Cafe 183 is a coffee shop that specialises in the DIY model of business. Consumers are sold coffee and allowed to participate in its making process, with emphasis on the latte art. The paper seeks to evaluate the business model, target market and the potential financial and economic risk or constraints. The research is primarily done through desktop research and content analysis. Various primary sources and secondary sources have been analysed for information about the business model, similar models, and its location in, Canada, Vancouver. The DIY business operation model was scarce in Canada, which leaves ample room for the organisation to expand and proceed at it won pace. This lack of competition and room to grow is viewed as a plus in the model. However, consumers can also buy regular coffee, which exposes the business to tow markets segments. The first segment is the traditional coffee market, while the second segment is the DIY market. The two, when combined, expose the business and its operations to a larger audience.
It was found that it needs to have proper connections at the local level in Vancouver for the business to be successful. Such links can boost its star up efforts since it would be riding on an infrastructure that has already been established. However, some assumptions had to be made in the decision-making process. Such beliefs often introduce risk since they are aspects of the business that are not entirely known. For example, Vancouver’s partnerships have not been confirmed, but the budget has accounted for the assumption that they exist and what impact they would have if this exists. This introduces the risk of such partnerships being absent and the business suffering due to the unforeseen circumstances. Cafe 183 is expected to break even and turn a profit in the third year or the beginning of the fourth year. At this point, it is taken that the business would have had enough time to carry out advertising campaigns and gotten references from the various consumers who would have had the experience. Canada’s cultural background has been studied, and other aspects of the nation relevant to the business have been analysed. This is because the act that for the company to be launched must be established in an environment whose variables have been accounted for to enhance the business’s compatibility and the surrounding society.
Cafe 183 Global Venture
In this case, the business, Cafe 183, is a coffee shop that offers coffee to consumers and provides a service of teaching the consumers how to make their latte art. From this perspective, the business has two aspects; it gives a good and service, this is purposely designed to attract a broader range of consumers and add a unique component to the business which would act as a niche. Usually, coffee shops specialise in offering drinks, coffee, and other fast foods, if available, as a complimentary service. However, in such cases, the potential of the workers is not utilised to its full scale. This business venture explores this niche by exploiting the leadership side of the coffee shop employees. It places the power to teach into the hands of the employees, and in the long run, it empowers the customer. Consumers are often attracted to a business that prioritises their needs and seeks to empower them rather than enhance them.
The potential benefit of this model to the consumer is the fact that it empowers the final customer. It helps the customer get past the days of secret recipes and enables an experience that nurtures a close relationship between the staff and the consumers. If consumers and employees agree and talk freely, then misunderstandings are reduced, and the business image improves in the local and international markets. This business approach subscribes to the disruptive innovation modelling, which innovations are introduced to the market, and they offer more for less. This means that the consumer gets more for the services provided than they perceive to have paid for.
The international market targeted for this innovation in Canada. According to the Coffee Association of Canada (2018), coffee is the most consumed beverage, outcompeting tap water (Coffee Association of Canada, 2018). It is a $6.2 billion industry growing and provides job opportunities for over 170, 000 Canadians in various capacities. In the cafes and shops section, over 160, 000 employees are engaged, over 5000 in the manufacturing and roasting processes and an additional 5000 people are involved in the independent coffee shops and franchises. This is a demonstration of the vastness of the coffee market in the country.
With a market with several coffee players from businesses to private establishments, position the products and service of Cafe 183 must be done with specificity and the specific market segment targeted. The message that would facilitate the positioning would be designed for the target audience, positioned where the audience is most likely to see it. The message would be explicit in bringing out the unique rather than the obvious. For example, in Cafe 183, the message centres around the do it yourself services offered and how they tie in with the coffee experience. This is important so that anyone who views the product and service can immediately note the distinction between the DIY model and the regular model in which consumers are simply that.
