Summary
Summary Unit 7 - Coffee Industry Report
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- PEARSON (PEARSON)
Unit 7 - Coffee Industry Report
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Sami UddinUnit 7 – Business Decision Making
Introduction
I will provide all the key information about a coffee business whether it is best to set up a
new coffee shop or buy an existing coffee shop. The things that I will look into this report is
that looking at the latest data and also the trends, the external environment and also the
financial environment and the two options are:
Option 1: Set up a new coffee shop
Option 2: Buy an existing coffee shop
Key factors and risks
In 2014, the UK had over 16,000 coffee shops with a turnover of over £6.2 billion. This was a
6.4% growth compared to the previous year, this is a strength within the market and
indicates that there is still a demand for coffee in today’s market. Another reason why the
market is growing is because by 2018, the market forecast is for a 4.5% annual growth, with
revenues exceeding £8.7 billion from 20,500 outlets, this makes the coffee industry one of
the most successful in the UK economy. However, it comes with a huge cost in being able to
produce large amount of revenues.
There are very high levels of competition within the market with huge businesses such as
Costa Coffee, Starbucks Coffee Company and also Caffe Nero remaining to be the UK’s
leading brands with a combined market share of 54%, this can be a weakness as there is a
huge amount of competition within the industry. However, it can be an opportunity for a
new business as they can identify a gap in the market or be termed as a niche market
whereby there will be less competition.
The demographics in the coffee industry is that in the UK, we now drink roughly around 95
million cups a day along with a mix of different types of people whether they are young or
old or even rich or poor, with 65% of coffee is being drunk at home, with the 25% at work or
while studying and with the rest being is used in the shops, bars and restaurants.
One of the main trends within the market is that it is predicted that customers will focus on
where the coffee beans have been grown and on the quality of the coffee preparation. This
can lead to an increase in demand for specialist coffee shops offering high quality and also
ethically sourced goods with a variety choice of beans.
Implications of Resources
Physical Resources
Vehicles will not be required within the business unless if it is delivery of supplies coming
into the business or the idea of providing coffee to customer by delivering, then a vehicle
would be needed for transport for either existing business or new business. Building will be
required to carry out day to day business operations as there will be face to face customer
interaction for either existing business or new business. Machinery will be needed in order
to produce the coffee for the customers for either existing business or new business.
, Sami Uddin
The cost of getting a normal vehicle is around £2,000 and with insurance and road tax on
the vehicle will be around altogether £500 for both existing business or new business. For
purchase of a building the annual lease of premises per year for an existing business is
around £10,000 a year whereas a new business annual lease of premises is only £7,500. The
cost of getting coffee machine is £5,000 for the new business which is termed as a start up
cost.
With the existing business location it is based in the city centre which is surrounded by many
shops, offices and two universities. The way that this is beneficial is that workers from
others shops are able to get a coffee during their break as well as students from the
universities coming in to get a coffee as well and this will lead to more increase in sales.
However, there are many competitors within that area with more than 105 competitors
nearby. Another drawback of having the coffee shop in the city centre is that there is no
parking for either staff members or even customers to stop by and get a coffee.
With the new business location it is based outside of the city which is near local shops and
transport links along with popular tourist attractions. The way that is beneficial is that
tourists are able to visit the store and getting a coffee while going to the popular tourist
attractions and another benefit is that for workers who might have to go their workplace at
another place they can stop by at the coffee shop as there is parking and get their coffee
and go to work. However, by having the coffee shop outside of the city you are less likely to
get more customers therefore it leads to decrease in revenue and potential loss.
Human Resources
The staff requirements for the existing business is that they already have 2 part time staff
members at the coffee shop which is also the same for the new business staffing
requirements of only needing two part time staff members.
It is very important that staff members are payed equally and payed at least to the
minimum wage standards which is currently at £8.72 an hour as the minimum wage but will
increase to £8.91 an hour by April 2021. The reason why it is important to pay staff
members equally is because they will feel that they are not valued enough by the business
and therefore might leave the business. The Equality Act 2010 legally protects people from
discrimination in the workplace and in wider society. It was previously called the anti-
discrimination law with a single act, by producing this law it makes it very easy to
understand and be able to strengthen various protection in some situations. An example of
this would be getting equally and fairly as if this is not met it will lead to employees being
less motivated to do their work and might leave the business.
It is important that staff members receives bonus and employee discounts on products and
services that are provided as this will lead to them being motivated to do well and carry out
their task and this will lead to increased productivity within the business and therefore leads
to more sales being made. Within either existing business or new business there should be
Democratic leadership within the business and the reason why is because it makes members
to be able to take a more participative role in the decision making process and also get
other ideas from other people and this will lead to motivation within staff members.
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