SWOT Analysis for Mocha House Co.

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Introduction

For millions of people all over the world, coffee continues to be an integral part of daily life, which defines the growing trend for the global coffee shop industry. As Team Linchpin (2021) reports, despite the COVID-19 pandemic and closings, the market “should bounce back to an average growth rate of 9.0 percent yearly to reach $191.1 billion in 2023” (para. 2). The purpose of this paper is to provide a SWOT analysis of Mocha House Co., a new locally-owned coffee shop in the United States, to evaluate each segment and the overall business venture.

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Mocha House Co. will align its operations and processes with the company’s mission. It aims to serve delicious coffee and provide a welcoming and friendly space for the customer to relax, work, or study over a cup of a freshly brewed beverage. Therefore, the company’s primary objective will be providing quality coffee, bakery products, and customer service to develop and expand the clientele and build brand awareness in the local community.

SWOT Analysis

The company’s strengths, weaknesses, opportunities, and threats need to be considered to obtain a comprehensive view of the business. SWOT analysis can develop a foundation for an effective strategy and market penetration for a new venture company (Kumar, 2020). As presented in Table 1, the SWOT analysis for Mocha House Co. covers all four elements providing an overview of the business’s state.

Table 1. SWOT Analysis for Mocha House Co.

Strengths
  • Highly motivated and skilled staff
  • New brewing methods and customer ordering
  • Free Wi-Fi and access to outlets
Weaknesses
  • Low brand awareness
  • High competition in the market
  • Weak financial reserves
Opportunities
  • Develop a culture of innovation
  • Build strong customer relationships
  • Broaden product range
Threats
  • Low-profit margin
  • Meeting cash flow requirements
  • Competitors that target similar customer groups

Note. This figure depicts the strengths, weaknesses, opportunities, and threats of the Mocha House Co., providing insight into the internal and external factors affecting the business.

Strengths

The strengths of Mocha House Co. derive from its commitment to providing quality coffee, bakery products, and customer service. Namely, the company built an experienced, highly-skilled, and passionate team that will provide excellent and sustainable service and attract new clients, thus developing brand awareness and customer loyalty. Furthermore, the market trends were considered to ensure that the coffee shop offers up-to-date value and meets the needs of the local community. As reported by Team Linchpin (2021), there is a growing demand for specialty coffee beverages, new brewing methods, milk alternatives, and customer ordering. Hence, Mocha House Co. will implement these products to serve a variety of coffee lovers and deliver value for different customer groups. Another strength of the company will be the free Wi-Fi and access to electrical outlets to provide the clients with an opportunity to charge their devices while enjoying their freshly-brewed cup of coffee.

Weaknesses

As a newly-established coffee shop, Mocha House Co. will likely encounter the challenges of low brand awareness and poor customer confidence at the beginning of the business. Furthermore, established coffee houses and brands might limit the company’s potential customer base. Therefore, a relevant marketing strategy is required to increase brand awareness and attract clients. High competition in the market is another major challenge to be overcome. According to Team Linchpin (2021), the coffee shop industry is highly competitive; hence, there is a need for sustainable value provision to retain customers. Weak financial reserves and a small margin between the cost and profit constitute other weaknesses of a new business and require efficient management and planning.

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Opportunities

The coffee shop industry is evolving, allowing for developing a culture of innovation and implementing technology-driven approaches in daily operations, thus excelling the business. Various aspects can be improved through this approach, including the products’ taste, work process, seating arrangements, and others. Another opportunity for Mocha House Co. is building strong customer relationships due to the company’s commitment to its values, mission, and vision. Ensuring customer satisfaction will lead to increased sales and improved brand awareness (Formichelli & Villanueva, 2019). Furthermore, the company can broaden its product range and include more cakes, bakery products, and snacks on the menu to earn additional profit.

Threats

Low-profit margin can be considered one of the main threats to the business due to the significant expenses involved. Furthermore, in the coffee shop industry, it is difficult to meet cash flow requirements as a result of external factors affecting the operations, including holidays, weekends, pandemics, and associated restrictions for the business (Formichelli & Villanueva, 2019). Furthermore, another threat is competitors that target similar customer groups and can attract clients by lower prices or stronger brand loyalty. It is essential to be aware of the external threats and tackle the challenges in an efficient way.

Monetary Information

Opening a coffee shop involves startup costs to purchase the required equipment. It includes a coffee stand, an espresso machine, a coffee maker, coffee roasters, refrigerators, a water filtration system, as well as furniture, dishware, food and drinks, milk and alternatives, and condiments (Formichelli & Villanueva, 2019). Furthermore, there is a need for renting space, hiring personnel, payroll, supplies, and advertising. The startup money will primarily come from personal savings and partly from bank business loans to ensure that the estimated rent payment of $100,000 per month is covered.

It is expected to recoup the expenditures on the setup of the coffee shop within two years. However, the monthly income heavily depends on the advertising, the quality of the provided services, and the location of the coffee shop. Therefore, even though it is planned to recoup within twenty-four months from the opening, in reality, delays might occur. Additionally, the costs of supplies that are estimated at $15,000 per month might increase due to unstable economic conditions in the country and inflation. One of the ways to attract clients is to advertise it on social media. It is planned to spend 5 percent of monthly revenue on advertising.

To conclude, the SWOT analysis of Mocha House Co. provided an insight into the company’s strengths, weaknesses, opportunities, and threats. It can be concluded that it is reasonable to continue this business venture since the identified strengths and opportunities out weight threats and weaknesses, allowing the company to balance its operations and costs. Mocha House Co. should develop its brand awareness while being committed to its mission and providing excellent customer service to succeed.

References

Formichelli, L., & Villanueva M. (2019). Starting & running a coffee shop: Brew success with proven strategies for every aspect of your espresso startup. Alpha.

Kumar, R. (2020). Principles of management. Jyothis Publishers.

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Team Linchpin. (2021). Trends in the coffee and tea industry outlook for 2022. Linchpin. Web.

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