Your Federal Quarterly Tax Payments are due April 15th Get Help Now >>

Dessert_Paradise_FINAL.ppt - managementconsulting by wuzhenguang

VIEWS: 7 PAGES: 27

									DESSERT PARADISE
     Final Report
    Master of Business Administration
  SCHOOL OF BUSINESS & MANAGEMENT

     Consulting Skills for Managers
               Fall 2009
           24 October 2009




                                      By:
                                              Suzanne So (0893 3851)
                                            Bryan Cheung (0893 3564)
                                                  Chris Li (0893 4178)
                                                   Eric So (0893 6229)
                                               Vincent Ng (0893 3409)
Executive Summary

Dessert Paradise (DP) is a new start up dessert shop near Pak Tin Estate at Shek Kip Mei since June 2008.
Since its opening DP has been generating a net income (NI) that is just about breakeven.

However, DP’s revenue growth stalled. The prospect of growth appears to be overshadowed in the highly
competitive industry with around 1,007 dessert stores in Hong Kong.

The main challenge is how to achieve a significant increase in NI through solid revenue growth?

The main source of growth is customers expansion. Our recommendation is to broaden customer base
through an integrated strategy of:
1. Introducing signature desserts in attracting out-district customers (destination customers)

2. Launching lunch set in attracting in-district customers (passers-by customers)

3. Leveraging promotion, publicity and merchandising in Improving brand awareness



1. Attracting destination customers through introducing signature desserts
Signature desserts are effective in attracting destination customers from outside districts with high growth
potential because:
A. Heavy Reliance on passers-by of local residents, students and workers limits DP’s growth opportunities
B. The propensity to spend and the purchasing power in the area are rather low in which DP cannot charge
a high price
C. Hong Kong people like to make deliberate trip for signature dessert
Executive Summary (cont.)

2. Recruiting passers-by customers through launching lunch sets
Our research found that demand for lunch products existed. DP can meet the existing lunch demand of
passers-by customers through lunch set introduction because:
A. DP attracts a low percentage of total customer traffic during lunch hour with only around one third of its
competitor’s customer flow during lunch hour
B. DP has spare resource at lunch hour with current capacity of less than 10% of total staff utilization
C. DP has the competence in providing lunch set product not currently available in the market but
demanded by the customers



3. Improving brand awareness by leveraging promotion, publicity & merchandising
As per our expert’s interviews, customers food critics at popular website such as openrice.com in Hong
Kong creates word-of-mouth impact and generates brand awareness for destination customers while
appealing in-store merchandising attracts passers-by customers. Many high-traffic flow dessert stores such
as Chung Kee Desserts and Yuen Kee Desserts utilise the tactics in expanding customer base as opposed
to launching above-the-line campaign. We conclude that it is essential for DP in pursuing the tactics
because:
A. The brand awareness of DP is significantly lower than other dessert stores
B. Interest and trial cannot be induced with low brand awareness
C. The channel of promotion is cost effective given DP’s limited resource
1. Signature Dessert
A) Heavy reliance on passers-by of local residents, students and workers limits DP’s
growth opportunities.

Observation: DP heavily relies on in-district customers and hence the business growth is
limited.

                                      Customer Mix (% )
    100%
     90%
     80%
     70%
     60%
     50%
     40%
     30%
     20%
     10%
      0%
             Dessert Paradise    Lok Lam (綠林)     Chung Kee (松記)       Yuen Kee (源記)

                       Passers-by Customer      Destination Customer



Source: Shop Interviews
1. Signature Dessert
B) The propensity to spend and the purchasing power in the area are rather low in
which DP cannot charge a high price.

Observation: Destination customers spend more than passers-by customers



                                         Spending of a Dessert Trip per PAX (HK$)
                       50%
                       45%
 % of Total Customer




                       40%
                       35%
                       30%
                       25%
                       20%
                       15%
                       10%
                        5%
                        0%
                             Below $10       $11 - $15    $16 - $20         $21 - $25        $26 or Above
                                                         Spending
                                  Passers-by Customer                 Destination Customer



Source: Survey of 100 in-district and out-district people
1. Signature Dessert
C) Hong Kong people like to make deliberate trip for signature dessert.

Observation: 75% of People Make Deliberate to a Dessert Store for Signature Desserts.

People Making Deliberate Trip to a Dessert Store for Signature Stores
by %



                          25%




                                                                    Yes

                                                                    No




                                                      75%




Source: Survey of 100 in-district and out-district people
1. Signature Dessert
C) Hong Kong people like to make deliberate trip for signature dessert.

