Bake ME a cake Case Solution
Introduction:
Amy Bourgon; an owner of a homemade cake business, wants to take some important decisions regarding the expansion that would increase the profitability and attract more customers. Basically, she started her business from her home and used to deliver cake because she had no idea of the business growth and space accommodation. She is deciding to take the company to next level to provide a space and increase the profitability.
Therefore, the case objective is to expand the business by considering the space challenges, increase the profitability by increasing the price, or to adopt a new advertising strategy to improve the profitability. For expansion of business, she has two options, (1) Renovate the family home (2) Leasing a location and profitability decision by increasing the price to 2.25 and 2.50 per cape cake. The decision is made on differential analysis and contribution analysis in order to make fair decision.
Competitive Analysis:
The major competitors of BMAC are Global Donuts, Sticky Fingers, and Junior Bakers. If we compare their strengths and weaknesses with that of BMAC, we can analyze how competition is increasing with commercial bakers.
- BMAC: the business is in growing stage and the owner is experienced in food industry, she use to make cakes for immediate sale. The weakness is she has a few customizations as she works out of her home.
- Global Donuts: They have huge variety in cake but limited stock of demanding products.
- Sticky fingers: They make pre made cakes on which no customization is allowed.
- Junior bakers: wide variety along with 3D cakes but most of designs are copied by BMAC and less attractive look.
Qualitative Analysis:
The differential Analysis:
Amy wanted to expand the business from her family’s kitchen, as she analyzed the increase in customers from last three years. Therefore, she has chosen two alternatives; one is to renovate the home location by creating a separate space for business, and other alternative is leasing the location that will provide a commercialize location for her bakery. Therefore, she has to decide that whether it is better to invest her money in business or to invest in market (due to ups and downs in Canadian market).
Alternative 1: Renovation
Pros:
- Personal investment would be used that is $ 20,000
- The business will stay at home no external interventions
Cons:
- Limited growth opportunities unless heavy amount is spend on advertising
- Limited space and uncertainty for business improvement............
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