Q.1 Analyze TCB’s competitive environment using appropriate tools.

Answer:

TCB is in a highly competitive market, there are many players in the coffee making market. It was
established that TCB cannot compete with Starbucks, and strategic analysis proved it.

Tools used to analyze TCB’s Competitive environment are:

a. Porter’s Five Forces:

 New Entry Threat: This is high due to the small number of barriers to entry. The hurdles that
exist in the coffee industry are also uncomplicated and easy to remove, making it easier to enter
the market. It is a huge market with many players because it is not a niche product and there
are many players.

 Threats of substitutes: High because there are several alternatives available, such as tea, cold
drinks, shakes, and juices. Other local hot drinks also pose a threat to coffee industry
alternatives as local hot drinks are accepted.

 Competitive rivalry:. Starbucks is a leader in the coffee industry with a huge source of income.
This means that players competing with huge financial resources in the coffee industry are
internationally accepted and have a high level of competition with each other. It is important to
note that these are international chains and that local chains in each country are also part of the
competition that further intensifies competition in the coffee industry. The TCB had financial
constraints, administrative issues, and lack of digitization. Due to internal problems, they had a
weak front to their competitors.
  Customer bargaining power: High due to the large number of coffee suppliers without
fundamental differentiation. Although TCB claimed that their new technology would provide
delicious, tasty coffee at a very low price. If you can provide what they claim, you can be loyal to
your customers. Buyers can choose from a variety of international and domestic brands that
keep them high, and companies offer transactions based on the bargaining power of the buyer.

 Supplier bargaining power: The bargaining power of the supplier is low because the company is
strong and there are many suppliers. With the right finances and sales, the supplier is ready to
sign a contract with the company. The task is to select suppliers based on quality,
environmental, and economic aspects.

b. SWOT Analysis:

Strength: Weakness:
 Friendly Service  Lower adaptability to changes
 Quality product  lack of digitization
 welcoming atmosphere  Improper financial management
 Easy Availability in malls and localities

Opportunities: Threats:
 A strategy of targeting price-sensitive  Larger competition from other players in
coffee drinkers the market ex- Starbucks, and others
 Inclusion of new technologies in machines  Lack of funds and bank balances
and improving the quality of product in  Employees iteration rate
competition to others
 Large target market
2. Discuss the management control issues that may be hindering Martina from increasing TCB’s
profitability.

Answer:

To create an efficient and effective management control system, first of all, the precise control measures
applied and the MCS implementation rigor or core that the TCB must perform to increase the
profitability margin. You need to select the level of the element. • Adjust to your organization's strategy
and goals Before implementing a new strategy to increase profitability, you need to outline your current
strategy.

 Coffee beans were active in eight different locations in the United States. Some businesses were
owned or rented. Coffee Bean (TCB) had a large amount of debt at some shopping malls, which reduced
the profit on the bill.

 Due to concerns about the availability of spare parts, one of the Atlanta stores replaced a machine
designed by Martina and supplied by TCB with a locally manufactured machine. Coffee quality has
declined, and in response to consumer concerns, store managers have lowered coffee prices to maintain
sales levels.

 The biggest surprise for Martina was when she learned that a newly hired manager in Peoria took
over the next lease to increase the store's capacity and serve pizza and beer. The manager explained to
Sally that the shop's product range needs to be expanded based on the quality of the coffee.

Consistency with corporate culture TCB Incorporation needs to take into account how a company works
and how it builds its business. In the digital age, most enterprises rely on accounting software / ERP
implementations to achieve better error-free results. Enterprises seek to reduce human intervention by
installing better software. In this case, it is clearly stated that Uncle Fred relied on a manual accounting
process to hold the company's financial statements. TCB's corporate culture believed in traditional work
patterns. Sally didn't suspect the problem, but TCB Inc. It has never been audited.

• The last important element of teamwork implementation for team building activities / profitability
should have focused on working in a cohesive and uplifting environment. The case study reveals that
Uncle Fred worked alone in accounting and did not enjoy working in a team or being helped by his
subordinates. As a result, the annual financial statements for the establishment of the TCB were not
sufficiently detailed and lacking in clarity. The idea of the system is to motivate managers to work in
teams. Many of TCB's top employees, including the company's largest Boston store manager, were
publicly looking for work elsewhere. When Martina asked Uncle Fred for help because the bank didn't
have the funds available to repay his monthly loan, he could only present the financial statements for
the previous quarter and the organization hired the right employee (financial adviser). If so, timely
financial advice was a better way.
3. Use Simons’ Levers of Control Framework to derive recommendations that address the
issues raised above

Answer - There are few key areas of concern pertaining to the case that need to be addressed and with
the help of Simon’s lever of control and its various control system recommendations can be given.

1. Belief system - Used to articulate the values and direction that senior managers want their
employees to embrace.

The area of concern for TCB was the decisions made by recently hired manager in regards to core
business model and many key employees of the store who are looking for the jobs anywhere.

