Business Plan for New Product Introduction: Bing! Coffee - Iloka Benneth Chiemelie, Kueh Yi Kia, Teng King Wee

0.1 ABSTRACT

Purpose – To prepare a business plan for new product, indicating the opportunities, ways to implement it, marketing strategies and financial analysis of the plan.

Design / Methodology / Approach – Based on combination of literature research and in-depth concise review, the paper explore the main purpose of the research through knowledge-intensive secondary researches.

Findings – It was found that no coffee shop in Kuching currently, offer home delivery services and this is a service desired by many customers who just can’t let go of their duties just to have a quality coffee.

Research Limitations/Implications – Future quantitative research could condense the general overview of this research, since consumer behaviors are different within different generation. Lack of primary research makes this paper a worth reading but not certain on the contents.

Originality/Value – Contents of this paper are gotten from secondary research and primary research conducted through the company’s official website and outlets. This paper thus, is categorized as valid, but also voidable.

Keywords – Business plan, financial analysis, Coffee shop, Marketing strategies, Bing! Standard quality.

 Paper type – Business plan based on secondary and primary research.

1.0 EXECUTIVE SUMMARY

Kirton (2003) believes that different organization has different ways of solving problem and developing solution. As an innovative organization, we have developed a business plan which Bing! Coffee Shop can use to gain competitive advantages over their customers and as an opportunity to increase their market shares. This business plans is an introduction of a home delivery service.

Craving for java fix? and maybe something more? Bing! Possesses just what people want in coffee: fine gourmet coffee made with only lily bean, varieties of homemade cakes and mouth-watering snacks. Since its establishment in 2004, Bing! Has become “a go-to place for good cup of coffee” (Official Bing! Coffee Website, 2010). The Balinese-inspired ambiance of the coffee shop has made it a perfect spot for those who want to get away from stresses that come along with day to day activities. Bing!’s first outlet is located at Pandugan Road, Kuching, Sarawak, and has other 3 outlets across the Kuching borders. Bing!’s experience isn’t only for coffee lovers, as they also serve wide section of a healthy Taylor’s specialty teas and fruit smoothies. With so much to offer, what not to like in Bing!?. This has been the Shops’ mission and they have always made it a perfect please to take a break from the hustles and bustles of life.

Bing! Has many competitive advantages over other coffee shops in Kuching and they include, command of a premium brand -  a cup of coffee in other coffee brand’s outlet cost RM2, but a cup of coffee in Bing! Cost RM6 and customers are willing to pay this high price, because they believe they are making a social statement at the same time. Promotional patience – Bing! Has decided to shun the conventional business practice of advertising because of the mix messages it delivers and allows outlets to promote their products through heavy dependent on strong brand and word-to-mouth to communicate positive reputation about their products. Quality service – if we adopt Heskett’s et al (1997) service profit chain account, customer loyalty, achievable through customer satisfaction (Reicheld and Sasser, 1990), depends on quality service. This is one of the competitive advantages Bing! Has over its competitors and one of the reasons why customer always want to comeback.

Target market is a key decision area for organizations, performing business and strategic plan (McDonald, 1995; Piercy, 1992). It groups customers with similar needs and buying behavior together (Dibb and Simkin, 1996). Bing! Targets the niche market (Day et al., 1979; Kahn et al., 1988; Kotler, 1991;  Fader and Schmittlein, 1993) of coffee lovers around Kuching, they also have varieties of menus for the not-so coffee lover who stands are their second target market.

Bing!’s management team is made up of the boogie crew. The boogie crew comprises of; baritas-they prepare the beverage, cashiers-take orders and handle financial transactions, servers-delivers orders to customers and finally, the food preparation personnel-otherwise known as chef, they prepare all the dishes (Official Bing! Coffee Website, 2010).

A projected increased sales volume of more than 3 million Ringgit Malaysia at an increased price of 50 cent per order and average delivery service of 5 Ringgit Malaysia depending on customer location is expected by the end of the first year market testing. This amount is expected to reach 3 million Ringgit Malaysia, because customers can have Bing! Coffee delivered to them at their own convenient time and place.

The business requires skilled and professional drivers, servers and cashiers, who will handle the delivery service department to coordinate fast delivery and proper financial regulations. A delivery truck and motorbike that is capable of holding both cold and hot dishes at their temperature for at least 2 to 4 hours time.