Observation: 61% of people like to make deliberate trip for signature desserts if the store is
at Shek Kip Mei.

People Making Deliberate Trip to a Dessert Store at Shek Kip Mei for Signature Stores
by %




                       39%

                                                                         Yes

                                                                         No

                                                            61%




Source: Survey of 50 out-district people
2. Lunch Sets
A) DP attracts a low percentage of total customer traffic during lunch hour

Observation: If DP reaches Ice Joyce’s customer flow (double existing) during lunch time
(11am-2pm), DP NI will be increased by 70%

Daily Customer Flow
by %

        35%
        30%
        25%
        20%
        15%
        10%
         5%
         0%
              11am-1pm      1-3pm       3-5pm      5-7pm        7-9pm      9-11pm

                    Dessert Paradise    Ice Joyce Café     BBQ Pork Shop

Source: Physical count on site
2. Lunch Sets
B) DP has spare resource at lunch hour with current capacity of less than 10% of
total staff utilization

Observation: DP can handle the surge in customers during lunch.

Staff Workload Utilization
by %


         30%

         25%

         20%

         15%

         10%

          5%

          0%
                11am-1pm     1-3pm     3-5pm       5-7pm      7-9pm   9-11pm


Source: Owners’ Tallying
2. Lunch Sets
C) DP has the competence in providing lunch set product not currently available in
the market but demanded by the customers

Observation: Over 40% of local customers / residents want a “Sandwiches Set” which can
be delivered within the owner’s capability

Food style preferred by customers / residents
by %           45%
               40%
               35%
               30%
               25%
               20%
               15%
               10%
                5%
                0%

                  Sandwiches Set    Noodles Set    Dim Sum Set       Others

Source: Survey of 50 local customers / residents during lunch time
3. Promotion & Publicity
A) The brand awareness of DP is significantly lower than other dessert stores.

Survey: Only 2% of Hong Kong people is aware of DP while 40% is aware of Honeymoon
Dessert, 10% Lucky Dessert and 13% Chung Kee.

Percentage of people who are aware to the particular dessert shop
by %
                45%
                40%
                35%
                30%
                25%
                20%
                15%
                10%
                 5%
                 0%

                   DP     Honeymoon Dessert   Lucky Dessert   Chung Kee

Source: Survey of 50 out-district people
3. Promotion & Publicity
B) Interest and trial cannot be induced with low brand awareness

Survey: Only 5% of people do not go to DP because they don’t like the food, while 60% is
not aware of DP.

Percentage of people
by %
                70%

                60%

                50%

                40%

                30%

                20%

                10%

                 0%

                       Go to DP     Don't like the food     Not aware of DP

Source: Survey of 100 in-district and out-district people
3. Promotion & Publicity
C1) Online food critics provide a cost-effective way in increasing brand awareness of
destination customers

Observation: Word of mouth is not frequently used to promote DP on the internet while
many successful stores utilized the tactic in creating traffic flow




               Dessert Paradise


                                             VS




Source: Customer Comments @ Openrice.com
3. Promotion & Publicity

C2) To increase brand awareness of passers-by customers, DP can revise its menu

Observation: Takeaway leaflet of DP is dull and lack of photos. .




                              VS


                                            Dessert Guy


     Dessert Paradise

                                                                    Honeymoon
                                                                      Dessert



Source: Mystery Patrons
                                             Chung Kee
 3. Promotion & Publicity
 C3) To increase the brand awareness of passers-by customers, DP can create
 attractive merchandising

 Observation: DP does not have enough merchandising to attract customers when
 comparing against successful competitors




                                                           Dessert Story



                          Special Display on
                          Signature Dessert

 Magazine Clippings




Source: Mystery Patrons                                       Poster
List of Appendices
Appendix 1 – Interview Guides
a. Schedule

Date         Interviewee                                Interviewer (Leading in Bold)   Status

