Assignment 1: Professional Advisor Report

Student ID: 17063967

Submission Date: 4th February 2019
Module: 4BUS1139-0905-Business Operations and Leadership
Module Lecturer: Sheenagh McKillop
Word Count: 1936

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Table of Contents
1. Introduction..............................................................................................................................3
2. Company Set-up.......................................................................................................................3
2.1 Company Structure................................................................................................................3
2.2 Statutory Obligations.............................................................................................................3
3. Industry and Business Environment.........................................................................................4
3.1 SWOT Analysis.......................................................................................................................4
3.2 PEST Analysis..........................................................................................................................5
4. Marketing.................................................................................................................................7
5. Business model, planning and strategy....................................................................................8
6. Economics and Pricing Strategy...............................................................................................9
6.1 Factors Affecting Demand.....................................................................................................9
6.2 Factors Affecting Supply........................................................................................................9
6.3 What will determine pricing strategy?..................................................................................9
7. Financing a business...............................................................................................................10
8. Employment Issues.................................................................................................................11
8.1 Unfair or Wrongful Dismissals.............................................................................................11
8.2 Employment Status..............................................................................................................11
References.....................................................................................................................................13
Appendix........................................................................................................................................14

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1. Introduction

The aim of this report is to address some of the key operational matters facing Mixit Limited, a
high street café, looking to rebrand itself as a smoothie and health food bar.
This report will examine Mixit’s internal and external environment and discuss the marketing
and pricing strategies that will best suit the company towards achieving its objectives and
satisfying its consumer’s needs.
Currently, the café is faced with issues relating to staffing and competition. Therefore, this
report will examine the current activities at Mixit and suggest improvements to increase sales
revenue and overall performance.

2. Company Set-up

2.1 Company Structure

Mixit has inherited to a sole proprietorship business. Such structure means the trader is
essentially self-employed, not seen as a separate entity and has unlimited liability where they
are personally liable for all business debts or obligations. This means the liquidator can access
trader’s personal accounts, property, or assets if any business accounts cannot cover the debts
(ACCA F4 - Corp and Business Law (Eng) - Study Text 2013, 2012).
However, this limitation can be mitigated by forming Mixit as a limited company, benefiting
from limited liability, where the incorporation forms legal separation between Mixit’s owner
and their business. The personal asset of trader is not exposed. Liability is limited to the amount
of their capital contribution.

Additionally, it can be difficult to raise finance for business expansion with a sole trader as
banks have preference for the increased accounting transparency that go along with limited
company (Korchak, 2014).

2.2 Statutory Obligations

There are certain obligations to comply with before trading as “Mixit”. The trading name cannot
be same as an existing trademark. It is therefore advisable to carry out a trademark search to
ensure you are not infringing another company’s trademark.

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3. Industry and Business Environment

The following sections considers external and internal environment for Mixit.

3.1 SWOT Analysis

SWOT analysis is used in assessing a company’s strengths, weaknesses, opportunities, and

threats. The strengths and weaknesses are internal aspects. The opportunities and threats are
the external factors that could affect the company (Kotler & Keller 2009, 101). Below table 1
provides overall picture of Mixit:

Helpful (in achieving Harmful (in achieving objective)

objective)
External Environment Internal Environment

Strengths
- Owner business knowledge
-High street location
-No. of loyal elderly customers
Opportunities
Weaknesses
-Absence of online ordering
facility
-Very old fashioned
-Poor customer service
-Less passing trade
-Staff issues Threats

-Summer events -Highly competitive industry

-Consumer health conscious -Seasonal
-Protein content selling point -Changing regulations (e.g. sugar
-Consumers are moderating levy, single-use plastic etc.)
alcohol intake

Table 1 - Mixit SWOT Analysis

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Mixit’s strength lies in being a high street café. This could potentially be advantageous as the
number of health-conscious consumers grow and if Mixit can differentiate product from
competition to attract sales.
Nevertheless, the business is currently very old fashioned and having many staff issues which
lead to poor customer service. A further weakness for Mixit is it has no online presence to
attract customers when no passing trade on the high street.
The increasing health concerns by society may provide opportunities in that smoothies are
viewed as alternative to unhealthy sugary drinks.
The likely threats to Mixit are changing regulations, competition, and that the smoothie
industry is somewhat seasonal where sales are higher during warm weather.

