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Strategic Management Project: Coffee Corner Plc

Introduction:

Strategic Management is related to the planning of business and its decision making on improvement of overall performance of the organization.It deals with the improvement and restructuring its business process of organizations operating structure.

‘The systematic analysis of the factors associated with customers and competitors (the external environment) and the organization itself (the internal environment) to provide the basis for maintaining optimum management practices.The objective of strategic management is to achieve better alignment of corporate policies and strategic priorities’.(business Directory, 2011)

This research project seeks to investigate the Strategic performance management of Coffee Corner Plc.

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Specially on its operations of its store. Coffee Corner plc has been introduced to some remote places in United Kingdom by a couple in the year 2005. It has currently 3 operating branches around Scotland. The aimed customers are the people living around the surrounding area to come and socialise. As these places have many houses but not much community gathering place. It is a vastly growing cafe, but due to some strategic operations problem it is lacking its smoothness of running and effecting profitability.

To ensure a good practice and resolve the un-dealt problems, the company needs to look into some ignored fields of it’s operations strategy and also needs to come up with some sorts of innovations to overcome the situation. The situations that has occurred on these branches, which is making the owners change their mind to expand the business any further and might result to shut down some of the stores if its not resolved consequently.

Objectives:

To identify core strategies such as; supply chain management, process layout of the stores operations management by using the process analysis models.
To recommend the solutions for the above mentioned problems.
To ensure maximum profitability and customer satisfaction by providing best available service.
To see the overall service assortment and to recommend accordingly the solutions.
And also to do the cost analysis to see how cost can be reduced for more profitability.

The Current Operations Strategy of Coffee Corner:

The current operations strategy has been developed during its early years, when they had only 1 shop to deal with, but over the ears the business has expanded, but the operations strategy and the suppliers has remained the same. The Operations strategy is shown below on a tabular format:

Figure: Coffee Corner plc Operations System to be reviewed

At the moment Coffee Corner plc is dealing with inventory management by ordering the stock from 3 different suppliers:

1. Sandwiches, panini’s and cakes

2. Milk and beverages

Cleaning products and snacks and takeaway cups and lids.

The orders need to be made to these 3 different suppliers in two different ways, by telephone and by internet.

The customer service is provided by all the workers to the customers by making the coffee and heating up or toasting the sandwiches and panini’s and moreover to clean the tables as soon as a customer left the table and also to clean everything end of the day.

The manager is responsible for the end of the day cash up and also the inventory. In some of the branches, the capacity is becoming an issue as Coffee Corner has monopoly market on the places it opened its branch in; the locals are spending most of their time of the day in there doing socialising.

Projects Operations Strategy Analysis (Explanatory Research):

Cause- and- Effect Diagram:

This is an important aspect of a process analysis that relates the key performance problem to its potential causes. In Coffee Corner Plc there is a lot of time complains about delaying their service and mainly the service is not smooth. The reason for such a problem has bin identified by using the ‘fish-bone diagram’ the factors that lead to the identified problem. The step which needs to be followed to get a perfect cause-and-effect diagram, are:

1.Identify the problem:

In this situation, the identified main problem is that the service is not running smooth as it should be for any service based business.

2. Work out the major problem involved:

The major problem is that the whole process layout is in a chaotic situation, that leads the staff to reduce their efficiency and also the problem to provide their full attention when the customers order.

3. Identify possible causes;

The possible causes are the complex layout of the service unit which is not aligned properly with the needed materials; also the problem lays training by the manager and the supervisor which provides inefficient training of the person to be around the till. The other problem is that the built in Speakers are near the till where the staff needs to hear what the customer wants clearly, but they can hear more music, instead of the customers, resulting to present wrong product. Such as instead of Bar of chocolate they sometimes provide hot chocolate, that causes wastage as well. So it is causing problem for their attention. And if the music is put down, the customers all the time asks the staff to put the volume up as they love the buzz in the quiet place where they are from for a change. The coffee machine sometimes breaks down because of the over pressure, so the owner was not sure about the capacity or demand of amount of coffee or hot beverages that leads the machine to break down very often. Also the space in the cafe is not enough, for the stock they need which causes chaos during delivery of the product, which is during the busy hour of business.

