Business Organization and Management Group
Case Study Cutbacks
What is the product in this business and its value? What type of business is it and why?
What is a competitive advantage for the company? How can the management use it? Make SOOT analysis for the company.
What types of decisions did the owners have to make? Why you think they had to make those decisions?
Which are the reasons of success for a coffee shop in Greece?
What can we assume for the BID (Brand Development Index) and CDC (Category Development Index) of the company?
How can the environment influence the company? How can the current environment influence the company?
‘Cutbacks’ mission statement is ‘Establish Cutbacks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow. ‘ (wry. Cutbacks. Com ). Having that in mind, Cutbacks have indeed invaded the world and is now a powerhouse in the coffee shop business, this case study will try to shed some light into what has made the company such a worldwide success.
Cutbacks is the largest coffee importer and roaster of specialty beans and the arrest specialty coffee bean retailer in the United States. The firm is aggressively moving into several different foreign markets. “Today Cutbacks have more than 16. 226 stores in various countries. Cutbacks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, snacks and items such as mugs and coffee beans. Through the Cutbacks Entertainment Division and Hear Music Brand the company also markets books, music and films. Many of the company’s products are seasonal or specific to the locality of the store.
Cutbacks – brand ice cream and coffee are also sold out at grocery stores. (www. Wisped. Org ) Cutbacks Soot By knotted its well conceived and well implemented strategy, their growth is planed and coordinated each step of the way through careful site selection and promotional campaigns and its near fanatical emphasis on quality control. For example milk must be at precise temperatures between 150 and 170 degrees, and every espresso shot must be pulled within 23 seconds or discarded, And no coffee is allowed to sit on a hot plate for more than 20 minutes.
Schultz also refused to franchise his Cutbacks stores, fearing a loss of control and a potential deterioration of quality. According to Howard Schultz words through an interview to Geoff Garrison business reporter with the Winnipeg Free Press Canada, on August 30th, 2004. “Our stores have become a gathering and meeting place in addition to the coffee. Intimate relationship with customers is one of the keys of this brand and I do not believe we can build a sustainable brand simply through advertising and sales promotion. We have built an emotional connection with our customers.
I think we have a competitive advantage over classic brands in that every day we get to touch and interact with our customers directly. Our product is not sitting on a supermarket shelf like a can of Coca-Cola. Our people have done a wonderful Job of knowing your drink, your name your kids’ names and what you do for living. ” (wry. Branchville. Com)
Cutbacks is a worldwide powerhouse brand name and notably a profitable corporation. It has almost a number of more than 16. 226 stores in various countries. Its reputation was built on high quality products and on the services it provides.
Moreover, the company is well known for the way it values its workforce and its throng ethical values as stated in the following ethical mission statement ‘Cutbacks is committed to a role of environmental leadership in all facets of our business. ‘
Cutbacks has a reputation for new product development and creativity. But new ideas can not come so often and even if they do they may not be on target. Moreover, almost the % of their shops are located in the U. S. Which means they are depended too much on one country. They need to spread into another group of countries in order to spread the business risk.
Also organization is dependent on a main competitive advantage, the retail of coffee. This could make them slow to diversify into other sectors should the need arise.
Cutbacks have shown in the past that they are very good at taking advantage of opportunities. In an strategy alliance with Hewlett Packard, customers could create their own music CD within a Cutbacks coffee shop. Thus the company could look for such as India and the Pacific Rim nations, also Europe which is getting more and more accustomed with the brand name “Cutbacks”.
Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential.
The greatest threat of them all at this particular moment for Cutbacks, or any other company for that matter, is the global economy crisis. In particular the source of the crisis, this lays in its home country the U. S. So if more than % of the companies growth is depended on the U. S. Then the strategy should be carefully devised for them not to loose track of their main target, which is profit and to avoid as much as possible the effect of the crisis.
One other threat could be the opportunity seizing of the companies that antagonize Shattuck. Shattuck should always be one step ahead. The art of decision making can be a result of either a specific act, or a general process. Decision making is the ability to evaluate, choose and act among a set of alternatives. Managers usually have to make many different types of decisions.
There are two large categories, programmed decisions and non programmed decisions.
