Company Description:
Agrabah Cafe was founded by a couple of friends who want to create an idea of special cups that will get the customer’s attention. It was founded in 2016 and is located in the USA. Although many coffee shops are existing in the country, Agrabah has decided to come up with different, unique, and creative ideas to capture the large market share by providing the customers with a unique experience of coffee.
The main office of the café is located in France, and due to its high demand, the company has decided to enter the US market. The idea of providing the best coffee to the customers is also one of the fundamental objectives of the business but these business partners have decided to come up with a differentiating idea of providing creative cups to the customers. The café is highly appreciated because of its theme and the differentiating products and services provided by the café.
The Agrabah is established by a partnership or group of friends who have come together to share their ideas and experiences. Also, the Agrabah café is focusing on providing the customers with coffee served in special cups that will make them feel good and special. Also, the café is aimed to integrate new changes in its setup so that the customers will be provided with a relaxing environment and high-quality coffee in specialized cups.
D. Product Services Description:
The Agrabah café is famous for providing special coffee to its customers. The café does not believe in providing just a sipping coffee to its customers, instead, it offers them a relaxing environment so that they can have a higher level of satisfaction and they can get a feeling that they are having something special and fine and they are really paying for the value of the product. The café is not only focusing on products such as the quality and taste of the coffee but it is also focusing on providing the customers with extraordinary services.
From the point of view of providing the customer’s high-end services, the café has taken an initiative to provide coffee in specially customized cups, it’s a simple coffee shop in addition to a creative idea. The cups that customers get their coffee in are special with each cup having a unique design. And can be designed to whatever the customer wants. By providing this service to customers it is adding value to the experience of the customers.
The brewers and the staff members are trained enough to design the cups of coffee according to the demands of the customers. These staff members are so experienced and skilled in their performance that they design the cup within no time by providing the customers a fresh coffee in a limited time. The cups are designed both manually and automatically according to the demands of the customers.
The strategic mission of the café is to create value by providing the customers with differentiated products and services including the high quality and taste of the coffee as well as the specialized cups being designed by the expert designers. The café has developed its strategy for differentiation in the market by focusing on two main objectives.
- High quality of work held by designers who can design special cups for customers.
- The reputation of clean work by employees.
- Providing unique designs according to the demands of the customers so that they can have a sense of specialty.
- Obtain a sustainable competitive advantage in the market through value-added customer service.
F. Strategic Goals:
The Agrabah café has established its business by keeping in view various strategic goals and the company has developed its goals based on its resources and the services being provided to the customers. Some of the strategic goals of the Agrabah Café are as follows
- To expand the business, and establish branches across the world.
- To globally recognize the brand of the coffee and the unique services of the café.
- To create more value and happiness for the customers.
- To be more creative towards the customer orientation.
G. Sustainable Competitive Advantage
As it has been discovered in the earlier section that there is a large number of cafés existing in the market of the United States and it is a major area of concern for the company to obtain a sustainable competitive advantage. The Agrabah café is following various strategies to obtain a sustainable competitive advantage in the coffee market of the USA.
i. satisfaction of the customers
The Agrabah café is more concerned about the high level of customer satisfaction for obtaining a sustainable competitive advantage in the market. The company not only provides products of high quality but also provides additional services so that more satisfaction should be created for customers.
ii. Difficult to Imitate
The café also focuses on the concept that it is hard for the competitor to imitate the strategy of the café and also the customers should remain attracted to the café because no such services are provided by any other café.
iii. Availability of Less Substitute
It is the strategy of the café that it should provide customers with the unique blend of coffee and unique design of its cups so that it is hard to find any substitute of such products and services and customers would prefer the Agrabah café instead of going any other café.
iv. High Value to the Customers
The café is committed to providing products and services of high value to the customers through its quality of coffee, exceptional cups, and the environment where the customers feel special and they visit the café again and again.
H. Situational Analysis
1. SWOT Analysis
I. Strengths
- Requires a low amount of capital or investment.
