment of appreciation…
We consider all of our customers as part of our product development team, and we are
fortunate that they have put their time and effort into improving our product through their
comments and suggestions. We will continue to incorporate improvements into coming
releases of this product and welcome your comments and suggestions.
The authors would like to thank many people for their support in the development of this
simulation. Payton James-Amberg, Karen Kelly, Kristen Knecht, Tony Naidu, Anne Louque, and
Clayton Shumate were all part of the original development and testing team, and the
simulation is significantly better due to their efforts and suggestions. Interpretive especially
appreciates the early users of the simulation who provided invaluable feedback, with a special
thanks to Jackie Shemko of Durham College and Bill Gregory of Indiana University Northwest.
Many of their suggestions have been incorporated into the simulation.
The latest release of BizCafe incorporates the feedback of the 100,000+ users of the simulation
since its initial release. Internally, we want to acknowledge the hard work and dedication of a
number of Interpretive employees—especially Matt Travis, Johanna Ackert, Patrick Neeley,
Rachel Hill, and David Luzader.
Stu James
Mike Deighan
v
Contents
Introduction
BizCafe Quick Start Guide
BizCafe Manual
1
3
4
Case
Specialty Coffee Market
Overview
Start-up Decisions
Weekly Decisions
Measuring Performance
Next Steps
5
6
7
10
12
14
16
Business Essentials
Management
Marketing
Operations
Accounting
Planning and Integration
17
20
22
24
26
27
Appendix
Using BizCafe in a Group
Glossary
29
30
31
Printed March 26, 2019
BIZCAFE
Introduction
2
BizCafe is a computer simulation that provides a great way to learn about running a business. It
is designed to help you learn about the challenges and rewards of making good decisions in a
small, service-based business. You will learn about management, operations, marketing, and
accounting by running your own coffee shop for up to 16 simulated weeks.
In BizCafe you will typically be making decisions as part of a student management team.
Teamwork is increasingly important in business today, and a valuable part of the BizCafe
experience is learning how to make the best decisions when confronted with several different
opinions. Your group will have to decide how to sort out your priorities and objectives in the
context of a limited checkbook balance and a changing environment.
At start-up, your team will need to name your business and decide what furniture and
equipment best meet your business objectives. You will then make weekly decisions to staff
your cafe, price and promote your product, set shop hours, and purchase materials to operate
the business. In addition, you may have to respond to issues raised by “incidents” (mini-cases)
and complete supplemental assignments chosen by your instructor.
You will need to understand the business in order to make good decisions. Therefore, take
some time to familiarize yourself with the case before beginning the simulation. While working
through your decisions, you will find it helpful to refer to the manual for information and
management tips.
To get the most out of the BizCafe experience, we recommend the approach outlined on the
following page.
3
BizCafe Quick Start Guide
1. READ THE CASE:
• Industry background,
• Company starting situation.
2.
•
•
•
START-UP DECISION:
Access simulation from course website.
Create and enter a name for your business.
Choose furniture and espresso machine.
3.
•
•
•
•
PERIOD DECISIONS:
Weekly Purchases,
Staffing and Hours,
Marketing,
Special Decision.
4. DECISION ANALYSIS:
• Cash Budget,
• Break-Even,
• Decision Summary.
Go back to Step 3 until satisfied with decisions.
5. SIMULATION ADVANCES:
• Check schedule for times.
• Complete decisions before deadline.
If the simulation is over, skip to Step 7.
6. EVALUATE RESULTS:
• Company reports,
• Market reports.
Go back to Step 3.
7. SIMULATION ENDS:
• Evaluate team performance.
• Review what you have learned.
Your instructor may require additional assignments during the simulation. Check the
schedule and messages on your course website for details.
4
BizCafe Manual
The remainder of this manual is divided into the sections described below. Your understanding
and success in BizCafe will be greatly enhanced by reading this manual before you begin the
simulation. The manual will answer most of the questions students typically have during the
simulation experience, and reading it has the added benefit of improving your competitiveness.
Contextual help within the simulation interface and Frequently Asked Questions, “FAQs,” on
your course site provide more information.
The Case presents a description of the coffee shop and the decisions you will be making as a
manager of this business. A thorough understanding of your cafe’s situation will help you make
better decisions. In addition to appearing in this manual, the case is also available within the
simulation interface for your convenience.
Business Essentials provides a brief introduction to business management: what it is, why it is
important, and what concepts will be used in the simulation. In addition, each of the basic
functional areas covered in BizCafe are discussed.
The Appendix provides supplemental materials to help you with the simulation experience.
There are tips on using the simulation as part of a group. The Glossary contains business terms
that are used in the simulation.
BIZCAFE
Case
6
Jane Valdez was ready for a change after 30 years of 12–15 hour workdays, 6 days a week. Jane
had grown up in Collegetown and graduated from the local university there, majoring in
engineering with a minor in business. After graduation, she worked at Hewlett-Packard and
Apple Computer in the ’70s and ’80s. Like many of the technology workers of that era, she soon
forged out on her own, starting several companies, failing at two, but hitting on a successful
formula with her third venture—handheld computing devices for hospital applications. In 1995,
she took her company public and eventually sold the company before the high-tech bubble
burst. Soon thereafter, she was a founding partner of a successful venture capital firm, but now
she is ready to return to her roots and slow down a bit.
However, she wants to share her success in a unique way, by helping college students learn
about business by operating their own company. Select student teams will receive a $25,000
start-up loan at 10% interest to manage their own coffee shop for a year as an independent
study for credit. Jane is confident that teams will have no trouble paying back the entire loan
with interest by the end of the year.
Specialty Coffee Market
According to the National Coffee Association, 62% of people drink coffee daily, up from 57% in
the previous year. “More of us are drinking coffee, and younger consumers appear to be
leading the charge,” said Bill Murray, NCA president and CEO. “A steadily growing taste for
gourmet varieties is also driving a wider trend toward specialty beverages.” Some other
interesting statistics from the study include the largest one-year increase in past-day
espresso—jumping from 18% to 24%; and more than half of all cups of coffee consumed in the
past day were gourmet—59% in the past year vs. 46% five years ago.
The largest chain specialty coffee shops are Starbucks (26,000+ locations worldwide), Dunkin’
(12,000+ locations), Tim Hortons (4,500+ locations), Costa Coffee (3,400+ locations), and
McCafe (1,300+ locations). Despite the ubiquity of these coffee shop chains, there are many
single owner or local small chain shops that are thriving, especially thanks to the growing “buy
local” movement. Coffee shops not only provide a good cup of specialty coffee but often a
place to socialize or work as well. Jane hopes her students can capitalize on these trends!
7
Overview
Jane studied various locations and found a good potential storefront on Main Street, not far
from the business school and on the downtown pedestrian mall. There are a number of retail
establishments nearby such as restaurants, clothing shops, as well as service businesses.
The retail space available contains 1,000 sq. ft. with glass frontage on Main Street and 2nd
Street, providing good visibility for pedestrian foot traffic (see layout). The space is next door to
R.C. Fox Women’s Clothing, an independent retailer catering to more upscale buyers. Across
the street is a trendy restaurant, Salamanca, which is primarily a dinner destination. Next to the
restaurant is Readerwise Booksellers, an independent bookstore which has been in business
over 20 years.
Rent is $24 per square foot per year, or $24,000 total for the year. A deposit equal to one
month’s rent must be paid in advance, and monthly rent of $2,000 is due on the first day of
each month. In addition to paying rent, the lessee (your company) will also be responsible for
paying utilities—water and electricity. These are estimated at approximately $500/month
8
based on historical usage of the restaurant that had previously occupied the location but may
vary based on hours open and traffic. A $500 deposit is required for utilities.
Jane expects the coffee shop to be a success because of the good location downtown near
retailers and the business school. For instance, businesspeople might stop by on their way to
work or for a meeting place; students could go between classes and at night; and local residents
would find the shop a great place to meet friends or relax while they are downtown shopping.
She expects long-term demand to be primarily a function of the quality of the experience—
atmosphere, length of wait, friendliness of the staff, etc.—and the price charged for the coffee.
The students have some sales information on a specialty drink shop that recently closed
because the owner moved to another area. Though not a perfect comparison and incomplete,
Jane believes this information will be helpful to the students when trying to calculate the
necessary operational capacity for the shop. However, these values are from a more
established business, and demand will certainly be different based on pricing, advertising, and
quality of the experience in the coffee shop.
Pat’s Coffee and Chocolate: Weekly Demand (Cups Ordered)
Week Starting
Jan 1st
Jan 8th
Jan 15th
Jan 22nd
Daily (M–F)
1000
1150
1070
1045
Saturday
750
720
780
950
Sunday
550
510
530
690
Price
$3.50
$3.50
$3.50
$3.50
Jane also suggested to the students that the shop could stimulate additional demand through
advertising and by offering special promotional deals. She has arranged for a team of
information technology students to create a website for the business as a course project, and
online and radio advertising can be used to drive traffic to the site.
In addition, the local weekly circular has a weekly poll on many of the local businesses including
two awards given to specialty drink shops. Jane knows the importance of such awards for wordof-mouth and creating a “buzz” around a business. Jane wants to be sure her students are
aiming to win one of these two awards:
•
•
Best in town specialty drink—ambiance,
Best in town specialty drink—satisfaction.
Jane knows that the easy—and fun—part of running a business is creating the concept and
setting up everything. However, she also knows that most retail shop success, especially for
service oriented shops, is made “in the trenches”—the day-to-day running of the business. Will
her students hire enough quality staff to serve the customers in a friendly and timely manner?
Will they have enough supplies and inventory so they don’t run out of what customers want?
Will they be able to handle the rushes before class and work? It sounds easy enough, but her
students will likely need a cadre of part-time college students to work at the shop. Keeping
9
them organized, attentive, and happy working there won’t be simple. Customer satisfaction is
an important measure for capturing the experience that visitors have at the coffee shop. Long
lines and impatient employees will surely have an impact on this measure.
Finally, the financials should add up over the course of the
semester. Jane expects more expenditures relative to revenues in
the early weeks, but as the weeks progress, she expects the cafe to
become profitable. Students should keep a careful eye on their
checkbook and cash balance. Eventually, daily receipts will need to
cover the expenses such as rent, utilities, wages, advertising, and
product costs (cost of goods sold). It will be a tall order but one
Jane believes will be a great learning experience.
10
Start-up Decisions
To start your business, you will need to decide on a name for your cafe, how to furnish it, and
what equipment to buy for producing your product.
The name you choose should reflect the vision you have for your cafe and differentiate your
product from your competitors’.
Jane found some used tables and chairs at a local thrift and antique shop for $2,000. You can
purchase these or select from a variety of new boutique sets of tables and chairs. The new
furniture costs $4,000. Both used and new furniture options will provide sufficient seating for
