SWOT ANALYSIS OF THE CASE

Strength 1 : Muddy Child Cafe has a well-established parent Company

Explanation: In 2003, Muddy Child Cafe was launched by Muddy Mom Corporation in
Melbourne, Australia. Muddy Mom Corporation as a backbone for its expansion to compete
worldwide.
Page: 193/202

Strength 2: The efficiency of top management

Explanation: The top management of Muddy Mom corporation took a quick action in
discussing the issues with the management team of Muddy Child Cafe to find out the root
causes in order to fix them.
Page: 197

Strength 3: Muddy Child Cafe can purchase raw materials in low cost
Explanation: In terms of supply chain management, materials supply can also provide
benefits in terms of cost reductions, as Muddy Mom's suppliers can send materials to Muddy
Child Cafe when either party places an order.
Page: 202

Strength 4: Database growth with every sale

Explanation: With every purchase, Muddy Child Cafe can ask their customers to apply for
membership. From there, Muddy Child Cafe can get their information to connect and build
relationships with the customers.
Page: -

Strength 5: Offer lower price compare to the competitor

Explanation: Muddy Child Cafe uses the low pricing strategy by offering lower coffee prices
than their competitors. As a result, Muddy Child Cafe gained a price advantage over the
competition.
Page:193 & 203

Weakness 1: Muddy Child Cafe have a weak of customer value proposition and lack of
product competitiveness
Explanation: Muddy Child Cafe is a new entrant in the market, so they do not have a strong
customer value proposition because they are not concerned about customer preferences in
certain areas that do not satisfy the customer's desire to drink their preferred coffee.
Besides, Muddy Child Cafe has a limited product line that makes the company unable to
compete with other companies. This is due to the low pricing strategy, which limits the
product features available.
Page: 192

Weakness 2: Poor management by the marketing department

Explanation: Only certain market segments were focused on for the current advertising
campaign.
Page: 199
Weakness 3: Lack of skillful baristas
Explanation: Muddy Mom Corporation would be asked to provide manpower for the
Operation and Services Department to transfer staff for the fast food line to Muddy Child
Cafe.
Page: 199

Weakness 4: Lack of experience in coffee industry

Explanation: Muddy Child Cafe is new in the industry compared to other competitors such
as Dom’Donuts and Starbaskets.
Page: -

Weakness 5: Different way of treating the customers

Explanation: The company was not well prepared as they were only using Muddy Mom
experience with the US market. The same strategy in Australia was used in the US,
expecting the strategy to yield similar results. In Australia, the customers like the decoration
of Muddy Child Cafe as it creates a feeling of a cool environment equipped with metal
couches, stainless steel chairs and tables. However, in the US, the customers did not like
the cafe concept because they wanted to get their coffee quickly.
Page: 195

Opportunity 1: Muddy Child Cafe has the resources, means and capability to expand their
business
Explanation: They can offer a low pricing strategy. Furthermore, one of the product
development department functions is to develop new products and to design new menus.
Lastly, Muddy Child Cafe can raise money for expansion from Muddy Mom
Corporation.
Page: 198

Opportunity 2: Can improve the overall customer experience

Explanation: By offering reward programs, new offers, and launching new techniques would
help Muddy Child Cafe to develop a better experience for customers.
Page:

Threat 1: The awareness of competitors’ products among the society

Explanation: Since competitors’ products are popular among celebrities and public figures,
they get free advertisements and will cause premium social status to their product. This will
be a threat to Muddy Child Cafe since their products did not appeal to public figures.
Page: 199
Threat 2: It is hard to maintain their economic condition
Explanation: One of the problems that Muddy Child Cafe was facing is to maintain their
cash flow. Cash flow is the movement of money. Cash in higher than cash out shows the
company is in a good position. However, it has become a challenge for Muddy Child Cafe to
keep the same cash flow day after day. This is due to a variety of factors like weekends,
holidays, strikes, protests, pandemics, and so on. For example, Muddy Child Cafe may
receive more customers and increase their cash in the weekend compared to the weekdays
because most people are on their holiday during the weekend. Other than that, pandemics
may be a problem for Muddy Child Cafe to keep their stability of cash flow because of the
movement control order that minimises the ability for their customers to visit their shop.
Page: google
ISSUES & EXPLANATION