- High quality of products and services.
- Highly trained and expert staff having the knowledge and experience of making high-quality products and serving customers.
- Highly skilled designers to provide unique designs of cups to the customers.
- Having a competitive advantage of serving customers attractively each time.
- The attractive environment of the café.
- High demand for coffee in the market.
- Having strong relations with suppliers.
- Have an efficient management system.
- A convenient and profitable business venture in the U.S.
- Offering instant ways of services by letting customers place their orders through their mobile application.
- Offering the facility of delivery services to the customers.
ii. Weakness
- Limited resources
- As Agrabah is new in the market, so currently does not have any brand equity in the market.
- Limited resources for advertising and promotions to create brand awareness.
- Strong competition from strong market leaders and competitors in the market.
- Extensive efforts are required to capture the large market share.
- No experience in the coffee retail business.
iii. Opportunities
- An increasing population brings opportunities for new companies to enter the market as the demand increases with the increasing population. United States’ total population is recorded to reach an all-time high of 321.6 million in 2015 (as shown in the graph below) experiencing a change of 323% in the course of the last 50 years (Trading Economics, 2016).
Figure 1: Increasing Population of US adapted from TradingEconomics.com
- The coffee market in the United States is continuously growing and the revenue is expected to reach 32.46 billion U.S. dollars by the end of 2016 (Brizek, 2014).
- Increased sales as the people get aware of the specialty and customization serving overtime.
- National as well as Global Expansion.
- Product line expansion by adding more products and offerings to its menu.
IV. Threats
- The coffee retail industry of the United States is saturated by already many competitors existing in the market and is still increasing over the years as shown in the graph below(Statista, 2015):
Figure 2: Increasing Number of Coffee and Snack shops the US adapted from Statista.com
- The fluctuation in the economic factors may have a strong impact on the profits of the company.
- If the idea of serving customers in a customized way could prove to be successful, then the idea could be immediately copied by the competitors.
2. Competitor’s Analysis
The direct competitors of the company include Starbucks Coffee, whereas all the local coffee cafes in the locality are indirect competitors. The following graph shows that Starbucks is capturing almost twenty-nine percent of the market in the USA, and it makes it difficult for the other coffee brands to capture the market (Statista.com, 2011).
Figure 3: Starbucks Market Share in US market as adapted from Statista.com
3. Points of Difference
The major point of difference between the Agrabah café and the other competitors such as Starbucks is that it is a quite established brand in the market prevailing long ago and it has established its branches in various countries. Whereas Agrabah café is new in the market and it will need time to develop a strong brand image in the minds of the customers. So the main point of difference is as follows
- Starbucks has a strong brand name and brand image in the market.
- The customers will show more loyalty to the brand they are already consuming.
- Starbucks has extensive business operations worldwide (LeTrent, 2010).
I. Market product Focus:
1. Price of Product/ Service and Price Strategy:
The pricing strategy for the Coffee shop in a saturated market where the company faces competition from premium leaders to low-priced suppliers is an extremely complicated task. Therefore, the selected pricing strategy for the products is the market penetration pricing strategy. This strategy involves the company capturing the market by offering its products at comparatively lower prices than its competitors while maintaining the quality. This strategy helps the company to create awareness among the people and drag people to try the product. Initially, this strategy may not bring high profits or may even cause loss to the company, yet it assists in generating sales by attracting customers, generating word of mouth, and attracting a maximum number of people. (Gitman & McDaniel, 2008) Yet, the prices are designed not too low because for any business giving good quality products or services at the right cost while maintaining the right profit margin and at the right time is the key to success.
The below chart shows the main menu of the products that are offered by Agrabah Café along with the prices of their small serving; The prices of the medium and large serving will increase by $ 0.20 and $ 0.40 respectively in all products. While setting the price of each product, Psychological Pricing Strategy is also adopted by pricing the products 3.99 instead of 4.0 as this minor distinction makes a major difference in the perception of the consumers.