4. Analyse your diagram:

The diagram is below and it has on the fish bone head its main problem which is ‘No smooth running Service’. The fish bones are separated in few major elements such as the machine, staff, process and the inventory and also the weather sometimes causes problem for the process to be slow. As the out side sitting arrangement is done with some chairs with cushions, so whenever it rains, the cushions needs to be brought in no matter how busy the staff are, this also created delay to the service.

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Figure: Cause-and Effect Diagram (fish-bone Diagram)

Supply Chain management:

Supply chain management is the management of relationships and flows between operations and processes. Technically, it is different from supply network management, which looks at all the operations or processes in a network. Supply chain management refers to a string of operations or processes. However, the two terms are often used interchangeably. Many of the principles of managing external supply chains (flow between operations) are also applicable to internal supply chains (flow between processes). (Slack et al, 2006).

The supply chain management produces internal relationship between the process as well as the external relationships of the operations. It is concerned with the flow of the information as well as the flow of the products and the services, the some work it relates to is shown

below as a list:

• Long-term plans and requirements

• Market research information

• Individual orders

• Payments types

• Potential new products and services

• Overall products and services

• New products and services

• Delivery information

• Payment request/Credit (Slack et al, 2006)

Supply Chain Management for Coffee Corner Plc:

The supply chain management of Coffee Corner Plc is done according to the planning of the owners from the year they started. The supply comes from 3 different suppliers. First, they have to place the order as they forecast the requirements. It is done by seven days of the week. The supple is done 6 days a week, apart from Monday. The orders are made by the store managers every 6 days a week in the morning and to do the order has to be done to 3 different suppliers. Only one supplier takes the orders by the internet and the rest of the three suppliers take the orders by the phone. Then the orders are delivered to the each of the stores an hour before the closing times and they are counted and sorted by the manager or in his absence by the supervisor of the store. Delivery charges are separate as the suppliers are separate, so 3 different delivery charges are needed to be paid from petty cash. The orders which are made by phone, needs to be done by using the unique codes of each of the products and also the quantity. The internet order is reasonably easier to make.

The stock room is on the top floor of the store and then the milk, cake, take away cups and the cleaning products are first taken up to the stock room for the stock count and then it is brought down to the store after the delivery check. The stock check is done on every Monday evening and the total stock is counted apart from the same day delivered stocks. Then a note is made and it is filed for the record, also the missing amount of stock is recorded for further investigation on it.

The store also pays a huge amount of insurance for all the three different suppliers that bring in the products. It was done for the safety of the product to be supplied as if there is any accident or emergency of the product not arriving; the supplier has to deliver it on any other means. It was done to make the business unharmed in case of an accident and emergency issues.

Process Design:

Process design is concerned with conceiving the overall shape of processes and their detailed workings. The first of these tasks (conceiving the overall shape or nature of the process) can be approached by positioning the process in terms of its volume and variety characteristics. The second task (conceiving the detailed workings of the process) is more concerned with the detailed analysis of the objectives, capacity and variability of the process. (Slack et al, 2006)

There are different ways in which the different resources within a process (people and technology) can be arranged relative to each other. But however this is done, it should reflect the process’s volume–variety position. Again, there are pure ‘types’ of layout that correspond with the different volume–variety positions. These are fixed position layout, functional layout, cell layout and product layout. Many layouts are hybrids of these pure types, but the type chosen is influenced by the volume and variety characteristics of the process. (Slack et al, 2006)

Process layout for Coffee Corner PLC:

The layout of the workstation of Coffee Corner is not sequenced with the job design.

