Report On Case Study
Magic Muffin Company is a case of a small institution in the food industry located at the Newport harbor. The company operates during summer, a time when the population of the people visiting the harbor triples. The organization has seen great financial growth since its inception, although it operates at certain periods of the year. The owner of the business, a renowned person in the food service industry intends to expand the business to other areas to create more market for the products. The owner hopes that the success that the business has shown in the current location will replicate to the new location, although with a few more inputs in terms of finances and marketing. Currently, the organization prides itself in being the only shop at the Newport harbor that offers muffin as the primary product. In this connection, this paper will seek to determine the viability if the muffin business opportunity at the inception of the idea and in the next five to ten years. Further, the paper will seek to determine if the Newport harbor store provides ideal opportunity and return on investment to the business owner.
The muffin business opportunity is quite viable based on the current trends and the future projections. The nature of the market is point worth of consideration while evaluating the viability of a business idea. Muffins have a wide variety of consumers who are willing to spend on quality products. Muffins are readily available products and their fair prices make them a center of attention for many people. The potential market size for muffins is enormous, especially at the harbor where the population quadruples during summer. Almost all the people in the world are potential muffin consumers; therefore, a rise in the number of people frequenting the harbor makes the business idea viable (Guo, 2012). Further, muffins are part of the impulse buying products; therefore, as long people see them, the market is bound to grow. According to the business analysis report, the business did pick up quite well with many consumers flocking the magic muffin company’s premises.
However, muffins are junk food, something against which nutritionists are constantly cautioning people. Therefore, it makes it hard to determine the viability of the business in five to ten years in a world where people are so conscious of their health (Down, 2010). Women are the major consumers of muffins and with the notion of body weight management it is hard to predict the future of fast food stores around the world. Health diet propositions make the business opportunity unviable for the future.
The trend of the market is another issue that makes the muffin opportunity viable at the time of the business conception. The market is constant in the sense that every summer, people will always increase at the harbor. The stability of the market makes it possible for the businessperson to estimate effectively the financial gain that each summer season is going to raise. Business predictability is an essential factor to consider while setting up a business (Kamoroff, 2011). It allows the owner to estimate the risk factors and develop contingency plans in the worst-case scenario. The market is growing as well because every summer period is characterized by an increase in the number of people visiting the harbor. The growing market places the business at an ideal phase of growth, hence a viable idea.
Competition for the business is quite low, especially at the harbor because none of the stores selling muffins makes it a primary product. As such, magic muffin has an ideal opportunity to market the product and produce high quality products by focusing on the muffins only. Additionally, the two stores at the harbor selling muffins are rather small, thus reducing the competition to a manageable situation. The two shops cannot effectively serve the population of the people visiting the harbor in the summer, thus creating a business opportunity for magic muffins. The food service industry has very low entry limitations because the industry is characterized by fragmented markets of manufacturers and retailers. Any people with the right expertise can survive in the food service industry. The relationship that Meg, the owner of the magic muffin company has with the industry places the business in an ideal competitive position. Further, high demand and low supply give the businesspersons the power to make ideal decisions such as pricing and the rates of production in the industry. However, the low entry requirements to the industry pose a threat to the future of the muffin business (Sutherland, 2008). The viability of the business for a period of between five to ten years is blurry.
The infrastructure at the harbor makes it possible for the business to thrive. The connectivity of different transport systems makes it possible for suppliers to provide the necessary materials to the business in time. The availability of an ideal infrastructure reduces the cost of production and increases the return on investment (Landstrom, 2007). Additionally, the materials needed to produce muffins are readily available. The company can source the products locally, thus reducing the cost and the complications of transportation from one place to another. The nature of the business as well does not require much space: muffins can be sold along the roadside or in a big store as long as they are visible to the consumers. The nature of the business, therefore, reduces the complication of certain infrastructure, thus making the business opportunity viable.
Personnel training and management is another issue that makes the business opportunity viable. The food service practices are highly common to most people, thus making it easy to get human capital. In addition, the owner of the business is a renowned person in the industry, placing her in an ideal position to determine the right people for the job. Training is easy in the food production industry as well as in sales and marketing. Further, the strategic location of the industry does not require much marketing skills to further the business idea. The ease of training people in the food service industry reduces the cost of production, which makes the business lucrative. Further, Meg being an expert in the industry, she would require less input in training the new employees and managing the business at the same time. The muffin business does not require a wide range of personnel to run. The same people who produce the products can act as marketers and sales persons at the same time.
The muffin business produced higher returns than the cost of production, thus making the business opportunity viable. Any business opportunity must provide rewards to the investor to make it viable. The muffin business as mentioned before does not require much human capital, which makes it easy to manage financially (Longenecker, 2012). Further, the materials used for the production of muffins are readily available, thus cutting down the cost of production. The muffin business does not require a long supply chain because the owner can source the products locally and find a personal means of transport to move the goods to the store. The availability of good infrastructural services such as roads and other means of transport help to reduce the cost of production. The market for the product is stable especially because of the increased income among women who are the major consumers of the product. Therefore, the level of returns on investment makes the business viable both at the present and in the future.
