Report Prepared for:Clem Ramchatesingh
BMGT 650
Prepared By:Chanel Browne
Catherine MacfarlaneAndrew Edwards
Adam NeilNigel VeeranZach Shaver
Table of ContentsINTRODUCTION............................................................................................................................. 4
Company Background................................................................................................................4
Executive Summary....................................................................................................................4
INTERNAL ANALYSIS.......................................................................................................................5Company/Organization..............................................................................................................5
Vision/Mission....................................................................................................................... 5
Objectives.............................................................................................................................. 6
Organization Structure...........................................................................................................6
Corporate Culture..................................................................................................................6
Current Strategy........................................................................................................................ 7
Business Strategy...................................................................................................................7
Functional-area Strategy........................................................................................................7
Operating Strategy.................................................................................................................7
Primary Value Chain Activities...................................................................................................8
Marketing.............................................................................................................................. 8
Operations.............................................................................................................................9
Sales/Services........................................................................................................................ 9
Inbound Logistics...................................................................................................................9
Outbound Logistics................................................................................................................9
Supply Chain Management....................................................................................................9
Secondary Value Chain Activities.............................................................................................10
Financial & Performance Analysis............................................................................................10
Internal SWOT Analysis............................................................................................................11
Strengths..............................................................................................................................11
Weaknesses......................................................................................................................... 12
EXTERNAL ANALYSIS.................................................................................................................... 13External SWOT Analysis...........................................................................................................13
Opportunities.......................................................................................................................13
Threats.................................................................................................................................14
Competitive Environment........................................................................................................14
Intensity of rivals..................................................................................................................14
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Suppliers.............................................................................................................................. 14
Buyers..................................................................................................................................15
Threat of New Entrants........................................................................................................15
Threat of Substitute products..............................................................................................15
Driving Forces.......................................................................................................................... 16
Product Differentiation........................................................................................................16
Changing societal concerns, attitudes and lifestyles............................................................16
Emerging new Internet Capabilities and Applications.........................................................16
Technological Change..........................................................................................................16
Product Innovation..............................................................................................................16
Key Success Factors................................................................................................................. 17
Quality Products.................................................................................................................. 17
Customer Service.................................................................................................................17
Employees............................................................................................................................17
Strong Brand Name..............................................................................................................17
Advertising...........................................................................................................................17
P.E.S.T Model...........................................................................................................................17
Sociocultural........................................................................................................................ 17
Economic............................................................................................................................. 17
Technological.......................................................................................................................17
PROBLEMS/ISSUES STATEMENT..................................................................................................18
STRATEGIC ALTERNATIVES...........................................................................................................18
RECOMMENDATION....................................................................................................................19
IMPLEMENTATION.......................................................................................................................20
APPENDIX 1..................................................................................................................................23
Statement of Retained Earnings..............................................................................................23
Balance Sheet.......................................................................................................................... 24
Statement of Income...............................................................................................................25
APPENDIX 2..................................................................................................................................27Interview with Katie Whitall (Business Manager)....................................................................27
APPENDIX 3..................................................................................................................................29Letter of Confidentiality...........................................................................................................29
BIBLIOGRAPHY.............................................................................................................................30
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INTRODUCTION
Company BackgroundIn 1998 Wendy Whitall (owner and founder of Bread & Butter Bakery) came up with the
idea and establishment of the Bread & Butter Bakery. With the support and encouragement
from her husband and two girls she turned her love of baking into her career. With their help,
along with a great staff and loyal customers, the bakery has grown more than they could ever
imagine. The Bread & Butter Bakery is located in Kingston, Ontario and they are open every
day of the week (hours differ on the weekend). The bakery strives to take pride in maintaining
the highest standards in fine baking and cooking. Everything in the store is made fresh every
day, using all natural ingredients and local produce whenever it is possible. They make all their
products from scratch right there inside the store. All through the night, seven days a week,
their bread bakers are busy in the kitchen preparing the bread for that day. Each of the
bakery’s loaves are hand rolled and made using all natural ingredients and no preservatives.
They also offer a selection of carefully chosen products, such as local maple syrup, honey and
coffee. Some of the bake goods that the Bread & Butter Bakery offers are hot cross buns,
dinner rolls, pies, tarts, cupcakes, cookies, squares, loaves and cakes. They also offer a variety
of savoury products including dinners, salads, soups, and much more. The bakery doesn’t just
do business out of their store; they also make goods for events such as birthdays, graduations,
anniversaries and anything else that the consumer feels like celebrating. The Bakery has been
around for 15 years and they try to give back to the community through charitable donations
and they donate day old baked goods to the food bank.
Executive SummaryBread & Butter bakery was established in 1998 by Wendy Whitall with a mission to offer
the highest quality baked and cooked foods using fresh and locally sourced ingredients in order
to achieve higher profits to increase the value of the company. It is located in Kingston Ontario
and is open daily. Some of its products include; different types of bread and rolls, cakes, pies as
well as soups and sandwiches.
