Strategic management

Business plan

On

“Kaufy hub”

SPILL THE BEANS. . .

COFFE AND OTHERWISE…..

BY

AV.N.L.SIRISHA

MBA--- 8001

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Contents

1. Executive summary

2. Mission

3. Vision

4. Objectives

5. Key to success

6. Company summary

7. Company location & facilities

8. Start up summary

9. Products & description

10.ETOP analysis

11.SWOT analysis

12.Porters five force model

13.Strategy implementation

14.Balance score card

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Executive summary:

KAUFY HUB is determined to become a daily necessity for local coffee addicts, a
place to dream of as you try to escape the daily stresses of life and just a
comfortable place to meet your friends or to read a book, all in one. With the
growing demand for high-quality gourmet coffee and great service, Kaufy hub will
capitalize on its proximity to the people of Hyderabad. Kaufy hub will offer its
customers the best prepared coffee in the area that will be complimented with
pastries, as well as free books that its patrons can read to enjoy their visit.

The company will operate a 2,000 square foot coffee bar within Himayat nagar
area. The owners have secured this location through a three-year lease with an
option for extending. The have also provided 10, 00,000 of the required 30, 00,000
start-up funds. The remaining capital will be obtained through Bank of America
commercial loans.

The company is expected to grow sales revenue from 15, 00,000 in FY2009 to
62, 00,000 in year three. As Kaufy hub will strive to maintain a 65% gross profit
margin and reasonable operating expenses, it will see net profits grow from 7,
00,000 to 10, 00,000 during the same period.

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Mission:

“Kaufy hub will make its best effort to create a unique place where customers can socialize
with each other in a comfortable and relaxing environment while enjoying the best brewed
coffee or espresso and pastries in town. We will be in the business of helping our customers to
relieve their daily stresses by providing piece of mind through great ambience, convenient
location, friendly customer service, and products of consistently high quality. Kaufy hub will
invest its profits to increase the employee satisfaction while providing stable return to its
shareholders.”

Vision:

“To provide excellent, unique food and service with a plus towards expansion”

Objectives:

Kaufy hub has objectives it wishes to achieve in the next three years:

 Thirteen Drive-thru locations and four fully booked Mobile Cafes by the end of the third
year.
 Gross Margin of 45% or more.
 Net After-tax Profit above 15% of Sales

Keys to Success:

There are four keys to success in this business, three of which are virtually the same as any
food service business. It is our fourth key--the Community Mission--that will give us that extra
measure of respect in the public eye.
 The greatest locations - visibility, high traffic pattern, convenient access.
 The best products - freshest coffee beans, cleanest equipment, premium serving
containers, consistent flavor.
 The friendliest servers - cheerful, skilled, professional, articulate.
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  The finest reputation - word-of-mouth advertising, promotion of our community mission
of charitable giving.

Company Summary:

Kaufy hub shop, a limited liability company, sells coffee, other beverages and
snacks in its 2,300 square feet premium coffee bar located near Himayat nagar
area. Kaufy hub major investors are Harika and Sirisha who cumulatively own over
70% of the company. Our book and music selection and helpful staff will appeal to
the audience that is seeking to grow. This invigorating aspect will attract younger
and elderly members to come to the lounge. The central location will provide easy
access from most points of origin throughout the Twin City area.

Company Ownership:

Kaufy hub shop is registered as a Limited Liability Corporation in the state of Andhra
Pradesh. SIRISHA a owns 51% of the company. Her friend, HARIKA hold minority a
stake in Kaufy hub.

Company Locations and Facilities:

Kaufy hub bar will be located on the ground floor of the commercial building at the
Himayat nagar. The company has secured a three years lease of the vacant 2,500
square feet premises previously occupied by a hair salon. The lease contract has an
option of renewal for three years at a fixed rate that Kaufy hub will execute
depending on the financial strength of its business.

