Cafe Xaragua Harvard Case Solution & Analysis

Issues prioritizations:

  • Gather funding
  • Quality
  • Differentiation
  • Managing expenses
  • Competition
  • Overcoming lack of experience
  • Limited product portfolio
  • Gut feeling on sales projection
    cafe xaragua case solution

    cafe xaragua case solution

In terms of prioritization, the most important issue for the new start-up business is to gather the desired level of funding. The three entrepreneurs join their capital, and it totaled around $75000, but it is not enough. For more capital, they have decided to opt for debt financing in terms of the loan with an interest rate of 13% on an annual basis.

The next issue that is on the priority is maintaining the quality standards especially in the high scale market with its positioning as a premium product in the Alberta city. In order to maintain the quality, the company needs to maintain strong relationships with its suppliers.

The next issue is related to the differentiation i.e. the Café Xaragua needs to find a point of differentiation in comparison with its competitors. The partners of the business knew that the biggest competition for the company would be Starbucks but they felt that with a strategy focused on an in-house roasted product rather than just a café’s atmosphere, they would have a competitive advantage and a shot at succeeding in Calgary.

The next issue in terms of priority is managing the cost and expenses of doing business in a city that is known to be very expensive in terms of everything. The main reason behind this is the sound economy and economic stability in the country. Moreover, consumer spending is high in Alberta in comparison with other cities in Canada that encourage retailers and businessmen to increase their pricing level. The next issue faced by the company is of competition followed by lack of experience in the business by young entrepreneurs. All the three entrepreneurs don’t have experience in this field, and this might create an issue for them in the long run.

Another issue that is ranked as a second last in terms of priority is making sales projections solely on gut feelings. They have not done any homework to gather strong and relevant data related to the sales of the company and this factor might put them in jeopardy. Lastly, the café is offering very limited product portfolio despite the fact that they have to compete with one of the largest coffee brands in the world like Starbucks.

Alternatives available:

Alternative 1: maintain the status quo

The first alternative available for the company is to maintain the status quo i.e. doing nothing and leave the business as it is.

Alternative 2: opening mobile store

The next alternative the company has is to start a mobile store i.e. a store on wheels. It will be based on having a temporary store like a coffee truck to increase brand awareness and reach the customers directly rather than waiting for them to come. This will help the company in creating a high level of brand awareness. In addition to this, it will bring excitement and attract customers that will help the company to grab their attention. On the other hand, it will require time for the acquisitions of permits. Moreover, it will increase expenses of the company as they have to make modifications in the truck.

Alternative 3: online sales

The third alternative that the company has is making its business more focused towards online sales. In addition to this, they can go for selling its product in traditional grocery stores as well. The main point of differentiation here would be the pricing factor. One of the major advantages in this alternative is the experience in already familiar online selling.

The risk of failure will be low if the company opts for this alternative. Moreover, expenses in terms of cost are also low in this alternative as online business is always cost effective. On the other hand, reach to the customers will become limited in selling through grocery stores. Moreover, it might be difficult for the company to make alliances with the local grocery stores in Alberta.

Alternative 4: license and open store

The last alternative available for the company is to open a store as Café Xaragua. Along with this, the company can license their product to local cafes in Alberta City with high recognition for the brand and believes in the factor of social responsibility as well. One of the primary advantages in this alternative would be exposure to the larger market that will help the company in increasing brand awareness. In addition to this, it will also help the company to create synergies. On the contrary, there will be limited level of differentiation in terms of providing services. Moreover, licensing might have a negative impact and result in degrading of a brand................................

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