Cup Cake Business
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Our mission at Blue Cream Cakes Investments is to make social functions tasty, creamy and sweet experiences to both confectionery and passive consumers of the same. We pride in delighting cup cake enthusiasts with high quality products taking into consideration a variety and customized brands to satisfy a wide range of customer preferences. With our detailed survey report concerning the rising number of both active and passive confectionery fans; who would not mind having tasty but cheaper confectionery to match those moments of celebration, we intend to reach out to them at all convenient venues to satisfy their needs.
Four years from now, Blue Cream Cakes Investments will be one of the best suppliers of cheap but quality confectionery especially cup cakes within the country with a fully satisfied customer base. This should translate to annual revenues of over one million by being consistent in timely delivery, reasonably priced products and organizing thrilling events for both active and passive confectionery enthusiasts. This should boost the society’s interest in Bakery through encouraging more of the population to shift from passive to active confectionery enthusiasm.
Executive Summary; management strategy
The Blue Cream Cakes Investments is a small business venture that operates in the university. The venture is in its pilot state and run by Shneda Edgar an all round Confectionery enthusiast. He is an experienced Baker of quality cup cakes and other confectionery both as a hobby and occasionally provides upon request services to match specific occasions within the institution and interested external clientele. He is familiar with the city’s community festivals and seasonal needs and has an advantage of an intensive network of all events within and around the institution.
The current target market has no serious competition basing on a study that clearly indicates that no individual or institution had seriously considered institutional celebrations within the city except for the beverages and brewery industry (Cohen, 2006). This is with respect to their short notices and our need to market our Bakery’s quality product with minimal advertisement costs. The niche is cut by the fact that consumers only consider a variety in confectionery long after confirming the price levels with regards to the quantity, size and quality on confectionery. Provision of cheaper but excellent quality cup cakes should encourage more active consumption thus an enlarged consumer market. This can also be seen as a forum of offering excellence personal training for confectionery enthusiasts the opportunity for good cake sampling techniques. Therefore they will be able to differentiate our quality products from other available products from possible competitors thus build on brand loyalty (Kennedy, 2000). Through provision of high standards of staff training within the city, Blue Cream Cakes Investments intends to command personalized customer attention at an affordable price hence a great business opportunity (Kennedy, 2000). The director has secured a central location in the city for easier correspondence with external customers. This should provide a collection point easily accessible from any part of the city through all available means of transport. Proper shop layout combined with Student’s knowledge and interest should make Blue Cream Cakes Investments a worthwhile and profitable venture.
Situation Analysis (SWOT)
Blue Cream Cakes Investments is a start-up business currently operating at a low level thus marketing is an integral aspect in its prosperity and subsequent financial gains in high revenues (Cohen, 2006). The venture provides a wide variety of confectionery with specialization being in cup cakes, randomly for new customers and on order placement by existing customers. The basic demand of the market is top quality and reasonably priced cup cakes for all round celebrations. Blue Cream Cakes Investments through extensive market research has information about common desires of the market base which consists of busy customers either studying or working that have serious time constraints to purchase desired confectionery. This is reiterated through our existing loyal customers hence Blue Cream Cakes Investments intends to take advantage of this knowledge to fully exploit the untapped customer bases through expansion plans which includes door to door marketing and delivery networks.
The acronym SWOT stands for Strength, Weaknesses, Opportunities and Threats within any existing competitive market (Debelak, 2000). Our analysis highlights key strengths and weaknesses and further indicates threats and opportunities Blue Cream Cakes Investments is likely to face.
- A strong working bond with suppliers and producers of ingredients which enables us to meet our orders in good time.
- Exceptional location which is more accessible through all mode of transport in the city (Kennedy, 2000).
- Properly trained staff members in customer service that are trustworthy and highly efficient in meeting deadlines, thus ensuring a huge chunk of our income comes from repeat business.
- Blue Cream Cakes Investments has a limited financial outlay to meet branding requirements which is important in our expansion program.
- It is costly to acquire quality cooking equipment used in mass baking and also train more employees with regards to our current target market.
- An expanding market that is significant in terms of our financial projection that has limited knowledge about Blue Cream Cakes Investments existence.
- An increasing number of the city’s population that are constantly hosting celebrations and social occasions with restricted and low budgets.
- There is a high profit margin with considerably static costs which makes it easy for budgeting and operational planning.
- Stiff competition that originates from web based companies who offer constant discounts.
- Struggle in always having fresh products for the expanding market.
The venture intends to provide a wide variety of confectionery products which should be able to address most if not all the customer needs. We intend to also have communication options through our website whereby our customers can input their order specifications in good time for maximum satisfaction of their needs to be achieved. The store will be open for reasonable and fluctuating extended hours suitable for any prevailing social events. Further accessibility will be enhanced through our website for special delivery considerations. We intend to maintain and improve quality standards and from time to time provide extra magical moments to our customers through bonus gifts and surprise prizes (Cohen, 2006). Apart from the normal profit pricing factors, our products will be priced according to the celebration atmosphere in the specific times of the annual calendar. This is a unique way of considering emotions in pricing thus a sure point of attracting and retaining clientele.