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It is a small company, comprising of 30 full time and part time employees and
management, Wendy and also her husband Wayne who both oversee the operations and make
all major decisions of the business. They set the standard of working long hours to ensure
production is fulfilled and employees are required to adapt their hours of work to meet
demands at various times of the year and are rewarded with bonuses.
Bread & Butter has a strong brand name due to the superior quality of its product,
specialty items and outstanding customer service. It has also demonstrated good supply chain
management. However, the company has not had an advertising campaign since 2010, its
financial planning is poorly designed and they face competition from substitute and alternative
products.
As with many industries, Bread & Butter is faced with the threat of new rivals, which can
take away from its market share. Nonetheless, there are opportunities available to expand the
company. The owners can move to a bigger location which can provide an area for customers
to eat. This can be done through an implementation process that includes the owners meeting
to discuss the feasibility, budget, location prospects, acquiring a property, obtaining the
necessary permit for renovation and the renovation process. Once renovation is complete,
revise operational structure and duties of employees to include the new eating area. Train
employees for new tasks, inform customers of new location well ahead of its opening and when
all infrastructure have been put in place the company can start operating from its new location.
INTERNAL ANALYSIS
Company/Organization
Vision/MissionThe vision of Bread & Butter is to maintain and improve upon the highest standards in
fine baking and cooking.
Their mission is to offer the highest quality baked and cooked foods by using fresh, high quality,
locally sourced ingredients.
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ObjectivesThere is a lack of clear financial objectives for Bread & Butter; they simply seek to
achieve higher profit margins. They are much more strategically focused, although with
Wendy’s daughter Katie coming on as business manager this could change.
Strategically, they have a few goals. They seek to increase sales to fund investments in
new equipment and supplies. They always need new mixers or equipment due to high volume
of use, so extra cash on hand is useful. They seek to continuously improve their product line.
Katie is in charge of this; she looks for products that aren’t selling well and takes them off the
shelves in favour of better sellers. They are also seeking to beat their competitors on quality
and become known as the best bakery in Kingston. For instance, they choose not to use
margarine in any of their recipes, just high-quality butter. They could cut costs even further by
using margarine, but they would sacrifice their main strategic goal of being high-quality.
Organization StructureBread & Butter has what is called a simple structure. It is very flat, with really only two
levels of hierarchy: management and employees. Wendy & Wayne make all the major decisions
and oversee all the operations in the business. This allows for quick training, fast
responsiveness to change and low administration costs. Even though there is a split of authority
between management and employees, everyone feels like they are on the same level, which
will be explained in the Corporate Culture section below. Chefs, bakers and front staff are
encouraged to bring new recipes or their own ideas to Wendy. In the end, all decision-making
goes through Wendy, so it is still fairly centralized.
Corporate CultureWendy and Wayne are considered management, but they still work as hard as any of
the workers. They come in early and work very hard to help the night-time bakers with pushing
out the products. Often working longer hours than the employees, it sets an example for
everyone to follow: Hard work pays off. Wendy also gives employees bonuses for times like
Christmas when the workload is extremely stressful. This type of culture really makes you really
feel like you’re a part of the business, and not just a tool for earning profits.
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Current Strategy
Business StrategyThe highest level of decision making is left to Wendy and Wayne. If the business is to
take on any big project or makes any large changes, it does so through them. In addition to
overseeing the functional-area and operation strategies, they will make company-altering
decisions as well. For example, in 2010, Wendy decided to run the business 7 days a week.
Before that they were open 6 days, closing on Mondays so workers could have a break. Wendy
saw that operating only 6 days meant a lot of waste. Goods that didn’t sell on Sunday had to be
thrown out or donated to the Food Bank, because they couldn’t sell them on Tuesday. Also,
employees worked long hours, with only one day of break. With opening the store 7 days and
hiring more employees, efficiency and productivity increased and savings were made. Now
employees weren’t worked to their limits and the bakery didn’t have to throw out day-old
goods.
Functional-area StrategyKatie, Wendy’s daughter who was brought on as business manager, handles most of the
marketing, R&D, and production strategies. Her main task is to find ways to cut costs to
improve profit margins, and she does this in many ways. She has outsourced cheaper waste
management and laundry services. She has also helped Wendy to keep better track of her
finances, tracking food costs and purchasing products from the cheapest suppliers.
Although Wendy used to do traditional radio and television marketing through local news
(CKWS), they have started moving towards social media as their main advertising platform.
Katie’s use of Facebook and twitter for the business has generated some positive feedback.
They have also been winning awards in the city, such as the Medium Business of the Year and
have been featured in articles an on TV. All this publicity they got for free, just for having a good
reputation.
Operating StrategyThe operating strategy is left up to Wendy, Wayne, and the Head Chef. Wendy and
Wayne conduct how operations for the front-staff and bakers will be done each day. They will
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leave a list of goods to be produced during the night for the bakers. When they come in in the
morning they will make sure that everything has been baked and they are on track to open with
all the baked goods. They will make sure the front-staff are packaging and showcasing the
baked goods properly. Their guidance is crucial in opening the bakery.