The best exit strategy for any investor in Bing! is buyout. Organizational and shares buyout as per Halpern et al., (1999) is currently experiencing the largest boom in nearly two decades (Mendell and Radler, 2006). Only a handful of researchers (Lorsch et al., 2004; Cotter and Peck, 2001; Gertner and Kaplan, 1996; Holthausen and Larcker, 1996; Sing, 1990; Baker and Wruck, 1989) did consider buyout as a response to loose in share value, and buyout also serves as a distinctive source of value. Buyout is a business strategy whereby, investor’s sale off their shares when the company is making huge losses or when their buying price is lesser than their selling price to prevent them from going into liquidation. This is the best exit strategy for any investor that is investing with Bing! Coffee. On the other hand, Bing! Coffee might Capitalize- that is pay off their investors for their shares to avoid them from liquidating.  

2.0 THE BUSINESS

2.1 Opportunities: it has been argued that allowing consumer to engage in utilitarian exchange (Sherry, 2000) and responding to where and how they demand (Bitner, 1992; Sherry, 1998), influences consumer purchasing power and enhances consumer loyalty (Michon et al., 2005; Oakes and North, 2008; Turley and Milliman, 2000) Presently, there are no coffee shops in Kuching that offer home delivery service, and sometimes customers who wish to have a good quality coffee might need to consider the distance, and the time. That is why we want to fill this customer’s need, by introducing the first ever home delivery service by a coffee shop in Kuching, so that customers can now take coffee whenever and wherever they wish to.

2.2 Description of Business: many prominent consumers researchers such as Holt (1998), Thompson and Tambyah (1999), convincingly argued cosmopolitanism to be an important consumer orientation, yet this phenomenon remains largely neglected among coffee shops and in Kuching city to be precise. Cosmopolitan orientation manifest, when consumers seeks to consumer products originating from culture other than their own or which they don’t have within them (Cannon and Yaprak, 2002; Urry, 2000). Based on research, it was found that Kuching city, has great coffee lovers and a high cosmopolitan market, conjoined with long working hours that gives workers less time to go out for leisure. This business solves the problem of allowing consumers to either do their duties at work or spend time with their families while sipping a cup full of Bing coffee through quality home delivery service. Established in 2004, Bing coffee is now a go-to place for quality coffee. Its menu ranges from high quality coffee, assorted deserts and dishes and ice creams. The management team is made of the boogie crew, which consists of the server, cashier, food preparation team and coffee mixing team. Drucker (1971), defined company mission as a clear and realistic objective, and are often based on founding values of entrepreneurs. The desire to offer quality coffee can be seen from Bing’s mission and objective which is: “freshly made products and services are our passion; consistent excellence is our objective” (Official Bing! Coffee Website, 2010).

2.3 Competitive advantage: a firm develops competitive advantage by capitalizing on the relative imperfections within the sector it competes (Rumelt, 1991; McGahan and Porter, 1999, 2002; Wiggins and Ruefli, 2002). With limitations of firm’s sources of competitiveness such as raw material and suppliers as researched by Barney (1991), coffee shops find it difficult to be price or product focused. The developed business plan (Home Delivery Service), is so unique that if well implemented it would serve as a sustainable competitive advantage over other coffee shops. This is because; it would be the first of its kind in Kuching, making Bing! Coffee a mover and this will enhance customer loyalty and growth of brand quality. As researched, quality delivery service is a perfect customer-focused strategy that impact firms performance positively (Lumpkin and Dess, 2004; Porter, 2001; Singh and Kundu, 2002; Srivastava et al., 2001; Tanriverdi and Venkatraman, 2005; Verona and Prandelli; 2002), and it boldly supports our idea.

2.4 Current status and requirements: Bing! Coffee is currently one of the best coffee shops in Kuching, with over 2.5 million Ringgit Malaysia revenue generations annually; it currently stands as one of the market leaders in Kuching city. Minimum 700 thousand Malaysian Ringgit is required to start off the new business plan. This includes ne staff recruitment, purchase of 2 food delivery trucks and 10 delivery motorbikes, and a 10 percent advertisement fee for the new business plan.