The prevailing trend in the confectionery industry is to acquire quality products at a good discount. Blue Cream Cakes Investments has the ability to exploit this because whether new or existing clients, we will provide for extra and free supplies basing on economies of scale that can generally yield high profits at any reasonable discounting rate.
At the moment there exists no known serious competition within the city. The bulk of competition arises from scattered general traders who do not specifically bake their own products but retail for other bakers existing outside the city. The competition further deals in bulk consignments that are majorly composed of products suitable for large scale consumption by institutions and large scale dealers like super stores. These products are mostly of uniform nature and luck much in diversity to suit the highly varied customer base in terms of taste.
Marketing Mix Elements: Pricing
Blue Cream Cakes Investments intends to minimize expansion costs by selling through the consignment contracts whereby we will partially collect ingredients and only pay suppliers after sale of final products. This will fluctuate with the market demand. With proper savings and business establishment, we intend to also deal in a few beverage products to further address any new needs of our existing and most prized customers. Basing on our existing city’s consumer base, our positioning in the market will highly rely on excellent customer care that will deliver quality cup cakes that are not common in the city. This is strengthened by the fact that our niche is not explored extensively and our pricing is negotiable between us and the suppliers and might change due to prevailing circumstances in the market. The consignment contract of ingredients gives us room to cover from any financial setbacks in the market hence only pay for storage before considering our suppliers.
As discussed, our startup business has two major pricing objectives which include:
- To increase our customer base from the university by taking care of other city dwellers too thus increasing our market share.
- To increase the quantity in sales volume as we target a larger market share.
Pricing constraints are those factors which hinder or control our process of setting prices (Debelak, 2000). These factors introduce boundaries and other limits which we have little or no power to decide against them. Some of the possible pricing constraints are:
- Customers demand will be a major determinant of the set prices because if it goes up we will raise our prices and if it goes down, cup cakes being perishable, we will have no choice but to lower prices in order to move sales volumes and avoid loses.
- Our Break-even point will determine our least price even in the wake of lower price demands by customers. The customers sometimes determine the price ceilings basing on prevailing market prices in the same industry. This will also affect any additional costs absorption incurred for quality thus controlling our pricing.
Our 3 possible sales prices per unit will be; 1, 2 and 3 dollars. The variable cost per unit is 0.5 dollars. The total fixed expenses are 100 dollars. Break-even point can be computed by finding that place where the total sales are equal to the total costs of sale and therefore neither profit nor loss is incurred (Cohen, 2006).
Therefore: Sales= Cost of sales.
Sales= Variable expenses + Fixed expenses+ profit
Sales @ 1 dollar/unit
Sales @ 2 dollars/unit
Sales @ 3 dollars/unit
1Q= 0.5Q+ 100+ 0
1Q- 0.5Q= 100
Q= 100/0.5= 200 units
2Q= 0.5Q+ 100+ 0
Q= 100/1.5= 66.7 which is 67 units.
3Q=0.5Q+ 100+ 0
Q= 40 units.
Graphical Representation of the 3 break-even points
Basing on my diagram, the fixed cost (F. C) is at $100 at all production units. The variable cost (V. C) is worth half a dollar for each unit. Therefore Total cost (T. C) curve is a combination of the F.C curve and V.C curve. It should be noted that the V. C is constant thus at the breakeven level for the:
- $1 sales price per unit, the value of total cost will be; $100+ 0.5Q.
Q = 200 thus T.C= ($100+ 0.5*200).
T. C= $ 100+$ 100= $200. Therefore for $1 price per unit, the BEP will be at the 200 units of sales and $200 sales value. The BEP is at P1.
- $2 sales price per unit will yield a BEP at 67 units of sales and a sales value of ($100+ 0.5*67) which is $ 133.50. The BEP is at P2.
- $3 sales price per unit will yield a BEP at 40 units of sales and a sales value of ($100+ 0.5*40) which is $ 120. The BEP is at P3.
In case the prices adjust reasons being demand, cost, profit or competition oriented, the only way to stay ahead is to ensure we either minimize our expenses/costs or increase our profit margin thus our break even points will shift to the right side but upwards meaning an increase in sales volume but a decrease in prices. Discounts, allowances and geographical adjustments call for an increase in sales volume too, so as to carter for any dip in our current profits thus the BEP will shift to the right but upwards. Therefore my new prices will be:
Sales @ 0.6 dollar/unit
Sales @ 1.8 dollars/unit
Sales @ 2.6 dollars/unit
0.6Q= 0.5Q+ 100+ 0
0.6Q- 0.5Q= 100
Q= 100/0.1= 1000 units
1.8Q= 0.5Q+ 100+ 0
Q= 100/1.3= 76.9 which is 77 units.
2.6Q=0.5Q+ 100+ 0
Q= 47.6 which is 48 units.
Basing on the change in environment considerations, our final price will be at $1.8 per unit.
The purpose of Blue Cream Cakes Investments marketing plan is to guide the venture into profit maximization and customer satisfaction hence proper monitoring of Revenues and expenditures on a monthly and annual basis.
Blue Cream Cakes Investments new market segment and small scale start up does not enable it to have constant financial projections but with the expansion vision we intend to establish a permanent finance and budgeting department. We have consequently established an office space in the City centre fully equipped with the resources to seriously embark on all our departments this year.
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