Cafe Xaragua Harvard Case Solution & Analysis

Broad issues:

The case focuses on an entrepreneur who is facing certain issues and challenges while making decisions about the growth in his business along with his two partners. Initially, the entrepreneur with his partners visit Haiti and found potential in terms of economic development as there were many sectors that were not explored yet. Thus, he along with two of his business partners to delve into the coffee business and began exporting coffee from Haiti.

cafe xaragua case solution

cafe xaragua case solution

The success gives them confidence and thus they decided to make an investment but being an investor, they knows investment is a risky thing to do and therefore they have to face certain risks in terms of analyzing the internal rate of return and payback. The entrepreneur with his partners needs to make changes in their direction and scope of the business that is based on online retail store engaged in the sale of coffee beans from Haiti.

Relevant data:

In order to identify the issues faced by the company for making further investment in their new business. The management needs to analyze several factors. First, there is a high need to identify a potential market where the company wants their business to expand. The market should have the potential to make the company successful. The three entrepreneurs looked at various countries and finally saw Canada as a potential market to launch their business particularly in Calgary.

The reason behind choosing this city was a strong economy, higher commodity prices, entrepreneurs’ understanding of the local environment and their connections with the private sector. In addition to this, data related to the competition is important as well so that company came to know the intensity of rivalry in the market. Furthermore, the industry in which the company wants to enter should be promising as well. Haiti is known to be one of the premium coffee beans producers in the world. It is supplying coffee to almost half of the world.

Moreover, the company needs to make an assessment of the city in detail in which they are planning for their business. Assessment would be made on certain factors like the economy, its gross domestic product and the growth rate of the economy. Along with this, the company also needs to look into the infrastructure, political conditions, government rules & regulations and the workforce level. Additionally, the level of spending and income level of the target market needs to be considered as well as the wrong estimation can create problems in the overall business.

Proper estimation in terms of cost needs to be done to get more command and accuracy, or else probability of errors will always be high. Other factors and data that is important for the problem identification is the ways through which capital will be raised for the company and the pricing level for the products offered.

Key problems:

As mentioned above, the entrepreneurs have decided to open its café in Calgary, Alberta. Calgary is known to be an expensive market for any business and doing business there can never be cheap. This means the company needs to have enough capital to open its business in such an expensive city of Canada. Lehnert knows that Alberta is an expensive city, and he knew that retail companies found it very hard to compete for talent with the petroleum industry.

Another problem faced by the company was the competition in the market as both second cup and Starbucks had a location in the Kensington district. Completion is high because there are a large number of commercial players while small number of small independents. Moreover, threat of new entrants is also high in the market as starting a business is easy, and there are no such barriers to entry as well. Threat of substitute is also high as there are a number of casual beverage options for the customers. In addition to this, the three entrepreneurs have limited experience in running a café or store. Moreover, they do not have enough capital for the business start-up.

Another problem faced by them is a limitation in terms of product portfolio as they are not offering a diverse range of products. One of the products they have planned to sell is the baked goods, and they are dependent on others for this particular product........................

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