Edible Art Studio Case Study Solution
Edible Art Studio is Sarnia, Ontario based bakery, which was found in 2017 as a sole proprietorship and served Sarnia and surrounding areas. The company takes pride in providing the finest and freshest cakeand bakery delights to its customers. Additionally, the company has been providing highestquality items in appearance and quality.On account of the unique artistic abilities and passion for baking; Glenda Perry started her home business as it had given her an opportunity to pursue her passion in making cakes and allowed her manyflexibilities and freedom to grow her business at her own pace.The list of the products,including: cakes, custom cake deigns and 3D sculpted cakes helped the customers to find the rich and moist cake on the affordable price based on the custom designs. The home based business was a great start to the financial future of Perry.
Identification of problem
Despite of the continuous admiration of the products; Perry is concerned about the sluggish growth and unmet net earnings target for the business. This requires Perry to take the business to thenext level through improving margins as well as giving the business its own space. Over the prior three years, Perry had worked so hard to attract the wider base of customers but now her ultimate objective is to improve the bottom line and focus on the expansion or the new location. Perry is confronted with the dilemma of moving her business out of the kitchen and take further risk, but at the same time she is excited about growing the business. The case explores the process of decision making that small business must undertake while considering to have an expansion. In such process, there is a need to undergo a critical assessment of the industry as a whole, with an inclusion of the financial projections in order to evaluate the company’s worth in the upcoming years.
Assessment of the industry
Attractiveness of the Bakery industry
The baking industry of the US generates more than $33billion in revenue annually. Theindustry is based on nearly 3000 commercial bakeries and 6000 retail bakeries. The growth of bakery industry is forecasted to be increased by 4 percent annually,by 2023.The bakery industry is driven by the accessibility, convenience and nutrition profile associated with it. Furthermore, as a result of the worldwide increase of working population and urbanization; the increased demand on nutritious and instantproducts and growth of out of the home consumption have been fueling the continuous increase of the bakery products.
An increase in health conscious American and Canadian consumers are shifting from highly processed products containing artificial flavors and ingredients towards favoring the food that is more natural due to less reliance on added preservation ingredients and shorter ingredient list. The market players are poised to the challenge of constantly changing consumer health trends. The nutritional preferences of consumer are changing and they arebecoming more health conscious. This pressure from the consumers have led the market players to tirelessly work on the product differentiation, such as: low-carbohydrate, low-calorie and whole grain products. Even though these nutrition trends are affecting the industry; their impact is unlikely to last a significant change in the industry. The market players are continuously introducing new products with an intent of satisfying the nutritional preferences of the consumers.(Forbes, 2015).
Porter five forces analysis
Intensity of rivalry
The company faces direct competition from seven independent bakeries in Sarnia and grocery stores that operate in their own in-house bakery and indirect competition from the Walmart, metro and Loblaw, offering the freshly baked products to the customers. Due to an increased demand of the bakery products and high revenue potential; the competitors are in race of stealing the market share of another competitor through product differentiation. The competition is rigorous and fierce in the bakery industry as more businesses are looking to gain market share and quick serve restaurants are upping their game. To stay ahead of the market competition;the market players are enhancing beverage program, integrating more technology to speed up operation and engaging the consumers. An increased market competition means that Edible Art Studio needs to work harder on innovating cake lineups, justifying price points and meeting the needs of consumers for convenience…………………………………..
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