Case Study Yuanqiang Pan
By 1996, the Cutbacks mermaid logo appeared on more than 1,000 stores. Cutbacks selected its locations carefully, targeting areas with large numbers of wealthy and highly educated professional workers. Beginning in 1996 Cutbacks embarked on a significant wave of growth by concurrently executing two initiatives which are selling through mass distribution channels and dramatically expanding Its retail stores. With the strong raising competition between 2006-2008, one which Is the Ralston numbers of Independent coffee shops by serving coffee that was handcrafted by expert baristas and one Is that fast food restaurants such as Dunk’
Donuts and McDonald’s had started offering specialty coffee, financial results from the previous quarter were the worst in its history as a public company. Schultz returned to Cutbacks as CEO at the request of the board of directors.
He complemented several improvements for the company, expanding presence in “Away from the Store” coffee, single-serve pod coffee, developing Non-cutbacks branded businesses and acquiring the coffee equipment company. Cutbacks has been successful in constantly pursuing diverse growth strategies despite various barriers in the industry.
However, how can Cutbacks continued to lead its brand toward the Sino of a great, enduring company? Can there be more growth opportunities? 2. Problem Statement The coffee brand Is being diluted by the massive expanding on the menu to the other products. No company can be all things to all people.
Every successful global restaurant chain has succeeded by centering its menu on a handful of core offerings. No other global restaurant chain has abandoned its core product and continued to prosper.
Nowadays in Cutbacks shop, customer could order new gourmet sandwiches, alcoholic beverages, Tavern tea or craft soda, their core coffee product seems gradually becoming an auxiliary choice. . Decision Options: 1) Put more focus on its core coffee product, Increase the sales proportion of the total store sales.
2) Reduce the Increasing of new foods and beverages products, cut the unnecessary or minority consumed products. 3) Explore overseas market, to get more potential customers from like Salsa and Europe. Position statement: Recommended Decision 1) Put more focus on its core coffee product, increase the sales proportion of the total store sales. 5. Proof of Recommended Option / Critique of Options Recommended Decision: Position Statement Reasons: Criteria Evidence Choices overload.
By giving customers more choices, Cutbacks is making decisions more difficult and lowering purchase satisfaction. “Cutbacks Evenings” is now available in 26 cafes, with plans to reach 40 by the end of the year.
The cafes also serve a variety of small dishes ranging in price from $3 to $5, such as bacon-wrapped dates, truffle macaroni and cheese, and flatbeds. A Columbia University study found that people were more likely to make a purchase when offered six choices rather than 30 choices. Participants in the study were also more satisfied with their purchases when they selected from fewer options.
Cutbacks coffee is burned and bitter which is widely reflected by the consumers. Most fine coffee beans should be medium roasted.
Junk beans are often burned, because, once you burn the beans, you can no longer tell what sort of quality they might have had if they had been properly roasted. The fact is, all burned beans taste the same: burned and bitter. Consumer Reports magazine said that in a test conducted at two locations of each emporium, its tasters found McDonald’s coffee to be “decent and moderately strong” with “no flaws. ” On the other hand, the Cutbacks brew “was strong, but burnt and titer enough to make your eyes water instead of open.
Coffee product is more profitable and controllable. As coffee beans are the primary input in the value chain of the industry participants, the prevailing volatile prices of coffee beans determines market costs and profitability margins. The world price of coffee has risen sharply in recent years due to growing demand in other countries and the resulting supply shortages. During the five years to 2018, coffee bean prices are projected to decrease, which will likely translate into lower market costs and higher profitability.
Critique of Options: Good chance to increase the selling variety of products to get more profit.
Cutbacks has stores in some of the most prime and strategic location across the globe. They target premium, high-traffic, high visibility locations near a variety of settings, including downtown and suburban retail centers, office buildings, university campuses, and in select rural and off-highway locations across the world. This has earned them a significant competence and advantage to be able to penetrate prime markets and tap into customers convince factor.
Their stores are visually appealing ND have a ‘cool’ factor attached to it with being designed to reflect the unique character of the neighborhood they serve in and environmentally friendly. They provide free wife, great music, great service, warm atmosphere and provide an environment AT community meeting spot, wanly Torts a wider part AT ten stardust’s Experience’. The main aim for the firm is to make their stores a third place’ besides home and work Growth fast overseas but no profits Operating margins at Cutbacks’ foreign stores averaged 8.
1% last year, compared with 14. 6% in the U. S. During the quarter ended Par. 0, foreign margins narrowed to n anemic 3. 6%.
The company attributed the decline in part to higher operating costs, especially store rents. Cutbacks’ profits are generated by its U. S. Operations, which account for 85% of its $9. 4 billion in annual revenues. 6.
Major Disadvantages of Recommendation: Disadvantage Evidence and mitigation High cost comes with high quality. While Cutbacks does differentiate their products with being highly quality couple with the whole ‘Cutbacks Experience’, in times of economic sluggishness, consumers to have so switching costs to competitor’s products with lower prices and forgo paying a premium.
These premium prices could also pose some weakness for it to succeed in developing countries Self-centralization through overcrowding By aggressive expansion and high saturation due to overcrowding in the market leads to self-centralization and diminishes long term growth targets of Cutbacks. This is happening especially in the United States where Cutbacks operates 8078 stores 7. Major Risks and Responses: 1) Risk: Healthy lifestyle is coming Response: As consumer tastes and lifestyle shift towards more snacks and beverages options, Cutbacks should tailor its menu and expand to give more health rotgut offerings in its mix.
) Risk: Another growth sector is its packaged coffee packets and iced beverage products. Response: Cutbacks should build better relationships with big box retailers to get premium shelf space and increase the efficiency of this distribution channel. 3) Risk: Challenge on get succeed in overseas market with different coffee taste Response: Cutbacks has great growth opportunities in Tea and Fresh Juice products mix. They should build up these products along the same line of their core coffee products in order to meet more demands.