Written Analysis and Communication

Assignment 1
All in Flour Bakery: Making Bread or Making Money

Instructor: Professor Avani Desai

Academic Associate: Ms. Priya Ashokan

Submitted on 04/12/2022
Submitted by
Sagar Sengar- PGPGC202200357

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Memo

Date: 4th December 2022

To:

Monika Wallace,

Founder, All in Flour Bakery (Cala w Mące)

Żoliborz, Warsaw, Poland

Subject: Future prospects of All in Flour Bakery

Dear Monika,

I have evaluated the cost and opportunities ahead of the bakery while keeping the changing
business environment and associated risks in mind. Keeping in mind the nature of the business,
the bakery’s unique stand on uncompromising quality, investment opportunities, and market
risks, it is in the best interest of the bakery to engage with high-end restaurants and markets
and hence foster a new channel of growth. Competitive risks, possible investments required,
and company and core values were the centerpieces around which the process of my analysis
revolved. The detailed report is presented on the next pages.

Thank You

Regards

Sagar Sengar

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Executive Summary
In the wake of the pandemic and changing customer preferences, it has become imperative that
All in Flour bakery revisit its future plans. While the focus on high-quality offerings has served
the bakery well so far, different avenues of growth, such as expanding the bakery’s production
capacity, opening up new outlets, or charting out a new revenue stream via restaurant & market
engagements, lie in front of it to choose from. Engagement with high-end restaurants shall help
the firm avoid direct competition with other bakeries while ramping up its production with no
investments.

(Word Count: 95)

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Table of Contents
Memo ......................................................................................................................................... 2
Executive Summary ................................................................................................................... 3
1. Situation Analysis ............................................................................................................... 5
2. The Problem/Objective ....................................................................................................... 6
3. Possible Alternatives .......................................................................................................... 6
3.1. Option I: ...................................................................................................................... 6
3.2. Option II: ..................................................................................................................... 6
3.3. Option III:.................................................................................................................... 6
3.4. Option IV: ................................................................................................................... 6
4. Criteria for Evaluation ........................................................................................................ 6
5. Evaluation of Alternatives .................................................................................................. 7
5.1. Customer and competitor risk ..................................................................................... 7
5.2. Cost to be incurred ...................................................................................................... 7
5.3. Quality maintenance and control................................................................................. 7
5.4. Alignment with company and founder’s values .......................................................... 7
6. The Recommendation ......................................................................................................... 8
7. The Action Plan .................................................................................................................. 8
7.1. Field study ................................................................................................................... 8
7.2. Engagement ................................................................................................................. 8
8. Contingency Plan ................................................................................................................ 8
9. Exhibits ............................................................................................................................... 9
9.1. Exhibit I: ...................................................................................................................... 9
9.2. Exhibit II: .................................................................................................................... 9
9.3. Exhibit III: ................................................................................................................... 9

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1. Situation Analysis
The prevalent business environment amalgamated with the internal working of the bakery
shall help us understand the context in which we are operating.

Characterized by the domination of highly competitive and crowded small players, lower
barrier to entry, and shutting down of a few chains of restaurants (such as that owned by
James Oliver), hints at the fact that economies of scale aren’t relevant in this sector.
Furthermore, the reduction in the bread consumption of Polish people (Exhibit I), along
with their shifting preference away from inexpensive average-quality bread to expensive
high-quality bread, signifies the interpretation of the product as an occasional luxury
consumption product as opposed to a daily-use commodity. However, the lack of customer
loyalty restricts the inclination towards the products and not any company.

The young bakery has weathered the uncertainties of the COVID era but has seen a
significant slashing of its per-operational month revenue (Exhibit II), hinting towards its
underutilization. Working inwards, no night duties, and existence of internship programs
show the employee-centricity of the organization. Engaging outwards with customers, the
firm places immense emphasis on quality as opposed to allied services (such as taking
orders, accepting reservations, etc.) which has positioned the offering as a “pull product.”
While the products have sold off well so far, with the coming in of new artisanal bakeries,
a lack of services can cost the bakery its market share due to lower differentiation.

The core principle of focus on uncompromising quality and the charisma of the owner has
popularized the bakery, whereas the founder’s inertia to change and risk-averse nature, as
visible from her apprehensions about growth, is also reflected in the working of the bakery
such as having zero bank loans on the firm’s finances and concerns pertaining to loss of
autonomy upon expansion. This shows that the founder’s vision, viewpoint, and image are
tightly wound with the core values of the bakery and define its everyday working.

Avenues for growth exist, such as via engagement with restaurants and high-end markets,
which offer possibilities of increasing production by 15-20% without any new investment
but may lead to compromise on the quality front. On the other hand, decentralization of
operations may lead to loss of autonomy and departure from the core company values.
Furthermore, steep increase in production capacity via shifting to a new place carries its
own set of operational challenges.