2. Positioning In the Market/Positioning Grid visual
The Agrabah coffee shop endeavor to position itself as the high quality, customer-centered, and reasonably priced coffee shop in the region. The coffee shop aims to maintain its competitive advantage by positioning itself as a customer-centered coffee company that allows the customers to have a customized, special experience of drinking coffee each time. On the positioning grid, the Agrabah café position itself as a high-quality product with prices lesser than its main competitor, Starbucks as shown in the graph below:
This positioning will leverage the café’s competitive edge as the majority of cafés in the market do not have a distinction and niche market to focus on. Today cafés are concentrating on their taste and types of coffees while Agrabah will not just be concentrating on the quality but will also provide the customers a memorable experience which they could share in their social lives. Hence, the main focus of the company is to generate value for its customers, following the strategy of keeping customers satisfied will lead to revenue generation as well as rapidly gaining market share.
3. Place Distribution Strategy:
Agrabah café will offer its products and services initially through a physical café shop at ___________ along with having small stalls in malls and café shops in regions of ___________. This will allow the company to initially introduce itself in the region and later expand its business in nearby regions while finally expanding throughout the nation. The company will also be making itself available through the internet by offering its products to be ordered via the internet and mobile phone applications and receiving the orders through delivery services. Initially, this facility will only be offered to customers living in the nearby region of the physical shop but with its physical expansion, the products delivery services and ordering online will be done anywhere in the U.S. These placement strategies will help the company to reach the maximum possible audience while maintaining an accessibility approach.
J. Marketing Program
1. Target Market
The target market is the specific group of people to whom a company aims to offer its products or services. This involves segmenting the market geographically, psychologically, demographically and behavioral. (Manoj, 2008). Agrabah café’s main target market comprises of people having demographics as follows:
Age: Agrabah customers tend to fall in the age group 18 to 40.
Gender: It targets both men and women.
Income: Over $20,000 monthly
Geographical:
The café target the population of the U.S. that is increasing at an alarming rate as the number of immigrates is increasing each year as shown in the graph below. The estimates show that the U.S. immigrant population is anticipated to boost by 715% from 1970 till 2060, likely to hit 78.2 million people. During the course of the last 45 years, the immigrant population of the U.S. drastically increased from 9.6 million to 42.4 million with an estimation to reach the high levels and reaching new records each year (Zero Censorship, 2016).
Psychologically:
the café targets people who are fond of drinking coffee. The Agrabah Café tends to appeal to these consumers through its contemporary, hip design that could be seen from advertising, shop décor, and working environment to make its products being perceived as a status symbol. Consumers incline to be urbanites with relatively high income, professional careers, and focuses on social wellbeing. This segment of the market is increasing at a rate of 3% yearly. (O’Farrell, 2014).
Recently carried out statistic shows an average American consumer spent approximately 21.32 USD on a coffee weekly (Statista, 2016). The company tends to target the adults who today prefer to have specialty coffee even for their daily consumption and this consumption by the customers is increasing continuously over the past few years as shown in the graph below:
Behavioral:
the Agrabah café focuses on the same target market that its competitors focus on.
These include singles, married, professionals, students, social moms, travelers, music lovers, and sports lovers. Usually, these people visit a coffee shop in three settings:
Alone:
people usually visit the store while they are alone for a coffee as a break on their way to any work, during the course of a task or getting back from work or any other busyness.
Two people:
usually, people visit coffee shops with their friends as a meeting point or getting to somewhere and stop for a break for a calm discussion.
Group Setting:
usually, people visit a café to have quality time with friends or family or to have a conversation on a topic while not having the mood of eating anything. Hence, a cup of coffee seems to be enough to accompany a discussion. In this segment, a larger portion is catered by college students that prefer hanging out, studying, writing term papers, and meeting people and friends for coffee. Besides, this age group is highly active on social media and is conscious of their “cool” image.