A programmed decision is when that decision took place and was built with some frequency.
On the other hand non programmed decisions are those that their structured and act much less often. A large parameter of decision making is the conditions that take place in the same time that these decisions are being made. These parameters are; decision making under uncertainty, decision making under risk and under certainty. Decisions under certainty are those decisions that are been made by the decision maker having in mind with certainty all the alternatives and what conditions are associated with those alternatives.
As for uncertainty decisions are these that the manager took when he doesn’t know all the alternatives, risks, or consequences of these alternatives. Decision under risk is the availability of each alternatives and potential payoffs and costs all associated with probability estimated. (Griffin, Rocky W. 2003) In the case study the owners took different types of decisions. First of all programmed decisions are been made in order to maintain the Cutbacks phenomenal growth and success. Programmed decisions are also ordering supplies and quality specifications that every single coffee must have.
Additionally Howard Schultz made a programmed decision of step-up expansions again as every business-man does and moves more aggressively to foreign markets. A non programmed decision now, of the owners was the grand- scale internet plan that Howard Schultz and his management team have. We can conclude the same decision also as a decision under uncertainty because this plan wasn’t the most usual from a coffee shop firm. In the end we can consider a decision under risk and uncertainty demand that was in New York for Cutbacks product such as drip coffees.
In order to balance the situation then they start to sell espresso crept. So a hasty renovation was necessary so that the store can provide more espresso and less drip coffees. The main cause of these decisions by the owners was to maximize profits. The owners made these choices also in order to raise the quality standards of their stores and keep them there. Also they wanted to expand their firm activities by getting in to the web, create CDC, chocolates and other new products, and conquer new and foreign markets.
All according to a well-conceived and well-implemented strategy that Cutbacks always had. In Greece there is a very special environment and ‘philosophy about coffee shops. It is an entire culture based on Greeks going to coffee shops. Our people spend most of his time there so the first of success would be a nice built and decorated store in order to attract customers and inspires them to stay there. A second clue of success old be a very careful price politics. It’s an important issue for Greeks to be able to enjoy their coffee or beverage at a logical price.
It’s worth mentioning that prices at coffee shops in Greece are extremely high, because of the enormous demand that exists in the country, and also because the customers stay there for a long time, even after the coffee is finished. Another factor of success is the place. On one hand anyone can open a coffee shop, anywhere in Greece and have customers, but on the other hand if someone wants to have large profits by the store must carefully select he location of his store. A good owner-manager in order to achieve productivity and profitability must create the competitive advantage that will make the customer to select his/hers cafeteria.
All the above contribute into creating his competitive advantage. In addition, good quality of supplies, satisfying quantity of the final product and well trained or experienced employees must also be an important issue of success of a coffee shop in Greece. What can we assume for the BID ( Brand Development Index) and CDC (Category Development Index) of the company? The combination of the category development index and the brand development index of Cutbacks, by taking into account all the above, we can only assume that they have been a success.
As the time passes more and more people drink their coffee and get their snack from Cutbacks. The category development index of Cutbacks for coffees gets a big percentage of the global market of cafeterias and coffee shops as it has devised many successful marketing strategies. Also the brand development index of Cutbacks has been very useful because after researches the management have found ways to attract into the shops deferent kinds of categories of people. Some of these ideas were, selling except from coffees, snacks, chocolates, Cad’s and other.
How can the environment influence the company? How can the current environment influence the company? The environments that can affect a company are divided into
The Task Environment
The Internal Environment
The most vital effect that the environment can have on Shattuck right now is through the general environment and its economic dimension. Because of the on-going economic crisis and its huge dimensions all the environments can be affected directly or indirectly.
From the employees to the employers of the company, from the competitors to the suppliers, from the technological dimension to the political – legal dimension thus the consequences of the environment can be of great importance to a company and it must always have in mind the repercussions of these influences so as to act accordingly and prevent the negative aspects it may have.
Wakefield Foundation, Inc. 2008. Cutbacks [online]. [Accessed 14th December 2008]. Available from World Wide Web: http://en. Wisped. Org/wick/Cutbacks Cutbacks Coffee Company. 2008. Cutbacks Diversity [online].