The Head Chef, who makes the fine foods such as pot pies and soups, will decide on their own
operating strategy. This involves deciding on the menu, as well as sourcing special ingredients
needed. They will delegate tasks to the two cooks under them. Wendy hires this person for
their culinary skills and trusts them with executing the role responsibly.
Generic Competitive Strategy
Bread & Buttery bakery generic competitive strategy is a focused differentiation
strategy. They focus on a narrow market niche where buyer needs preferences are distinctively
different. Bread & Butter Bakery takes pride in maintaining the highest standards in fine baking
and cooking. Their pricing also reflects their niche market because they sell at higher prices
than the competition, which is a goal in the fine bakery industry. There products appeal
specifically to niche members. Features and attributes tailored to the tastes and requirements
of its niche members. As opposed to many bakeries to maintain the best taste and maintain
high quality they only use butter and not margarine. They have small-scale production and
custom made products that match the tastes and requirements of niche members. Custom
made products like birthday cakes and cupcakes, as well their products can be customized to
the liking of their customers.
Primary Value Chain Activities
Marketing In 2010 Bread & butter took part in an advertising campaign with CKWS, with both TV
commercials and radio commercials. Since then they have not done any advertising in which
they have sourced out themselves. However in the past 2 years, Bread & Butter have been
fortunate to have a lot of exposure through others. Bread & Butter have been featured in a
number of newspaper articles, online articles, a couple of TV appearances and
recommendations from people in Kingston.
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OperationsThough out each day the bread bakers are busy always making fresh bread for that day.
Each loaves of bread that is made are hand rolled and made with all natural ingredients. Bread
and butter bake a wide variety of bread such as: white, whole grain, multi grain. Bread & Butter
bakes cakes for almost any occasion such as birthday, graduation, baptism and anniversary.
Cakes are baked using fresh ingredients and fresh butter and can be finished with a wide variety
flavors (vanilla, chocolate, mocha and lemon and raspberry). Bread & Butter uses fresh local
and season produce. Breakfast items are always baked fresh each morning. Other baked items
include cookies, squares, tarts, cheesecake and pies.
Sales/ServicesWhitall’s Bakery Inc. is committed to excellence and serving all customers including
people with disabilities. Wendy is open to all feedback with regards to the goods and services
that they provide. Any feedback can be told either verbally or electronically (E-mail). All
feedback that is received is sent straight to Wendy Whitall.
Inbound Logistics
Bread & Butter uses fresh local and season produce. They support the local economy. By also
buying locally, it decreases the shipping time and shipping costs.
Outbound Logistics
Customer picks up orders from within the store but currently they do not deliver to people’s
houses. Customer come into the store and takes a number and wait to be served.
Supply Chain ManagementBread & Butter uses a traditional food distribution service to obtain it`s raw product.
Their main supplier is GFS, Gordon Food Services, and they keep costs low by using this supplier
who has economies of scale in Kingston. When certain produce are in season, such as rhubarb,
Wendy will buy from local farmers. The farmers come to her with their produce at cheaper
prices than GFS, so this is another cost-cutting measure.
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Secondary Value Chain ActivitiesThe secondary activities for the Bread & Butter Bakery are relatively simple. The
company currently has 30 employees. When Wendy is selecting a candidate she has them in for
a 1-on-1 interview, and sees where they are with their skills. If she is convinced that they will
be an asset, she will take them on for a 2-week training period. If the candidate appears to be
picking up how to do things then they will be hired on as part of the team.
The systems and technology that the bakery uses is very basic. They operate using
Microsoft Office (Word, Excel, Access) to keep track of orders, inventory, and management
contact system. The equipment they use to make the goods is your basic mixers, ovens, stoves
etc. When the bakery is deciding which products to sell, they try and implement the new
products but if they notice that they are not selling then they will stop producing them or phase
them out in favour of the high-traffic items.
The company has an adaptive culture that changes with the seasonal demand. Usually
relaxed but can be very stressful around peak times (Easter, Christmas, Thanksgiving). The
bakery also likes to give back to the community by making charitable donations to charities like
the Heart & Stroke Foundation. They also donate day old baked goods to the Food Bank.
Financial & Performance Analysis
After reviewing the financials for Bread & Butter we can say that they are in a fairly good
financial situation. From a profitability perspective their gross profit margin has increased every
year from 2010-2012 which shows that they have a good enough percentage of revenues
available to cover operating expenses and yield a profit. For those same 3 years they produced
steady operating profit which shows that they are indeed earning profit on each dollar of sales,
before paying interest. They have a steady net profit margin as well which also shows that
profit is being made.
In 2010 when the business switched to being open 7 days a week, it resulted in more of
the inventory being used which allowed for a better financial performance (in 2011 gross profit
increased by $144,109 and in 2012 it increased by $58,184). Net income may have taken a little
hit in 2010 but once the new schedule was refined, net income increased by $42,137. There
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current ratio is above 1.5 for all 3 years analyzed which shows that they are able to pay current
liabilities using assets that can be converted to cash in the near term. They also have large
amounts of working capital which means they have cash available for their day to day
operations. This demonstrates that they have more internal funds to pay its current liabilities
on a timely basis and they could finance inventory expansion, additional accounts receivable,
and a larger base of operations without resorting to borrowing or raising more equity capital.