Figure: Coffee Corner current workstation service layout

The layout of the whole workstation is very much chaotic. The coffee machine and the coffee and milk in the fridge are far apart from the coffee machine. The Ice machine for the cold drinks is not by the cold drink blender. The till is by the coffee machine, and it helps the person who makes coffee to know straight away what coffee the customer wants straight away. But the Coffee and milk is not located near the coffee machine, so it is a bit time consuming for a busy coffee shop like Coffee Corner deals with such a non practical lay out of the work station. Especially when there is 3 people during the busy time to work and 2 person is responsible to open and close together for the security. The owners planned the lay out by them selves as they have some previous experience of building before coming to this Coffee shop business.

The Identified Problems of the Organization:

The problems have been identified in the cafe are mainly 2 different ones:

The supply chain Management system
The Service layout
The Supply Chain Management Problem:

The supply chain is a big problem in this service.

Suppliers: Specially the three different suppliers and for this is the delivery charges are 3 times more and also the 3 different insurances. The suppliers are more laid back and demanding for their service they provide. The quantity of the products is for all the 5 branches and all these suppliers’ needs to supply them on basis of the first order first delivery provided.

Delivery Charge: Delivery charges are different for each of the suppliers and the money going out is three times from the each shop for the deliveries. Though the delivery charges are fixed as the amount ordered are as not big for each of the branches, but very costly.

Insurance: Insurance needs to be paid to all the 3 different suppliers and the rate of insurance are very high.

Ordering Process: Ordering process are different for each of the suppliers. Two of the suppliers still prefer Telephone orders and by the product code and quantity not the product name, this tends to be a real waste of time.

Stock Taking: The stock is taken in to the upstairs on the arrival and then counted there before bringing them down to the store. So it also takes time.

Stock Counting: Stock counting is done by a very old fashioned way even it is very time consuming for the Managers and the business as it takes time to do them manually.

2. The service Layout Problem:

The service lay out is causing a big chaos for the workers and it is causing a huge disruption from a smooth process to carry out the service. The whole machinery and service facilities are layered on a very chaotic order that reflects the unprofessional system to the business. Because of this the whole quality to the service is being affected and also the time is being wasted. It was not a big problem before, but as it is a sole coffee shop in these remote areas the locals are buzzing in more and more and the layout that causing a huge disruption to the overall service quality and time is reflecting brightly.

This is also affecting the outside tables and chars where the chairs are cushioned and needs to be removed during rain and that is quiet common work for the workers in there to remove them. Even when its busy and people are queuing up. The cushions are not needed nowadays as the business has already made a booming profit despite of the problems. But if the outside sitting arrangement is done in more practical way, then the whole business will be more efficient when it comes to provide a service.

The staffs work in the cafe without any proper job description apart from the managers. So they are sometimes clueless on what their duty is. Specially recently some old workers left so the new people have not been trained on basis of what they should do on the busy period. This is due to the training problem and also the workers gets only 10% off the food price and they can’t effort to buy it always as it is a bit costly and also there are not many shops around the place they opened each of the branches, so if the workers do not bring their own food, thy have to pay a lot of money compared to their wages. (Apart from the Manager as he gets commission for the rise of the sales)

Conclusion:

Innovative Recommendations:

Corporations must be able to adapt and evolve if they wish to survive. Businesses operate with the knowledge that their competitors will inevitably come to the market with a product that changes the basis of competition. The ability to change and adapt is essential to survival.

Today, the idea of innovation is widely accepted. It has become part of our culture – so much so that it verges on becoming a cliche. For example, in 1994 and 1995, 275 books published in the United States had the word ‘innovation’ in their title. (Trott, Paul 2005)

Here the company is doing okay to survive its position in the market because of their location and the monopoly market they are having, but it needs to be bared in the mind that this might not last forever. The planning needs to be done for the future. So to change the business strategy is very important.