25 Sept      Owner, Dessert Parade – Mr. David Kuan     Suzanne/Vincent                 Completed

27 Sept      Owner, Dessert Parade – Mr. Martin Yu      Bryan/Eric                      Completed

11 Oct       Manager, Lok Lam Dessert Store,            Chris/Suzanne                   Completed

11 Oct       Manager, Chung Kee Dessert Store           Bryan/Eric                      Completed

13 Oct       Consultant, Tsui Wah Restaurant – Mr. Ng   Suzanne                         Completed

14 Oct       Owner, Yummy Baking – Ms Nancy Tsui        Vincent                         Completed



b. Objectives
●      To obtain insights about the dessert / food and beverage industry
●      To understand the key success factors about the industry


c. Key Questions
●      How is the industry situation? How does your shop compete?
●      Can you rate the following factors – location, chef, servicing staff, special products, promotion, and
       menu? Which are the most successful?
●      How is your cost structure? Is it typical?
●      Do you have signature products? How much percentage of sales do they represent the total?
●      Do you use differentiation strategy? Combo products? How are they going?
●      What is your shop’s average margin and that of normal against signature products?
Appendix 1 – Owner Interview 1
   Interviewee: David Kuan (Owner)
   Interviewers: Vincent and Suzanne
   Date: 8pm, 22 Sep, 2009

   Key Takeaways

   Background:
        Current Situation: DP can barely make a profit in its 1st year, however, it faces several key
         issues, e.g. too few customers, fierce competition and few dessert selections.
        Future Plan: It targets to increase its profit sharply in its 2nd year and aims to open one more
         store in the same district.
   Strength:
        It adopts a low price strategy to attract customers.
        Its brand awareness is enhanced by word of mouth and good comments on the Internet
        He is keen on trying new desserts at idle time and regularly updates the menu to offer more
         choices to customers.
   Weakness:
        As DP does not have any covered areas to serve customers, it has to be close during bad
         weather.
        Due to limited space, it cannot order too much ingredient and this limits its customers’ choices.
        Due to limited manpower, leaflet distribution / free delivery was on hold.
        Customers in this district is quite price sensitive, DP has difficulty in increasing price.
        Without much bargaining powers on suppliers, it has no ground to further reduce its cost of
         goods sold.
Appendix 1 – Owner Interview 2
   Interviewee: Martin Yu (Owner)
   Interviewers: Bryan and Eric
   Date: 8pm, 25 Sep, 2009

   Key Takeaways

   Opportunities for DP
        Pricing – If the price of all desserts increases by HK$1, its daily turnover will be improved by
         ~$200 and its annual net income can improve by $63K.
        Lunch Time – DP only has a few customers at lunch time and this period would be a new
         revenue source in the future.
        Partnership – A few competitors near DP has approach them to form partnership to launch
         lunch combo or discount promotion to boost sales in the district.
        Manpower – DP plans to recruit a permanent staff to replace one of its owners, so that he can
         focus on strategic planning or return to his original industry to lower its opportunity cost.
        Customer Relation – With the high quality of services, DP has successfully developed a
         customer base from repeated customers in nearby schools and local estates.

   Threats for DP
        New competitors – As the start up cost for new cafés is low in this district, a few new snack
         shops have open recently to compete for customers.
        High rental – Its landlord is likely to increase its monthly rent in 2010 and this would further
         affect its profitability.
        Government Penalty – DP has a risk to be accused of illegally occupying public areas to set up
         tables to serve customers.
Appendix 1 – Expert Interview 1
   Interviewee: Nancy Tsui
                 Owner of Yummy Baking (a cake & dessert school in Yuen Long)
   Interviewer: Vincent
   Date: 1pm, 14 Oct, 2009

   Key Takeaways

   Key successful factors for signature dessert
        Understand the ever-changing needs of customers in different seasons in different districts /
         countries.
        Compare and analyze the SWOT of the signature product in the district
        Keep focus on learning one or two signature desserts by attending intensive class or working in
         famous dessert shop
        Offer free tasting / discount coupon to passers-by to enhance word of mouth
        Drive customer flow (instead of revenue) by signature desserts

   Critical factors to run a dessert store
          Shop location: It is essential to analyze the customs flow, customer preferences and competitor
           offerings in the nearby areas
          Product variety: Focus on a few key high margin items
          Promotion: Advertise on magazine, discussion board and social network such as facebook/twitter
           induce trial
          In-store merchandising attract passers-by customers
          Partnership: Identify any potential partners in the nearby areas to enhance sales
Appendix 1 – Expert Interview 2
   Interviewee: Mr. Ng Tak Leung
                 Consultant of Tsui Wah Restaurant (Received “Eating in Hong Kong
                 Image Flagship Store” Award)
   Interviewer: Suzanne
   Date: 7pm, 13 Oct, 2009