the shop.
Your team will also need to purchase new equipment for producing your product. Jane found a
new basic 2-cup espresso maker for $3,000, or you can purchase a 4-cup model that is
potentially 30% faster for $6,000. There was already a counter, sink, and enough room in the
storage area for coffee beans, cups, and other items necessary to run the business.
Model
Duo
Capacity
2-cup
Auto-Four
4-cup
Equipment Options
Speed
Basic
Price
$3,000
Up to 30% faster
$6,000
The furniture and equipment you purchase at start-up may affect the operation and perception
of your cafe. Make your selections carefully, as you may not have the opportunity to make
changes later. The cost of the furniture and equipment will come out of your checking account
before you open on January 1st and will be depreciated over five years.
11
Default Used Furniture (Costs $2,000)
Used
New Furniture Options (Each Costs $4,000)
Modern
Country
Green
Elegant
Weekly Decisions
Management
Managers
Each store starts with two full-time managers to cover Monday through Friday. The first
management decision is what to pay your managers. One manager must always be on site from
one hour before the shop opens until one hour after the shop closes. You are guaranteed to
always have two managers, but their effectiveness (productivity) will depend upon the wages
you pay them and how well you manage the server staff. If you decide to open on weekends, a
third manager may be needed—depending on the total hours your cafe is open. Managers are
salaried employees that work a minimum of 40 hours a week and you must pay the same salary
to all managers.
Servers
Managers cannot do all the work in the shop; you will need to hire staff to help serve
customers. Each server is part-time and works 10 hours per week. In addition to the number of
servers, you will need to set their wages. Wage rates should be competitive with other shops in
the simulation. Pay your servers too little, and you might not attract the best employees while
those you do hire may be more likely to change jobs. Workers like to be busy, but not stressed
out, so be sure to hire an appropriate number of servers to meet demand.
Marketing
Pricing
Coffee typically comes in three sizes: small, medium, and large. You start out offering mediumsize cups and may be able offer additional sizes as the simulation progresses. Every week you
will need to set a price for each size. Prices must be set such that the difference between sizes
ranges from 20¢ to $1.00, and larger sizes must have higher prices. Jane has also set a minimum
of $1.00 per cup and a maximum of $6.00 per cup. Be careful about increasing prices as it may
frustrate and disappoint customers, but it’s better to have a price that works than one that
doesn’t cover your fixed costs.
Advertising and Promotion
Students may choose to advertise online or on one of the local radio stations. Radio spots can
be used to promote awareness of the cafe. Online advertising includes listings on the web,
search engine optimization, as well as banner and mobile ads. Special promotions—one for 50¢
off a cup of coffee, the other a 2-for-1 coupon—may be run simultaneously with the online ads.
13
Creative Design
These options allow you to use your more creative side. Your instructor may ask you to design a
logo, advertisement, and coffee cup for your cafe. Logo and ad images may be created in a
design program of your choice; saved in GIF, JPG, or PNG format; and dropped into the BizCafe
program.
Operations
Shop Hours
Students set the days and times the store will be open for business. The shop may open
between 7 and 10 a.m. and close between 8 and 11 p.m. The hours Monday through Friday
must all be the same. In addition, if your instructor allows, you will be able to open the store on
the weekends and set those hours as well. Employees set-up for an hour before the cafe opens
and clean-up for an hour after the cafe closes.
Coffee Purchase
Coffee is ordered weekly in bulk, and you must specify the number of pounds to order. You
must also choose coffee quality: good quality, high quality, or organic. Small cups use 1 shot of
espresso, medium use 2 shots, and large cups use 3 shots. It is estimated that each shot of
espresso requires approximately 7 grams of coffee, or about 1/64 of a pound—but you may
want to allow a bit extra in case your servers spill some. Thus, a large size would use
approximately 3/64 of a pound of coffee. Fresh coffee grounds are discarded immediately after
use. Any coffee left at the end of the week is discarded for quality and freshness reasons. If you
run short, local purchases are made at a higher cost than when ordering in bulk.
Cup Purchase
Cups with a printed logo can be ordered in bulk on a weekly basis. Any unused cups will be kept
in inventory until they are needed. If you don’t have enough logo cups, standard cups from a
local vendor are available but at a slightly higher cost and without logos.
Special Decision
Incidents
If your instructor selects this option, some weeks you may have an “incident,” which you will
need to address. An incident is like a mini-case. Your team will need to discuss the issue
presented and enter an appropriate response. Any costs associated with an incident will
automatically appear in your checkbook just like any other expense.
14
Measuring Performance
The success of your coffee shop will depend on the quality of your
decisions in relation to the environment and in relation to each other.
For example, when you are making pricing decisions, have you
considered the impact a change has on other functional areas of your
business such as staffing and product purchases? What impact does it
have on demand for your product and net income? As the manager of
a small coffee shop, you must make sure that all functional areas of your business are in line
with your overall objectives and that all of your decisions are integrated—working toward
producing the desired results.
There are a number of reports under the COMPANY menu that you can use to track
performance as you operate your business. The Dashboard to provides an overview of your
cafe’s performance on various measures. Tiles colored in green show improvement on the
metric. You may also see your cafe’s rank within the Collegetown market (industry). The
Dashboard also highlights happenings in the simulation for your industry and cafe.
Another essential tool is the Checkbook, used to monitor cash flow. Payments for rent, utilities,
wages, advertising, product purchases, and interest are automatically made at the appropriate
times during the month. Daily cash receipts from sales are taken to the bank’s night deposit and
added to your balance the following morning—except Sunday. You can track your current cash
balance at any time by reviewing the checkbook. The change in balance for the week will give
you an idea of whether your sales receipts are sufficient to cover expenses. Keep in mind that
some weeks will see more cash going out than others due to payments made once a month,
such as rent, utilities, interest, and payroll taxes. Using the Cash Budget Analysis can help you
anticipate these payments. If cash from the loan provided by Jane runs out, you may be eligible
for an additional small business loan if you provide sufficient rationale to your lenders.
For a detailed analysis of sales, view the Daily Receipts report. It shows the daily capacity, or
the maximum number of cups you could have sold based on your equipment and staff; the
actual number of cups sold; and the average price of the coffee sold (including promotions and
different cup sizes). Comparing cups served to capacity is one way to measure how busy your
staff was for a given day. If you served at capacity, it probably means that your servers were
always busy and some customers may have left due to the long lines.
The Weekly Purchases report, located under the DECISIONS menu, provides information about
the coffee and cups used in the past week. Check this report before ordering cups as you may
have enough in stock (inventory) to meet demand for the coming week. Unlike cups, coffee is
perishable and any coffee not used during the week will be discarded at the end of the week. If
15
you do not order enough coffee or cups to meet demand, a local source will be used to fulfill
orders, though at a higher cost than purchasing materials ahead of time.
You will need more than weekly reports to ensure that you are making good business decisions.
Fortunately, the university found a retired accountant who has offered to create a monthly
income statement, balance sheet, and cash flow statement for you. The Income Statement
shows revenues and expenses on an accrual rather than cash basis, so items are expensed in
the period they are used, rather than when they are purchased. For example, each month
shows a depreciation expense for the equipment you bought at start-up, and cups are
expensed as they are used, rather than when they are purchased.
The Balance Sheet shows your firm’s assets, liabilities, and equity. It “balances” because assets
must equal the sum of liabilities and equity. Examples of assets are cash, rent and utility
deposits, inventory, and equipment. Liabilities include taxes payable and loans. Cumulative
profits will appear under equity on the balance sheet. Unlike the income statement, which
shows results over a specified period, the balance sheet is a snapshot of your business at a
point in time.
The Cash Flow Statement (optional) shows the changes in your cafe’s cash position over the
month. The statement begins with net income from the income statement, then adjusts for
any differences in cash flow from operations to calculate net cash from operations. Then any
adjustments due to investment activities and financing activities are made to arrive at the net
increase or decrease in cash for the month.
In addition to viewing reports for your business, you will want to look at what is happening in
the local market. Under the MARKET menu you will find important market and customer
information. The Local Labor report provides the averages for manager and staff wages,
average turnover rate (which tells you about how often the staff at local businesses is quitting),
the area’s minimum wage, and the number of employees for the other coffee shops in the area.
The Customer Survey shows customer satisfaction with your cafe, an important measure of
your performance. As the simulation progresses, the marketing research firm that surveys
satisfaction may provide additional information depending on your decisions. The Industry
Menus option shows the menus for all your competitors so you may compare competitor
prices, coffee quality, and cafe hours with your own. Finally, under CREATIVE, Industry
Branding is where you can view your competitors’ logos, ads, cup design and menus once they
have been designed.
16
Next Steps
Jane Valdez is confident you will be successful in managing the coffee shop. While the fixed
costs associated with running the shop are high, she is sure there is sufficient demand in the
local market for your team to generate enough revenue within the next two months to have
positive cash flow. Your experience in BizCafe will have wide application for business
management:
•
•
•
•
Make a good plan.
Coordinate your management, marketing, and operations decisions.
Analyze results.
Make adjustments.
Remember to enter start-up decisions.
Best of luck in running your cafe!
BIZCAFE
Business Essentials
18
Why study business? To start with, all of us interact with businesses every day. Many of us will
spend much of our lives working at a business. As consumers of products and services, we
decide on a daily basis whether to purchase products and services and which particular ones to
choose. Some of us may decide to study business because it is a fascinating and dynamic
activity that offers us good career opportunities. Others may study business because it helps us
better understand how the economy operates and how our actions and decisions may affect
those around us.
No matter what your particular reason for choosing to study business, you will find that
businesses share many common traits. These traits are common whether the business is small
or large, for-profit or non-profit, or provides a product or service. Businesses need to consider
what they want to accomplish (objectives), whom they serve (markets and other stakeholders),
and how to create and deliver value for these markets and stakeholders. Within this general
framework there are many variations, but keep these simple ideas in mind as you further
explore topics in business.
BizCafe is an opportunity to explore business through the use of a dynamic computer
simulation. In the simulation you will open and manage a coffee shop in a university town for
up to 16 weeks. During this exploration you will learn about different aspects of running a
business at a fundamental level and gain insights into questions such as:
•
•
•
•
Whom should I hire? What should I pay them?
What price should I charge? How do people find out about me?
What should I purchase? What equipment do I need?