3.0 MANAGEMENT TEAM, COMPANY AND LEGAL STRUCTURE, AND INTELLECTUAL PROPERTY

3.1 Management team: organizations create teams to improve process in other to gain competitive advantage (Jones and George, 1998). Teams is of an advantage to companies because, they improve productivity, enhance creativity, creates effective response time and improve decision making. The experiences team members has, leads to team empowerment and effectiveness (Kirkman et al., 2001), and this influences positive decision making accuracy (Hollenbeck et al., 1998) and skills (Irvine et al., 1999). Since its establishment in 2004, Bing! Has invested hugely in its staffs to improve their abilities and experience, and that is why their staffs currently posses at least 5 years experience in their respective departments. The staffs are a combination of innovative and creative individuals, who give out the best of their abilities to the company moving in the right successful direction. Information and technology, helps firms in differentiation of good and gaining competitive advantage (Carr, 2003). One of the ways technology enhances competitive advantage is through reducing production cost, an important element in determining company’s profitability (Kadiyala and Kleiner, 2005). With professional information and technology team, Bing! stands out as the best among other coffee shops in Kuching, ranging from their sophisticated ordering machine, automated answering machine and well designed website for e-commerce. The company plunges its way forward with the induction of different series of coffee mixer and juice extractors to improve quality service which is their mission and keep the orders at customers table within reasonable time. The technicians are experts with at least a diploma in relevant field.

3.2 Company and legal structure: Mr. Hii Bong is the CEO of Bing! Coffee Shop.  Bing! is a partnership business, with Mr. Hii Bong as the highest shareholder (owns %60 of all Bing! coffee shares). It is also a public listed company, listed in the Malaysian stock exchange. The organizational chat is illustrated below.

Figure 1 Bing!'s Business structure.

3.2.1 The marketing and sales manager: handles services and promotion coordination, through the server and waiter. The server delivers the food to the customer, while the waiter receives the other from the customer.

3.2.2 The finance manager: has the responsibility of controlling all financial transactions through the cashier and waiter. The cashier handles all financial transactions, while the waiter receives orders from the customers.

3.2.3 The production manager: undertakes the duty of seeing that all dishes and coffee meet the Bing!’s standards through the baritas and chefs. The baritas makes the coffee while the chefs prepare the dishes. All three managers respond to the CEO’s calls.

Figure 2 Bing! Logo

3.3 Intellectual properties: the Bing! Boogie Cup is a full patent property of Bing! Coffee. Their trademark is fully licensed by the ministry of agriculture and high court of Malaysia, under act 234, section 45 to 49 of trademark rights. The Bing! Coffee logo is a copyright of Bing! and any misuse against the company’s rights are high prosecutable by law.

4.0 INDUSTRY ANALYSIS

4.1 Industry description: since its establishment in 2004, Bing! coffee shop offers wide varieties of coffee, ranging from local bread coffee, white coffee to international coffee brands. It also serves wide section of a healthy Taylor’s specialty teas and fruit smoothies. It is a restraint trend. With just 3 branches yet, Bing! employees 58 staffs across all its branches in Kuching that makes the shop a small medium enterprise. Several researches have stressed the critical impact of new product process in new product development outcomes with growth stage being the most critiqued point (Ciccantelli and Magidson, 1993; Cooper, 1993, 1994; Cooper and Kleinschmidt, 1986; Hart and Baker, 1994; Hart et al., 1998; Saren, 1984; Schmidt and Calantone, 1998). Bing! is currently in the growth stage with increased revenue, entrance of more competitors and high demand. The profit potentials range from social statement which Bing! brand makes among consumer, high and constant demand from consumer, less competitiveness and strategic target market. These factors maintain a sustainable cash flow to the company. The main profit potentials are the brand image it portrays in the society.

4.2 Target market: one of the more significant decision problem faced by marketing teas is identifying their target market (Ziamou, 1999), proper identification of target market helps in fostering the trial and eventual adoption of new product (Foxall, 1989). Today’s Kucing consumers, comprises of diverse multi-cultural markets with wide rage of preferences and options. Bing! target market is basically coffee lovers, but it uses its brand to target a mass market of snacks consumers, who wants to taste different things while making a social statement at the same time.

4.3 Competitive position within target market: firms of nowadays, operate within a fast changing business environment created by technology advancement (Aaby and Discenza, 1995: Raymond, 2003), social and economic changes (Wheelen and Hunger, 1998), and shortening product life cycle, which results in  hyper-competition (Chakravarthy, 1997). This complex environment necessitates high need for timely, first-rate business knowledge and information (Hannula and Pirttimaki, 2003).

4.3.1 Main competitor: Starbucks Coffee is the main competitor that posses a high threat to Bing!’s growth.

4.3.2 Threats posed by Starbucks: They are the second largest coffee shops and have built a very strong brand of doing business internationally and branding locally. With trust on their brand, they pose the biggest threat of penetrating Kuching coffee market, with any new outlet they open.