This is also reflected in the cash on hand which increased every year from 2010-2012.
With them now opening 7 days a week you can see that gross profit increased by 16
percent in 2011. Operating income also increased in 2010 and 2011 mainly because of the new
wages being paid out for the 10 new employees along with their benefits. Net sales also
increased because being open extra days meant more money to be made and Bread & Butter
was able to make enough money to offset their expenses enough to bring in a good profit from
2010-2012. One factor that was noticed while reading the financials was that they currently
have a high debt ratio in 2012 after it only being at 5.9% in 2010. This is attributed to them
having no short term investments in 2012.
Internal SWOT Analysis
StrengthsBread & Butter has a strong brand name and company reputation. They have been given
positive reviews online and in other written material which recommends them as their
favourite Kingston bakery. In addition to this, Bread & Butter has also won awards, indicating
that they are a business that delivers what they promise.
They also offer superior product quality with their specialty cakes and wide variety of
breads, which includes specialty hard to find breads. They change their selection according to
seasons and what sells best and when, which helps them determine when the best time to
make these products is.
Bread & Butter demonstrate good supply chain management. By extending their
operating hours to 7 days a week, they were able to minimize the food waste. This ensured that
produce would not go bad over the weekend, so they were able to use the maximum amount
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of food, which cuts down on cost to replace foods that could not be used. They developed a
good relationship with their main food supplier Gordon Food Services, but when certain
produce was in season would buy from local independent farmers, which was an effective way
of cutting down on seasonal costs. Another way they cut down on costs was sourcing out their
linen to Canadian Linen.
Since Bread & Butter is owned by baker Wendy Whittal, she is able to experiment with
many different recipes and creations. This allows for unique baked goods to be created, which
indicates that this business has product innovation capabilities. Making simple changes can give
her a competitive edge against rivals since she can create new cakes, experiment with flavours
and see what works best. By being creative with her culinary skills, she can continue to impress
with both her dessert and dinner offerings.
On top of everything else, Bread & Butter has great customer service capabilities. They
know how to keep their customers happy and returning for more. With the service they
provide, they are able to keep customers happy, which leads to praise and positive word of
mouth. This allows them to attract new customers and keep return customers coming back.
WeaknessesBread & Butter lack good advertising. They are hands off when it comes to getting their
name out there. In 2010 they had an advertising campaign with CKWS which involved radio and
television advertisements. They mostly rely on word of mouth, as well as newspaper articles,
online articles and TV appearances. In addition to this, they won the Medium Business of the
Year award which provided them with exposure, but no extra efforts to draw in new customers
was made. By maintaining this hands off approach, they are missing out on potential new
customers to rivals.
They also have a weak balance sheet. They do not have budgets set out and although
this has not yet negatively impacted them. However, if they were to make any changes to their
business or facility, not paying attention to where their money is and should be going, they may
end up spending more than they would have liked or set aside.
There are many substitutes available, as well as cheaper alternatives. Grocery stores
provide cakes that are ready to go for customers when they arrive, as well as packaged cookies,
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muffins, etc. Since Bread & Butter offers higher priced baked goods, customers may choose to
go with a cheaper alternative.
In 2010, Wendy hired her daughter as business manager, which was a new position in
the company. The business had already been operating for 12 years, and this position was
added. This indicates that there is not a lot of management depth. Wendy demonstrates a “Do-
It-Yourself” mentality. Since part of the business manager’s job was to find new ways to cut
down on costs, there are 12 years where potentials costs could have been saved, but also
where relationships with different suppliers could have been developed in the process.
EXTERNAL ANALYSIS
External SWOT Analysis
OpportunitiesBread & Butter could move to a larger location that would provide more space for
storage and potential to expand on their product selection. This could be a good opportunity to
increase their revenue and create more baked goods that are successful.
In addition to a larger location, they could offer customers an area to eat inside the
bakery, catering to customers who are on-the-go and need a quick stop for lunch. This would
also serve the market segment that prefers a sit down meal, so instead of taking their meals to
go, they can eat it right there. This would also give them competitive advantage and help them
compete with rivals who offer a similar service.
Another opportunity exists with their online capabilities. They could offer an online
ordering service option as a quick and easy alternative to ordering in person or over the phone.
Customers would be able to enter in all their information, as well as any specifications or
special instructions. This process could include payment online, which would allow for pickups
to be easier. All the customer would have to do is show their printed off receipt or order
number, where the only exchange necessary would be handing over the order once it’s ready.
This is a quick and convenient method for customers.
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ThreatsThreats to Bread & Butter include the potential entry of new competitors. They could
lose out to new rivals who come in offering a similar product offering for a cheaper price or who
offer additional services, for example catering.
In addition to this, they could also lose out on potential profits to substitute products.
Rather than buying their specialty multi-grain breads, customers could go to their local grocer
and buy a loaf of Wonderbread for a much lower price. Bread & Butter could lose out on sales
to more convenient, cheaper products.