2. Integrated Marketing Communications Promotion Strategy:
As the company is new in a highly competitive market and needs extensive efforts to create strong brand awareness in the market, therefore, the company will be aggressively promoting its services and brand name. The company needs to create a brand image and brand recognition among its target market. But as the promotional budget of the company is limited, therefore, the company will be highly emphasizing the low-cost promotional activities while ensuring reaching maximum audiences. For the promotional, the company adopted the following Media:
| Media | Percentage of budget | Reach level | Duration |
| Broadcast media TV and Print media | 30% | High and to the mass population | 1 month after opening on all nearby TV channels and Newspapers |
| online ads/social media campaign | 40% | High and Mass population | Monthly ads for the first year on related websites and social media sites |
| Personal Selling Strategy | 10% | Average and mass | Free sampling and gifts |
| Sales promotion | 10% | High and focused | Sales promotion for each month |
| Public Relation campaign | 10% | High and focuses | Brochures and flyers will be placed in a nearby place. |
I. Advertising Campaign:
As the main objective of the advertising campaign is to create brand awareness and brand recognition, so the campaign will be designed in a way that will enhance these two brand’s attributes. For this, to gain the attraction of the customers, a teaser campaign will be carried out through large billboards, print ads, and teaser TV ads; in which three ads will be preview with three different pictures of customized cups sample with three different slogans on each ad. These slogans includes
- “ Your Name Written On Your Coffee Cup”
- “Drink in your own way”.
- “Express Your thought of the day silently”
These teaser campaigns will generate curiosity and attraction of the audiences to further learn about the offerings and the supplier of the offering, that is, the brand. After one month of the teaser campaign, another advertising campaign will be run for one month to call the audiences to try for their experiences with designed cups with blank area in between yet to be filled, along with the logo and name of the Café. At this point, the pull strategy will be adopted to drag the customers by attracting them to try the product at least once.
II. Personal Selling Strategy:
Personal Selling will be carried out by the customer services provider of the shop where each employee will be trained to provide a warm welcome and tutorial of the services and products and how the customized cups will be designed for them. They will also provide the options to the customers to select their liking accordingly. Besides, the sales force will guide the customers about the “coffee of the day”, special promotions of the week or any other discount/attractive deal for them.
III. Public Relations Campaign
Following public relation strategies will be adopted in the campaign:
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Special Events
The company will be taking active participation in the events organized in the region like food festivals, sponsor sports festivals, or similar.
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Mobile Marketing
The company will send regular text messages to its existing and new customers about the sales promotions, specialty of the day, or any new additions in the menu to let customers have a recall of the offerings. Special messages will be sent to the customers on their birthdays.
-
Written Materials
Attractive different Tag lines will be displayed in the store, through messages, emails, and social media sites to attract the customers to have these tag lines on their coffee cups.
-
Audiovisual Materials
Audio Visual Advertising will be carried on the premises of the coffee shop. Each coffee shop of the company will have a facade that evidently differentiates the establishment from what it is. These things will include the large windows of the shop enlightening the indoor sitting area, its outdoor tables set up and coffee menus positioned outside; Having Digital displays of the type of coffees that will create temptation in the customers to buy the product.
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Loyalty Programs
Loyalty programs fall both under sales promotions as well as personal relations as the Loyalty programs help to maintain a strong relationship with the existing and regular customers and facilitate them and the new one to regularly visit the string to avail the offerings being offered through the loyalty programs. The loyalty program will simply be in the form of a punch card with the promise for the customers of receiving every 4th cup of coffee free. This offering will attract the daily coffee drinkers to at least avail two cups of coffee free every week. Special deals will be offered to loyal cardholders whose sales will increase a specific mention price.
IV. Promotions
The following sales promotions strategies will be adopted by the café:
- Free Sampling will be done in regions where the company will open its new outlet by giving away free coffee for tasting. Besides, “discounted Hours” will be offered every week during which a specific drink is offered for half of its original price.
- Discount Coupons like Buy one and get one FREE will be distributed often
- Social media contests will be carried every month and Check-Ins rewards will be given to Customers.
- Discounted Deals and Prices will be offered on bundle purchases.