The floor plan will include a 200 square feet back office and a 2,300 square feet
coffee bar, which will include a seating area with 15 tables, a kitchen, storage area
and two bathrooms. The space in the coffee bar will be approximately distributed
the following way--1,260 square feet (i.e., 55% of the total) for the seating area, 600

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square feet (26%) for the production area, and the remaining 440 square feet (19%)
for the customer service area.

This area was chosen for various reasons, including:

 Proximity to other areas within the Twin Cities; Central location easily
accessed.

 Proximity to the main areas.

 High Visibility.

 Diverse population within the community.

 Scarcity of other coffee houses in the area.

The coffee bar's open and clean interior design with modern wooden decor will
convey the quality of the served beverages and snacks, and will be in-line with the
establishment's positioning as an eclectic place where people can relax and enjoy
their cup of coffee. The clear window displays, through which passerby will be able
to see customers enjoying their beverages, and outside electric signs will be aimed
to grab the attention of the customer traffic.

Start-up Summary:

The start-up expenses include:

 Legal expenses for obtaining licenses and permits as well as the accounting
services totaling 1, 00,000.

 Marketing promotion expenses for the grand opening of Kaufy hub shop in
the amount of 3,00,000 and as well as flyer printing for the total amount of
1,50,000.

 Consultants fees of 2, 00,000 paid to ABC Espresso Services for the help with
setting up the coffee bar.
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  Premises remodeling in the amount of 5, 00,000.

 Other start-up expenses including stationery (50,000) and phone and utility
deposits (100000).

Business line:

Products - Beverages and Baked Goods

Kaufy hub sells quality freshly roasted coffee, specialty beverages, and beverage related items
to the discriminating coffee drinker. The beverages are made by trained staff members who
know the products and make recommendations to customers.

The coffee varietals, teas, and other beverages items are supplied by Espresso Services, Inc
and delivered within 24 hours. The roasting of the green beans will take place on-site for the
freshest product possible. Owner will rely on customers and employees to shorten the
communication and feedback loop in product and service offerings.

Kaufy hub will offer custom roasting services to our customers. Customers will be able to order
selected coffee varietals roasted to order for enjoyment in their homes or offices. These custom
roasted coffees will create a unique experience for our customer, and allow them to further their
specialty coffee knowledge.

Product Description

Kaufy hub sells the entire array of coffee and espresso-based drinks, specialty drinks, and
bakery items, as well as music and books geared toward the spiritual reader.

Specialty Coffees
The primary product of Kaufy hub is the coffee. Several unique blends will be micro roasted for
daily serving or specially roasted to order at our customers' request which will give our
customers the variety they seek. These coffee blends include: Columbia Supremo, Tanzanian
Peaberry, Jamaican Blue Mountain, Guatemalan Antigua, Costa Rican Tarrazu, Sumatra
Mandheling, and Ethiopian caffe. Other blends and decaffeinated coffee will be offered as well.

Espresso & Coffee Drinks

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  The Straight Shot - The foundation of every espresso beverage; served in a demitasse,
when consumed alone.

 Espresso Macchiato - Espresso served in a demitasse with a small amount of foamed

milk on top

 Espresso Con - Variation of the Macchiato substituting whipped cream in place of the
foamed milk.

 Caffé Americano - A single or double shot of espresso is combined with hot water from
the espresso machine. This produces a smoother and fresher (as well as hotter) cup of
coffee than conventional brewing.

 Cappuccino - Espresso mixed with foamed milk upon the pour; can be garnished with
shaved chocolate.

 Caffé Latte - Espresso mixed with steamed milk, and topped with foamed milk; can be
garnished with shaved chocolate.

 Mocha - Espresso, steamed milk, and chocolate syrup, usually topped with whipped
cream and chocolate shavings.

 The Breve - An extra rich Caffe' Latte made with half & half instead of milk.

 Café Au Lait - Drip coffee with steamed milk added and topped with foamed milk.

Flavor-Based Drinks:

Hot Chocolate and Steamers - These drinks are made like lattes and mochas without the
addition of coffee. Flavored syrups are added to steamed milk and may be topped with whipped
cream at the customer's request.