Changes in driving forces could also become an issue. Product innovation is one of the
major factors that sets this bakery apart from others. If other bakeries make similar products
that taste just as good or better and offer it at a lower price, customers might shift their buying
needs over to the competitor. Offering something different and refreshing their menu
periodically could help keep customers coming back and cut down the chance that rivals may
come up with a duplicate product.
Competitive EnvironmentIntensity of rivals – Moderate
Bread & Butter has a number of rivals located throughout Kingston. These include Wolfe
Island Bakery, Fardella’s Classic Bakery and Internet Cafe, Pan Chancho, Silly Yak and Saint &
Cinnamon. Although many of these locations offer similar products, many seem to focus on
breakfast, lunch and dinner meals whereas Bread and Butter specialize in high quality baked
goods, with dinner meals as an added bonus.
Bread & Butter has an advantage since its hours of operation are longer and later than
most of their rivals, however rivals such as Wolf Island Bakery and Pan Chancho offer catering
services, which is a segment that Bread & Butter is missing out on. By offering catering services,
these rivals can encroach on a market segment that Bread and Butter would not be able to
attract, which could also result in loss of market share since these businesses would likely retain
these customers for smaller, one item at a time purchases. Wolfe Island Bakery also has three
locations, two of which are in the Kingston area, which allows them to cover more ground.
Suppliers - Weak
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For standard items such as; flour, sugar, butter and milk these items are readily available
from a host of suppliers, although Bread & Butter Bakery has one main supplier, Gordon Food
Service. For some baked goods like that are offered seasonally like Strawberry Rhubarb pie in
the Spring, Peach Cobbler in the Summer and Pumpkin Raisin cake in the fall, there is a lot of
independent farmers who they buy from. Switching costs are low as there is a host of suppliers
available.
Buyers - Moderate
There are no switching costs for buyers to switch to another bakery. Most of the breads
and cakes offered are standardized products, while the seasonal specials are differentiated.
Buyers are well informed about the quality and prices offered by various sellers in the industry.
Buyers are small and numerous relative to sellers. Buyers are not very price sensitive; they
prefer quality over price as the prices offered by Bread & Butter Bakery is higher than some
bakeries in the area.
Threat of New Entrants – Strong
The threat of new entrants in this industry is very strong. Starting a bakery is an easy
business to get into because all one would need to start up is a location, materials, culinary
capabilities and a good idea. The location doesn’t even have to be large because it can be set up
as a small business out of someone’s home kitchen.
The barriers to entry are low. There’s a low capital requirement. As well, suppliers
would be plentiful and like Bread & Butter, potential entrants could also go to local farmers. As
well, strong brand preferences and loyalty may not exist with the bakeries in Kingston which
would make it easier to break into the local market.
Threat of Substitute products – Moderate/Strong
There are low switching costs associated with substitutes. Baked goods are not a must
have product, so customers can go to a cheaper, faster and more convenient solution, such as
seeking out bread at their local grocery store rather than making an out of the way trip to a
bakery. Not only this, but the products sold in grocery store are cheaper, which makes them
more attractive to customers. This is especially true in the case foods that are considered
staples in a household.
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There are also alternatives to going to Bread & Butter for their dinner menu. Since going
there would be for customers who do not feel like making dinner, they could also buy prepared
foods in their grocery stores or deli counters, much like the ones offered at Metro and Loblaw’s.
Fast food and sit down restaurants are also substitutes for Bread and Butter’s dinner menu,
which would offer more convenience or a wider variety of options.
There is also the option of home-baked goods. All a person has to do is buy ingredients
and they can make their cakes and cookies at home. Cost effective for them to do so since they
are paying a small amount for the ingredients, with the potential to get more quantity. This is a
substitute for a price sensitive customer who cannot afford the high-priced goods sold at Bread
& Butter.
Driving ForcesProduct Differentiation-To attract and retain customers, industry members must come up
with new products that are unique and special from rivals- which can increase the demand and
intensity of competiveness in the industry.
Changing societal concerns, attitudes and lifestyles- People are eating out a lot more
than before and most of the products offered are geared towards a healthy eating which many
buyers have adopted over the years.
Emerging new Internet Capabilities and Applications- The internet is a great
opportunity for businesses to market their products to attract new customers by listing their
products and prices online, and it also gives buyers the ability to research the different products
offered by rivals especially if looking for special items.
Technological Change- Having the most advanced technology in terms of equipment helps
to increase efficiency and productivity.
Product Innovation- Introducing new items to their menus helps to differentiate companies
from their rivals. It can attract new buyers and help old customer coming back and increases
the rivalry among sellers.
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Key Success FactorsQuality Products- Companies in the industry should offer products that meet the standards
of customer in terms of the type of ingredients used, the method of preparation and freshness.
Customer Service- Ensuring that customers are satisfied with the quality of service will help
in customer retention and help promote the business through word-of-mouth which is the best
form of advertising for businesses of this size.