Issue 1: Lack of Market Analysis

Explanation: They did not conduct a thorough analysis about the US Market because they
applied the same strategy as the Australian community and it is the main reason why they
failed to enter the US market in the first place. The main reason is because Australians and
Americans have different lifestyles. Australians and Americans have different lifestyles.
Americans prefer to have their coffee quickly and on-the-go while Australians prefer to drink
coffee at the cafe and enjoy the ambience of the cafe
Recommendation: The company should do some market analysis on the customer
behaviours from both countries. For example, Muddy Child Cafe can try to provide fast
service by introducing drive-thru and self-service kiosks.
Page: 195-196, 200

Issue 2: Have a tough competition between competitors

Explanation: Muddy Child Cafe is a coffee house style food and beverage and became a
Big Three in the US coffee industry alongside Starbaskets and Dom’ Donuts. Even though
Muddy Child Cafe is a famous company in the industry, they receive intense competition
from other companies, either big or small companies. The challenge increased when Dom’
Donuts partnered with a giant consumer goods corporation to introduce coffee drinks at retail
outlets and Starbaskets partnered with the popular beverage maker as a strategic alliance to
launch the ready to drink bottled frappuccino drink..
Recommendation: Muddy Child Cafe should be ready to collaborate with other companies
in doing their business. They cannot only depend on their parent company in running their
business. As one of the famous companies in the industry, it should be easy for them to
collaborate with other companies and make sure they could offer the products that can
compete with the other competitors. Hence, if Muddy Child Cafe wants to compete with their
competitors, they also need to collaborate with the other company. For example, Muddy
Child Cafe can collaborate with the other famous food and beverage companies in order to
increase their product features they can offer.
Page: 194

Issue 3: Lack of Customer Value Proposition

Explanation: The headquarters of Muddy Child Cafe was not aware about the customers’
preferences due to lack of surveys made. Hence, the product line was weak in customer
value proposition because headquarters has decided to promote mocha, oreo mocha, and
mocha chips in the adult working area of the office. It was clear that the promotion does not
match the taste of customers who prefer bitter coffee drinks.
Recommendation: Muddy Child needs to be concerned with the customer in US
preferences. For example, they should offer the appropriate coffee that is suitable with the
people in the specific place. They must conduct research on the favourite coffee of the
community in the US in order to gain a place in the hearts of the customers in the US.
Page: 199
Issue 4: Inadequate skills of employees
Explanation: Muddy Child Cafe needs more skilled manpower, especially baristas to make
coffee as they need help from Muddy Mom Cafe.
Recommendation: They should invest more in employees’ training to improve their skills so
that if anything happens in the future, they know how to react and control the
situations/problems smoothly. Other than that, they should only hire a skilled worker if they
want to save cost on training. If the employees are well-trained, the drinks that are served
will be higher in quality.
Page: 199

Issue 5: Too depending on their parent Company

Explanation: Muddy Child Cafe’s competitor, Dom’ Donuts and Starbasket had partnered
with a giant consumer goods corporation and a popular beverage maker subsiquently, in
doing their business. While Muddy Child Cafe only depends on their parent company. They
didn't work with other big consumer goods corporations.
Recommendation: Muddy Mum should practice autonomous management on their
subsidiaries to give authority towards Muddy Child Cafe in managing their own processes to
create their own strategies in ensuring the successfulness of the cafe instead of having work
details controlled by Muddy Mum
Page: 201 and 202
ETHICAL CONCERN

Unethical Behaviour 1: Prioritising cost over quality

Explanation: Mr Thomas, who was the manager of the purchasing department always
emphasizing ‘cost comes first’ to his management. For a company, quality of the products
should be prioritised to give the customers the best quality of products.