4.3.3 Company profile: established in 1971, Starbucks was named after the first mate in Herman Melville’s Moby Dick and their logo is was inspired by the sea- featuring a twin-tailed siren from Greek mythology. With a total of 16,706 stores in more than 50 countries (as of Dec. 27, 2009), Starbucks operates 8,850 stores and 7,856 are licensed stores. It has more than 30 blends of coffee and single-origin premium arabica coffees. Its other products includes handcrafted beverages, merchandise, fresh foods, consumer products, and brand portfolio. Their website is www.starbucks.com.

4.3.4 Objectives of Starbucks: The main objective of Starbucks is to create customer loyalty through giving them more than they demanded.

4.3.5 Starbucks’s marketing strategy: Starbucks currently uses brand image strategy to pursue their objectives and it is currently working as expected because they are globally known for their quality and perfection.

4.5.6 Starbucks Strength:  their strengths include assorted varieties of menus and products, international branding and multi stores across the world. These are their strengths because it gives them more competitive edge, and their long history has developed the spirit of competitiveness in the company.

4.3.7 Starbucks weakness: 7,585 stores Starbucks stores are licensed, and this can lead low standard qualities since the licensed stores have their own separate management.  The differences in their management can affect consumer’s perception of the company and since they are a global company, default in one store can largely impact other stores worldwide.

4.3.8 How Starbucks is likely to respond to our business plan:Starbucks is a household name, and with huge financial ability on their side, they are likely to respond to our business plan through advertising or opening of more outlets within the Kuhcing, borders. 

5.0 MARKETING PLAN

5.1 Product feasibility: as an actual product, Bing! differentiation is the main product strategy. The business plans incorporates this differentiation strategy by being the first coffee delivery shop in Kuching and enhancing quality brand. This differentiation is meant at allowing customers to buy and exploit the products (Blanchard, 1998; Dhilon, 1999; Fabrycky and Blanchard, 19991; Patton and Bleuel, 2000) offered by Bing! the business plan enhances close heart branding and differentiates Bing! from other coffee shop as the only coffee shop that offer deliver service in Kuching. The new business concept will be tested qualitatively by advertising the new business plan and giving questionnaires to customer who order for the delivery service within a space of 3 months to determine their thoughts about the idea and ways to improve the service. The usability testing will be conducted by getting consumers to know more about the company, asking them their opinions about the delivery services and gathering as much information as possible from their for improvement measure. This information will be analyzed and noted to let consumers know that they are important to the company. After analyzing the data, improvement measures will be implemented based on what consumers want and how they want it.

5.1 Pricing strategy: price related behavior represents an important focus point within the stream of research on customer loyalty (Dawar and Parker, 1994; Richardson et al., 1994; Seiders and Costley, 1994). The price is based on a customer-value based pricing strategy (Ingenbleek et al., 2003), which uses psychological pricing strategy to penetrate the market by letting the customers understand that they are not just buying a coffee but they are also making a social statement at the same time. This strategy is used to position Bing!’s brand quality in the customers mind and it is effective because they are currently the only coffee shop using this pricing strategy. Consumers don’t see Bing! as just a coffee shop but also a place to make a statement about their social class.

5.3 Channels of distribution: a selective distribution channel will be implemented. This involves using limited number of outlets within a given geographical area to sell products. An advantage of this approach is that it gives producer the opportunity to choose the most appropriate outlet and focus attention on them.

5.4 Promotion and advertising: Gupta, (1993) stressed the importance of promotion by stating that most consumers acquire brand because of their attraction to the promotion it offers. Promotion is very important in introduction stage of any product or business, because it encourages purchase and creates awareness in the market. The business plan uses a pull advertising strategy, which involves directly advertising the product to the customers. This is because of the mix messages advertisement can transmit to different customers. The Mass-media (News papers, Radio, Television and Magazines) will be used in creating awareness of the business.

6.0 FINANCIAL PLAN:

6.1 Capital requirements for the next 3 to 5 years: the money will be raised from the company’s account and used to implement the business plan following the financial projection give below.

6.2 Over view of financial projection

Financial projections for 3 years                         RM= Ringgit Malaysia
Year 1	4,000,000.00 RM
Year 2	3,800,000.00 RM
Year 3	3,000,000.00 RM

Sales                                                                         RM 2,459,000.00

Less:

• cost of sales                                                  RM 600,000.00

Gross profit

Less:

General and administrative expenses                        RM

• Professional fees                                   4,000.00
• Directors’ remuneration                        2,000.00
• Insurance                                               20,000.00
• Medical fee                                           15,000.00
• Rental of premises                                200,000.00
• Salaries, allowances and bonus             50,000.00
• Utilities                                                 18,000.00
• Upkeep of office                                    7,000.00
• R&D expenses                                      60,568.00
• Others                                                   39,442.00
• Total G&A                                                                   RM 416, 010 .00