How do I keep track of money – my revenues and expenses?
Using business terminology, we might translate these questions into the different functional
areas of a business at a fundamental level as follows:
•
•
•
•
Management = Whom should I hire? What should I pay them?
Marketing = What price should I charge? How do people find out about me?
Operations = What should I purchase? What equipment do I need?
Accounting = How do I keep track of money – my revenues and expenses?
In no way do the questions reflect the full range of issues in each of these functional areas, but
they do represent a good place to start, and that is the purpose of BizCafe—to allow you to
experience some of the issues in running a business before your paycheck depends on it!
Before we go into more detail on these functional areas, we should talk about general
organizational approaches used in companies. For instance, in a traditional functional
organization, all of these functional managers would typically report to a President or CEO of
the company. Thus, there would be a human resource manager (or Vice President), a marketing
manager, an operations manager, etc. all of whom would report to the President of the
company. However, there are alternatives to this approach, such as organizing by product or
19
service, or by geographic area, for example. With BizCafe, we will focus on the more traditional
functional approach, but realize that one of the most important decisions for a company is
deciding how best to be organized.
The remainder of this section provides a brief description of each of these different functional
areas of running a business. Your textbook and instructor will likely provide much more detail
and examples, but for purposes of BizCafe, this general introduction to each of these basic
functional areas will provide a helpful framework.
20
Management
Although management could encompass running the entire business, in the context of BizCafe
as well as many business courses, management often refers to the narrower definition of
human resource management, or managing people. However, even with this narrower
definition, management is one of the most challenging, complex, and important areas of
running a business.
Let’s consider some of the key areas that (human resource) management encompasses. These
include, but are not limited to, job analysis, recruitment and selection, compensation and
benefits, training, and employee motivation and morale. There are many other important
aspects to management, but these are common to almost all organizations, large or small. Let’s
take a few moments to better define each of these in a broad sense.
First, within the organizational structure, someone must define both what general roles are
necessary within the company as well as the specific tasks to be done by the employee in that
role. Generally, this would be considered job analysis and would result in a series of job
descriptions and job specifications. Once these are determined, the company will also need to
understand how many employees will need to be provided in order to perform these functions.
The expected level of work that needs to be done should drive the overall staffing level;
however, determining that expected level of work is not a simple matter. Typically, a manager
would look at expected sales and estimate the support necessary for that level of sales based
on historical data or industry norms. It is important to remember that service quality and
profitability objectives should also play a role in determining appropriate staffing levels.
Once the jobs and staffing levels have been decided, the next issue for management is how to
recruit and select the best employees for the jobs. Recruiting would include on-campus
recruiting, internet sites, newspaper ads, job fairs, and television advertising; it would also
include developing supporting materials, such as brochures, and scheduling on-site visits.
Selection would encompass all the different ways of matching the best candidates for the jobs.
This would include, for example, candidate testing and interviewing procedures to sift out
which candidates are best qualified for the job as well as who are likely to accept and be
retained.
This brings us to the next aspect of management, which relates to compensation and benefits.
This would include deciding on appropriate salaries for different positions and candidates as
well as choosing different benefit options for your employees. Compensation would also
include incentive compensation and bonuses. All of these decisions will impact your ability to
recruit, motivate, and retain employees.
21
Employees also need training. This is especially important when they start, but training and
education should be part of an on-going process of developing employees to maximize their
potential. Employees are one of a corporation’s most important assets. To not develop their
skills is not only poor motivation for employees but also often a poor investment decision.
Finally, related to training and compensation is motivation and company morale. Training and
compensation are two ways to provide motivation, but obviously there are many other
considerations for how to improve employee job satisfaction and morale. This topic begins to
bring in behavior theory, company culture, managerial styles and leadership, all of which are
topics in their own right. The bottom line is that there are many factors that will impact an
employee’s performance. As a manager, one must take all of these into account to the best of
one’s abilities to bring out the best in an employee as well as meet company objectives. As you
may imagine, it is a daunting task to do well.
In BizCafe, management is simplified to two decisions that represent all the above issues at a
very basic level. The first decision is hiring the right number of servers to keep your cafe
running smoothly and to keep customers and staff satisfied. Second is determining the right
amount to pay your staff (servers and managers) to motivate them and meet your financial
objectives. Though simple, these two decisions will impact the performance of your business.
22
Marketing
Marketing also encompasses a wide range of activities within an organization. At its most
fundamental level, marketing is the process by which a company creates and distributes
something of value to its customers. Let’s break this down into more manageable chunks.
Create
The creative aspect of marketing is what turns ideas into products and services that customers
want. This would basically be the product—or service—development process. It could be
something as simple as creating a new flavor of ice cream or as complex as managing the
release of a new car model. How this process occurs varies considerably. Some companies just
come up with ideas and market them; others follow a very deliberate product development
process. A company must balance financial risks and rewards when deciding on appropriate
product development processes. However, in addition to financial trade-offs, one must also
consider the company culture and management style.
Distribute
Another aspect of marketing focuses on how to best deliver a product or service to a customer.
For instance, could the item be purchased electronically, say on a website? Or does the product
need to be consumed in person—such as in the case of an ice cream cone? Distribution covers
all the issues around where a product or service is purchased and potentially consumed.
Value
Value refers to the relationship between the benefits of a product or service and the cost of
that product or service. The benefits include not only the functionality of the product or service
but also the emotional benefits. For instance, does someone derive more emotional benefit
from wearing a certain brand of clothing vs. another even if they both have the same
functionality? The cost of the product or service is most often associated with the price of it,
but there are other costs to consider as well such as the time it might take to consume or shop
for the product. Pricing is a complex issue as well. For instance, a company might only be able
to set the price to a distributor and not the ultimate price a customer pays for a product
(indirect vs. direct marketing). Consider what influence the company has over the ultimate
price in this situation and how the company can adjust its policies to achieve its goals.
Customers
By definition, a customer is someone who purchases a company’s product or service. But a
company must think about which potential, or target, customers to seek. Who should they
target in their advertising? What would be appealing to this potential customer? Customers are
23
different and a company must take into consideration a potential customer’s needs during the
product development process, their behaviors and preferences when designing promotion and
distribution options, and their likelihood to pay a particular price when deciding on how much
to charge for a product or service. For example, a company that produces women’s running
shoes wouldn’t target high school football players in their advertisements and ask those
football players about possible product improvements!
Often people in marketing refer to the 4 P’s of marketing: Product, Price, Promotion, and Place
(distribution). You will find these concepts sprinkled about in the above paragraphs. These tend
to be the focus of decisions in the marketing area, but remember that marketing is ultimately
about creating something of value for a target customer. Whoever does this best is likely to
have a successful business. Those who don’t provide this value often fail.
In BizCafe, marketing is simplified to two decisions that represent all the above issues at a
very basic level. The first decision is the price to charge for your beverage. How much are
your potential customers willing to spend to experience a cup of your coffee? How will the
price impact demand for your product? How do different price points impact the profitability
of your business? The second decision is how much to spend on advertising and promotion.
How will people learn about your cafe? How can you entice them to buy from your cafe
instead of the one down the street? These choices will also have a great impact on the
success of your business.
24
Operations
In a more traditional product-based business, operations would typically encompass the areas
of manufacturing (capacity and production), quality control, purchasing and materials
management, and storage and distribution of the product to the channel or customer in a
timely manner. This process is often referred to as “supply chain management”—the overall
process beginning with demand forecasting and ending with delivery of product to the
customer. As more of the economy moves toward service-based businesses, we have to expand
our view of what operations means. For instance, what would be considered operations in an
organization such as a university or a hospital? When we think of service operations, the line
between management and operations becomes even fuzzier. At this introductory level, we’ll
focus more on the physical plant—the cafe itself—and purchasing, but realize that operations
management is a vast and increasingly important area of business.
In order to have an effective operation or business, a business must be designed to meet a
certain level of demand. This would include answering the fundamental operations question, “If
our organization expects some level of sales, how will we be able to fulfill it with the quality and
timeliness our customers expect?” Thus, operations management begins with having a good
understanding of expected demand. This is not a simple matter. For instance, marketing may
provide a sales forecast for the next year. That is a good starting point, but how accurate are
those sales forecasts? More importantly, for operations, it may not be the annual demand that
is the issue, but instead, other time segments such as months, days, or even hours. Perhaps the
issue is more peak demand (capacity) such as is the case for a utility company. These are the
types of issues that keep operations managers up at night.
Once demand has been considered, this must be translated into the different operational
aspects necessary to meet demand such as the physical plant and equipment, amounts and
timing of purchases, systems, quality considerations, employees, training, etc. Often, very
complex information systems and statistical processes go into both the planning process and
the day-to-day operations.
25
In BizCafe, operational decisions are simplified to a few basic issues that will give you a
glimpse into the challenges of operations. One set of issues centers on the cafe and
equipment. For instance, what hours will you open? What furniture will you purchase? Which
espresso machine is the appropriate choice? The second set of issues is around demand
forecasting, purchasing, and inventory. Here you will make decisions about how much coffee
to purchase as well as the quality of the coffee. Since coffee is perishable, forecasting