Italian Sodas and Creamosas - An Italian soda is a combination of flavored syrup and high
quality carbonated mineral or soda water, served over ice. A creamosa is an Italian soda with
heavy cream or half & half added and gently stirred to making a swirled appearance in the drink.

Granita - An Italian style granular ice drink similar to a slushy but much more dense in
consistency.Granita flavors are usually coffee or fruit based

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Other specialty drinks include: Gourmet hot tea, iced Tea, Chai, smoothies, blended coffee and
tea-based drinks, and bottled soft drinks.

Books and Music:

Books - The most popular titles will be stocked in limited supply. Such books as Woman, Thou
are Loosed by T.D. Jakes; In Pursuit of Purpose, by Dr. Myles Munroe; Prayers That Heal The
Heart, by Mark & Patti Virkler; A Fresh Word For Today, by Bob Gass; Run Baby Run, by Nicky
Cruz; Morning By Morning, by Charles H. Spurgeon, and others.

Music - Kaufy hub will carry the finest in contemporary Christian music. Titles include Kirk
Franklin; Mary Mary; Set Free; Audio Adrenaline; Yolanda Adams, and more.

Bakery Item:

Kaufy hub will also offer its customers a variety of baked goods, including pastries, cookies, and
cakes. Bread for sandwiches and buns for soup will also be secured. Negotiations with several
local bakeries are now underway. Quality and consistency will be the determining factors for this
decision.

Future Products:

As Kaufy hub grows, more features will be added to the existing store. A key part of this is the
addition of live entertainment. This entertainment will be in the form of Jazz singers, poetry
readings, Comedy for the King, motivational speakers, and Christian musical Artists.

Food items will be added to the menu of offerings. The soup will be made fresh daily, one kind
per week. The soups are: Chicken Noodle, Minestrone, Clam Chowder, Vegetable Beef,
Vegetable, Chicken and Rice, and Wild rice. Sandwiches are made to order and include deli
favorites such as herbed turkey, egg salad, tuna salad, roast beef, corned beef, and turkey. A
variety of condiments will also be available. Kaufy hubwill obtain deli meats from Costco. The
salad sandwiches will be made fresh on-site.

Kaufy hub will establish itself as the destination for non-secular and motivational entertainment.
We also envision adding meeting rooms, hosting receptions, and adding small devotional rooms
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for private reflection. The meeting rooms will be perfect for small business and non-profit
organizations with limited office space. Coffee and pastries will be served to ensure a
successful atmosphere for business. Kaufy hub will also be available for private receptions,
such as birthday parties, anniversaries, or showers. Customer provided catering will go a long
way to ensure the guests' parties are successful. The devotional rooms will be wired for
individual music selection, equipped with one-way TV cameras, and furnished with a
comfortable chair and table.

These additions complete the vision for Inspirational Grounds, and provide its customers with a
place for socialization, relaxation, and reflection.

Technology:

The technology Kaufy hub is dependent upon is the micro-roasting equipment it will use to roast
the beans on-site. This equipment is serviced through the supplier, Espresso Services, Inc.

Kaufy hub will also use our website to advertise specials and events, and to post the monthly
menu and talent offerings. We will use email to communicate with customers wishing to sign-up
for email specials. Eventually, we would like to institute online ordering for roasted coffee and
specialty merchandise, but that plan is at least two years off.

The Point of Sale (POS) technology Kaufy hub will use allows for order taking when the lines
are long, keeps customer discount information, inventory, and revenue/profit information. The
system has a battery back-up in case of power surges and temporary power losses.

The Kaufy hub logo will be Federally Trademarked. Although the beverages will not be
protected in content, beverage names for specialty drinks reflecting the theme of the shop will
be protected under the Federal Trademark laws.

The security system Kaufy hub uses will protect the contents of the store and reduce insurance
premiums.

