Monk Coffee Case Study

Review Case One: Mystic Monk Coffee

Father Daniel Mary, the prior of the Carmelite Order of monks, would like to purchase a nearby ranch to expand the monastery. Father Daniel Mary would like to know if the monastery’s Mystic Monk Coffee business is capable of generating profits to help raise money for the sell.
Mystic Monk Coffee is a small internet based business created by the Carmelite Order of monks in Clark, Wyoming. The small coffee bean company sells whole coffee beans and ground caffeinated and decaffeinated varieties via a website primarily targeted to Catholic coffee consumers. In addition to coffee beans, Mystic Monk Coffee sells coffee accessories. Let’s begin by examining Mystic Monk’s current financial performance at the conclusion of the first year in operation:
Monthly Sales
$56,500
Cost of Goods
(Cost of sales 30%)
(Cost of inbound shipping 19%)
(Broker fees 3%)
52% = $29,380
Operating Costs
37% = $20,905
Profit Margin
11% = $6,215
Annual Sales
$678,000
Annual Profit
$74,580

MMC’s financial performance shows the company was profitable in its first year of operation with a net profit of $74,580. The next step, in order to evaluate the company to determine its profitability, and future earning potential, is to examine the company’s current business model.

Based on the business model, the customer value proposition is vulnerable. According to Gamble (2015),
The customer value proposition is established by the company’s overall strategy and lays out the company’s approach to satisfying buyer wants and needs at a price customers will consider a good value. The great the value provided and the lower the price, the more attractive the value proposition is to customers. (Gamble et al., 2015, p. 3)
MMC’s strategy for to gain a competitive edge is a focused differentiation strategy. The small coffee company concentrates on a narrow buyer segment, a market niche, as they target Catholic coffee drinkers. Usually, this strategy would concentrate on offering customized attributes that meet the tastes and requirements better than rivals’ products (Gamble et al., 2015). This strategy is suspect because the coffee company is not offering a customized product; however, they are a unique organization that appeals to a group of followers that may feel a spiritual obligation to patronize MMC. The weakness in their strategy is they may not retain customers and get repeat sales since some customers may consider their first order a donation and an obligation. Since MMC is appealing to a niche market, repeat sales are crucial to their long term success. To explore the strategy further, to determine if the current strategy qualifies as a winning strategy, the three tests of a winning strategy outlined by Gamble et al., (2015) will be applied. (1) How well does the strategy fit the company’s situation? The strategy may fit the short-term goal of making a profit. However, the strategy does not support a long-term goal of increasing profit margins to generate resources to buy property. (2) Is the strategy helping the company achieve a sustainable competitive advantage? The strategy does not ensure MMC will gain a competitive edge over competitors for more than a short period of time. (3) Is the strategy producing good company performance? There is not enough evidence to answer this question with any conviction. However, based on the current strategy, it is unlikely MMC will make gains in profitability and financial strength, without a major change in strategy. Therefore, based on the three tests, MMC does not have of a winning strategy. Recommendations to Father Daniel Mary, would be to consider investing the $250,000 donation and the $75, 000 profit to expand operations. Purchasing the larger roaster and hiring a small staff that has not taken an oath to dedicate their life to prayer and worship would be the first recommendation. The next recommendation would be to alter the business plan to market their coffee to attract a larger customer base highlighting the quality of the coffee produced and the benefit to consumer’s personal health. Marketing to all coffee drinkers and highlighting the quality and personal health benefits should increase revenue generation and increase the chance of repeat customers. Next, Father Daniel Mary should determine how much profit MMC needs to generate to purchase the nearby ranch, then consider ways to reduce costs of goods and operating costs to increase the profit margin. Personally, this assignment pushed me to look deeper into the strategy to determine if a strategy had the necessary elements to gain a competitive advantage. The three tests of a winning strategy was also beneficial. Furthermore, the exploration of the business plan increased my knowledge of how to breakdown a business plan to evaluate the components to determine feasibility to meet short and long term goals.

References
Gamble, J.E., Peteraf, M.A., & Thompson, A.A., Jr. (2015). Essentials of strategic management: The quest for competitive advantage (4th ed.) New York, NY: Mcgraw-Hill Education

References: Gamble, J.E., Peteraf, M.A., & Thompson, A.A., Jr. (2015). Essentials of strategic management: The quest for competitive advantage (4th ed.) New York, NY: Mcgraw-Hill Education