demand as accurately as possible is important, as any unused coffee must be discarded at
the end of the week. In addition, you will decide the appropriate approach for purchasing
cups. Do you order in bulk at a lower price—with the added benefit of a logo printed on the
cup—or purchase them as necessary locally at a slightly higher cost.
26
Accounting
Accounting serves two primary purposes. First, all businesses have certain state, local, and
national reporting obligations. Examples of these would be yearly corporate income tax returns,
as well as state unemployment, Social Security, and Medicare reporting requirements. Without
accounting systems, a business could not accurately fulfill these filing requirements. Second, a
well-designed accounting system also provides a manager with important information about
the state of the business. This information may be in the form of basic financial statements such
as an income statement or balance sheet, or they may be more specific in nature such as
costing, vendor, or customer analysis reports.
Another issue to consider with regard to accounting is whether a system is cash-based or
accrual. Cash-based is probably the easier of the two to understand. Money that is received is
counted or recognized as income or revenue at the time it is deposited. Money that is spent is
counted as an expense when it is spent. An accrual accounting system is somewhat subtler in
nature. In an accrual system, the idea is to recognize revenues and expenses when they are
used. For instance, if a sale is made, but payment is delayed by 90 days, the sale is still
recognized at the time of the sale rather than when payment is received. On the expense side,
issues such as depreciation come into play. Depreciation, or expensing a purchase over time, is
used for assets such as computers or equipment that have a useful life of more than one year.
For example, a computer might cost $1,000, but the expense is spread over five years—$200
per year—because it is likely to be used for approximately five years.
In BizCafe, accounting is captured in four reports. One is your checkbook. This represents your
cash-based accounting system. You start out with cash in the bank from a loan. More cash
comes in when coffee is sold. Cash goes out when items are purchased or when employees
are paid. You may look at your checkbook at any time, and it gives you an up-to-date balance
of how much you have in your account, how much money was deposited, and how much was
spent. In addition to your checkbook, you also have an accountant who prepares an income
statement, balance sheet, and cash flow statement monthly for your cafe. Thus, at the end of
each month, you will be able to see at a glance your revenues and expenses, the balances of
key accounts, and the changes in your cafe’s cash position. Though simple, these views of
your financial health will provide you with a great introduction as to why accounting is such
an important tool for measuring the performance of a company.
27
Planning and Integration
All of these functional decisions and processes will take place in the simulation. How well your
business operates will be determined by the quality of these decisions in relation to the
environment (market, competition) and in relation to each other (integration). The overall
planning and integration process has two basic steps: (1) analyzing the situation and (2)
choosing a course of action. This process is much more detailed and complex than the two
simple steps, but if you remember that everything you are doing in business planning is part of
one of these two steps, you should be better able to work through this process.
Analyze the Situation
As a business manager, your primary focus when analyzing the situation is to gather
information to help you identify opportunities that will help your company be successful. The
purpose of this information is to help you make better decisions as a manager. For instance,
what information would be helpful to have when deciding about the price to charge? You might
want to know how much it costs you to make what you sell (cost of goods sold), how much your
competitors charge, and how customers respond to different prices. All of these would go into
your decision process leading us to point number two, choosing a course of action.
Choosing a Course of Action
To make a good decision, three circumstances must be present. First, as discussed above, one
needs to have good information regarding the decision. Second, one must have an objective.
With an objective or goal in mind, one can think about how the decision would likely impact the
ability to achieve the objective. Third, the person making the decision must be able to
understand the information, accept the objective, and be able to discern the likely impacts of
different decisions on possible outcomes. This is in no way a simple task. Typically, the person
making the decision will not have perfect or complete information, but a decision still must be
made. So a decision-maker must also learn how to be comfortable choosing a course of action
in the imperfect world of reality while constantly looking for ways to make better decisions.
Integration
Finally, a general manager must think about integration of decisions. If we go back to our
pricing decision, one element we left out was the likely impact of a change in price on the other
functional areas. For instance, if you decided to lower the price by 20%, what impact would that
have on demand? On your operations? On your net income? The general manager must make
sure that all of these functional decisions are in line with the company’s overall objectives and
that all of the decisions are integrated.
BIZCAFE
Appendix
30
Using BizCafe in a Group
If you are using BizCafe in a classroom setting, you will likely be asked by your instructor to
work in groups. Each group will pool its skills and resources to manage collectively the
management, marketing, and operations roles. Thus, the specific decisions your group will
make depend on the responsibilities you are assigned.
Group work is the way business is most often conducted today. It can be rewarding and
frustrating. It is, therefore, critical that you learn how to make every group experience a
success.
One of the most frequent complaints with group work is the amount of time wasted in trying to
organize and make decisions. There are also complaints that individual members are not
“pulling their weight.” To reduce these problems, your group should answer the following
questions in your first meeting:
•
•
•
•
•
•
•
When, where, and how often should we meet?
How should we efficiently and effectively conduct our meetings?
Should we choose a general manager? What authority should this person have?
How should we divide the tasks among group members?
How do we resolve issues and make final decisions?
How do we encourage and maintain a high quality of contribution?
How will we deal with personal conflicts among group members?
Over time the group should assess whether it is functioning efficiently and effectively. The
group may have to reorganize to best meet the current needs of the business as your product
portfolio changes, new competitive situations arise, and more information becomes available.
31
Glossary
Term
Accounting
Accrual Accounting
System
Ambiance
Balance Sheet
Break-Even Analysis
Capacity
Cash-Based Accounting
System
Checkbook
Compensation
Competition
Cost of Goods
Customers
Customer Analysis
Report
Customer Satisfaction
Definition
The way in which a business keeps track of and provides important
information about its financial state and fulfills its state, local and
national reporting obligations.
An accounting system wherein money in the form of revenues and
expenses is counted when it is used, not necessarily when
payment is made or received. A sale is recognized at the time of
the sale, even if payment comes later.
The mood, character, quality, tone, and atmosphere of an
environment.
A snapshot of your organization at a particular point in time,
containing the current balance in your asset, liabilities and
shareholder equity accounts.
A way to calculate either the price you need to charge at a
particular level of sales—or, conversely, the number of units you
need to sell at a particular price—to cover fixed costs.
The estimation of how many cups of coffee your shop can
handle—or could have handled—serving on a given day based on
your equipment and staff.
In this system money that is received is counted or recognized as
income or revenue at the time it is deposited. Money that is spent
is counted as an expense when it is spent.
This represents your cash-based accounting system. It is a record
of all receipts and disbursements for the current week.
Something given or received as an equivalent for services or debt.
Nearby businesses of a similar nature producing a similar product,
which may attract customers that would otherwise support your
business.
How much it costs to make the product, or create the service, that
is being sold.
Someone who purchases a company’s product or service.
An evaluation of who the customers are and what they are looking
for in regard to a particular product.
The extent to which a business is fulfilling the needs and desires of
its customers.
32
Term
Depreciation
Disbursements
Distribution
Expenditures
Expenses
Fixed Costs
Forecasting
Human Resources
Management
Income Statement
Inventory
Job Description
Management
Manufacturing
Capacity
Materials Management
Organic
Operations
Definition
A decrease or loss in value because of age, wear, or market
conditions. For accounting purposes, there are different methods
by and time periods over which the value of an asset is
depreciated. For example, an asset worth $1,000 might be
depreciated over 5 years using “straight-line” depreciation. In this
situation, each year $200 of the asset’s value would be
depreciated.
Payments or expenses costing the business money.
Where a product or service is purchased and everything that leads
up to, and helps achieve, this action.
All of the expenses of a company; what was actually spent in a
fiscal period.
Costs and charges that you must pay.
Costs that remain unchanged with volume sold.
Predictions of spending or costs based on calculations in advance.
The management of people, which includes: job analysis,
recruitment and selection, compensation and benefits, training,
and employee motivation and morale.
A report of a firm’s overall results for a period, including a
breakdown of major expenditures and a calculated value of the
net income.
The stock and materials on hand at a business, including raw
materials, finished goods, etc. Inventory would be listed as an
asset on the balance sheet of the company.
A written description of what a job entails, including what tasks
and skills are expected of an employee.
In BizCafe, management often refers specifically to the aspect of
managing people—such as hiring, setting wages, etc. However,
more generally, management often refers to the managing of
people, products, materials, and any other number of items.
The maximum amount that can be produced or manufactured in a
particular period of time.
Managing the materials in a business, from raw materials to the
finished product.
Grown using fertilizers and pesticides that are strictly of animal or
vegetable origin, thereby creating a product without the use of
drugs, hormones, or synthetic chemicals
The areas of manufacturing, quality control, purchasing and
materials management, and storage and distribution of the
product to the channel or customer in a timely manner.
33
Term
Place
Price
Product
Product (or Service)
Development Process
Promotion
Purchasing
Quality Control
Receipts
Recruitment
Revenues
Stakeholders
Value
Definition
Refers to distribution, or how products get to the stores so that it
is convenient for us to buy.
Involves all factors that affect how much is paid for a product. The
amount of money a person is charged for a product or service.
The bundle of attributes that we buy to satisfy our needs and
wants, be it an item, a service, or intellectual property.
The process by which a business takes products from ideas to
products that are sold. Usually this process is well defined and
used repeatedly.
Involves all activities that companies use to communicate with
us—from advertising to sales people—and the activities
companies use to get us to buy from them. In BizCafe, a coupon
for a special deal such as $1 off and the advertising associated
with it is an example of a promotional activity.
Ordering supplies and other raw materials.
The process by which a business ensures that its products are
meeting standards.
Revenues, or money coming into the business.
The process of discovering employees and drawing them to your
business to work.
A particular item or source of income.
Those who have invested in a business and have an interest in
profits. In BizCafe, this would include Jane Valdez.
The relationship between the benefits of a product or service and
the cost of that product or service. These include functionality and
emotional benefits.
BizCafe Strategy by Tej Partap Singh
Step by step to win BizCafe:
Starting week:

Set your price High between (5.99-4.99), when the price is high, you would be
able to cover your expenses and as well make a profit. Your break-even point wouldn’t
be big, you’re not gonna need to sell lots of cups and as well. The other business who
started with a low charger for the coffee were suffering at the end of the game and
couldn’t make lots of profit even though they were selling more cups than we did. If you
end up raising the prices, you would lose your customer. “if you set your price low, you
set yourself to fail.” – Dan Lok.
o
DON’T SET YOUR COFFEE PRICE LOW

Open max hours ours was from 7Am-11Am

Choice Organic Coffee

Don’t order a lot of coffee in the starting week, order around (20-25 lb)

Buy the insurance which would cost you $500, because later on in the game,
you will have an accident and the insurance would cover for it. If you don’t have
insurance, you would end up paying $4000 to fix the accident.

For Marketing: do Gen.aware online and 10/day radio, in other word Maximize
your marketing.

Hire around 20 employees and 2 managers. Again check in your instruction
about the employees part. Pay them above min.
o
for example: our min was $10.25/hour. So we paid them $12.70 for
employees and we kept increasing it until 14 later but we started at $12.70 and for the
manager, we paid them $800, we kept rising it until $930. Make sure you have the
most employees in the business. you can always check that under Market-> Local
Labour
Week 1:

Special decision: we decided to go for a suggestion box which cost us $0. we
thought that was enough for us.

for a coffee purchaser, you can purchase about 5-10lbs higher than what you
sold

keep everything else the same
Week 2:

Special decision: buy the staff training going on one for $1200

for a coffee purchaser, you can purchase about 5-10lbs higher than what you
sold or see if you sold more then buy more. make sure to use your coffee calculator.
Keep doing this every week.

keep everything else the same as well.
Week 3:

Special decision: buy the oven, it will bring lots of money later for you and it will
help you to make more revenue

For weekends: open Maximum hours and hire a 3rd manager. Also, you should
one more employee for the oven.

keep everything else the same as well.
Week 4:
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BizCafe Strategy by Tej Partap Singh

Special decision: Do not advertise your coffee place as a fair-trade. The
customers will find out and they would stop coming again to your place which means
losing revenue.

Also, you can cut down for the Radio to 5spots/day. That’s when you can start
cutting down a little bit about marketing to reduce the expenses. but keep the online
advertising.

keep everything else the same as well.
Week 5:

Special decision: Do not change your theme. The customers will be happy to
find out that you didn’t change your theme.

Also, you can cut down for the Radio to 5spots/day. That’s when you can start
cutting down a little bit about marketing to reduce the expenses. but keep the online
advertising.

keep everything else the same as well.
Week 6:

Special decision: Choice the Radio show offer, simply because the person who
is going to come has a lot of followers and it’s like advertising on the radio but for
cheaper price.

Also, you can cut down for the Radio to 5spots/day. That’s when you can start
cutting down a little bit about marketing to reduce the expenses. but keep the online
advertising.

You can buy 20,000 cups for small and 10,000 cups for large.

The Price for the small $4.59-$5.59 and the Large $5.94-$6.94

keep everything else the same as well.
Week 7:

Special decision: we chose to fire the employee who was causing issues with
the rest of the team. I believe that was the best decision but the result of that was the
employee threatened to sue us, there wasn’t actually a case for it but I’m just letting you
know what happened. You can do the same or give notice to her/him. The most
important thing is that you listen to your other employees and consider their feeling so
they don’t leave.

Also, you can cut down for the Radio to 5spots/day. That’s when you can start
cutting down a little bit about marketing to reduce the expenses. but keep the online
advertising.

keep everything else the same as well.
Week 8:

Special decision: buy the coffee roaster. that will make your coffee the best and
more customers would come in.

Also, you can cut down for the Radio to 5spots/day. That’s when you can start
cutting down a little bit about marketing to reduce the expenses. but keep the online
advertising.

keep everything else the same as well.
Week 9:

Special decision: We dealt with sexual harassment towards one of our
employees. Ask the customer to leave the store because that would make your
employees feel safe and would stay in your business.
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BizCafe Strategy by Tej Partap Singh

Also, you can cut down on Radio (no more Radio advertising) and just do
$0.50 off for online. That’s when you can start cutting down a little bit about marketing
to reduce the expenses.

keep everything else the same as well.
Week 10:

Special decision: DO NOT EXPAND. Expand doesn’t mean it will increase your
revenue or selling cups. It would just add more expenses for you and you might end up
losing the first place. DO NOT DO IT.

Also, you can cut down on Radio (no more Radio advertising) and just do
$0.50 off for online. That’s when you can start cutting down a little bit about marketing
to reduce the expenses.

keep everything else the same as well.
Week 11:

Special decision: We faced an irate customer. The only thing you have to do is
to apologize for the customer and offer complimentary coffee.

Also, you can cut down on Radio (no more Radio advertising) and just do
$0.50 off for online. That’s when you can start cutting down a little bit about marketing
to reduce the expenses.

keep everything else the same as well.
Week 12:

Special decision: NO SPECIAL DECISION. 🙂

Also, you can cut down on Radio (no more Radio advertising) and just do
$0.50 off for online. That’s when you can start cutting down a little bit about marketing
to reduce the expenses.

keep everything else the same as well.
This brings us to our conclusion, make sure to do the special decision every week, your
employees and 90% at least of your customers are happy, being listened to, and
satisfied with the service and wages. Marketing is a big player in this game, make sure
your keep change your Marketing plan as I advised you above. The price of the cup is a
very big factor as well if you start with too low, you find a hard time raising your coffee
prices later and your break-even point will be so high. you would have to sell a lot of
coffee cups to start making a profit.
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Week 1
Beginning decision
Modern Furniture: $4000
High Capacity coffee maker $6000
Management decision
2 managers for $650 a week
Hired 10 servers for $9 an hour
Marketing decision
Price $4 a cup
Newspaper ($200 a day) General awareness ($1400 a week)
Radio ($40) 5 per day
Operation decision
Mon-Fri 7-10
Weekly purchase Coffee 35 lbs organic, 5000 medium cups
5000 Medium cups
Special
No insurance
Week 1 Results
Revenue $4,232.00
Employee efficiency 11.5
Cup Sales 1058
Weekly Purchase 3.4%
Customer Satisfaction 49.9%
Revenue per employee $352.67
Gross Margin 92.0%
Capacity Utilization 76.7%
Wait time satisfaction 94.3%
Weekly net income -$3273.22
Weekly change in cash -$3078.00

You have a special decision to make on getting more customer feedback.