Employees- Hire staff with experience in food service industry and train them. Provide all
that is needed in order for them to deliver quality products and great customer service.
Strong Brand Name- Having a name that is associated with superior quality and great
customer service enables the company to retain and gain market share through word of mouth
advertising by loyal customers. Rewards and favorable reviews in publications can also help to
promote and strengthen the image of a company.
Advertising-To increase market share or if faced with declining sales, company must find a
find to make promote their products to buyers, by offering daily specials, or by showcasing
items that are not selling as well as others.
P.E.S.T ModelSociocultural - Companies are meeting the demands of buyers who are eating out more and
do not have time to prepare certain food items at home and preparing products to suite the
health lifestyle of some buyers.
Economic- Since the end of the 2008-2009 recession sales have increased due to customer
demand, even though some companies’ prices are higher the industry’s.
Technological- It helps companies to be more efficient and product and encourages product
innovation which helps to differentiate rivals.
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PROBLEMS/ISSUES STATEMENT1. Physical location is too small. The increasing demands/sales is putting more pressure on the
bakery. With the same amount of space but more work being done, it is making it very
congested.
2. The bakery does not have a dining room area. This is a problem because they are losing out
on the opportunity of capturing a certain market segment that likes to sit down and eat. This
may cause them to lose out on potential revenue. Most bakeries have a sit down area where
the customer can grab a coffee or something and relax. It also adds to the overall customer
experience.
3. Another problem that we have noticed is with their website. They don’t have an online order
form. They are losing out on big potential orders by not having a way of ordering online. A lot
of businesses now have it set up so you can order their products online. This will make it easier
for the consumer to order goods and it will also give the bakery a little more lead time to fill
these orders. By doing this they may generate more revenue by making it more convenient for
consumers to order goods.
STRATEGIC ALTERNATIVES1. Acquire a bigger location.
PROS:
- More space to work efficiently/communicate
- Creates a safer work environment
- More storage
CONS:
- Increase in fixed costs
- High cost of capital
- Could lose your loyal customers by moving locations
2. Create a dining area.
PROS:
- Natural extension of food service
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- Capture new clients
- Help strengthen customer relationships
CONS:
- Loss of working space
- May not be feasible (cost outweigh the benefits)
- Increased labour costs (cleaning up the dining area)
3. Set up on-line order and payment system
PROS:
- Convenience
- Could bring in more customers
- Increased organization
CONS:
- Could take away from the personal customer relationship
- Could have system errors
- Need to have technical support
RECOMMENDATIONWhat we would recommend for the bakery is to buy a bigger location so that they could
improve productivity and be more efficient to accommodate the rising demand. This will
provide more space for storage and give more room for employees to work freely without
being too congested. Adding a staff room for breaks and lunch would keep them out of the way
of production when they are on break. This will also cut down on liabilities and improve
hygiene (they currently all take breaks at their work station). This will give them an opportunity
to add a lounge area without worrying about cutting into limited space. By adding a lounge
area this will help capture new customers and add to their overall experience. The increased
labour costs of the lounge area will be covered by the increase in revenue. If they were to buy
a bigger facility this would be a long term asset as oppose to renting which would be a liability.
The cost of renting would never go down and by buying you would own the building eventually
18
which you could sell if they wanted to. Purchasing a bigger location is easily justified by the
potential increasing sales and the current spatial problems.
IMPLEMENTATIONStep 1: What: have meeting about new location and what it will need.
Who: Wendy, Wayne and all staff of B&B
When: immediately
Step 2: What: set up budget for what is to be spent on the new location, as well as renovations,
new equipment, furniture, etc.
Who: Wendy, accountant
When: immediately
Step 3: What: Scout out potential locations, playing close attention to price, as well as location.
Don`t want to stray too far from the current location to minimize potential customer loss
Who: Wendy
When: As soon as budget has been completed to follow as a guideline
Step 4: What: once an acceptable location has been found, place bid on the property
Who: Wendy, realtor, accountant
When: immediately following the determination of budget and potential location of new
property
*Step 1 through 4 approximately last one month, depending on availability of open properties*
Step 5: What: Discuss the general ideas and blueprints for the renovations necessary in the new
building.
Who: Wendy, Wayne
When: Once building has been acquired
Step 6: What: Obtain relevant building permits necessary to do renovations
Who: Wendy and City of Kingston
When: immediately following the purchase of property so that work can begin as soon as
possible.
19
Step 7: What: Once property is acquired, seek contractors to make any changes to the building
and discuss blueprints
Who: Wendy and Wayne
When: Once building has been bought and paid for
Step 8: What: Begin renovations
Who: contractors
When: when all the plans are finalized, the renovations can begin
Step 9: What: Establish new operational structure, including any new or altered employee
responsibilities and how suppliers deliver to the building i.e. New entrance points and
unloading procedures, etc.
Who: Wendy, Wayne, employees
When: After developer has given specifications on the new layout
Step 10: What: Revise job responsibilities for employees
Who: Wendy
When: once it has been established what has changed in the new location and what changes
should be added or taken away from current job responsibilities
Step 11: What: Hire and train new employees to get ahead of the need for extra hands once the
business begins operating in a larger building
Who: Wendy
When: Two months prior to opening of new location. Training will begin in the current location.