Sales and marketing expenses

• Advertisement                                                200,670.00
• Entertainment                                     45,000.00
• Printing and stationary                        3,567.00
• Salaries and commissions                    398,980.00
• Tender fee                                           2,300.00
• Travel expenses                                   60,876.00
• Upkeep of motor vehicle                    8,876.00
• Upkeep and maintenance                    4,400.00
• Telecommunication                             25,000.00
• Total S&M                                                                   RM 749, 669 .00

Other income                                                                           RM 409, 413 .00

PBDIT                                                                                      RM 1, 102, 734 .00

Less:

• Amortization                                       10, 000 .00
• Depreciation                                        30, 000 .00

PBIT                                                                                         RM 1, 062, 734 .00

Less:

• Financial charges                                 50, 000 .00

PROFIT/ (LOSS) BEFORE TAXATION                           RM 1, 012, 734 .00

LESS: TAXATION                                                                RM 167, 014 .00

PROFIT/ (LOSS) AFTER TAXATION                              RM 962, 734 .00

Minority interest                                         RM 28, 900 .00

Distribution profit                                       RM 49, 000 .00

Less:

• Dividend                       38, 600 .00      

Retained profit / (loss) for the year           RM 1, 002, 034 .00

Retained profit / (loss)                               RM 1, 002, 034 .00

• B/fwd                                              RM 1, 002, 034 .00

Retained profit / (loss)

• C/fwd                                             RM 500, 2034 .00

Dated for one year – 1^st January 2010 – 31^st December 2010

7.0 CRITICAL RISK FACTORS

These are the uncertainties surrounded by the uniqueness of a particular company, which may affect price of the company’s securities.

7.1 Management: risks arising from management issues, such as decision making, success planning, skill acquisition and retention can be increased to a large extent due to firm’s procedures and policies (Milward et al., 1992). Some of the management risks are explained father below.

7.2 Decision making and success planning: the cost of a wrong decision or unsuccessful planning is of high risk to the business plan because the success of every business is dependent on decision making.

7.3 Skill acquisition and retention: lack of adequate skill and retention of skills for undertaking the business plan is of risk to success of the plan. This is because for any business plans, there are certain required skills that are needed to fully implement the plan into a successful business strategy.

7.4 Marketing risk: the biggest marketing risk is fluctuation. This is basically the loss of assets values in the form of stock or shares. This posse as a great risk to the business plan because they could impact consumer’s perception and result in waste of marketing expenses.

7.5 Financial risk: this is the amount of risk present in any financial investment. Investors always look for secure investments with low risk and they access companies risk before investing in it. Financial looses which might result from low sales are of great demerit towards attracting potential investors to Bing!

7.6 Intellectual property infringement: this is one of the biggest risks faced by Bing! infringement of intellectual property is the violation of intellectual right, which can be in the form of imitation and it can cost the company great loss of market shares, customer loyalty and brand image trust because the imitating company, might not be following Bing!’s set standards. This is because it generally affects the brand and market position of the product not just in a given market but in the mass market.

7.7 Regulatory change: this normally occurs in re-branding; companies decide to change their market position by branding their goods in a new way. It is a high risk because it can change customer’s perception of the company and brand, leading to lose of loyal customers.

8.0 APPENDIX

8.2 PICTURES OF PRODUCT PROTOTYPE:  DRINKS.

Figure 4 caffe latte

Figure 5 white caramel latte

Figure 6 Tiramisu latte

 

Figure 7 tiramisu

Figure 8 white mocha latte

PICTURES OF PRODUCT PROTOTYPE: DISHES

Figure 9 panini

Figure 10 bambini

Figure 11 lasagna

Figure 12 classic tuna bake

8.3 LOCATIONS OF BING! COFFEE OUTLETS IN SARAWAK

Hills
Hills Shopping Mall At Interhill Place, 
Lot 27, 270 and 276
Section 47 at Jalan Mathies
KTLD, Kuching, Sarawak

Premier 101
Lots 228, 1020-1079 & 1080 Block 16, 
Premier 101, Jalan Tun Jugah
Kuching, Sarawak

Bormill
Ground Floor, Lot 3192, SL 
1, Block 10, Lrg Tun Ahmad Zaidi Adruce 12
93150 Kuching, Sarawak

Padungan
No 84, Jalan Padungan 
93300 Kuching, Sarawak

Official website: www.bingcoffee.com

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