Coffee purchase was just right.

You have 3942 medium logo cups in inventory.

College town café satisfaction increased from 35% to 59.9%
Decision
Purchased 40lbs of coffee, organic
Staffing the same
Marketing the same
Put survey forms on the table $50
Receipt
Monday cups served 235 $940
Tuesday cups served 220 $880
Wednesday cups served 190 $760
Thursday cups served 209 $836
Friday cups served 204 $816
Total cups served 1058 for $4232
Decision Rationale
For my beginning decision, I decided to purchase modern furniture as well as the high
capacity coffee maker. Although I knew it had a higher price, I believed that it would increase
customer satisfaction by looking more appealing to the customers as well as being more efficient
in making more coffee. To make this decision I used strategic planning which is “the process of
analyzing competitive opportunities and threats, as well as the strengths and weaknesses of the
organization, and then determining how to position the organization to compete effectively in its
environment” (Chapter 1, lesson 1.3). I knew by making these decisions, customers would be
satisfied with the environment of my company. My college town café satisfaction increased from
35% to 59.9%.
I chose to hire two managers and pay them $650 a week. A manager “related to both a
position in an organization as well as the nature of different roles and responsibilities” (Chapter
1, lesson 1.2). These managers will help to manage the 10 other staff members that I hired for $9
an hour. I chose this price because it was slightly higher than our other coffee store competitor.
Therefore, our members will be satisfied with the price they will be getting payed. I decided to
not make any other changes to my staff and kept their wages the same was well as the number of
members. The employee efficiency was 11.5.
I purchased 35lbs of organic coffee which ended up being the perfect amount of coffee.
Then I purchased 5000 medium cups and chose the price of cups to be $4. For the week, on
Monday 235 cups were served, Tuesday 220 cups were served, Wednesday 190 cups were
served, Thursday 209 cups were served, and Friday 204 cups were served. Making a total of
1058 cups being served with a total of $4232. With ending with a well revenue, I figured my
customers would come back for more coffee in another week so I then made the decision to
purchase 40lbs of coffee. I also had left over medium cups so I did not need to purchase anymore
since I will still be able to use them. I now have 3942 medium cups left in inventory. I want to
succeed in my company and be able to manage a rivalry with our competition. I must be away
for the Five-Forces framework which “refers to the degree of competition between existing
firms…consisting of numerous competitors, slow industry growth, high fixed costs, lack of
differentiation, high strategic stakes and high exit barriers” (Chapter 5, lesion 5.5). With being in
a competitive industry, I need to focus on how to make sure my costs of coffee will compare to
our competitors.
For advertisement, I purchase an online and radio ad for $1400 each. This way customers
will hear and see about our business. I decided to keep these the same for the following week to
continue to get people to hear about our business in hope to gain more customers. I also
purchased a survey form for $50 for customers to fill out at the table. This way we can receive
feedback from our customers. Advertisement is important because it provides a vision statement
for the company which is “a future-oriented declaration of the organizations purpose and
aspirations.” Chapter 4, lesson 4.1). It’s important for me to make my company known and
advertisement is able to allow people to see what I am providing as well as show them my
purpose for selling coffee.
I strive to make improvements each week in my business.
Week 2 results
Revenue $5348.00
Employee Efficiency 15.9
Cup sales 1,337
Customer Satisfaction 65.4%
Revenue per employee $445.67
Weekly Net income $(291.33)
Weekly change in cash $379.00
Wait time satisfaction 98.5%
Gross Margin 92.1%
Weekly Purchase Variance 6.5%
Capacity Utilization 70.2%
Industry News:
– Now that café owners have some experience with work week, shops may extend their
hours to weekends. Please see your staffing decisions for this new option.
– College town server turnover decreased from 12.4% to 12.1%.
– College town café satisfaction increased from 59.9% to 67.7%
Company News:
– You have the opportunity to train your staff.
– The survey results are now available. Check the customer survey report.
– Had to make emergency purchase of 3lbs of coffee.
– You have 2605 medium logo cups in inventory.
– Think carefully about weekend hours, and don’t forget to adjust staff accordingly.
Management decision
– Hire 1 manager
– Hire 3 servers
Marketing Decision
Change cup of coffee from $4.00 to $3.90
Operation Decision
– Changed shop hours to Mon-Fri 7-10, Sat 7-11, Sun 7-10
– Purchase 65 pounds organic coffee, 5000 cups (2605 were left)
Special
– Purchased the ongoing training program for $1200
Customer Survey
– Price 3/5
– Ambiance 3/5
– Service 4/5
– Comments/suggestions: short lines, great coffee, bad ambiance, price is okay. Love the
coffee. Ambiance is icky. Okay service, too expensive. Ambiance is okay. Good coffee.
Nice ambiance. Nice paintings. Great ambiance. Great price. Great service.
Local Average
– Average manager wage $625 per week
– Average server wage $8.88 an hour
– Average turnover rate 12.1% per month
– Minimum wage $7.25 per hour
Decision Rationale
For this week, I decided to extend my company hours into the weekend. My shop
operates now from 7-11 on Saturday and 7-10 on Sunday. By extending the hours to the
weekend, I had to hire more staff. I added three more staff members and one more manager. By
adding these worker’s, it allows my shop to not over work people. My shop was given the option
for my staff to take a training program so I decided to purchase the ongoing training for $1200. I
think it is important for my staff to be trained properly for it will help with the satisfactory of our
shop.
Since I was short 3lbs of coffee last week, I decided to purchase 65 pounds of organic
coffee this week. It is important for me to strategically plan out how much coffee I need to buy in
order for me to not be short again. Since we sold 1337 cups of coffee last week and there is 2605
cups left in inventory, I decided to make another purchase of 5000 cups in order to not run short.
An issue would be caused if there was a shortage in coffee cups.
The customer surveys came out and I received some great comments/suggestions and
wanted to take peoples suggestions into consideration. Some people complained that the price of
coffee was too high so I changed it from $4 to $3.90 to see how that adjustment would be. I may
look to lower it in the future depending on how well our customer return rate may be. Our
customer satisfaction rate increased from 59.9% to 67.7%.
Week 3 Results
Revenue $7043.40
Employee Efficiency 17.1
Cup Sales 1806
–
Customer Satisfaction 74.3%
Revenue per employee $440.21
Gross Margin 91.2%
Weekly Purchase Variance 12.5%
Weekly Net Income $(936.47)
Weekly change in cash $(1643.93)
Capacity Utilization 66.1%
Wait time Satisfaction 93.9%
Industry News
– College town server turn over decreased from 12.1% to 10.4%
– College town café satisfaction increased from 67.7% to 72.2%
Company News
– See special decision about selling baked goods in your café
– The employees appreciate the training program. The subscription has been posted to
“prepaid expense” and will be expensed over the year.
– A lightning strike caused electrical fire, which damaged your espresso machine. You
needed to pay $1000 in repairs.
– 7 pounds of coffee went to waste
– You have 5799 medium logo cups in inventory
Operation Decision
Changed Sunday hours open to 8-8
Weekly Purchase 65 pounds organic
Market Decision
Kept coffee price at $3.90
Management decision
Hired 2 servers
Special
Purchased the oven costs $4000+.50 per unit
Customer Survey
Price 3/5
Ambiance 3/5
Service 3/5
Comments: Price is okay. Bad ambiance! Happy!
~~~> 🙂 Great price! Too expensive! Great coffee! Short lines! Ambiance is icky! Okay service.
Good coffee. Ambiance is okay. Long lines. Nice paintings! Lines are okay. Nice ambiance! Gre
at ambiance! Great service! Love the coffee!
Local Labor
–
Manager wages—$625 a week
Average staff wages—$8.88 an hour
Average turnover rate—10.4%
Minimum wage—$7.25
Decision Rationale
Due to waste in 7 pounds of coffee, I decided to not change the amount of coffee
purchased. I kept it at 65 pounds in the hope to be able to sell those amounts for this week. This
affected my weekly purchase variance and put it at 12.5%. I also have 5799 medium cups
leftover in inventory. I also decided to change our Sunday hours to 8-8 because Sundays are
typically not as busy of days.
My espresso machine was struck by lightning which cost me $1000 in damage repairs.
This negatively impacted my waste time satisfaction (93.9%) causing my customers to have to
wait longer to receive their coffee. Overall my customers were still satisfied and my satisfaction
rate increased from 67.7% to 72.2%.
I was given the option to sell baked goods at the café, so I decided it would be best to
purchase our own oven for it will allow us to give the customers their goods at a reasonable time.
This oven will attract more customers and add to the ambiance of our café. Since I made this
decision, I had to hire two more staff members in order to continue to run our café efficiently.
The customer survey comments had typically the same ideas. People seemed to love our
coffee but complain about the long lines. I know the issue with the lines is due to the damage of