Step 12: What: Begin sending out notices (through newspapers, online forums, general signs)
that the location has been changed. Direct mailers or flyers can be used to get as much
coverage in Kingston as possible.
Who: Wendy, community newspapers
When: One month leading up to the grand re-opening to start generating as much notice as
possible
Step 13: What: Once building renovations have been completed, go through a test run to make
sure all the equipment is working. This will be necessary to make sure that ovens are working
properly, there is running water, etc., just to make sure that everything is running smoothly in
20
order to avoid any potential problems on opening day. This will also give employees a feel for
the kitchen beforehand.
Who: Wendy, a few employees, contractor on hand to be present in case there are problems
When: One week prior launch
Step 14: What: Put current location property up for sale.
Who: Wendy and Wayne
When: As soon as new location is open
Step 15: What: Open new location, monitor and evaluate results e.g. value added, peak
periods, etc.
Who: Wendy, Wayne, employees, accountant
When: Once renovations and test run have been completed. Evaluation is on-going once new
location has been opened.
21
APPENDIX 1
Statement of Retained Earnings
WHITALL'S BAKERY INC.
STATEMENT OF RETAINED EARNINGS
FOR THE YEARS 2010-2012
2010 2011 2012
Opening Balance 238,474 312,716 377,939
Dividends -26,000 -26,000 -352,327
Net income 100,242 91,223 91,223
Closing Balance 312,716 377,939 116,835
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Balance SheetWHITTAL'S BAKERY INC.
BALANCE SHEETFOR YEARS 2010-2012
Years 2010 2011 2012Current AssetsCash on Hand 49,729 57,983 85,293Short term invesments 191,146 281,271 0A/R 5,190 4,261 5,356Inventory 2,000 2,000 2,000Prepaid Expenses 1,771 1,771 1,771HST Receviable 4,432 4,287Corporate Taxes Recoverable 731 2,352 0Due From Share holder 1,262 5,549 73,351
Total Current Assets 251,829 359,619 172,058
Property Plant and equipment 79,293 104,015 98,253Other Assets 1,200 1,200 1,200
Total Assets 332,322 464,834 271,511
Liabilities:Current LiabilitiesAccounts Payable and accruals 19,605 55,649 72,135Payroll Liabilities 31,146 16,399Coporate taxes payable 23,905Total Liabilities 19,605 86,795 112,439
Shareholder loans 0 0 0
Retained EarningsShare Capital 1 100 100Retained Earnings 312716 377939 158972
Total 332,322 464,834 271,511
23
Statement of IncomeWHITTAL'S BAKERY
STATEMENT OF INCOMEFOR THE YEARS 2010-2012
2010 2011 2012Revenue:
Sales $ 1,353,813.00
$ 1,551,642.00
$ 1,615,912.00
Other income $ 1,508.00
$ 3,385.00
$ 4,182.00
Total $ 1,355,321.00
$ 1,555,027.00
$ 1,620,094.00
Cost of Sales
Inventory at Beginning of year $ 2,000.00
$ 2,000.00
$ 2,000.00
Purchases $ 468,220.00
$ 523,817.00
$ 530,700.00
Inventory at end of year $ (2,000.00)
$ (2,000.00)
$ (2,000.00)
Cost Of Goods Sold $ 468,220.00
$ 523,817.00
$ 530,700.00
Gross Profit $ 887,101.00
$ 1,031,210.00
$ 1,089,394.00
Operating Expenses:
Accounting and Legal $ 9,658.00
$ 10,397.00
$ 15,448.00
Advertising and promotion $ 23,349.00
$ 15,799.00
$ 12,540.00
Amortization and depreciation $ 22,449.00
$ 24,360.00
$ 26,873.00
Bank charges and interest $ 10,711.00
$ 13,086.00
$ 12,342.00
Dues an fees $ 1,426.00
$ 1,685.00
$ 2,624.00
Insurance $ 3,420.00
$ 4,183.00
$ 4,324.00
Office Expense $ $ $
24
12,835.00 14,590.00 9,832.00
Supplies $ 4,604.00
$ 2,625.00
$ 29,687.00
Rent $ 34,223.00
$ 34,195.00
$ 34,256.00
Repairs and maintenance $ 30,460.00
$ 33,779.00
$ 27,408.00
Telephone $ 2,718.00
$ 3,935.00
$ 2,362.00
Travel and entertainment $ 2,733.00
$ 327.00
$ 617.00
Utilities $ 19,549.00
$ 24,961.00
$ 26,795.00
Vehicle $ 4,205.00
$ 4,297.00
$ 6,270.00
Wages and Benefits $ 583,131.00
$ 732,931.00
$ 717,938.00
Sundry $ 2,294.00
$ 2,095.00
$ 2,813.00
Total Operating Expenses $ 767,765.00
$ 923,245.00
$ 932,129.00
Total Operating Income Before Taxes $ 119,336.00
$ 107,965.00
$ 157,265.00
Provision for corporate taxes $ 19,094.00
$ 16,742.00
$ 23,905.00
Net Income $ 100,242.00
$ 91,223.00
$ 133,360.00
25
APPENDIX 2
Interview with Katie Whitall (Business Manager)
1. I noticed that the cost of wages increased quite a bit in 2010, did you hire more people?
How many?