The coffee would be sold and distributed at physical locations with coffee shops. There would be dedicated waiters, cashiers, and cooks. However, the DIY section would be done on a rotational program where the waiters would teach the customers they serve. Cafe 183 considers this part of the job description, and thus the employees would not feel overburdened. In this paper, the issues introduced shall be discussed and elaborated upon and complemented by new concepts that demonstrate the feasibility of the business in the foreign marketplace.
Café 183 is an international company that is planning on investing in the coffee business. The company is planning on integrating a global form of marketing. The country that the industry is planning on investing in Vancouver, Canada. The community tends to have a high number of people who happen to belong to different cultures. With a high purchasing power, the town’s increased population will play a significant role in ensuring that it manages to achieve its set goals in Vancouver’s coffee market. The market size of the coffee market in Vancouver happens to be massive, which is among the factors that will enable the business to thrive in the Vancouver coffee market. The company’s large market size is primarily attributed to the high population of residents present in Vancouver. The coffee shop will thrive in Vancouver as the market has an increased number of residents who enjoy taking beverages. Vancouver is suitable to invest in, as it has indicated a potential growth attributed to the high population, which has shown a possible increase in the unforeseeable future. However, the market is not stable due to the changing habits of the coffee consumers present in Vancouver. The area’s potential is also attributed to the fact that there are many coffee shops in the region, which is a positive sign of the success of the coffee business in the area. The new venture plan will be easy to penetrate the community as the organisation is planning on locating the coffee shop in an easily accessible region that will be easy for potential customers to find the coffee shop. The company will also have a competitive advantage due to the price strategy that the company is planning on applying to the coffee products that are set to be offered by Café 183 shop.
Information about Coffee Market in Vancouver
There is a technology present in the Vancouver coffee market that affects the operations of the Café 183 company significantly. The Vancouver coffee market tends to have multiple coffee technologies applied by the numerous coffee businesses operating in the market (Wong, 2015). The first technology that has been integrated into the coffee industry in Vancouver is the single server technology. The development of the single server technology is being preferred in the market due to coffee fan integrated into the technology such as personalised grinders and coffee that can take two types of coffee beans and hand pours (Wong, 2015). The other technology that has been integrated into most coffee shops in Vancouver is the coffee making machines which is easy and convenient (Wong, 2015). The coffee making machines are significantly used in the Vancouver market as it enables consumers to enjoy self-service. The other technological information present in the market is the use of a contactless and Near-field communication present as the mode of paying the coffee bills (Lister, 2018). The applied technologies integrate the use of a smartphone that applies through wireless connection radio waves (Lister, 2018). The Vancouver market has integrated computer software that plays a significant role in tracking payments made in the coffee shops.
The machine used explicitly for the coffee production is the Sage, a manual coffee by Blumenthal, the Barista Touch. It has an integrated coffee grinder that can accommodate over 250 grams of coffee and a touch screen which can help select the specific type of coffee such as latte, espresso and cappuccino. For the latte art, the machine that would be relevant is the Ripple. It is a machine that is specifically used to customises the coffee and enhance it. It does not brew the coffee, and therefore, the coffee would first be brewed via the Sage machine and then customised and enriched using the Ripple machine. It uses cartridges that are filled with natural coffee to produce art. It takes less than 10 seconds to output the art onto the coffee, which would save time. It is also flexible as it can print almost anything form text messages to photographs, making it an ideal choice. Finally, to ensure a distinct flavour and retention of the coffee quality, each coffee shop would employ stainless steel ice cubes. They have a special gel inside that keeps the coffee cold without diluting it and lowering the rate.
Size of the Market
The size of the coffee market in Vancouver is large. A survey conducted indicates that Canada has many coffee drinkers, thus telling the large size of the market. The high number of coffee consumers will play a significant role in enabling the company to achieve its goal in the market (Carvalho, Paiva, & Vieira, 2016). The large size of the coffee market will also enable the company to expand its operations to other potential regions with a high number of coffee consumers.