our espresso machine but that is an issue that will be fixed for this week. Many people thought
the price was okay so for this week, I decided to lower it to $3.85 in the hope to have more
people purchase our coffee.
Week 4 Results
Revenue $9306.50
Cup Sales 2090
Weekly Purchase Variance 5.8%
Customer Satisfaction 80.4%
Revenue per employee $517.03
Weekly net income $1982.90
Capacity Utilization 80.9%
Employee Efficiency 14.4
Gross Margin 89.5%
Weekly Change In Cash $(3,709)
Wait time Satisfaction 86.2%
–
–
Industry News
College town server turnover increased from 10.4% to 13.2%
College town café satisfaction increased from 72.2% to 75.2%
Company News
You have the option of making some green upgrades to your café.
Your over has been installed and the aroma of the baked goods is wonderful. Revenues
from sales of baked goods are shown on the daily receipts report.
Had to make an emergency purchase of 4lbs of coffee
You have 3709 medium logo cups in inventory.
Management Decision
Hire 5 servers
Customer Survey
Price 3/5
Ambiance 5/5
Service 2/5
o Comments: Great price, good coffee, tables could be cleaner, long lines, price is
okay, coffee is okay, nice paintings, love the coffee, great ambiance, nice
ambiance, too expensive.
Operations Decision
– purchased 78lbs organic coffee
Special Decision
Replace light bulbs $100
Replace toilets $600
Marketing Decision
Kept price the same
Change radio ads to 2 times
Local average
Managers wage $625
Servers wage $8.88
Turnover rate 13.2%
–
Minimum wage $7.25
Decision Analysis
This week I purchased 78 pounds of coffee. I did this because the past week I had to
make an emergency purchase of 4 pounds of coffee. I have a remaining amount of 3790 medium
coffee cups left.
My customers complained about our lines being too long so I hired 5 more servers in
hopes to make our lines shorter. The price seems to be overall good so I did not make any
changes to it. People have also loved our new oven for food.
I was given the decision to make conserve energy at my shop so I decided to replace the
light bulbs as well as the toilets. I feel like people will like this new improvement and it may
increase our buyers.
Week 5 Results
Employee Efficiency 15.4%
Customer satisfaction 81.3%
Weekly change in cash $993.60
Wait time satisfaction 93.6%
Revenue $9617.85
Cups Sales 2161
Gross Margin 88.9%
Weekly purchase variance 12.8%
Revenue per $418.17
Weekly net income $(471.72)
Capacity utilization 61.1%
–
Industry News
College town server turnover decreased from 13.2% to 11.9%
College town café satisfaction increased from 75.2% to 75.7%
Company News
You have completed your first full month of operation
You have a problem with one of your servers. See in special decisions
Customers noticed the changed in the bulbs and toilets. The rebate on toilets should be
coming in a month or so.
9lbs of coffee went to waste
You have 1548 medium logo cups in inventory
Weekly Purchase
Purchased 73 pounds of organic
Purchased 5000 medium cups
Special Decision
–
–
A shift manager comes to you with a problem, explaining that one employee is disrupting
the staffing schedule by repeatedly not showing up on time. Several employees have had
to cover her shift times and one employee worked a double shift today because she didn’t
show up at all. Your manager is concerned that employee morale will decline if
something isn’t done about it. How will you solve this problem?
o Fire the employee.
Marketing
Change price to $3.75
Customer Survey
–
Price 3/5
Ambiance 5/5
Service 4/5
Comments: okay service, awesome service, great coffee, great ambiance, long lines, great
service, nice ambiance, love the coffee, short lines, the price is okay, too expensive, lines
are okay, love the coffee.
Local Average
–
Managers $625/ week
Server $8.88/ hour
Turnover rate 11.9%/ month
Minimum wage $7.25/hour
Decision rationale
For this week, my company seemed to make a small increase in revenue compared to last
weeks. It was $9306.50 whereas, this week was $9617.85. This slight increase was due to 9
pounds of coffee being wasted. If I make a correct amount of coffee purchase, money would not
have gone to waste. There was also a slight increase in customer satisfaction which was 75.2% to
75.7%. My goal for next week is to make gain a higher revenue and larger increase in customer
satisfaction.
I made the decision to purchase 73 pounds of organic coffee in order to not waste any for
this upcoming week. Wasting 9 pounds was too much and I hope for it to not happen again. I
needed to purchase 5000 more medium cups since there was only 1548 left in inventory.
Our customer survey is a huge help to gain feedback about our company. We received 3/5
stars on price, 5/5 stars on ambiance, and 4/5 stars for service. Due to a lower rating in price, I
decided to lower to coffee price from $3.85 to $3.75. Hopefully, people will be please with the
price.
One of my employees was not showing up to work which made other employees have to
take his shift or work doubles. I find this behavior unacceptable because it has happened on
many occasions. Therefore, I made the decision to fire this employee.
Week 6 results
Employee Efficiency 16.5
Cup Sales 2,2343
Weekly Purchase Variance 1.7%
Customer Satisfaction 82.9%
Weekly Net Income $2207.63
Weekly Change in Cash $2897.00
Revenue $9785.25
Revenue per employee $425.45
Gross margin 89.2%
Wait time satisfaction 94.1%
Capacity Utilization 59.0%
Industry News
–
Coffee cup vendors in the area have made small and large branded cups available
College town server turnover decreased from 11.9% to 11.8%
College town satisfaction increased from 75.7% to 76.5%
Company News
–
You have a special decision to make about acquiring a coffee roaster
Most of the servers are relieved that you fired the problem employee, but she is now
threatening a lawsuit for wrongful termination.
Coffee purchase was just right
4305 medium logo cups in inventory
Server quit these week
–
Remember to set prices for the new cup sizes
Market
–
Small coffee price $2.95
Medium coffee price $3.65
Large coffee price $4.15
Staffing & hours
–
Hired 3 servers
Changed Monday-Friday to 7am-11pm
o Sunday to 7am to 8pm
Staff wage raised to $9.25
Manager wage raised to $650.25
Weekly Purchase
–
Purchased 5000 small and large cups
4305 medium cups left in inventory
Purchased 78 lbs. of organic coffee
Special Decision
You have been researching coffee roasters and found one selling for $2,400.If
you purchase the coffee roaster to roast coffee beans in your cafe, your
coffee purchase price per pound will remain the same, but the aroma of
roasting coffee will improve the ambience of your cafe and is apt to attract
more customers. Should you invest in the coffee roaster?
–
I chose not to purchase the coffee roaster
Customer survey
–
Price 3/5
Ambiance 5/5
Service 4/5
Comments: Great coffee, love the coffee, too expensive, nice ambiance, okay service,
lines are okay, short lines, great ambiance, great service, price is okay, great price, nice
paintings
Local Labor
–
Managers wages $625/ week
Servers wage $8/ hour
Turnover rate 11.8% month
Minimum wage $7.25
Decision Rationale
This week I was given the opportunity to add small and large cups to the menu. I
purchased 5000 small and large cups with 4305 medium cups left over. The prices are $2.95 for
small, $3.65 for medium, and $4.15 for large. Last week my coffee purchase was just right, for
this week, I purchased 78 pounds hoping this amount will sell since I am adding small and large
to the menu.
Last week I fired an employee and had one quit. Therefore, I decided to hire 3 more
employees. I also extended Mon-Fri hours to 7am-11pm and Sunday from 7am-8pm. I hope
extending our hours will bring in more customers. The employees also deserved a raise to I
raised the servers and managers $0.25 putting them at $9.25 and $650.25.
I was given the opportunity to purchase a coffee roaster for $2500, but I declined this
offer. I did this because the ambiance of my coffee shop is already 5/5 so I felt this buy could be
a waste of money. The service seems to be well and is a 4/5. The price is a 3/5 but hopefully this
will increase due to the new changes in prices.
Week 7 Results
Revenue $10,467.70
Employee Efficiency 17.3
Cup Sales 2,588
Weekly net income $2,851.63
Weekly change in cash $3,174.62
Customer Satisfaction 83.5%
Gross Margin 88.9%
Capacity Utilization 59.8%
Wait time satisfaction 93.8%
Weekly purchase variance 7.4%
Revenue per employee $418.71
Industry News
–
College town hourly survey pay increased 1.0%
College town server turnover decreased 11.8% to 10.7%
College town café satisfaction increased from 76.5% to 76.8%
Company News
–
Opportunity to provide internet access in your café. See special decisions
5 lbs. of coffee went to waste
You have 3890 small, 3300 medium, 4527 large cups in inventory
Server quit this week
Customer Survey
–
Price 3/5
Ambiance 5/5
Service 4/5
Comments: okay service, long lines, good coffee, happy, tables could be cleaner, fast,
love the coffee, great service, great coffee, short lines, too expensive, price is okay,
convenient hours, nice ambiance.
Local Labor
–
Average managers wage $625.12/week
Average server wages $9.00/hour
Average turnover rate 10.7%/month
Minimum wage $7.25/hour
Special Decision
There are several ways you could give internet access to your customers. You could provide free
low-bandwidth access to your customers and to others within range at a cost of $300; only a
portion of your customers’ devices would be able to connect before the connection speeds
noticeably decrease. Another option is to provide free high-speed access for a cost of $500,
which could accommodate all customers at reasonable speed. The last option is to provide fast