The raw materials for making the muffins and running the business are highly affected by inflation because of their relationship with agriculture. The changes in the price can highly affect the business, but the costs are taken care of by the high demand of the products. However, he margins through which these raw materials are affected by inflation is manageable especially for a small business. The changes of muffin prices, in addition, do not affect the success of the business because people are always willing to purchase the product at different prices. On the other hand, some of the raw materials such as sugar that are used in the production of the muffins receive certain incentives from the government. An example of such an incentive includes duty free importation and has an indirect impact on the food service industry (Guo, 2012).
Generally, the viability of the muffin business presently is unquestionable, based on the results presented in the income statement. The business thrived in every aspect and at an alarming rate. However, the future of the business is unclear because the fast food industry faces many threats, especially now that people are more concerned about healthy living. Further, the quick growth of the business could be an indication that the lifespan of the business is short. Expanding to different locations will create new challenges for the company and hinder further growth. The ease with which entrepreneurs join the industry also poses a threat to the future viability of the business (Kamoroff, 2011). Fast food products are losing value in the current world and many nutritionists have criticized muffins as unsafe for healthy living. Therefore, although the viability of the business presently is indisputable, the future of the same is indistinct.
Does Newport Store Offer Good Opportunity and Return On Investment?
The Newport store offered the best opportunity and return on investment to the magic muffin business in many ways. The location of the store made it easy for the company to reach a wide range of consumers within a short period. Due to the size of the store, the customers had to sit outside, which attracted more people to the store for curiosity purposes. Meg got an opportunity to meet different people who were willing to invest in her small business and create something for the whole world to partake. In other words, the store provided an ideal opportunity for the business to expand to other areas through the investment of various people and the word of mouth (Down, 2010). Many people from varied locations visit the harbor during the summer season and they could take the word about the muffins to their hometowns thus creating business opportunities for Meg. Further, the willingness of different people to invest in the business is an indication that the magic muffin company was a lucrative business with a chance to grow into the rest of the world.
Most importantly, the store gave the company an opportunity to test the viability of the project without risking further investments. The location of the store did not require a big business house to run. Therefore, the use of the small space did benefit the company financially, thus improving its return on investment (ROI) (Landstrom, 2007). The harbor is place with a business friendly environment where business houses are readily available. Both the business people and the consumers allow for business growth by charging relatively considerable prices for products. The government as well made it easy for Meg to run her business by allowing her to use the streets as a resting place for her clients. The sitting area drew more attention to the store. Further, the sitting area helped to raise the amount of revenue accumulated because it is easy for people to consume more products while resting. The sitting area gave a chance for the investors to interact with Meg and raise the desire to expand the business to new locations. The location offered proximity to current and existing markets, thus improving the chances for the business to progress in the future. The size of the store and the availability of the necessary materials helped in raising the return on investments. The cost of establishing the business was quite low yet the revenues were so high beyond the expected results.
The store offered good opportunity for the business and high return on investment because of the proximity to suppliers. The ease with which suppliers provided the good made it easy to cut down the cost of production. Further, the location of the store allowed the business operator to acquire the goods locally, thus avoiding the use of long supply chains that at times affect the progress of the business negatively. In addition, the store had limited hidden costs that often hinder the progress of a business. The size of the store did not require much development neither did the décor, which reduced the cost of setting the business up. In addition, the production of muffins does not require complicated infrastructure and technology, which further helped to cut down the cost of production (Sutherland, 2008). The size of the store made it easy to manage which helped to increase the returns on investment and the overall financial gain of the business.
The safety of the store based on the location as well as the considerable taxes provided the business with a good opportunity for growth as well as financial gain. The state laws offer ideal deals for small business operators to inspire the spirit of entrepreneurship in people. Therefore, Meg did not spend much on licenses considering that her business was going to run for only two and half months. Further, the store did not require a complicated décor because of the location of the business, which helped to raise the return on investment. The harbor is a highly populated place during the summer period, which raises the safety of businesses in the area. The increased numbers of people attracts the need for security for the citizens, which further guarantees safety for business operators. Other than business safety, the security of the consumers also affects the business positively (Longenecker, 2012). Customers can purchase the products at any time of the day, which helps to raise the income and expand the business.
The choice of the store location had a great impact on the magic muffin business. Meg chose a location that did not have threatening competition from the existing businesses, which helped in growing the company. Operating in a free environment presented an ideal opportunity for the business executive to learn new modes of operations that could work well in other localities. The store acted as a testing ground for Meg ideas of a muffin business as well as a center to connect with key stakeholders in the food service industry. The competition at the harbor was more about complementary than competitive. A complementary kind of competition helps to expand the knowledge of the business providers about the industry as well as create more opportunities for the organizations (Down, 2010). Complementary organizations further help to balance the demand and supply of goods and services, thus giving the producer a higher bargaining power in the industry. As such, the magic muffin company had the ability to set the prices of the muffins at a considerable price to beat the cost of production thus raising the level of ROI.
In conclusion, the magic muffin company is a successful organization in the food production industry and its growth depicts a promising future. The location of the business creates a good opportunity for growth and a high ROI presently. However, the long-term viability of the business is unclear based on the current concerns on junk food and human health.
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