Vancouver has a high population. Population census that was last conducted in 2018 indicated that the area had a population of 631,490 (Wordpopulationreview.com, 2018). The high population also happens to include the people of coffee consumers that are present in Vancouver. The significant population current in Vancouver will play a significant role in evaluating the coffee consumer behaviours and consumers present in the coffee market.
Economic (Including Income Levels)
The information on the Vancouver region’s income levels indicates the income for median income households is $ 77662 across the Metro Vancouver area. The survey also noted that the median income for one individual in the region was $38,449. Vancouver’s population suggests that most people belong to the middle class, thus indicating the high purchasing power present in Vancouver. The high number of people belonging in the middle class is a vivid indication that there is a high purchasing power. The Café 183 business will thrive as multiple numbers of consumers present in the market will acquire the coffee products that are being rendered by the organisation.
Vancouver region is renown across the globe for its nature. The most common language that is spoken in Vancouver is English. The other languages spoken in the area are Cantonese, Farsi, Spanish, English, French, Korean, Punjabi, and Mandarin (Chuck, 2018). The culture of the people of Vancouver is linked to seafood. Most organisations have invested heavily in the restaurant business that offers seafood connected to Vancouver’s culture. Vancouver’s culture also indicates a high number of coffee consumers present, thus showing the high susceptibility rate of Café 183 thriving in the Vancouver market.
Vancouver was first made a metropolitan in 1886 (Chuck, 2018). The city was given the name Vancouver to honour George Vancouver, an English navigator. George Vancouver is believed to have surveyed and explored the region in 1792 (Chuck, 2018). The suggestion to name the part Vancouver was given by William Van Horne, an American and the Canadian Pacific Railway president (Chuck, 2018). However, Vancouver had been inhabited by multiple native Americans when Fort Langley was established as a trading post developed in 1827 by Hudson’s Bay Company.
Cafe 183 is a coffee shop that offers an experience that supersedes the regular coffee shop, business model. Besides providing coffee, the company includes the customer in the production process at a small fee that can comfortably be paid with the coffee they choose to take. This is done so that the business does not sacrifice the regular model over the new model. Instead, Cafe 183 uses the traditional model and builds upon it by adding the concept of integrating the customer at a level beyond mere consumer feedback and customer care. Therefore, a customer who visits the store would take the coffee, and if interested, they would have the option of participating in the making process. If willing, the customer would be allowed to make their cup and drink it as if they were at home. This model brings the house to the business, and this is the main selling point. The only distinction is that the family, in this case, has experts who are willing to guide the whole process and the utensils are taken care of, saving valuable time (Borgogna, Stroh, Hilz, Agarwalla, & Jakovljevic, 2016).
This approach was selected because it inspires consumer confidence since they can see how their meals are prepared. It helps get rid of the myths that are often associated with food cooked by third parties. Such legends take the form of quotes such as “10 things McDonald chefs do not tell you” and “do chefs reuse mugs, how can you know?”. Such myths and statements are hard to prove right or wrong, but they can impact the consumers, subtly or significantly. Therefore, this business model would be cushioned against such myths, whether they come to be proven or not. The consumers who are in a rush and only want a coffee can have the traditional coffee shop experience and move ahead. However, that does not mean they would not benefit from the DIY model. This is because the do it yourself model serves a psychological function as well. If Cafe 183 is willing to let the consumer participate in the coffee-making process, it will depict the business as transparent. In such a case, not every consumer needs to participate, the few who do and the very nature of the concept would market it positively and attract more consumers (Dudin, Kucuri, Fedorova, Dzusova, & Namitulina, 2015).
The resources for Cafe 183 largely stem from financial support from friends and family. Financial resources are essential in the commencement of any business enterprise, and they are the primary resource for Cafe 183. They are sourced from friends and family members. The founders of the business enterprise have friends in Canada, a useful resource that ensures that research and market observation are done first hand. Having local representation is a big step in the setting up of a business in a foreign location. Rather than sending expatriates to Canada, the friends are in charge of securing space and making various purchases pertinent to jumpstart the business.