wireless access that gives you control over usage. This costs $1,000 and allows you to restrict
use only to those who pay for internet service at a rate of $2 per hour. Alternatively, you may
choose to not provide internet access to your customers at all.
– I purchased free high-speed access.
Weekly purchase
–
76 pounds of coffee purchased.
Staffing/hours
–
Hired another server
Marketing
–
Lowered large coffee from $4.15 to $3.95
Decision Rationale
This week our café was given the option to add Wi-Fi for our customers. I decided to
purchase Wi-Fi for $500 which is high speed access and will be free to the customers. I think WiFi will bring in more customers and increase our revenue. I chose to allow the Wi-Fi to be free
because it will encourage guests to purchase a coffee.
The customers rated our price 3/5, ambiance 5/5, and service 4/5. Overall good comments
were left such as great service, good coffee, and short lines. I decided to lower the price of large
coffee cups from $4.15 to $3.95. Hopefully this will encourage more people to purchase a large.
In inventory, there are 3890 small, 3300 medium, 4527 large cups left over. I ended up wasting 5
pounds of coffee so for this week I purchased 76 pounds.
The local labor of average server wage raised from $8 to $9 so I decided to give my
servers a raise to $10 a hour. A server quit, so I decided to hire someone else.
Week 8 Results
Revenue $11,868.55
Employee Efficiency 18.1
Cup Sales 2,965
Customer Satisfaction 86.9%
Revenue per employee $474.74
Weekly net income $3,651.05
Capacity Utilization 65.4%
Gross Margin 89.1%
Weekly purchase variance 9.3%
Weekly change in cash $1,039.55
Wait time satisfaction 92.1%
Industry News
–
College town hourly server pay increased 4.0%
College town server turnover decreased from 10.7% to 8.1%
College town café satisfaction increased from 76.8% to 78.4%
Company News
–
–
I have the opportunity to expand my business. Special decision.
High speed internet access is now available in your café. Customers enjoy the free, fast
internet access, but your internet service provider has warned you that your connection is
being used for downloading pirated content. Some customers complain that internet users
are taking up seats.
Had to make emergency purchase of 8 lb. of coffee
2629 small, 2166 medium, 3956 large cups in inventory.
Weekly Purchase
–
Purchased 90 pounds
Customer surgery
–
Price 3/5
Ambiance 5/5
Service 4.5
Comments: too expensive, great service, love the coffee, great ambiance, great price, long
lines, lines are okay, price is okay, service is okay.
Local Labor
–
Avg. manager wage $625.12/week
Avg. server wage $9.38/hour
Avg. turnover rate 8.1%/month
Minimum wage $7.25/ hour
Staffing and hours
–
Hired 2 more servers
Extended Sunday hours to 9pm
Marketing
–
Small coffee price $2.85, medium $3.55, large $3.85
o Lowered price by 10 cents.
Special decision
–
Did not extend café because there is a risk in not gaining more customers/money
Decision rationale
This week I had a purchase of 90 pounds of organic coffee. Last week I had to make an
emergency purchase of 8 pounds. I lowered each coffee price by 10 cents because some
customers still aren’t fully satisfied with the prices.
I was given the option to extend the coffee shop but I declined this offer. I feel that
extending our shop will be a big risk and potential way to lose a lot of money. I feel that with the
space we have right now out shop is doing fine. With that being said, I did hire 2 more servers to
shorten the lines as well as extended Sunday’s hours to close at 9pm.
Week 9 Results
Employee Efficiency 18.8
Weekly purchase variance 4.8%
Customer satisfaction 90.6%
Weekly change in cash $3,418.68
Revenue $11,899.55
Cup Sales 3,053
Gross Margin 08.7%
Wait time satisfaction 94.0%
Revenue per employee $440.72
Weekly net income $1,730.27
Capacity utilization 60.1%
Industry news
–
College town server turnover increased from 8.1% to 9.4%
College town café satisfaction increased from 78.4% to 80.3%
Company news
–
You have completed your second full month of operation
The space next door was rented out to a new boutique
The rebate on the new toilers has come in and been deposited to the checking account
Coffee purchase was just right
You have 1321 small, 991, medium, and 3387 large cups in inventory
Local Labor
–
Average managers wage $625.12/week
Average server wages $9.38/hour
Average turnover rate 9.4%/month
Minimum wage $7.25/ hour
Customer survey
–
Price 4/5
Ambiance 5/5
Service 5/5
Comments: great price, great coffee, lines are okay, nice ambiance, lines are okay, wow
fast, great ambiance, always open, awesome service
Weekly purchase
–
Sold 86lb. wasted 4lb.
Purchased 5,000 small and medium cups
Purchased 92 pounds of coffee
Marketing
–
Removed radio station advertisement, kept online general awareness
Decision rationale
This week, customer satisfaction increased from 78.4% to 80.3%. This was great for out
company’s which resulted in great customer feedback. Price received a 4/5, ambiance 5/5, and
service 5/5.
Since I made a perfect purchase of coffee from last week, I decided to purchase 92
pounds this week. Small and medium coffee cups were running low so I made a purchase of
5,000 for each of those sizes.
I felt this our company did no longer need to advertise our business on the radio anymore
so we now only advertise through online. I made this choice because we have been operating for
2 months and felt that online advertisement was only necessary. Hopefully, this will save money
for our company.
1
Week 1 Strategic Analysis: Foundations and Future Directions for Coffee Cove
Weekly Purchases
Coffee: 21 lb. Organic, $147.00
Medium Cups: 5,000 ($0.09/cup)
Rationale: The purchase of 21 lbs of organic coffee also bears connotations of quality and
tends to go well with consumers who maintain an organic diet. Medium cups for 5,000
indicate anticipation of high traffic, and would prefer to have a huge supply so that they don’t
have to restock regularly.
Staffing & Hours
Managers Employed: 2
Weekly Salary: $630.00 per manager
Servers Employed: 14
Hourly Wage: $8.75
Total Wages: $2,485.00
Taxes: $186.38
Total Staffing Cost: $2,671.38
Cafe Hours: Mon – Fri, 7 a.m. to 8 p.m.
Rationale: Hiring two managers guarantees the correct supervision and functional operation,
most importantly for a newly entering corporation. Employing fourteen servers at an hourly
rate of $8. 75 assists in the running of the services and management of the clients to ensure
that they are satisfied. Specific opening hours are from 7 a.m. to 8 p.m. to target the morning
2
and evening customers and ensure all customer groups are served to the maximum while
maximizing revenue prospects.
Marketing
Product Pricing: Medium Coffee $5.40
Advertising and Promotion:
Online ($200/day) – General Awareness, $1,400.00
Radio ($40/spot) – 10 spots/day, $2,800.00
Rationale: Pricing a cup of coffee at a medium level is $5. Forty leverages the product to a
prestige level based on the usage of quality organic coffee. Using promotional campaigns
such as internet ads and radio to flood the market with the product’s branding efforts seeks to
create awareness of the product within the shortest time (Quesenberry, 2020) This is
paramount for customer acquisition or to carve out a market share in whichever market one is
operating in.
Special Decision
Incident: Customer Survey
Choice: Set out a suggestion box. (Cost: $0)
Rationale: Deciding to place a suggestion box is cheaper as a conduit for securing customer
feedback. This proved helpful because the DM and the business could address areas of
improvement without the expenditure of further resources.
3
Dashboard Insights
Revenue: $2,154.60
Employee Efficiency: 10.2
Cup Sales: 399
Weekly Purchase Variance: 64.5%
Customer Satisfaction: 37.0%
Revenue per Employee: $134.66
Gross Margin: 91.5%
Weekly Net Income: $(6,899.69)
Weekly Change in Cash: $(7,192.53)
Capacity Utilization: 24.6%
Wait Time Satisfaction: 100.0%
Analysis:
Revenue and Cup Sales: The business generated $2,154. Sixty in terms of their revenues and
399 cups sold, which points to a good starting point. However, the overall customer
satisfaction level is low, only 37. 0%, which means that there can be work on the quality of
the delivered service or product.
Employee Efficiency: At 10.2, this reflects effective use of labor, but the high staffing cost
may need optimization.
Gross Margin: A high gross margin of 91.5% is positive, showing good control over direct
costs.
Net Income: The significant loss of $(6,899.69) and cash change of $(7,192.53) highlight
initial investment costs and operating expenses. This is typical for new businesses but needs
monitoring to ensure long-term viability.
4
Capacity Utilization: At 24.6%, there’s substantial unused capacity, suggesting that the
business can handle more customers without additional investment.
Wait Time Satisfaction: A perfect score (100%) indicates efficient service despite the high
number of employees.
Summary
For “Coffee Cove,” the decisions in Week 1 are primarily about maintaining a
dominant market position and providing satisfactory service. Organic coffee assortment,
extensive advertisement budget, and numerous employees are the indicators of the fastgrowth path and focus on the customer. Nonetheless, initially having low revenues and low
capacity utilization rates reveals the areas that require tactical changes – namely, increasing
the effectiveness of marketing processes, optimizing staffing, and satisfying customers to turn
them into loyal customers and brand advocates.
References
Quesenberry, K. A. (2020). Social media strategy: Marketing, advertising, and public
relations in the consumer revolution. Rowman & Littlefield Publishers.