Recommendations –
Core values- Core values of a business is the friendly service , quality coffee and inviting atmosphere.
Offering beer and pizza with the coffee was not the great idea to encounter problems and expanding
business. This system suggests to adhere to the quality offerings , best customer experience , which is a
core responsibility of all the employees of a company that they should follow.

The other recommendation is to stick to the grand purpose that the company serves, all the employees
should work in a similar line with the top management to expand the business and profitability. Lack of
farsightedness and less profits led many employees to switch the job for better opportunity.

2. Boundary system – Boundary control systems is used to avoid risk by setting limits and enforcing
rules such as, codes of conduct, strategic planning systems, operating directions.

Issue that can be addressed under boundary system is the replacement of coffee machines used by
company with some local company’s machine and compromising products and service quality.

Recommendations-

Risks to be avoided- Here the risk of losing customer base and brand’s reputation is involved. In
company’s Atlanta office store faced the repairing related problems of the machine but instead of
talking with the management they replaced the customized coffee machine with some local machine.
The decision compromised the quality of coffee and customers started complaining about the quality of
the service and quality.

The recommendation involves the approval of senior management before taking any decisions that can
affect the core values of a company. Justifying the bad quality with low costs is something that can
tarnish the reputation and brand value of a company. So, employees should not take such decisions on
their own.

3.Diagnostic control system – Help managers track the progress of individuals, departments, or
production facilities toward strategically important goals.

Issue that can be addressed here are the revenue generation , new strategic alliances and expansion,
proper auditing of the company and adaption of new technologies in different departments.

Recommendations-

Critical performance variable-

1. New Technology – Company should adapt new technology in their auditing , feedback system ,
coffee machines to improve the overall service and efficiency of a firm.
 2. Reduction of costs – Reductions of costs by cutting down the lease rentals in malls

3. Alliances and Expansion- Alliances with big brands to have a good place for stores to setup and
expansion in to other counties with the help of local franchises.

4.Interactive control system –

Are the formal information systems that managers use to involve themselves regularly and personally in
the decisions of subordinates.

Issues can be addressed here are the lack of communication between the managers , their subordinates
and the top management.

Recommendations-

Strategic uncertainties- Martina could have involved the salesman , local store managers in the
strategies making for local stores , product expansion , quality improvement and technology
implementation.

The team members and employees can also contribute in ideas to improve revenue generation, cost
reduction and enhance customer service. Involving them will give them a motivation and purpose to
work hard in line with the company’s goals.
4.What are the risks Robert’s proposal is likely to pose for TCB? Discuss the risks for each of the
proposed options

Robert the Marketing Director of the company proposed three different proposals discussed below.

a. Alliance with Walmart

b. Airports: Opening stores inside airports
c. Expand into Canada using local brands and franchises.

Risks associated with all the proposals are discussed below

a. Alliance with Walmart:

Strategic Risk- The Coffee Beans business model is to provide the same customer experience and
environment in all the stores. This might become an issue if the company wants to open stores
in Walmart as Walmart might want to maintain the customer experience that it gives even in
the coffee stores. So, there might be a clash between Walmart and The Coffee Beans business
models to provide customer experience.

Operational Risk- Walmart is giant with access to all types of raw materials for sale including
Coffee. Walmart may want The Coffee Bean to use and provide coffee provided by Walmart to
the customers. This might once again create disparity in the quality of coffee that the store
provides inside and outside Walmart.

Reputational Risk: The Coffee Beans owner, Martina’s father had a vision that the stores will
provide friendly services, a welcoming environment, quality coffee and the same type of
services in all the stores. This reputation may get distorted in Walmart as customers might feel
that services provided inside Walmart and inside the coffee stores are different which will cause
disparity in the minds of the customers. Some may prefer the same type of services on the
coffee stores as they are getting inside Walmart, in such a case the coffee store will loose
customers.

b. Airports:
Operational Risk- With Starbucks having its presence in all the major airports may pose a threat
from suppliers to The Coffee Bean. Suppliers may increase their prices because they would want
to strike better deals with Starbucks as it has a larger customer base. The fact that The Coffee
Bean is a loss-making company may create more of an issue to strike better supplier deals.

Competitive Risk- The Coffee Bean wants to differentiate its services from Starbucks by
providing low-cost coffee to flyers in the airport. This mighty attract customers who want a
quick economical beverage consumption before they catch their flight. In such a case Starbucks
may also introduce a new line of coffee items for quick flyers in at the same pricing and may give
stiff competition to The Coffee Bean. Moreover, Starbucks may introduce other services to give
discounts and freebees to their regular membership customers which will again provide
competition to the low-cost coffee strategy of The Coffee Bean.

c. Expand into Canada using franchise:

Franchise Risk- To expand its store in other another country like Canada The Coffee Bean may
face threats of Intellectual property. As mentioned in the case, Martina with the help of her late
fathers innovatively diagrammed brewing technology came with a new brewing machine that
brewed coffee with the same quality and with a lower cost. Giving a franchise to another
company may pave the possibility of this technology being copied and used for personal use and
benefits. Even if the technology is copyrighted by the Coffee Bean the franchise company may
steal the information of the technology and may make a brewing machine with other
innovations to make the machine even more efficient.