This saves costs, and the favours done can be repaid in other ways even if not monetary, they may even be free. Another resource that the business has at its disposal is the internet. This is an essential platform for advertising and data collection. Much of the research on Canada’s local market and how it is segmented shall be conducted online. Another resource available for the company is the cheap labour found in Vancouver Canada (Gupta, 2013). This is important because the shops’ goal is not to compete with giants such as Starbucks, which often need highly skilled labour. The strength of Cafe 183 is primarily the DIY session in latte art that it offers to its consumers. Also, since it is not yet a significant venture, there is no pressure to fight for highly skilled labour overqualified for the services offered.
The partnership network of Cafe 183 shall consist of complementary business ventures in Vancouver. For example, the shop’s positioning would benefit from partnering with local burger sellers so that the people who buy the burgers can also have a go at the coffee and learn about the business. Due to the business scale, it is essential to establish local roots before engaging in high markets as a startup. Researchers noted that the most lucrative, but often ignored market section of any population is the one at the bottom of the consumer pyramid. This action is comprised of over 4 billion people and accounts for the largest market group in the world.
Therefore, capturing their attention requires a business which is ready to go local through glocalisation. That is the rationale for the company, in this case, partnering with the local enterprises that offer complementary products such as snacks. Such partnerships also provide the business with an already established infrastructure that is invaluable in the distribution and marketing processes. In return, the firm would help pay the rent for space and build an infrastructure for the partnering business from which they can tap into the coffee market, resulting in a win-win situation.
Cafe 183 would interface with its consumers through various options. There would be a customer service centre. This would handle clarifications, requests, and complaints from the consumers. Also, each coffee shop would have its manager who would address consumer needs, if any. Finally, the internet would be instrumental in the enlightenment process and spread the message about the products. Social media, specifically, such as Twitter, Facebook and Skype shall be available for consumer feedback and free chatting for airing views and sentiments that are important in the improvement of the business model and the services or products offered therein.
The firm would generate revenue through the selling of coffee and the fee that shall be offered for the DIY sessions of latte art. The prices are designed to be small so that they can attract numerous customers. When the numbers grow, they would dramatically increase the small fees to a scale that the business would break even and facilitate future expansion. The lessons’ prices vary between 1-2.5 dollars on top of the cost of the coffee.
Segmentation and Positioning
The business’s target market is the youth in their late years, and the people aged above 35 years (Hilton, 2018). This is because these people form the working class, and they are the ones that have the cash from employment. The other groups, such as young adults, children, and the elderly do not often have disposable income, and they are not in a rush to beat reporting times for jobs. However, once the youth and individuals aged 35 and above are captured, they can now usher in the other groups. For example, a mother who goes to work daily and brews her coffee with latte art would probably come by during the weekend with her children so that they can share in the experience. In the same vein, a son who has seen the service can bring his elderly parents to the shop so that they can make their coffee and enjoy the experience as well.
As much as gender is not used to classify the market, Cafe 183 realises the gender roles in society and would include messages in the positioning and adverting oriented towards the female gender. Therefore, the product promotion efforts would target the groups above, emphasising the female citizens since they are often the ones who are in charge of the kitchen and cooking at home. However, due to the changes in the society, in which males have taken up the mantle to cook, in their homes and their bachelor apartments, the messages shall also include notions that nudge these male individuals to try out the experience.
This is the part of the project that establishes whether it can be realised with the currently available financial resources. This section will present the capital available, estimate future economic performance, and the Pro Forma Income Statement, consolidated for three years. The risk and the potential mitigation measures would be included in this section as well.