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 In a nutshell, the aftermath of the pandemic, shifting consumer preferences, and prevalent
market dynamics (growth rate, competitors, operational risks, future costs, etc.) nudge the
firm to think about its prospects.

2. The Problem/Objective
Decision pertaining to the future course of action, if any, that should be taken to maintain
core offerings and explore growth opportunities for All in Flour.

3. Possible Alternatives
The possible tracks that can be pursued are:

3.1. Option I:
Partnering with high-end restaurants and markets

3.2. Option II:

Opening a second bakery in Makotów

3.3. Option III:

Shifting the operations to a larger bakery

3.4. Option IV:

Avoid any changes and maintain the current method of operations

4. Criteria for Evaluation

1. Customer and competitor risk
2. Cost to be incurred
3. Quality maintenance and control
4. Alignment with company & founder’s values

The changing market dynamics of customers and competitors are the root cause for any
decision need arising at all, and cost being an important element for young firms, stands in
second place. The adherence to quality and other company and founder’s values are also
integral to their operations.

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5. Evaluation of Alternatives
5.1. Customer and competitor risk
• Option I: Catering to restaurants would help circumvent the problem of dealing
directly with customers with low loyalty. It would also avoid competition with the
otherwise crowded bakery segment, which directly caters to consumers.
• Option II: Increases the potential customer base but does not directly improve
customer loyalty. No differentiation with respect to other bakeries does not help on
the competition front.
• Option III: Like option 2, it increases the potential customer base but does not
directly improve customer loyalty. A decrease in Year-over-Year revenue (Exhibit
II) does not warrant the expansion of operations
• Option IV: At one end, there is no enhancement in customer loyalty; on the other
hand, enhancements in the quality of chain bakeries and hypermarkets pose a threat
to existing operations.

Option I fares the best on this front.

5.2. Cost to be incurred (Exhibit III)

As per exhibit III, option I and IV fare the best on this front.

5.3. Quality maintenance and control

• Option I: Production can be increased by 15-20% in the current set-up; hence the
quality control and maintenance would be as per the existing standards. However,
the quality of the product at the point of sale might be an issue.
• Option II: Decentralized operations can lead to loss of autonomy and hence possible
reduction/changes in the quality standards.
• Option III: Division of labor to deal with complex operations may deteriorate the
quality levels.
• Option IV: As per the status quo.

Option IV fares the best on this front.

5.4. Alignment with company and founder’s values

• Option I: As the production base stays the same, the cultural aspect of the bakery
will not be disturbed, and the core values will be retained.

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 • Option II: Decentralized operations can lead to a loss of autonomy, and the two
different bakery bases may not be driven by the core values of uncompromising
quality and employee centricity.
• Option III: Shifting to larger base may cause exertion on employees, which does
not sit right with the bakery’s core values.
• Option IV: As per the status quo.

Option I and IV fare the best on this front.

6. The Recommendation
The strategy to partner with high-end restaurants and markets shall ensure the growth of
the bakery alongside minimizing risk from the business environment. It shall also preserve
the core values of the firm while maintaining a decent level of quality.

7. The Action Plan

To ensure the successful implementation of the strategy, the action plan can be divided into
two parts:

7.1. Field study

• Doing market research to find the target restaurants and markets
• Reaching out to understand their volume requirements and forming contracts

7.2. Engagement
• Managing logistics and scheduling of orders
• Ensuring proper payment channels and inventory management

8. Contingency Plan
Some unwanted situations may arise which should be accounted in advance such as:

• Shutting down of restaurants: Partner with more restaurants with short term contracts
• Demand fluctuations of restaurants: Proper forecasting and inventory management
• Quality deterioration during transportation: Improve quality control measures and
impart training to restaurants too.

(Word Count: 1094)

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9. Exhibits
9.1. Exhibit I:
Per year bread consumption. 2021-23 figures are projected using linear reduction

Year 1981 2014 2019 2021* 2022* 2023*

Bread Consumption (in kgs) 100 47.8 34 29.16 24.16 20.16

9.2. Exhibit II:

Year-wise and month-wise finance of the bakery, which opened in mid-2019

Year wise Operational Month wise

2019 2020 2019 2020 Percentage reduction
Revenue € 32,222.0 € 39,000.0 € 5,370.3 € 3,250.0 -39.48%
Gross profit € 15,556.0 € 18,000.0 € 2,592.7 € 1,500.0 -42.14%
Operating
€ 12,890.0 € 13,800.0 € 2,148.3 € 1,150.0 -46.47%
Income
Net Income € 10,441.0 € 11,178.0 € 1,740.2 € 931.5 -46.47%

9.3. Exhibit III:

Cost of alternatives/options available

Option Cost/Investment
Details
No. required
I Partnering with high-end restaurants and markets No to Minimal
II Opening a second bakery in Makotów €120000-€135500
III Shifting the operations to a larger bakery € 36,000
Avoid any changes and maintain the current method of
IV Nil
operations