Table of Contents
This company is facing significant challenges from competition which is has sustained its level of attacks mainly from the fronts of price. As such, this company needs to device alternative competitive fonts. One strong proponent is online business which needs three main elements, online platforms (a website and a mobile app) and delivery infrastructure, and finally delivery employees. All these elements have been factored in the budget. The promotional strategies of the business need to be expanded to ensure that sales volumes are increased in the face of reducing prices to ensure that profit margins of the business remain at sustainable levels.
|16-17 Objective||Actual Result @ 6 months||Comment|
|Revenue @$5,500,000||Revenue @ $4,950,000 or 10% reduction||Same number of units sold but at a lesser price|
|Profit @ 16%||Profit@ 0% or Breakeven||Lower sell price but same quantity & costs|
|BBQ price @ $600/unit||BBQ Avg Price @$540/unit||Cost remained the same as 2015/16 but the customer is now more price sensitive.|
|Customer SatisfactionNew Build – Customer Service = 90% essential||Qtr Survey, 100% now rate it as “Essential”||Greater competition means ALL customers place more importance on customer service.|
|Customer SatisfactionNew Build – Australian Made = 80% important||Qtr Survey. Only 10% say it is “Important”||Australian made is no longer of major importance.|
|Social Media not considered important||Qtr Survey indicates young families – new builds – social media important||Social media is becoming a greater form of entertainment & communication|
|Distribution – online not a major avenue||Qtr Survey indicates, this is an important channel.||E-Commerce is an important channel|
Brew Ha Ha’s product element is of unwavering quality. The quality parameters is what has given the company the impetus to achieve its sales volume targets. Customers were responsive to the different coffee packs that were offered for take away by those willing to brew their coffee in their premises. However, competition has offered the same product to clients effectively offering a perfect ‘substitute’. To retain the competitiveness of the coffee beans, price had to be reviewed downwards, not because of reducing quality, but because of increasing competition. The foods and beverages offered in the store, coupled with the interior of the store proved to be sufficient magnets for clientele. On the flipside, just as above, competition reigned in on this market and forced product prices downwards. Through maintaining a strong social media brand, the community learnt about the products and was willing to sample. To ensure that our service in the store is raised to standard, our employees maintained a superior customer service which is a critical element in pushing the products to the consumers.
Brew Ha Ha’s products are of impeccable quality but competition is also catching up. As such, competitors are offering customers with an alternative without sacrificing quality. Initially, food prices were planned to range between $A4.50 to $A17 while beverage prices were to range from $A3.80 to $A5.80 for an affogato. For an ice coffee/chocolate, the price was projected to rise slightly to $A6.50. In reality, however, market forces prompted the company to reduce its prices in a bid to maintain the sales volumes which were projected. This essentially means that revenue targets were not met despite having met the sales volume target because of the price differentials in products. In future, the store does not aim to engage in price wars with competitors since price wars are destructive. Other strategies will be employed to retain customers.
To meet the sales volume target, the store was positioned at the right spot in a high pedestrian traffic. As such, the physical place element of the store is working for the advantage of the store. The online store needs more changes. Brew Ha Ha’s does not have to limit itself to Facebook only. The store will need a responsive and dynamic website and a mobile app where customers can order and review products. The propensity of doing deliveries to customers in nearby offices, who order online, should be piloted in a bid to shore up revenues.
The promotional tactics of the business need to be improved to ensure that revenues increase through increasing sales volumes. To do this, a social media consultancy company should be engaged. Also mainstream media and use of other companies and institutions where clientele can be found need to be explored. Learning institutions, for instance, universities have a rich possibility of being of value to the company.
The people factor in the store is great. Employees are well averse with their duties through continued training. More means of motivating employees are needed to ensure that they have renewed energy and determination of meeting customer needs.
|Budget Item||Original Budget $||New Budget $||Comments on Changes|
|Sales||$11,000,000||13,000,000||Reducing prices are eating on revenue. Increase sales volumes to compensate for reducing prices|
|Investment||$1,567,000||$2,000,000||Do a more responsive and dynamic website and a mobile app. Test if it is possible to deliver to clients who order online.|
|COGs||$5,890,000||$6,000,000||A slight increase in sales volumes|
|Wages||$2,567,890||$2,667,890||Add a few employees to do deliveries|
|Consultancy||$50,000||$60,000||Add social media consultancy|
|Marketing||$800,000||$1,000,000||Increase marketing to increase sales and dominance|
|Capital Exp||$120,000||$200,000||Acquire door to door delivery equipment|
|Net Profit||$1,792,286||$3,725,286||A result of increased investment in capital capabilities, online presence, and new business model (delivery)|
|Performance||Monitoring Activity||Performance Benchmark||Timing/Frequency||Responsibility|
|Customer Service||Survey at each customer transaction||100% with a rating above 4||Every quarter||Marketing Manager & ALL Customer Service|
|Sales volume||Monitor sales records daily||Sales volumes must increase by at least 5% every month||Monthly||Sales manager/marketing manager/staff interacting with customers|
|Employee performance||Monitor employee professional performance through customer satisfaction||Employees must retain or improve their relations performance||Monthly||Human resource manager|
|Online Reach||Number of clicks in the website, actual online sales, and likes in social media||There should be an upward trajectory in online indicators||Monthly||Marketing manager|
|Product quality||Random product tests||Quality must pass the recommended threshold. Customer complaints must be at the bare minimum||Random||Quality assurance maanger|
|Physical Safety||Evaluation of occupation safety and hazards||The score of an evaluation by an independent professional should remain static or improve||Bi-annual||General Manager|
This review of past performance has revealed significant areas that need immediate changes. The market seems poised for a price war which according to Dufwenberg and Gneezy (2000) is detrimental to the success of any of the market players. As such, innovative ways to keep the company performing according to expectation is the only way out. As such, the company is considering investing in delivery services which will take advantage of the growing popularity of online shopping. To do this, the company needs to have in its possession a well-structured website that is tailored for online commerce. A mobile app that customers can use on their handheld devices needs to be put in place to ensure that there is convenience. The company needs to maintain an increasing pace of employee training to ensure that there is a continued increase in customer satisfaction, which is an element that determines customer loyalty in the industry. Promotional tactics need to be improved to ensure that there is an increase in the catchment area for the company.
Name: Title: Date:
Dufwenberg, M., & Gneezy, U. (2000). Price competition and market concentration: an experimental study. international Journal of industrial Organization, 18(1), 7-22.
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