Cost of Start-Up
The estimated cost of startup each coffee shop would be approximately $25,000 to $35,000. This cost is arrived at with the assumption that only light advertising would be used. It is also assumed that the legal, political and local environment would stay stable enough to permit the business’s star in a smooth manner. Also, the cost of starting the company assumes that it is a fresh startup that is not in partnership with other local groups. Since the blocks would be built as time goes by, the initial costs of starting the enterprise would likely be similar to a startup that has no solid partnerships. However, subsequent establishments are probably going to be cheaper as since they would benefit from the goodwill created and the robust network that would have been established by then.
Future financial performance is expected to take the form of a steadily rising curve. However, in the first two years, the business is likely to plateau in profits and even make losses because people would not be conversant with it by then. Therefore, consumers would take time to get to know the business and explore its options. This can be attributed to the small advertising budget. However, the sales are expected to pick up during the second year, and the break-even point is likely to be between the middle of the third year and the beginning of the 4th year since the commencement of operations.
The risks associated with the business fall it two categories, inherent risks and external risks (Henisz & Zelner, 2010). The inherent dangers are inevitable and would likely occur due to the very nature of the business and its operations. The external risks are those that may stem from factors beyond the control of the entrepreneur. One of the primary risks associated with the business is that the consumers would reject the business model outright. The entire DIY model assumes that the consumer needs such a service enough to pay for it. However, it is possible that consumers already know how to make latte art. It is also possible that they do not even give it much attention or are not interested in learning how to make it.
There is also the risk that finding local partners would be challenging and unfeasible. Some local businesses may not want to partner with another organisation. They may like to have a full monopoly of their business space and only use it to expand. They may also see the new business as a competitor and thus make it hard to operate in the area.
To reduce these risks, Cafe 183 needs to perform thorough market research and evaluate the feasibility of its ideas in the real market (Hopkinson, 2016). This can be done by using appropriate tools such as surveys, which can be done in person and online. Market research is an invaluable part of any business enterprise, and it can determine whether the firm would succeed or fail, or even whether it would be technically feasible.
To mitigate the risk of low partnerships, it is essential that the business goes on location and finds out the local businesses’ willingness to accept a new enterprise. If they get the enterprise, it should be determined to what extent their terms and conditions are. These aspects may seem obvious, but they are essential since assuming they must be present and fit together can be fatal for the business and its owners (Iverson, 2013).
Cafe 183 is an enterprise with a new idea that is likely to disrupt the coffee market. It is a non-conventional idea that is often seen as impractical due to the fast-food industry’s very nature. Fast foods and coffee are designed to be taken on the go, and a venture that would require a consumer to learn any aspect of the brewing process is considered counterintuitive. However, the DIY model is aware of these issues and realises that people love doing their things. People appreciate being empowered to do small things in their lives. Parents often repair sinks and faucets at their homes and watch the repairmen do the repairs if there is a need for them. This shows that human curiosity can play to the tune of the DIY section of the coffee shop and make it the next disruptive coffee market model. The startup may be rocky and unpleasant, but it is worth it if it manages to take over the coffee market. For the first time in the area of Vancouver, consumers would make their coffee decorations at a fee that is slightly higher than the regular coffee cup but for an experience that is well worth it. This model may not be a hit immediately, but it would slowly pick up as people learn more about it and embrace the idea’s uniqueness. As it evolves and catches on, it is likely to be the next big thing in the market of coffee and the international markets. It is an innovation that empowers the consumer, a business model that scholars encourage in the modern society, and one that is fueled by numerous stories of dissatisfaction in the technology world and food markets.
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Proforma Income Statement for Cafe 183
|Year 1||Year 2||Year 3|
|Coffee cup sales||50000||55000||57000|
|Latte art fees||20000||25000||33000|
|Cost of Sage Machine||500||250||250|
|Cost of Ripple machine for the duration||333||333||333|
|Cell phone expenses||200||180||100|
|Proforma profit before taxes||3000||11800|
|Pro forma taxes||450||900||3540|
|Pro Forma Profit After Taxes||1050||2100||8260|