3.2 PEST Analysis

Political  Profit growth could be impacted by UK leaving

European Union (Brexit)
 National minimum wage expected to rise 2018-19
 Corporation Tax and VAT
Economical  Real household disposable income to increase during
2018-19 (IBISWorld report UK0.019)
 Household spending on food and non-alcoholic
beverages expected to increase (IBISWorld report
UK0.019)
 Coffee price is expected to rise somewhat during 2018
(IBISWorld report UK0.019)
 “Industry revenue forecast to increase… compound
annual growth rate of 7%” (IBISWorld report UK0.007)
Social/Environmental  Consumer health consciousness
 Single use plastic legislations
 Increasing pressure to be socially and environmentally
responsible
Technological  Strong presence of social media
 Third party delivery apps/sites
To consider the external environment further, PEST analysis is used which considers the
Political, Economic, Sociological and Technological factors that concern Mixit. Some key
considerations included in table 2 below:
Table 2 – Mixit PEST Analysis

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The overall external outlook for Mixit to operate as a chained café or rebrand as smoothie bar
appears somewhat favorable. Growth in the juice and smoothie bar sector is expected to
continue together with consumer health consciousness over the next five years (IBISWorld
report UK0.007, 2018). However, the sector has increasing competition with companies such as
Innocent Limited dominating and selling products to supermarkets whilst cafés and coffee
shops are expanding into the sector. This increasing external competition may cause an
augment in price competition leading to constrained profits for smaller businesses such as
Mixit. Furthermore, Mixit may face greater cost of ingredients for smoothies which could arise
when UK fruit picking farmers cannot access cheaper EU labour(O'Carroll 2016).

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4. Marketing

The “marketing mix is a marketing concept that includes tools available to develop efficient
actions and achieve sales targets within a target market“(50MINUTES.COM, 2015). The 4P’s
which make up a typical marketing mix include Price, Product, Promotion and Place.
For products to be “fairly priced” as per Mixit mission statement, Mixit should carefully
consider its pricing strategy. The sector is expected to have fluctuations in fruit and vegetables
prices which can influence Mixit’s profit growth. To maintain profit margin, Mixit should be able
to pass at least some increases to customers. Due to level of competition in this industry,
initially, Mixit should keep price competitive to attract customers. Further, to compete with
supermarkets and coffee shops, Mixit should review and modify the smoothie product ranges
on a regular basis. This will allow a degree of product differentiation. Protein and vegetable
content in the smoothies may offer a unique selling point (Mintel Reports, 2018).
As a small business in early stages with strong competition, Mixit should start promotional
activities at opportunistic events. Social media and word of mouth recommendations also
provide other low-cost alternatives.
Currently, the local market has less passing trade. Mixit should look to take advantage of
technological advancements and sign-up with delivery apps (e.g. Uber-Eats, Deliveroo) to
appeal to wider customer base locally. Social media presence can attract customers further.

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5. Business model, planning and strategy

Mixit has a mission statement which is effective in that it attempts to differentiate the business
from its competitors by being a “great place to be”. As a small business, it defines the market
and focuses locally to start with, wanting to be recognized as the “best smoothie bar in town”,
which is realistic. The mission statement is also somewhat inspiring and motivating which is of
importance for employees. Further, the mission statement is aligned to overcome some of the
weaknesses identified with current operation such as poor customer service and being old
fashioned.
Mixit’s objectives should be narrower in scope and be specific, measurable, achievable, realistic
and time-based. Objective should relate to the mission statement. To be the best in town, with
an excellent customer service, Mixit should have the following sort of objectives:

 Define business position with local market as a quality driven, health-focused resource
 Conduct a training program in the next 12 months to improve employee customer
service skills
 Achieve a 95% level of high customer service

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6. Economics and Pricing Strategy

6.1 Factors Affecting Demand

The level of demand for Mixit products will be influenced by some key determinants such as:

 Price
 Price of substitutes
 Consumer preferences/trends
 Consumer incomes

Due to rising disposable income in 2018-19 (IBISWorld report UK0.019) and consumer
preference for smoothies, the demand curve for smoothies is likely to shift right and increase
demand.