Unethical Behaviour 2: Unfair treatment towards employees

Explanation: The Business Administrative Department can be held responsible as they
have failed to recruit and hire and train baristas to be skillful to properly work at Muddy Child
Cafe that have caused lack of manpowers problems in the Operations and Services
Department.

Unethical Behaviour 3:
Explanation:

Ethical Behaviour 4: Fair distribution of rewards towards employees

Explanation: The purchasing department is the only department who was given rewards
due to its performance. This is not fair as other departments have also applied the same
amount of effort in completing their assigned tasks. (Extra)
STRATEGY ANALYSIS FRAMEWORK

Porter’s Five Forces Model (MAF661, Page 50)

The reason we choose Porter's

Five Forces Model is to evaluate the competitive strength of Muddy Child Cafe. We believe
that this model can determine whether Muddy Child Cafe’s products are attractive to the
market.

1. The threat of new entrants.

Explanation: Muddy Child Cafe was facing a high threat from the new entrants in the
industry. This is because the capital requirement to enter the industry is low. It is easy
for others to open their own coffee shop. As a result, the number of competitors are
increasing and threatening the business of Muddy Child Cafe. This situation
becomes worse when the switching costs are low. People could go to another coffee
shop to have a cup of coffee according to their heart's desire because they do not
face any losses. Then, the new entrants could also threaten the business running by
Muddy Child Cafe in terms of the product differentiation. Muddy Child Cafe that
introduced the low pricing strategy had a problem because the strategy had limited
the product features it can offer. Moreover, the capital requirement to enter the
industry is also low.

2. The bargaining power of buyers.

Explanation: Muddy Child Cafe was facing high bargaining power of buyers due to
the presence of many coffee providers without having any radical differentiation.
Customers do have loyalty to brands, but the commitment is not strong enough, and
the switching behaviour of the customers in the coffee is high with low or no
switching cost. The buyers have options to choose from multiple international and
local brands that keep the power of the buyers high, and the companies make offers
based on their bargaining power.

3. The bargaining power of suppliers.

Explanation: The bargaining power of suppliers was low as the companies are
strong and they have a large number of suppliers to buy from. Many companies
produce their own coffee beans which are the main ingredients of the coffee. The
company has the option of purchasing from various suppliers. When there are many
suppliers or low switching costs between rival suppliers, a company can keep its
input costs lower and puts the company in a dominant position. It helped the Muddy
Child Cafe to save their cost by choosing the lower price from supplier

4. The threat of substitute products and services.

Explanation: Muddy Child Cafe was facing a high threat of substitutes for the coffee
industry because of the availability of multiple substitutes. The number of coffee
substitutes is growing, which poses a threat to the coffee industry. Tea is one of the
major substitutes for the coffee industry, which is harming the coffee industry. In
many countries, tea is preferred over coffee, and coffee is only consumed on
occasion. Because of the acceptance of local hot beverages, other local hot
 beverages pose a threat of substitutes to the coffee industry. Other than that, the
customers also can choose other beverages like green tea and chocolate.

5. The intensity of rivalry among competitors in an industry.

Explanation: Muddy Child Cafe was facing a fierce competition due to the
presence of numerous competitors such as Starbaskets and Dom’Donuts.
Starbaskets is targeting the luxury market segment by providing high quality coffee
while Dom’Donuts is the brand with the longest history among the big three. Next, we
can see that the coffee industry lacks product differentiation. All of the coffee shops
basically sell the same thing. This will technically increase the competition in price
and service. Businesses that provide reasonable prices and good service will attract
more customers. This means that the players competing in the coffee industry are
internationally recognised and have tremendous financial power, so they provide
each other with a high level of competition.

Conclusion