V. Social Media Campaign
Aggressive promotion will be done through the social media sites by maintaining direct and interactive relations with the customers. Pictures of the customized cups will be uploaded on daily basis to promote the concept as well as to attract people to have their own cups. Besides, printable coupons will be offered on Facebook and Twitter that could be shown to the shop and could avail the offer.
K. Financial Data and Projections
I. Cost of Start-Up
| Name of Fee (Fixed Cost) | Target Location Fee | Name of Fee (Running Cost) | Target Location Fee |
| Legal | $2,500 | Advertisement | $800 |
| Brochures | $500 | Coffee raw material | $2,500 |
| Insurance | $5,900 | Napkins | $50 |
| Soft Opening Exp | $3,300 | Fruits | $1,200 |
| Grand Opening Adv | $4,500 | Rent | $2,000 |
| License | $2,200 | 2 Freezer | $2,000 |
| Furniture and Bar | $3,300 | Ice maker | $480 |
| Decoration | $1,000 | Plastic Straws | $25 |
| 3 Fridges | $2,600 | Plastic Cups | $200 |
| 5 Mixer | $800 | ||
| Estimated Total | $35,855 | ||
II. First and Five Years projections:
1. Financials |
||||
| The income statement for Agarbah is as follow : | ||||
| Income statement : | ||||
| Income Statement | ||||
| Values in $ | ||||
| Sales | YEAR 1 | YEAR 3 | YEAR 5 | |
| Sales | 1,837,6 24.00 | 1,955,897.00 | 2,252,544.00 | |
| Other | ||||
| Total Sales | 1,837,6 24.00 | 1,955,897.00 | 2,252,544.00 | |
| Less Cost of Goods Sold | ||||
| Other | 905,44 7.00 | 935,622.00 | 1,011,450.00 | |
| Total Cost of Goods Sold | 90 5,447 | 935,622 | 1,011,450 | |
| Gross Profit | 93 2,177 | 1,020,275 | 1,241,094 | |
| Operating Expenses | ||||
| Salaries and wages | 91,00 0 | 98,000 | 105,000 | |
| Depreciation | 8,00 0 | 9,000 | 10,000 | |
| Utilities | 29,95 5 | 31,500 | 33,600 | |
| web hosting | 80 0 | 900 | 1,000 | |
| Payroll taxes | 18,00 0 | 19,455 | 26,840 | |
| Insurance | 5,90 0 | 7,000 | 9,000 | |
| General and administrative expenses | 4,10 0 | 5,500 | 8,700 | |
| Web Advertising | 1,50 0 | 1,800 | 2,100 | |
| Training and development | 7,00 0 | 8,100 | 9,500 | |
| Miscellaneous | 1,20 0 | 1,300 | 1,700 | |
| Total Operating Expenses | 167,45 5 | 182,555 | 207,440 | |
| Operating Income | 764,722 | 837,720 | 1,033,654 | |
| Income Before Taxes | 764,722 | 837,720 | 1,033,654 | |
| Income Taxes | 147,842 | 153,485 | 188,590 | |
| Net Income | 616,880 | 684,235 | 845,064 | |
| Cumulative Net Income | 616,880 | 684,235 | 845,064 | |
Works Cited
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O’Farrell, R., 2014. Who Is Starbucks’ Target Audience?. Chron.com, December.
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Available at: http://www.statista.com/statistics/250166/market-share-of-major-us-coffee-shops/
Statista, 2015. Revenue of the coffee and snack shops industry in the United States from 2002 to 2016 (in billion U.S. dollars)*. [Online]
Available at: http://www.statista.com/statistics/196570/revenue-of-the-us-coffee-and-snack-shops-industry-since-2002/
Statista, 2016. U.S. Coffee Market – Statistics & Facts, s.l.: Statista: The Statistics Portal.
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Zero Censorship, 2016. U.S. Census Data: Immigrant Population to Increase 715% by 2060. Zero Censorship, 5 January.
