Strategic Management for Entrepreneur Research Paper

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Strategic Management

I definitely have the personality, skills and goals to be an entrepreneur. The entrepreneur requires both functional and managerial skills. Since the entrepreneur is responsible for all aspects of the operations, he/she must have a strong working knowledge of each different business function. In addition, the entrepreneur must have a distinctive competency in the business venture that is being launched.

The personality of an entrepreneur emphasizes hard work and determination. Entrepreneurs must be prepared to forgo sleep and comfort while they build their business. In many cases, owners are unable to withdraw money from their company for the first year or two. There are going to be numerous roadblocks as well, from government regulation to competitor response. I have the perseverance of an entrepreneur and the drive to push through the difficulties, the roadblocks and the naysayers.

B. The business idea I have selected is a third wave coffee shop. The coffee shop concept has proven its value to the American consumer. However, the marketplace is relatively saturated. This necessitates a degree of differentiation in order to be successful. The so-called "third wave" concept is one that arose in the Pacific Northwest -- especially Seattle and Vancouver -- and has spread throughout North America from there. The concept has a solid value proposition -- the price points are about the same as the major chains, but the product is substantially better.

The coffee offering will follow Michael Porter's differentiation strategy. Coffees will be made with the best beans available, even if they must be shipped from a roaster across the country. The coffee lineup will feature single-estate coffees, organic coffees and seasonal coffees. The experience to the coffee drinker will be akin to a brewpub or winery, with multiple high-end options available showcasing a wide range of flavors, aromas and textures. The espresso will be made on a top of the line machine, as opposed to the major chains which do not use proper espresso machines.

The service offering will be aligned with the product offering. The atmosphere will retain the typical "coffeehouse" comfort, but the music and artwork will be to a higher standard -- more creative and more eclectic. The food offerings will be entirely made on site, from scratch -- no baked goods made off-premise. The end result will be a superior experience at a price that customers are accustomed to paying for a mediocre experience. This will help to draw in customers from competitors in the immediate area. It will also draw customers from a wider catchment area than a less differentiated coffee shop.

C. The TOWS matrix is an extensive of the SWOT analysis, whereby the opportunities and threats of the firm are matched up against its strengths and weaknesses (Weihrich, no date). The first step is to prepare an enterprise profile. In this case, the coffeehouse is located near campus. There are three other coffeehouses in the area, but the population base in substantial. Lines are common at each coffeehouse during the peak morning rush. The top management is oriented towards the differentiation strateg.

The second step is to analyze the external factors. The economy is struggling, which means consumers either want cheaper coffee or better value for their good coffee. Socially, there is a substantial subset of consumers are interested in improving the quality of their food and drink. There are no political barriers to opening a coffeeshop, other than the basic food safety laws. Demographically, the neighborhood is large enough to support another coffeeshop. The student market is sizeable and most of them are willing to spend, as great coffee is an affordable indulgence. Among adults, however, the reverse is true, at least at mass-market coffee chains. In terms of products and technology, third wave is at the fore of new developments in both of these, from high-end espresso machines to single estate beans. Competition is moderate. The other coffeehouses are not particularly vigorous with new entrants, as there appears to be more than enough business to go around.

The third step is to prepare a forecast. For our coffeehouse, we expect to do approximately $400 per day in business, which is derived from an estimated 100 customers and an estimated average ticket of $4. There will be only incremental growth, given the location of the store. We expect to maximize customers at around 150 per day by the end of year two. The fourth step is to audit
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the firm in several key areas, which we will not be able to do during the business plan stage. Step five is to develop alternatives. The company could probably make a go as a regular coffeehouse, but it is felt that the added attraction of third wave coffee will expand the market somewhat. This plays to management's strength on the product side. Another alternative is to enhance our offering by hiring professional help for the kitchen. Our food is a weakness, but this can be turned into an opportunity if our food can best that of the competition. The choice made is going to be to capitalize on the growing interest in quality food and drink, the demographics of the area and the fact that the coffee business seems to be underserved to proceed with the third wave cafe.

D. There are essentially two sets of potential customers. The first set is students. This group will drive the business through the day and evening hours, traditionally weak periods for third wave cafes. This group does not have the wealth of the ideal target market, but is more apt to support our local, high quality business. Our shop will appeal to their counterculture views and will cater to their desire to have free wireless Internet. We will attract this customer through the physical space, which will be sufficiently comfortable so as to feel like a home away from dorm.

The area's adult population is well-educated and ranges from middle class to wealthy. This is the core target market for the morning rush, which we hope will drive half of our sales. Adults in this population are often early adopters or part of the early mass market. This audience is important to the growth of the shop as well, since they will spread the gospel through word of mouth. This effect is not as strong with students because of their limited time in which they will be in the area and therefore will be our customers.

E. The product will be the cornerstone of the experience, but it will not be the only aspect that makes up our offering. We will bring what is essentially an enhanced version of the coffeehouse concept. The music will be more underground, at time maybe have more edge. The food will be of higher standard than that of our competitors. We will also pay keen attention to the in-store experience. Coffee is a habitual product. The key to success in the industry therefore is to engender repeat business. The product is an important component, but the other is service. The customer experience must be superior to what they will receive at the competition.

Creating an experience worth getting hooked on is one thing, but for the business to succeed we must bring people through the door in the first place. With product already taken care of, and pricing at the same level as our competition, this leaves two of the four P's of marketing. The first is place. The coffeeshop needs a location that meets a number of criteria. One is high visibility -- it must be in a high profile area so that the target market will learn of its existence quickly. The second criterion is that it must be in a densely populated area, because this will determine the amount of traffic from the neighborhood. Although the shop is expected to draw from a wider area, it must have a local fan base in order to succeed. The third criterion is that the location have high foot traffic, as this will help to draw in customers. We would ideally combine this with a relatively low month rent.

The final consideration is promotion. Recognizing that we are offering a quality product that is habit-forming, we want to encourage our potential customers to form that habit. To this end, we will offer a promotion whereby every drink purchased entitles the purchaser to a second drink. The catch is that the second drink must be purchased the following day, by the purchaser. This will encourage return visits, and hopefully form the habit, thereby building a core group of customers.

F. Financing help for the venture will come from a variety of sources. There is some family money available to help support the venture. Personal savings will also be used. This may extend to credit cards as well, but bank loans and equity sales are impractical for the purposes of this stage of the business launch. It may be possible to secure a bank loan, but this is not…

Sources Used in Documents:

Works Cited:

Morkides, Alisa. (2008). Coffee's Third Wave. Delaware Out & About. Retrieved April 17, 2009 from

Weihrich, Heinz. (no date). The TOWS Matrix -- A Tool for Situational Analysis. University of San Francisco. Retrieved April 17, 2009 from

No author (2009). Frequently Asked Questions about Opening a Coffee Shop. Bellisimo. Retrieved April 17, 2009 from

No author. (2009). Choose Your Location Based on Value, not Price. Cafemakers. Retrieved April 17, 2009 from

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