Producing an economics assignment for an Australian business to improve its cost situation and competitiveness

Question

Task: Critically evaluate how different cost elements can cleverly save costs. Propose three cost-saving ideas, evaluate and discuss each of them in your economics assignment along with a competitive strategy which can help them to gain advantage in the market.

Answer

1. Introduction:
Present economics assignmentis done based on the three beans café store located at St George, Sydney in Australia. The café chain is present in various place of Sydney and Queensland, and they are well known for great tasting food that is prepared with attention and love by cooks of their kitchen. Three Beans were first opening in 2006 at Chatswood Chase by the visionaries James and Matt (Threebeans.com.au 2022). Both are aged players in restaurant and café industry that gave them scope to fulfill their long-waited dream of opening their own café chain. The café chain in the economics assignmentboasts its additive and preservative free products which are made by sourcing materials from local suppliers. Using sustainable bled of coffee from the trusted suppliers and producing exclusive blend of coffee is the philosophy of the Three Beans (Threebeans.com.au 2022). The name symbolise the approach of the brand towards food and drinks using on vanilla and avoiding any additives and preservatives. With strict animal welfare practice, three beans is a well-known brand in the targeted market (Threebeans.com.au 2022). The café chain in the economics assignmentprovides organic goods and products that have enabled it to move towards sustainable practice in different stage of business process; however, notable market penetration is not there for the brand. Based on the real life visit of the store and after discussing with the managers and employees of the store, this economics assignmenthas been produced to enhance the sales of the three beans in the present market. For this purpose, through the analysis here cost saving proposal, competitive strategy proposal, growth, pricing, non-pricing proposal and other strategies to enhance sales and market penetration has been mentioned.

2. Cost saving proposals in the economics assignment:
2.1 Fixed cost proposal:
Fixed cost is a cost which does not change over time with the change in production. Major fixed costs for the case organisation in the economics assignmentare rental cost, salary, cost of raw materials, cost of ingredients, electricity cost etc. As the firm has dedicated supply chain which provides raw materials from the local suppliers, cost production for case organisation cannot be change through alternating supply chain. Rather focus should be given on reducing the fixed cost through better rental agreement, reduced salary and use of alternative source of electricity.

As wage is rigid, changing it is not possible; hence, reducing the number of employees is optimal option as per the economics assignment. To enhance performance and reduce wage burden, bringing in automation can be proved to be beneficial (Panjaitan et al., 2022). Through automation, business process can be streamlined and error free that can enhance brand preference. On the other hand, as another method of reducing fixed cost, firm can rely on better agreement for rent of the store. To achieve this, firm can-do long-term agreement with landowner and ask for discount to reduce the rent. As the major process to use alternative source of electricity, case organisation in the economics assignmentcan use solar cells to powerup their store. This will reduce the burden of electric charges and limit the use of fossil fuel to power the stoves.

2.2 Variable cost proposal in the economics assignment:
Variable costs are those which changes over time depending upon the production. To reduce the variable cost, firm need to reduce the products that are not sold in higher numbers. According to the economics assignmentreducing the production of less preferred product will aid the firm to save raw material, effort and time that in turn will lead to reduction in cost. For instance, products like big breakfast, adult toastie, salmon on rye, smashed avocado are sold in least number. To reduce the variable cost, it is essential for the case organisation to reduce the production of these items.

Apart from that, though the three beans is known for their superior coffee, the firm sales non coffee items in large numbers. There is considerable number of sales of instant coffee, packed coffee and dairy products; however, products like fresh juice, green detox are sold in very limited number. According to the economics assignmentto reduce the variable cost, these products need to be produced in lesser number or need to be substituted with alternatives so the overall sales can be enhanced through increased sales of added items.

2.3 Cost shifting proposal:
Case organisation in the economics assignmenthas well established supply chain and they focus on the sustainability of the business through providing organic food items. However, this has resulted in higher cost of production for the firm that has resulted in limited profit margin. Moreover, there is higher number of staffs present than required in the store making unnecessary burden on the expenses of the store. To overcome the situation, case organisation can take various strategies. For instance, case organisation can bring in Grab and Go option; doorstep delivery, automated ordering and serving process. Grab and Go option will enable the staff present in counter to shift their focus on taking order and transferring it to the kitchen rather than focusing on continuous order taking and serving. This will enhance the performance of the counter attendant. On the other hand, if the firm in the economics assignmentcan bring in automation in their process, then it can take order in automated way through ordering device presented in table.

Figure 1: Automated ordering and payment mechanism from table
This will reduce the human interference in ordering process and ensure no error is there. Once the order is ready as per the economics assignment, it can be served by the server and bill at last can be paid through automated machine present in the table as well. So, introducing automated process firm can limit the need of human force and thus reducing the cost. Lastly, allowing developing dedicated app for ordering from case organisation can enable it to bring in doorstep delivery option. This will enable higher service in quick time as store will face low rush in visitor count physically.

According to the economics assignmentthis way by reducing the job count done through human interference can lead to smaller cost to company. Also, automated process and bringing in technology can safeguard the interest of the company of turning into a future proof organisation.

