Essay About Soft Serve Ice Cream Machine3 And Ice Cream Industryissue

Cool Moose Creamery Case Solution
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ADMN-3056: Economic and Management Decision MakingCool Moose CreameryCase Assignment #1XXXX XXXXXFebruary 11, 2018OverviewOrganization: Cool Moose CreameryIndustry:        Ice Cream IndustryIssue:        1. Introduction of a new product2. Single head vs. triple head soft serve ice cream machine3. Career feasibilityRole:        Advisor – analyze if the benefits of adding soft-serve ice cream product will outweigh the investment, time and effort required to add the single or triple head machines.Audience:        Greg Perantinos (Coole Moose Creamery Owner)Situational Analysis MissionTo help the community, make customers smile and inspire employeesVisionTo continue grow the business and open a new store in Cookstown, ONValue PropositionLower price compared to Dairy QueenGoals/TargetsShort Term: Expanding the product line by adding a soft-serve ice cream productLong Term: Continue to grow the business and open a new location to Cookstown, ON.ConstraintsRequired to meet current interest payments Key Stakeholders PreferencesGreg Perantinos (Cool Moose Creamery Owner)Key Success Factors (Industry)Maintain cleanliness of the machineKeep prices below competitorsMaintain exceptional customer serviceKey Risk Factors (Industry)Health and sanitary concernsCurrent Financial InformationSales growth if 233% over fiscal year in 2008Current business is profitable; however, it is uncertain if it can provide a full-time income.Bank is willing to extend Cool Moose a loan of up to $12,000 to purchase the desired machine at annual interest rate of 7%.SWOT Analysis Strengths (Internal)Found the niche as the only scooped ice cream parlor in the areaStrategic locations – being in the heart of downtownValues instilled into the employees and high level of customer service provided by the business has helped developed a customer base and established brand recognition.Low level of competitionSeasonality aligning with schoolWeaknesses (Internal)Relatively new companyYoung and inexperienced ownerLimited capitalOpportunities (External)Adding soft serve to the product lineExpanding to new locationsLittle direct competition in scooped ice creamLow price pointThreats (External)Relatively low barriers to entryAvailable financing for growthSoft-serve ice cream competitor (Dairy Queen)Favourable lease term Michael Porter’s Five Forces Model (Industry Analysis)Threat of New EntrantVery low or non-existent – no foreseeable threat of new entrantBargaining Powers of SuppliersVery low or non-existent – multiple suppliers. Soft-served ice cream mix bag is estimated to be only $0.25 per serving which is very low, this can be an indication of a perfect competition (no monopoly or oligopoly).Bargaining Powers of BuyersMedium to high – Dairy Queen and McDonalds are substitutes for sor-serve ice cream. Customers can easily go to those two locations.Threat of SubstitutesStore bought substitutes are much cheaper and high in availability.Rivalry of Existing FirmsDairy Queen is a direct competitor. It is an established business with 5,900 restaurants in 22 different countries. It is also the only other ice cream parlor in Alliston and became the destination for little league teams celebrating a victory, business professionals taking their lunch break and families taking time out to enjoy fast food and a variety of soft-serve ice cream products.IssueEffects of Adding a Soft-Serve MachinePros:Increase market shareIncrease in sales which can lead to higher gross margins and net incomeIncrease in variety of products (3 head increases flavour options)Increased competitive advantageCons:Cannibalize scooped ice cream salesInvestment costDirect competition with Dairy QueenHealth and safety concernsIncreased cost of operation (i.e. increased labour cost for cleaning etc.)Alternatives (Pros and Cons)Qualitative AnalysisSingle Head MachineProsConsLower capital costLess financial risk if unsuccessfulEasier cleaningUsedHigh potential repair cost3-year useful lifeTriple Head MachineProsConsMultiple flavours (vanilla and chocolate)WarrantyLong useful life (7 years)Large capital costInvestment riskMaintenance (cleaning)Status Quo (Do Nothing)ProsConsLeast riskyLimit ability to expandReflects missed opportunityCould be left behind by the competitionLow competitive advantageQuantitative AnalysisCash Flow Analysis        [pic 1]Investment Cost Analysis[pic 2]Analysis Summary[pic 3]RecommendationRecommend the purchase of single-head machine because of the following:ROI is 96%Short payback periodShort-term investment Test market for soft serveLow initial investmentImplementationPurchase 1 head used soft serve machineHave delivered and train staffIntroduce product with start of seasonAt year end, measure projected sale vs actual salesIf projected sales meet or exceed expectation, add it on the other location (Tottnham, ON)If projected sale of having soft serve in all location is less than what is expected for full time income, sell the business.