Here is some innovative recommendation for the business:

The Supplier needs to changed to one instead of the 3 different suppliers, it will save time for the people involved to make the orders and also it will save the charges for the insurance and the delivery.
The orders needs to be made by internet as there are less likely to have a mistake and it will result saving the time, saving the cost and enhancing the quality.
The delivery charges should not be taken from ‘Petty Cash’ it should be invoiced. So more professionalism is required.
The service workstation layout needs to be relocated to the places so that the coffee and fridge with the milk will be handy for the person making coffee, the display unit should be by the till, so that the person on the till serving customer, will provide the customer with the cakes and sandwiches right on time. And also the panini grill needs to be places near the till so that the person serving does not forget about the panini. And the coffee Machine should be close or opposite to the till for the Barista (The person who is trained to make coffee) to see the orders straight away without delaying or asking.
The dishwasher should be near to the exit of the work station for an efficient loading and unloading for the people who cleans the table and loads the dishwasher.
There should be stock counting and internal connections e-procurement system for the benefit of storing the stock accordingly.
The outside chairs should remove the cushions for all seasons comfortable sitting without staffs to run out when its busy inside.
The Staff should be trained properly to deal with the busy business environment.
There should be more discount for the staff as it will help the stuff to work better if they fuelled themselves properly and also to reduce the chance of stolen food products by the staff. This will save the unseen cost for the business.
The speakers needs to be relocated so that they are not around the till and does not distract the customers and also the workers during the order taken from the respected customers.

Suggestions on Cost analysis:

Savings of delivery cost:

As there were three different suppliers,

Supplier 1: Sandwiches, panini’s and cakes
Supplier 2: Milk and beverages
Supplier : Cleaning products and snacks and takeaway cups and lids.

The delivery cost: Supplier1: ? **.**

Supplier2: ?***.**

Supplier3: ? ***.**

Total: Delivery Cost ?***.**

Whereas Only one Supplier Delivery Cost: ?**.**

As it is known when you order big amount of things from the supplier, a bulk discount is received. Same way goes for the insurance and other cost.

Savings of Insurance Cost:

As there were three different suppliers,

The delivery cost: Supplier1: ? **.**

Supplier2: ?***.**

Supplier3: ? ***.**

Total: ?***.**

Whereas Only one Supplier: ?**.**the saving of insurance will be high as well.

Saving on long run:

The new layout will enhance the work efficiency and will provide a rich service so the cost here will be an investment for a long term.

It can be understood that from a service based organisation like Coffee Corner Plc, the service layout is very important for service efficiency. When supply chain is concerned; its efficiency results time savings as well as profitability.

Overall the great Formula needs to be kept in mind at all times to manage the business strategy: they are;

Passion: Passion for business.
Taste: Taste is important so Quality of food and coffee needs to be emphasised on at all times.
Positioning: Location of the business and the service layout for efficient service needs to be considered at all times, when opening a new store.
People: Good enthusiastic staff with motivation is necessary for any service oriented business. So the parks and wages needs to be considered accordingly.
Marketing: Marketing is key to drive loads of customers in to the store.
Systems: System of everything needs to be considered. Such as; staffing system, cleaning rota, opening and closing routines, food production and rotation system, supply-chain systems and cash procedures.
Money matters: to budget things and make sure to keep proper accounts of all sorts of costs and profit. Have a good communication system to have all the accounts of the day to day process can be recorded and revived when needed. (Richardson and Gilmartin,2010)

Reference:

Business directory (2011) Strategic Management

http://www.businessdictionary.com/definition/strategic-management.html

[Access Date: 12-04-2011]

Mind tools(2010) Cause and effect Diagram

Website: http://www.mindtools.com/pages/article/newTMC_03.htm

[Access Date: 10-07-2010]

Slack et al: 2006, Operations and Process Management: Principles and Practice for strategic impact, 2nd edition, Available from: http://lib.myilibrary.com/Browse/open.asp?ID=207106&loc=v

pg. 210-215, 109-115

Trott, Paul: 2005, Innovation Management and New Product Development, Pearson Education UK, Available from: http://lib.myilibrary.com/Browse/open.asp?ID=60150&loc=Cover 10 July 2010

pg. 5-14

Richardson, Gilmartin: 2010, Setting up and Managing Your Own Coffee Bar, How to Books Ltd UK.

Pg. 40-171

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