Case Study “magic Muffin”

Principles of Entrepreneurship

Individual Assessment

On: Case Study “Magic Muffin”

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Hult International Business School

Professor Daniel Rukare

By:

Gennesis Perez

Did you know that 29% of Americans eat muffins? This is a big percentage, which means that the muffin business is a applicable one. An entrepreneur starts up businesses with the mind set on making said business a success. However, there may be ups and downs the business may have because of several situations it may present. Therefore, entrepreneurs have to look first if the business is viable or if there should be changes so that the business becomes a viable one. For this to happen, they have to research what they have done and how can they improve this. In this essay I will analyze whether it is viable for “Meg”, the owner and entrepreneur of a store called the “Magic Muffin”, to expand her business and if the same presented a good opportunity and return on investment.

1. Discuss whether you think the opportunity of selling muffins was a viable one at the time as well as in 5-10 years. Provide a clear justification for your conclusions. (1500 words)

As a start-up business sometimes there’s rocky parts where managers have to think twice before moving too fast or too slow. When Meg started her business, one could see that her intentions were to try and make a little more money, but she never planned on making this an incredibly successful business where she could franchise, have mergers or acquisitions. However, when her business started booming she noticed that this could be a viable business because her little store was doing rather well. Therefore, when they recommended expansion she never thought it was a bad idea and consequentially put everything in before thinking about risks.

When Meg started, she thought about the location, how much money she was able to spend, the hours she would spend in the shop and her competitors. She even estimated that the stores probably sold $20,000 worth of muffins a year. With all this in mind, the store “The magic muffin” is a viable one since it will only get Meg, the owner, income rather than her having a loss. However, when people start suggesting her to expand she doesn’t take into consideration a lot of things that should be able to make her start up really well. First, before doing anything Meg should consider filling up the Business Model; with the help of the business model she would get to know exactly what she wants and then she should be able to proceed to make her store successful. Since every business plan should include a market trend analysis, so Meg should look at her potential market, not the actual market served. This means that Meg should not only look at the customers who come in but everyone that is within a driving distance. She should also take into consideration that for this she could not always find the information publicly available and should therefore settle for educational estimates and she needs to ask herself: what's going on with her market. What marketing trends and fashions does she see having an influence on her market segments? And the food consumer trends of today.

Secondly, she should do a market opportunity analysis. This is a tool to identify and assess the attractiveness of business opportunity. This should revolve around four key elements: customers, technology, company, and competition. (See Exhibit I) After knowing this, Meg should do a feasibility study. What is this? A feasibility study is an analysis of the viability of an idea. “The feasibility study focuses on helping answer the essential question of “should we proceed with the proposed project idea?” All activities of the study are directed toward helping answer this question.” Meg should understand that a feasibility study is not a business plan. The possibility examine gives an exploring capacity. It addresses the question for “Is this a feasible business venture?” those benefits of the business arrangement give a planning network. The business want layouts the activities required should detract the proposition from “idea” to “reality.”.

Meg’s biggest problem is that her costs are high; therefore, to reduce costs/expenses she should think about franchising, do a strategic partnership, distribution network, and have mergers and acquisitions. Since she pays herself a salary, there is a loss; plus, she should think about, improved maintenance, improved purchasing methods, tightened quality control, replacement of higher cost suppliers, improved production control and sometimes replacement staff can all reduce cost. Finally, the Fixed Costs may also be too high. Typically Fixed Costs will relate to people, and Meg has to make an assessment here on the effectiveness of what they are doing and the benefits they are delivering to the organization. Meg’s key question here is what’s essential to your business and what’s nice to have.

Another suggestion for Meg’s business to be a viable one is to look at her competition. For this she should use Porters Five Forces. “The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into.” Porters Five Forces are as follows; Supplier Power: Here, Meg should asses how easy it is for suppliers to drive up prices. This should take into consideration the uniqueness of their product, their strength, their control etc. The more the suppliers have control off, the more powerful they are. Buyer Power: Here, Meg should ask herself how easy it is for buyers to put prices down. This is determined by how easy it is for buyers to change from your product to someone else’s. Competitive Rivalry: What’s important here is the number and capability of competitors. If the competitors of the company offer equally attractive services and product and it’s easy for suppliers and buyers to change you, then it’s most probably your company has little power over this. Threat of Substitution: This may be affected by the ability of customers or competitors to substitute easily your product. If substitution is easy, then this means it weakens the power. Threat of New Entry: The power the company has is also affected by the ability of people to enter the market that your company is leading. (See Exhibit II)