Sourcing:

Kaufy hub has associated itself with the finest coffee supplier in the Twin Cities area, Espresso
Services, Inc. We will bring fine coffees from all over the world to South Central Minneapolis,
where residents, other Midtown tenants and passers-by can enjoy a freshly roasted quality cup
of coffee, an espresso or specialty drink in an inviting and friendly atmosphere.

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Environmental Analysis:

Economic:

 In a time of inflation when the purchase of non-essential items is down, Kaufy hub is
feeling the effects.

 600 Kaufy hub locations will close by mid-year 2009

 12,000 employees will lose their jobs. Offer relocation packages to many employees,
severances to others
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  In response to competition and imitators, Kaufy hub now offers the “bottomless” $1.00
coffee.

 Fewer than 200 new US locations will be opened in 2009 in comparison to 900 new US
locations projected to be opened in 2008

 Economic growth in countries where Kaufy hub operates, such as USA, Pacific Asia and
Europe, stipulates the firm’s growth strategies.

 The Kaufy hub business depends on economic factors in developing countries, where it
buys the coffee beans.

Political:

As Kaufy hub is expanding internationally, trade restrictions, tariffs, tax policies and employment
laws of related to their business countries have influence upon Starbucks.Kaufy hub has to take
into account very different political situations in countries from which it buys coffee and countries
the company expands to: from extensive poverty and deep social inequality (Latin America) to
the fast growing economy of Asia.

 As predicted by 2010, 60% of the world’s population will live in the Asia Pacific region

 Kaufy hub had two class action suits pending since 2001: Carr vs. Kaufy hub and
Sheilds vs. Kaufy hub

 Possible threats on a change in import laws for its imported coffee beans could greatly
affect numerous areas of production for the company

Social /cultural:

 Participating and organizing activities such as neighborhood clean-ups and walk-a-thons

 Recycling and reusing of resources

 Buying policies

 Waste reduction

 “Green Team” to install the environmental views into trainees

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 Consumer preferences could shift from coffee to other beverages

 Increasing energy conservation by 5% in 2010

Technical:

 Technologies allow Kaufy hub to offer the higher standard quality products

 Introduction of the Kaufy hub Card

 Most if not all Kaufy hub location have WI-FI for consumer needs

 Its computerized roasters allow the company to create unique computerized curves in
roasting coffee beans.

 Kaufy hub invests in research to obtain even better quality of roasting and various
blending.

 A Kaufy hub uses the Internet as a distribution mechanism and implements Internet
cafes to attract customers.

 New methods of working such as mobile communication, intranet gives enables prompt
communication.

Swot Analysis:

Strengths
 Product diversification
 Established logo, developed brand, copyrights, trademarks, website and
patents
 Company operated retail stores, International stores (no franchise)
 High visibility locations to attract customers
 Valued and motivated employees, good work environment
 Good relationships with suppliers
 Industry market leader
 Globalized
 Customer base loyalty

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 Product is the last socially accepted addiction
 Widespread and consistent
 Knowledge based
 Strong Board
 Strong financial foundation

Weaknesses
 Size
 Lack of internal focus (too much focus on expansion)
 Ever increasing number of competitors in a growing market
 Self cannibalization
 Cross functional management
 Product pricing (expensive)

Opportunities
 Expansion into retail operations
 Technological advances
 New distribution channels (delivery)
 New products
 Distribution agreements
 Brand extension
 Emerging international markets
 Continued domestic expansion/domination of segment

Threats:
 Competition (restaurants, street carts, supermarkets, other coffee shops, other
caffeine based products)
 Indian market saturation
 Coffee price volatility in developing countries
 Negative publicity from poorly treated farmers in supplying countries
 Consumer trends toward more healthy ways and away from caffeine

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 Fragile state of worldwide production of specialty coffees
 Alienation of younger, domestic market segments
 Corporate behemoth image
 Cultural and Political issues in foreign countries

Industry analysis:
 The coffeehouse business grown every year.

 Lifestyle factors converge to make the coffee industry strong at all times.

 Coffeehouse provides calm, invigorating ambiance for people to socialize, relax or catch
up on work.

