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Lecture 2

BU111 Lecture Notes - Lecture 2: Cappuccino, Espresso, Skill

Course Code
Sofy Carayannopoulos

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Mitchell Wolfman – September 17, 2014
Joe’s Java Case Preparation Questions:
For each of these questions, provide answers and case evidence or theory to support
1. Are there any relevant course models/concepts/theories that apply to
analyze/explain the problem and/or develop a solution?
The Diamond-E Framework is one course model that would apply. It focuses on
developing a strategy, reviews the important variables of strategic analysis (management
preferences, organization, resources, strategy, and environment), and how they all
correlate. Diamond-E Framework lists the strengths and weaknesses of the internal
organization and answers if a strategy makes sense in the business environment by listing
opportunities and threats. It highlights the critical success factors of a business as well as
its cultures and capabilities that define the type of strategies a business executes. Lastly, it
lists a business’s financial and human resources that impacts the skillset of management
and reflect how strategy is carried out.
2. What is the immediate decision Joe must make?
Joe must change his management preferences. Joe appears to be a rather conservative
business owner who doesn’t seem to take that many risks with his coffee shop. He ppears
content with selling the same varieties of coffees that he sold when he first opened in
2007 and doesn’t think it’s worth upgrading his menu. To solve this, Joe should learn
how to use espresso and cappuccino machines so he can sell these new varieties of coffee
in his shop and would provide an incentive for his regular customers to buy these flavors
at the shop they’ve been loyal to for most of their lives and not from Starbucks.
Therefore, Joe’s profits would increase. Additionally, Joe can achieve the same thing by
selling desserts. Joe would earn more income if his customers bought his desserts instead
from the bakery next door.
3. What is the underlying cause (primary problem) for the decision he is facing?
Joe’s primary problem is that Joe is too conservative. He doesn’t take any risks with his
business and instead uses the same strategy that he has been working with since his shop
first opened.
4. What are the causes and effects of these problems/decisions?
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Mitchell Wolfman – September 17, 2014
The cause of this problem is that Joe believes that buying a learning how to use the new
coffee machines is not worth the investment of time nor money. The effects of this
problem is Joe’s profits continuing to stay constant with little chance of growth.
5. What are the alternatives given in the case? Are there any other alternatives you
can think of?
Joe has many alternatives to take. From the case, Joe could purchase the new coffee
machines and desserts to provide his customers with an upgraded menu. Joe could sell his
business with the mindset that his business won’t become more profitable than it
currently is and move onto a new future. Joe could keep the business as is. Or, Joe could
move to a new industry to seek profits elsewhere. Outside the case, Joe could decorate his
shop because he said he hasn’t changed its appearance since it first open. This could
include upgrading his bistro tables, which had never been replaced before. Joe could also
propose a merger with the bakery next door to combines the bakeries resources of
delicious desserts with his original coffee.
6. What are the outcomes/objectives Joe is trying to achieve with his decision, i.e.
any good solution will satisfy the following objectives: (Hint: consider case facts
and course concepts)
With his decision, Joe is trying to achieve a growth in his profits that haven’t increased in
the last three years. Joe wants to become competitive with the Starbucks that had opened
up the street, and, in the process, bring back not just his regular customer whom he lost to
Starbucks but to gain new ones as well that will continue to keep buying from Joe’s Java.
7. What assumptions, if any, are you making?
One assumption being made is that Starbucks is the only competition that Joe’s Java is
facing. Other local coffee shops are not mentioned in the case so the newly opened
Starbucks seems to be Joe’s Java’s first major competitor in its lifetime. In addition, it is
assumed that Joe’s past regular customers have moved onto Starbucks because of their
flavors of coffee that Joe’s Java doesn’t sell. Another assumption is that Joe’s
neighborhood hasn’t grown in population and isn’t expected to grow any time soon. The
number of buyers would definitely increase the number of Joe’s Java’s coffees demanded
but statistically, demand has stayed consistent.
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