In the spring of 2010 we switched to being open 7 days a week which meant hiring more staff, and
additional training costs for those staff. I think we went from having approximately 20 employees to
having approximately 30.
I was also hired in July of 2010, to come on as the business manager which was a new position with a
higher salary level then most jobs within the bakery.
2. What is your role as business manager?
Part of my job when I started was to spend time sourcing less expensive ways to do business.
Something Wendy never had the time or opportunity to do before as she was baking! Some ways we've
cut costs, are souring less expensive waste management, linen services, keeping better track of food
costs, and ensuring we are purchasing our products from the right suppliers.
3. Do you and Wayne pay yourselves from the wages or capital?
Wendy and Wayne both get paid a salary. Wendy also takes dividends each pay. In 2012, Wendy,
Wayne, my sister and I all got paid out a portion of the profits.
4. Any there any major factors that you can think of that helped to increase the overall net
income over the past few years?
Opening 7 days a week has allowed us for less food wastage, and better productivity having staff here 24
hrs a day. Before being open 7 days a week on Saturdays it was always a struggle to make sure we
26
didn't have produce in the back that would go bad before reopening on Tuesday. Now we are able to
continually use produce without the worry of it going bad. We have also spent a lot of time the past 2
years analyzing what sells best when. This has allowed us to better tailor what products we make,
helping to "sell out" at the end of the day opposed to sending everything to the Food Bank for half
price.
5. What sort of promotional efforts are you involved in?
In 2010 we took part in an advertising campaign with CKWS, with both a tv commercial and radio
commercials. Since then we have not done any advertising which we have sourced out ourselves.
However, the past 2 years we have been fortunate to have a lot of exposure through others. We have
been featured in a number of newspaper articles, online articles, a couple of tv appearances and we've
also been mentioned in a lot of written material from individuals recommending us as one of their
favourite Kingston spots! All of that has been extremely beneficial for us, and hasn't cost us a penny.
We also won Medium Business of the Year this past year, which has provided us with quite a bit of
exposure.
6. Your cost of supplies went from $2,625 in 2011 to $29,687 in 2012. Is this because of
upgrades (new equipment, displays, etc)?
It was just cost of items getting putting into different accounts. The year prior we had some
costs that were going into food cost, and in 2012 we switched it to supplies.
NOTE:
In addition to the above recorded interview, Zach Shaver worked full-time as a baker at Bread
& Butter from 2008-2010 and thus has a considerable amount of internal company
knowledge. When locking down Bread & Butter as our company for this project, he visited
the work place again and had an informal discussion with the owners.
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APPENDIX 3
Letter of Confidentiality
To whom it may concern:
This letter is to verify that the undersigned group members are requesting your assistance in securing your company for an academic project. The purpose is for an academic grade towards their class in Business Policy (Humber College, course code: BMGT 650). This is a final term major group project that will require of them, the ability to study both the internal and external environments of a company and formulate actionable strategies.The information that you provide will be discussed in confidence and the material will only be used for academic purposes; that is, the information provided will be used exclusively in this academic term (Winter 2013, section R6- Friday) and in this course (BMGT 650- Business Policy) at this institution.
Please call me if your wish to discuss any aspects of this project. I will follow-up with an email at the end of the term.Thanking you in advance in supporting the education of the business leaders of tomorrow.
Respectfully,
Clem Ramchatesingh MBAProfessor, Business AdministrationThe Business SchoolHumber College, Institute of Technology and Advanced Learning(416)675-6622 ext. 5279clem.ramchatesingh@humber.ca----------------------------------------------------------------------------------------------
Group Members Signatures:Each group member agrees that all company information provided will only be used in the current academic term, Winter 2013 and for this course, BMGT 650 only and in section R6 only. No other use will be permitted. Each group member are required to date and sign this agreement.
Print your name Signature Date
_______________________ _______________________ ________________________________________ _______________________ ________________________________________ _______________________ ________________________________________ _______________________ ________________________________________ _______________________ ________________________________________ _______________________ _________________
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BIBLIOGRAPHY
"Home." Bread and Butter. 2013. K2media.ca & Zute Group. 19 Mar. 2013<http://www.breadandbutter.ca/>
"Kingston Bakeries." Urbanspoon. 19 Mar. 2013<http://www.urbanspoon.com/nf/242/40535/25601/Ontario/Kingston/Bakeries>.
Thompson, Arthur A., Margaret A. Peteraf, John E. Gamble, and A. J. Strickland III.Crafting & Executing Strategy. 18th ed. New York: McGraw-Hill/Irwin, 2012
"Welcome to GFS Canada." Home. 24 Mar. 2013 <http://www.gfscanada.com/>
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