 Coffee drinking is now an all-day activity.

 Not unusual for a well located coffeehouse to exceed a daily average of 900 customers.

 The business of coffeehouse definitely will continue to grow intensely.

Porter’s five force model:

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THREAT OF NEW ENTRANTS:

 Kaufy hub operates in highly competitive industry where there are strong brands among
competitors

 However, the entry in the retail specialty coffee market is low as the capital requirement
for purchasing or renting one store is not high.

 New entrants have to compete with respected brands. Most of these were one-store
establishments with no real plan for growth.

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  Coffee bulk purchasing offers Kaufy hub significant economies of scale.

 Outlets, stores, grocery chain, kiosks, Internet, mail delivery allow Kaufy hub to have
access to a wide range of distribution services.

BARGAINING POWER OF CUSTOMERS:

 The force is high, because customers are large and provide a large proportion of
company profits.

 Easy to switch between competitors, as the competition on brand recognition is very

high in the coffee industry.

 To neutralize the threat of powerful buyers, Kaufy hub could reduce buyer uniqueness
by product differentiation, cooperation, diversification, and forward vertical integration.

 Supplier power is high for Starbucks.

 There are a few suppliers and increasing volumes of purchasing by Kaufy hub leading to
difficulties in finding beans that meet the company’s quality requirements.

 To neutralize the threat, Kaufy hub could reduce supplier uniqueness and look into
development of second sources.

 To develop second sources, Kaufy hub should invest in coffee industry where there are
a number of coffee farms that can be increased.

THREAT OF SUBSTITUTES:

 This threat can be generated by competition among non-coffee related products such as
teas, and soft drinks.

 Technological innovations in roasting also give the opportunity to roast Soya beans.

 The threat is however quite low since there are no natural substitutes for coffee beans.

COMPETITIVE RIVALRY WITHIN THE INDUSTRY:

 The competition intensifies as the specialty coffee market is growing.

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  There is little difference between products, which makes the competition fiercer.

 Kaufy hub can take an advantage of the recognition of its brand in countries where it has
its name.

 Comprehensive Internet site allows Kaufy hub to attract more stakeholders. Gaining the
market share by store clustering, Kaufy hub depletes its rivals.

Strategy and Implementation:

Kaufy hub marketing strategy will be focused at getting new customers, retaining
the existing customers, getting customers to spend more and come back more
often. Establishing a loyal customer base is of a paramount importance since such
customer core will not only generate most of the sales but also will provide
favorable referrals.

Competitive Edge :
Kaufy hub will position itself as unique coffee bar where its patrons can not only
enjoy a cup of perfectly brewed coffee but also spend their time in an ambient
environment. Comfortable sofas and chairs, dimmed light and quiet relaxing music
will help the customers to relax from the daily stresses and will differentiate Kaufy
hube from incumbent competitors.

Sales Strategy:
Kaufy hub will handle the sales transactions. To speed up the customer service, at
least two employees will be servicing clients--while one employee will be preparing
the customer's order, the other one will be taking care of the sales transaction. All
sales data logged on the computerized point-of-sale terminal will be later analyzed
for marketing purposes.

In order to build up its client base, Kaufy hub will use banners and fliers, utilize
customer referrals and cross-promotions with other businesses in the community. At
the same time, customer retention programs will be used to make sure the
customers are coming back and spending more at the coffee bar.

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Balance score card:

Balanced Scorecard perspective Aspects of strategy

Financial Perspective • Long term stakeholder value

though a growth strategy
focussed on enhancing
customer value

Customer perspective • High quality experience

through service and product
quality

• Wide range of specialty

coffees with good availability

• Creating educational
experiences for customers

• Developing brand image of

coffee shop around key
aspects of customer value
proposition

Internal perspective • High quality supplier

relationships

• Retaining Loyal customers

Learning and growth Perspective • Well trained / knowledgeable

staff

• Effective information system

for tracking loyal customers

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• Customer focussed /
innovative organisational
culture and leadership

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