6.2 Factors Affecting Supply

There are several key determinants which also influence the supply of Mixit product which
include:

 Price
 Production costs: process used to produce and ship the product
 Government restrictions/regulations
 Technological Improvement (e.g. Increased productivity)

6.3 What will determine pricing strategy?

When setting prices, Mixit should understand cost of production such as raw materials and
wages. This should be the starting point and the product should not be sold for less than the
cost of production. An element of profit should be considered when setting the prices.
However, customers are more price sensitive when they have options and choices for their
needs. Mixit should consider the availability of product substitutes when setting prices as when
customers can choose from number of substitutes, they will be much more sensitive to price
changes. Further, if customers can easily compare prices among competing products, they will
become price sensitive.

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7. Financing a business

To finance the changes and innovations, Mixit will need to raise funds to get off the ground.
Here are some available options for Mixit:

 Personal Sources - Finance can be contributed by owner and owner’s family.

 Retained Profits – Any previous earned profits can be re-invested into Mixit.

The above are the internal sources. The owner will have to look for external sources of capital if
the changes cannot be financed through internal sources. Available external sources to Mixit
are:

 Bank loans/overdrafts –As a business in early stages, Mixit may find it difficult to raise
finance through bank loans as there are no proven track records. Banks will require
seeing Mixit’s business plan. An overdraft for Mixit may be preferred to a loan as the
latter ties the company to lender for longer, however, overdraft is more expensive than
a longer-term loan.
 Share Capital – As Mixit is a limited company, it can obtain funds through issuing shares
to third parties.
 Venture Capital – Venture capital houses can invest huge sums and provide expertise.
However, they would play a controlling role in managing Mixit. Being a new business,
Mixit may not be the ideal investment for a Venture capital organization.

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8. Employment Issues

8.1 Unfair or Wrongful Dismissals

A dismissal is considered wrongful when an employer dismisses an employee in breach of the

contract of employment (Cushway, 2017). This could arise, for example, if Maria was not given
the contractual notice to which she is entitled to. An employee cannot claim wrongfully
dismissed if reasons are justified and Mixit acted reasonably in the circumstances.
Dismissals are unfair if reason for dismissal is related to employee having certain statutory
rights such as pregnancy, family reasons or pay and working hours (ACAS, 2015). Dismissals are
fair if Mixit can verify it is for the following reasons:

 Redundancy
 The employee’s capability and qualification for the role
 Employee’s conduct
 Legal Prohibition or restriction - continued employment would not be lawful
 Other substantial reason which justifies dismissal (ACCA F4 - Corp and Business Law
(Eng) - Study Text 2013, 2012).

As Maria has been having personal difficulties, it is important Mixit investigate Maria’s situation
fully before dismissing her as she may have a claim under the statutory rights discussed. Mixit
should consider if her dismissal would be contractually justifiable reason in this case (e.g.
misconduct, dishonesty).

8.2 Employment Status

An employee is employed under a contract of service (ACCA F4 - Corp and Business Law (Eng) -
Study Text 2013, 2012). As their employer, Mixit can control what they deliver and how they
should do it. Meanwhile, a self-employed contractor is someone employed under contract for
services (ACCA F4 - Corp and Business Law (Eng) - Study Text 2013, 2012). They are hired for
specific tasks which are executed without permanent employment relationship.
To determine whether Somia is an employee or self-employed contractor, a court will consider
following factors:

 Level of control – does employer ask Somia how, when and where to perform task or
what task to perform? If so, Somia is perhaps controlled and is an employee.

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  Level of skill (integration test) – if Somia is highly skilled that she cannot be controlled.
Lack of control means Somia is not integrated in Mixit and therefore not employed.
 Other factors include:
o Does Somia use her own tools and equipment?
o Whether Somia is in business on their own account

If Somia is considered an employee, Mixit has certain obligations to meet:

 Paying her correct wages and provide itemized pay slip

 Maternity, paternity and holiday pay etc
 Right to request flexible working times
 Right not to be discriminated
 National minimum wage
 Protection from unfair dismissal
 Deducting correct amount of tax

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References

50MINUTES.COM (2015). The Marketing Mix. Cork: Primento Digital. pp.1-10.