3. Competitive strategy proposal:
3.1 Five generic competitive strategies:
Five generic competitive strategies mentioned in the economics assignmentis a tool to determine whether the profitability of a firm within industry is above or below industry average. Underpinning the model, five generic competitive strategies that can be developed for the three beans coffee is as follows:

1) Low-cost provider
2) Broad differentiation
3) Focused low-cost
4) Focused differentiation
5) Best-cost provider

For the low cost, the firm should consider the implementation of automation and reduce the human interference in the business process. For broad differentiation, the firm should rely on the restructuring of product line-up. Products which are sold less, they should be altered with new product line. To enhance the sales as per the economics assignment, firm should consider the low-cost product line so that it can enhance profit through sales maximisation. As the best cost provider in the market, firm should consider the premium product line approach that will enable it to charge high allowing profit maximisation through the price maximisation.

3.2 The 4Cs framework:
For enhancing the sales of the case organisation mentioned in the economics assignment, it is suggested that it should focus on contrast, combination, context and contrast of the product. Using functional drinks firm can enhance its sales of beverages. Ready to drink coffee with whey protein can boost the firm’s image as preservative free health drink provider. Also, ready to drink coffee with plant-based protein can also be introduced that will make the vegan consumers happy.

3.3 Place differentiation:
Three beans café store has exceptionally low appeal to its store as they have lack of dedicated tag line; and the location of the store is far from office or populated area. Moreover, the aesthetics of the store is not particularly good due to lack of decorations. With the rise in the number of social media channels as per the economics assignment, consumers are constantly looking for place which has good aesthetics and nice decoration to put photos on social media handles (Harahap et al., 2022). Thus, the three beans café need to modernise its store with new colour scheme which should dark and light shade. For instance, colour combination of grey and orange can be beneficial which will put great appeal and light colour scheme will give airy feel to the stores. Renting store in much crowded place or near the office area can be beneficial for the firm.

4. Growth, pricing, and non-pricing proposal:
Growth pricing and non-pricing strategies are crucial for the success of a business. For the case organisation mentioned in the economics assignment, it has been observed through physical store visit that it has all the necessary elements to success and have greater market penetration, although it lacks in case of internal and external strategies. To enable the case organisation, enhance more consumer streamlining its strategies, following internal, external and pricing strategies has been mentioned:

4.1 Internal growth strategy:
Internal strategies are those strategies which enables the organisation to streamline its process for enhancing business.

4.1.1 Mobile coffee shop:
To expand the business, using the available resources, case organisation can introduce mobile coffee shop. As per the economics assignmentthis will enhance the reach of the firm to different areas of Sydney where physical stores are not present. Moreover, through introducing mobile coffee shop, new channel of marketing will be there that will enhance the exposure of the brand.

4.1.2 Barista course:
Case organisation mentioned in the economics assignmenthas dedicated barista who produces premium quality coffee and coffee-based consumable. To enhance the cashflow of the store, it can introduce barista course, which will enhance the number if visitors with rise in popularity.

4.1.3 Make feeling of FOMO:
Fear of Missing Out (FOMO) as per the economics assignmentis a psychological situation where consumers fears missing information experience and events compared to peers (Alutaybi et al., 2019). The firm need to create such a brand image that it generated feeling of FOMO among consumers and this way organically, number of consumers will be increased. FOMO does not mean brining consumer putting gun on head, rather it is psychological strategy that big firms like Starbucks uses exclusively. Thus, if the case organisation mentioned in the economics assignmentcan use FOMO strategy, then it can enhance its sales and the number of store visits.

4.1.4 Unique promotion statement:
Three beans has good ingredients to success; however, it has no slogan or dedicated speech that attract attention of the consumers. To bring in success as per the economics assignment, unique promotion statement is required. For instance, promotion statement like “It gives you wings” from Red Bull has enhanced its sales drastically in various regions by grabbing attention from targeted consumers (Stoca et al., 2019). Thus, three beans also need promotion statement that can grab attention of consumers.

4.2 External growth strategy:
External growth strategy are those that provide indirect impact on business performance through controlling external market force. As the external growth strategy of the economics assignment, following can be mentioned:

4.2.1 Multi channel promotional strategy:
Depending on conventional promotional strategy and Word of Mouth strategy is not optimal in present market situation. To enhance a business, firms need to bring in multi-channel promotional strategy that can enhance the reach and exposure of the brand (Herwade&Shendage, 2019). To bring in multi-channel strategy of promotion, case organisation considered in the economics assignmentneed to consider, social media, online platform, digital media and conventional media to promote itself.

4.2.2 Collaboration with third party:
To reach new consumer and larger number of consumers, case organisation can rely on collaborating with third parties that enable multi-channel marketing, lead generation and boosting sales. Through tie up with small cafes in Sydney, firm can reach to larger number of consumers who were outside of the reach of serviceable zone for case organisation.

4.36Ns:
After physical visit of the case organisationconsidered in the economics assignmentstore in Sydney, following changes are also suggested:

4.3.1 New process:
As the store brings in its suppliers from local suppliers and uses only organic products; thus, no change is required here.