   Key Takeaways

   Key successful factors for food & beverage industry
        Visionary – successful restaurants in Hong Kong sets goals beyond making profit. Tsui Wah has
         the vision to bring Hong Kong style food to the international platform
        Signature products – salient element to attract customers and build brand
        Standardization – Tsui Wah has a central kitchen in preparing food items and standardized
         process in controlling quality and food safety. For example, the restaurant uses of refractometers
         to measure dissolved sugar level in food.
        Publicity – position the brand as “Hong Kong Quality Restaurant”. Promotion through editorial in
         magazines and internets discussion board

   Threat for start-ups
        Competitive – the competitive force in food & beverage industry is increasingly intense
        Rent – most landlords request for 7 months deposit in lieu of rent. New start-up that rent district
         with high traffic flow requires a minimum of more Hk$1 million on purely on rental payment
        Salary – salary dominates a large proportion of cost
Appendix 1 – Expert Interview 3
   Interviewee: Mrs. Chan (Manager of Chung Kee Dessert Shop)
   Interviewers: Bryan and Eric
   Date: 4pm, 11 Oct, 2009

   Key Takeaways
   Industry overview
         Intense competition in dessert industry
         Under such competition, need to maintain high quality and reasonable prices

   Key success factors
        Among different factors food quality is the most important; also need to maintain regular update on
         the menu so as to suit changing taste due to season and different segments of customers

   Cost
          Costs may be high due to the need to ensure quality raw materials
          Traditional dessert generally has a higher margin than newer ones, especially those with a lot of
           fruits. Therefore need to keep a healthy ratio to control costs and profits while catering customer
           tastes
          Take note of additional costs incurred from launching new desserts but failed.

   Tips
          Be a mystery patron in their own shop to objectively listen to customer comments, thus help with
           future product development with high success rate
          Be enthusiastic and determined to improve and grow the shop, it generally needs at least a year
           or two to recoup investment
Appendix 1 – Expert Interview 4

   Interviewee: Mrs. Lee (Manager of Lok Lam Dessert Shop)
   Interviewers: Chris, Suzanne & Vincent
   Date: 4pm, 11 Oct, 2009

   Key Takeaways

   Industry overview
          There is a keen competition in HK dessert industry
          Entry barrier for dessert industry is low. There are many new dessert shops opened in HK every
           year
          HK people easily accept new things. They are willing to try new dessert products
          Many HK people like to make deliberate trip for signature desserts with high food quality

   Key success factors
         Food quality is the most important factor for attracting customers and building customer loyalty
         Wide variety of products and seasonal desserts are important to increase purchase frequency
         Word of mouth is a powerful promotion channel in dessert industry.

   Costs
           Generally rental cost is the major expenditure in running a dessert shop in HK
           Raw material cost for fruit dessert is relatively higher than that of other desserts
Appendix 2 – Mystery Patron Checklist
          Dessert Stores            Lok Lam           Chung Kee      Honeymoon Dessert   Yuen Kee

  Location                        Shum Shui Po        Shum Shui Po       Kwun Tong       West Point
  Date                                11-Oct             11-Oct           27-Sep           4-Oct
  Time                                 3pm                3pm              9pm             10pm
  Mystery Patron                Chris, Suz, Vincent    Bryan, Eric        Vincent         Vincent

  1. Product
     a) Food Quality                    4                  4                 4               5
     b) Menu Selection                  5                  5                 5               3
     c) Signature Products              3                  3                 3               4
     d) Product Bundling                2                  2                 3               1

  2. Service
     a) Waiting Time                    5                  4                 4               4
     b) Responsiveness                  4                  5                 4               3
     c) Politeness of waiters           4                  4                 4               2

  3. Store Environment
     a) Hygiene                         4                  4                 5               3
     b) Merchandising                   3                  3                 4               1
     c) Location                        3                  3                 5               1

  4. Price                              4                  5                 2               5

  5. Promotion
     a) Coupons                         0                  0                 0               0
     b) Partnership                     0                  0                 0               0

  Total                                 41                42                43              32

  Remark: 0 = Bad, 5 = Excellent
Appendix 3 – Market Survey
1. Are you living in Shek Kip Mei?
      Yes __      No __

2. Do you like dessert?
     Yes __      No __

3. How frequently would you visit dessert stores?
a) everyday b) 2 -3 times a week c) once a week d) once a fortnight e) once a month

     Lunch Set (for Shek Kip Mei residents ONLY)
4. Which of the following lunch set (main + dessert) would you prefer?
     a) Sandwiches Set b) Noodles Set            c) Dim Sum Set d) Others: ____

     5. Which of the following price range will you pay for the lunch set?
     a) Below $20                b) $21-$25       c) $26-$30        d) $31 -$35     e) Above $36