ACCA F4 - Corp and Business Law (Eng) - Study Text 2013. (2012). 6th ed. [ebook] London: BPP
Learning Media, pp.146-209. Available at:
https://ebookcentral.proquest.com/lib/herts/reader.action?docID=1109373&ppg=1 [Accessed
2nd February 2019].

ACAS. (2015). Fair and unfair dismissals. [Online] Available at:

http://www.acas.org.uk/index.aspx?articleid=4098 [Accessed 21 January 2019].

Cushway, B (2017). The Employer's Handbook. 13th ed. London: Kogan Page Limited. pp. 242.

IBISWorld report UK0.007. (2018). Juice & Smoothie Bars - UK Market Research Report.
Available at: https://www.ibisworld.co.uk/industry-trends/market-research-
reports/accommodation-food-service-activities/juice-smoothie-bars.html [Accessed: 27th
January 2019].

IBISWorld report UK0.019. (2018). Cafes & Coffee Shops - UK Market Research Report. Available
at: https://www.ibisworld.co.uk/industry-trends/market-research-reports/accommodation-
food-service-activities/cafes-coffee-shops.html [Accessed: 27th January 2019].

Kotler, P. & Keller, K. (2009). Marketing management. 13th ed. Upper Saddle River, N.J: Pearson
Prentice Hall. pp.101.

Korchak,J. (2014). Disadvantages of a Sole Trader. Available at:

https://www.informdirect.co.uk/business-management/disadvantages-of-a-sole-trader-
business/ [Accessed 27th January 2019].

Mintel Reports. (2018). Fruit Juice, Juice Drinks and Smoothies - UK - December 2018. Available
at: http://reports.mintel.com/display/934918/ [Accessed 31st January 2019].

O'Carroll, L (2016). British strawberries could be wiped out by Brexit, farming leaders

warn. Available at: https://www.theguardian.com/uk-news/2016/jul/20/brexit-farm-labour-
shortages-fruit-vegetable-harvests-national-farmers-union [Accessed 27th January 2019].

Story, J. (2018). How to use Porter’s 5 Forces model. Available at:

https://www.smartinsights.com/online-brand-strategy/brand-development/how-to-use-
porters-5-forces-model/ [Accessed 27th January 2019].

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Appendix

Porter’s Five Forces model is used:

Figure 1 : Porters Five Forces Model (Story, 2018)

Threat of new entrants

This refers to the ease of which a new health food and drink business can enter the market.
New businesses starting in this sector can get started quickly as it requires little capital. There is
also small financial risk involved which means new business can start to build up a customer
base faster (Story, 2018). Mixit requires careful consideration to protect the business and
service from being imitated and offer product differentiation that would act as a barrier to
entry for new businesses.
Bargaining power of suppliers

Suppliers can reduce profitability in a sector by threatening to increase prices. Mixit is operating
in a sector where there is greater number of suppliers available and as such Mixit can switch to
cheaper supplier.
Competitive Rivalry

This refers to the level of current competition faced by Mixit within local market for smoothies
which is high. This could push Mixit to lower their price for their health food options. It

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becomes even more essential for Mixit to provide a unique selling point through product
differentiation that will allow increase in price.
Threat of substitute product

This is the substitutes that are available for smoothies and health food options. Consumers may
be unwilling to consider anything other than healthy options particularly if they are health
conscious. There are high number of substitutes in this sector e.g. smoothies offered by Naked
and Innocent. To reduce risk, Mixit can focus on providing fresh blended smoothies with unique
ingredients that are not available in supermarkets.
Bargaining power of buyers

Industries are more attractive when customers have little power to set the terms and
conditions under which they will buy. There is high bargaining power in this sector as
substitutes are available and no switching cost involved. This level of risk can reduce should
Mixit be successful in offering highly differentiated product and service.

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