4.3.2 New experience:
To provide fresh experience, the store need to be refurbished that will give clutter free experience. Colouring scheme should be changed in light shades and lighting should be enhanced to make the store feel airy and roomy.

4.3.3 New features:
To bring in new feature, store can bring in AI driven tables, where ordering and billing can be done by the customer. Moreover, dedicated app development is also needed.

4.3.4 New customers:
To bring in new customers company considered in theeconomics assignmentcan provide promotional offerings. To grab attention of youth dedicated youth program can be introduced and loyalty program for other consumers can be introduced (Kuncoro&Sutomo, 2018).

4.3.5 New offerings:
Firm to promote itself as superior brand can bring in superior product line that will include instant coffee, espresso, and food items that are sold in high numbers.

4.3.6 New models:
Consideraion of the demographic leadership model where decision making is done based on the two-way communication between employee and management (Lee et al., 2019). This will enable the case organisation considered in the economics assignmentto understand need at grass root level and employees will feel valued leading greater dedication to work.

4.4 Pricing strategy:
Pricing strategy is crucial for success of every business. Keeping price competitive is the primary focus of every brand so that consumer number is increased organically. However, after physical visit of the store, it is suggested that the case organisation should market its products as superior product with premium price. As per the economics assignmentthis will present the firm as a superior brand among the consumers and will fetch middle to high income earners who has high expense potential (Ferreira et al., 2021). This will enhance the revenue of the sales and through price maximisation firm can maximise its profit. A premium product range from the brand with premium pricing can make unique identity of the brand and help it to represent as competitor to Starbucks, Hudson Coffee and Gloria Jeans Coffee which is largest coffee chain in Australia.

5. Other strategies:
Apart from the growth, pricing, non-pricing, cost saving and competitive strategies, there are many strategies that the firm can consider.

5.1 Content creation:
Content is the king of 21st century in case of marketing (Rahman & Thelen, 2019). Three beans café has all ingredients of success in present time; however, it lacks in case of communication, customer engagement and marketing. To overcome the same in brief time and in pocket friendly way, content creation is the best suitable option to them according to the economics assignment. The café chain misses in social media presence at large; it has dedicated page in Instagram only where the posts are not very frequent. Engaging with consumer is less as the café chain in their existing social media handle does not responds to its consumers frequently. To bring in a paradigm change in the model of social media engagement by case organisation, it is beneficial to develop dedicated blog, where it can post on daily basis (Yamin, 2019). As the content, case organisation considered in the economics assignmentcan present video logs or web logs that speak about the people of the organisation, their consumer, their supplier, society, and value creation. Through the blog posting, café chain can connect with its consumers, understand their need and expectation, communication with the stakeholders in subtle way so that funding for future development is there. Moreover, presenting the way of business, spreading the words of employees of the firm to many readers can enhance its social acceptability enhancing the scope of business to gain higher consumer, loyalty from consumer and dedication to work from employees.

5.2 Dedicated app development:
As the second important strategy other than mentioned earlier in the economics assignment, developing dedicated app can be mentioned. In present business world scenario, online existence and serving consumer through dedicated app is important (Shukla & Nigam, 2018). Through developing dedicated app, case organisation can understand its market demand, reduce the cost of opening physical stores at various place, generate higher profit margin and reduce the liabilities to the firm. Though case organisation has dedicated application in Apple Appstore, however, it misses out in case of android. It is unknown why the store has not yet developed dedicated app for android users, however, in true sense it is hampering the business of the store. As 43.01% of the Sydney consumers are android users, not having dedicated app in android Appstore is leading the case organisation to miss out potential consumers (Statista.com 2021). Through app development for the various platforms ranging from android to windows for personal computers, can bring in more user centric data. This will enable the brand considered in the economics assignmentto understand human psychology, consumer buying behaviour and consumer decision making approach in case of buying products from café chain like case organisation. Hence, dedicated app is important and crucial for the success of three beans café.

6. Conclusion:
In this economics assignment, analysis has been done for the Three Beans, Sydney store based on the findings from the physical store visit. Effort has been given to develop strategies for the case organisation underpinning which it can reduce its cost, generate competitive strategy and enhance growth.

Using sustainable blend of coffee from the trusted suppliers and producing exclusive blend of coffee is the philosophy of the Three Beans. The name symbolise the approach of the brand towards food and drinks using on vanilla and avoiding any additives and preservatives.

As per the economics assignmentit was observed that firm has all ingredients to success, however, it lacks in case of the ability to use the same. To overcome the same, it was suggested in the economics assignmentthat firm should reduce human interference in business and bring in automation to streamline process. This will reduce the fixed and variable cost and shift the cost structure to profitability. On the other hand, it was also suggested that developing dedicated app for enhancing demand for the store. Multichannel marketing and content creation through blog posting can be proved to be beneficial for the case organisation. As the internal strength development, firm is suggested to enhance their product price so that it can present it in market as competitor to Starbucks. To conclude in the economics assignment, it can be mentioned that with strict animal welfare practice, three beans is a well-known brand in the targeted market. The café chain provides organic goods and products that has enabled it to move towards sustainable practice in different stage of business process; however, notable market penetration is not there for the brand.

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