      Dessert
6. Did you have any past experience of making deliberate trip to a dessert store due to signature dessert?
Yes __          No __

7. Would you make the deliberate trip if the dessert store is located in Shek Kip Mei?
Yes __         No __

8. Currently, what kind of signature dessert would you like? _______

9. Which of the following price range will you pay for a typical dessert trip per pax?
     a) Below $10                 b) $11-$15       c) $16-$20       d) $21 -$25       e) Above $26

     10. Which dessert store in Hong Kong you have visited the most in the past year?
a) Honeymoon Dessert (滿記) b) Lucky Dessert (發記) c) Chung Kee (松記)                d) Others: _____

11. Please pick the most important factor in visiting a dessert store?
a) Signature dessert (招牌菜)      b) Food quality c) Price d) Services e) Store Location __

12. Have you heard of a dessert store called “Dessert Paradise” in Shek Kip Mei?
Yes __         No __
        Appendix 4 – Not Feasible List
Issue                              Hypothesis                       Analysis                                  Data Sources                Status      Result

1. Cost                            DP can increase NI of $10K       Inventory cost analysis                   1. Owner's interview        Completed   Not feasible. Owners have
                                   by reducing 3% COGS                                                                                                compared many price lists from
A) Cost of Goods Sold - How        through alternative                                                                                                various wholesalers and due to
to increase NI through             suppliers.                                                                                                         relatively small order, DP
sourcing cheap raw materials                                                                                                                          cannot have any bargaining
in bulk from suppliers?                                                                                                                               power on price.

1. Cost                            DP can increase NI of $12K       Rental rate analysis                      1. Desktop research:        Completed   Not feasible as the real estates
                                   through a 10% rent                                                         Centaline webpage, Agency               market is recovering in Q2
B) Fixed Cost - How to             deduction.                                                                 quotes                                  2009. Owners believed the
increase NI by reducing fixed                                                                                                                         landlord will increase rent in the
cost of rent through                                                                                          2. Owner Interview                      renewed lease in Dec.
negotiating with the landlord?

1. Cost                            DP can increase NI of $6K        Analysis of utilities usage               1. Desktop research: HK     Completed   Not feasible as (i) no tax
                                   by cutting utilities bills and                                             Inland Revenue Dept                     incentive for new start up in HK,
C) Overhead Costs - How to         government bills by 5%.                                                                                            and (ii) Already minimize gov't
increase NI through reducing                                                                                  2. Owner's interview                    fee by all means. (iii) Tables are
utilities and government fees                                                                                                                         all located outdoor without A/C,
(license, business                                                                                                                                    thus only limited utilities are
registrations, taxes, etc.)?                                                                                                                          used in the store.

2. Service Change                  DP can increase NI by            1. Financial model on profit margins of   1. Owner's data             Completed   Not feasible - The store is only
                                   $15K by increasing 20%           each additional service                                                           100 square feet with manpower
How to increase NI by              customers through                                                          2a. Desktop research                    constraints
recruiting new customers           provision of services (e.g.      2. Analysis of customer preference on
through provision of               internet, wi-fi, comics, car     service levels                            2b. Mystery patron at
customized services?               parking, special events, DIY                                               nearby restaurants
                                   class etc.)
                                                                                                              2c. Market survey

3. New Delivery Channel            DP can increase NI by            1.Financial model on optimal order        1. Owner Interview/Data     Completed   Not feasible - The owner ran a
                                   HK$80K by providing free         amount of delivery service and profit                                             trial of delivery service. Due to
How to increase NI by              delivery to 1,000 new in-        margin analysis                           2. Desktop research                     limited manpower, the service
recruiting new in-district         district customers for order                                                                                       could not add additional
customers through providing        >HK$40                           2. Analysis of amount of nearby           3. Market survey                        revenue.
delivery to the neighborhood                                        schools and their existing delivery
and schools?                                                        service

                                                                    3. Analysis of student preference on
                                                                    their acceptance to school delivery



4. Promotion                       DP can increase NI to            1. Impact research                        1. Desktop research         Completed   Not feasible - Current price has
                                   HK$70K by increasing 30%                                                                                           a slim margin. Further discount
How to increase NI by              new "residents" through          2. Financial model on profit margins      2. Owner's data                         will hurt its net income.
recruiting in-district customers   providing discount to those      analysis
through providing discount to      whose ID # has "8"
those whose ID # has "8"?
Questions?
      Comments?
           Thoughts?

								
To top