Nancy’s Coffee Café

 Introduction

The given case study is about the the case of  Nancy’s Coffee Café chain which has been going as a strong company even in the face of the competition from the big names like Starbucks. The case analyzes the establishment of the brand from the scratch by Mrs.Nancy and then the development of the company in hands of Mrs. Beth Wood-Leidt as the CEO, who took over the company after the death of her mom.  The case also explains how the company has grown from only 10 employees to the current company. The case puts down the challenges faced by Ms.  Beth in the current scenarios and what kind of expectations then she has from the company.

This paper explains the case study in detail and presents the solution to the case study. Nancy Coffee Café chain was established in 1978 when Ms. Nancy introduced Columbian and Kenyan coffees in the coffee bars owned by her. Soon Ms. Nancy’s son and daughter, Roxanne, joined the fray and the company thrived under their leadership. Ms. Beth, at that time, was working as a full-time employee, and used to handle the financial aspects of the business. In 1993, when her mother passed away, Ms. Beth took the charge of the company with a view to sell it over. However, after seeing the potential in the brand, Ms. Beth was lured into the business and became the CEO of the Nancy Coffee Café chain. The coffee chain grew under the able leadership of Ms. Beth and now, it boasts of around  29 stores from Boston to Niagara falls to New York. These stores are spread all over the country and are providing profitable business.

Ms. Beth entered the business with the aim to get it ready for the acquisition. But then she entered the path of growth. The business, currently, caught in the growth plateau. The business is neither growing further, not it is at the acquisition stage. The choice is on Ms. Beth to decide what way forward the business should take. This paper tries to examine the different routes Ms. Beth can choose with regards to the business and suggests a plan for the implementation of the same.

For the purpose of the same the paper is further divided into five major sections. The first section is the SWOT analysis of the company.  This is conducted to understand where the company stands currently. The next section explains the problem statement. The third section focuses on the different alternatives that Ms. Beth can adopt. These alternatives are then evaluated. The action plan for the process forms the fourth section. The last section concludes the chapter by presenting the findings in concise.

Environmental Analysis

Internal Analysis

• High turnover rate.
• Expanding business, and better financial performance.
• Better than before management team.
• Loyal customer base.

External analysis

Macroeconomic analysis

• Economic Trends: Rising middle class and growing economy.
• Social Trends: Increasing interest in coffee houses as a place to hang-out.
• Cultural Trends: Development of coffee-appreciative generation which is interested in quick fixes and take away choices.
• Technological trends: Improved techniques of coffee making, the use of credit cards etc.

Microeconomic analysis

• Competition: Strong competition especially in terms of the street front stores where the bigger brands like Starbucks have already established themselves. Further the cost of entry is quite low, and many fast food chains like McDonalds and KFC are also offering coffee.

SWOT analysis

The SWOT analysis is conducted with regards to the current position of the company. The main idea is to understand where the company stands in the current view of the things.

Strengths Analysis

• Locations: The company has the café which are located inside the mall. These are the locations with the untapped potential as many of the other companies are not ready to pay the exorbitant rents for the space in the mall. The café inside the suburban malls are the biggest USP of the company. They came in the mall much before anybody had entered the market and established a market. Hence, it can be said that Nancy Coffee Café has leadership with respect to the location.

• One card membership: The location leadership will be a moot point without one-card membership. With the onecard membership, the company established a loyal customer base in terms of the employees who work in the malls. Onecard allows the customers to pay earlier, and enjoy the coffee at the discounted rate. This concept allows the loyal customers to save on the money they spend, and for the company, this means that the customer will be returning another time as well. This is one of the biggest strength of the company.

• Management of the organization: The strength of the company lies in its management. The empployees and the managers of the café are encouraged to be cost-effective in their dealings. Ms. Beth had tried to form innovative solutions to various problems including the problems of turnover, lower pay rate at coffee shops etc. She introduced above-18 employee plan and took the employees over 18 years of the age to reduce the turnover rate. She also established the appraisal/bonus system which promotes being cost conscious about buying the products. Also, she established the tip system in the company to attract and retain the employees without increasing their base salaries.

• Brand: With somewhere around 29 café in its chain, the  Nancy Coffee café has made a brand for itself among the different stakeholders.

• Private Holding: Nancy Coffee café is the privately owned company. This allows the freedom of choice to a large extent to the company. The decisions are not caught in the bureaucratic web, and Ms. Beth as the CEO is free to take the decision with respect to the future of the company without much of encumbrance.

Weaknesses of the company

• Employee turnover: One of the biggest weakness of the company is the employee turnover. While initially the turnover rate had been seen as high as 700%, the rate has been controlled has come down to 250%. Despite this it can be seen that the turnover is quite high and needs to be taken care. However, this is the weakness of the retail business. The higher turnover means more investment in terms of the training of the employees.

• Lease Issues: The company is in a business where the café are built on the leased space. The lease mostly comes with the timeline of 8-10 years. This means that even if a store is not performing, the store has to be continued in order to save the investment in the business. The lease cost in terms of mall can go as high as $10,000, and if such a venture fails, the continued cost of this adds up to the total cost of the operation without generating any profit.

Opportunities

• Growth: The biggest opportunity before the company is to grow further. The company has explored quite a number of suburban malls, but there still is the scope for the growth in the company in terms of more malls and the streetfront locations. The cash flow of the company shows that the company has reduced its losses drastically. However, the company is still not fully in profit. Further growth can make it a completely profitable venture.

• Further differentiation in terms of offerings: Another way the company can look forward towards the growth of its customer base as well as the brand is by looking at alternate offerings along with coffee. The café already keeps biscuits and other stuff for food. But alternative desserts and innovative dishes like different kind of waffles can also be added to the menu to increase the customer base in terms of the shoppers (EuroMonitor, 2013).

• Franchising: The second opportunity the company has in terms of the venturing into franchising. This will take off the load of the management by a single person, and it will also help in development of the brand.

• Acquisition sale: Although not the current choice, this is one of the long term opportunities of the business. The company has made a name for its store. When the time comes for the brands like Starbucks to enter the mall location for expansion, Nancy Coffee café will provide a lucrative choice for the acquisitions.

Threats

• Unsure bank financing for future growth: The Company has around $350,000 in terms of the bank debts. For the further investment the company needs around half a million more for which the company is dependent upon the bank. They may not decide in the favor of the company making the growth path difficult for the company.

• Strong competition: The company has enjoyed its place in the mall without much of the strong competitions. But now, many of the coffee brands are entering the mall area as well. Even Ms. Beth is thinking of exploring the streefront location. This means there is going to be a direct competition between the brands like Starbucks and Nancy Café coffee.

The main competitors of the company are the established companies like Starbucks and Dunkin Donuts. The Nancy Coffee café has directly competed with these companies for customers, space, and price earlier as well, and this is likely to continue.

Moreover, the coffee business is such that it does not a strong barrier to entry. Even the food chains like McDonalds and KFC have started experimenting in terms of the coffee offered by them.  Even 7-11 offers the coffee. This kind of competition adds to the threat that the company faces (Lussier, 2003).