What_is_the_Rationale_for_Investing_in_a_New_BrewPub.docx.pdf

What is the Rationale for Investing in a New BrewPub?Conceptual Study by the Owner of an Existing Restaurant/Tavern (Based on a running case and a business simulation package)Read the Business Running Case: The decision-making process in evaluating the rationale for investing in a new BrewPub (preparation for a conceptual study by the owner of an existing restaurant/tavern)Learn how to use a business simulation package, specifically developed for this course, in combination with selected decision support tools covered in this course. Possible Points: 8 Task 3-0 (A3/Part 1): Structure and present your paper in the form of a Managerial Report, with a cover page, table of content, main body, appendices. Recommended length of the main body of Part 1 (without the preparatory and appended parts): 15 pages APA format. (max 1 points)Task 3-1 (A3/Part 1): Based on the business simulation 'Strategies and Decision Support in Organizations' and the business running case, define and present the overall goals and objectives from the business owner’s point of view. (max 2 points)Task 3-2.1 (A3/Part 1): Formulate your preparation for a decision making based on a research of the following areas of your study — Marketing Management, Financial Management. (max 2.5 points)Task 3-3.1 (A3/Part 1): For each one of the functional areas apply at least two from the introduced and discussed in this course decision support tools (e.g. Decision Tree Analysis, Sensitivity Analysis, SWOT Analysis, PESTEL Analysis, Break-Even Point Analysis, What-If-Analysis, Optimization Analysis, Risk Analysis, others). (max 2.5 points)

Introduction

The case study is about the opening of a new brewery and production of the draught –

beer. The owner of the existing restaurant has decided to use the additional space to install the

new production plant. The turn-key system would ensure the smooth production of new draught-

beer and the distribution. The implementation of the plan involves the training of newly hired

staff, along with the investment plan that would be done through funding from private financial

institutions. The discussion of the primary goals and objectives of the business makes it easy to

devise a comprehensive investment plan.

Goals and Objectives of the Business from the Owner's Point of View

Every company, before starting its new operations or business, always defines the aims

and objectives to achieve the targets and business goals. In the current scenario that has been

based on the strategies and the decision supports in the organization, the major goals and

objectives for the new setup from the owner’s point of view are as follows.

 The principal objective from the owner's point of view is that the new business

can be initiated by adding the new space in the existing operations. Still, the new

venture in brewing, fermentation, and chilling can be treated as a separate and

new business venture.

 All the equipment necessary to install at the new location of business makes it

possible to run the brewery optimally. The system will be installed as a turn-key

system that will provide the maximum brewing of eight types, this purpose behind

this new system installment is to handle the maximum customers at a time.

 The company has been interested in investing in the training and development

program of the newly hired employees, as it will be more helpful in maximizing

the production level and enhancement of the profitability.

 The company owner has decided to enhance its sales of two types of beer (draught

beer, measures in pints) to be distributed through the direct sale or retail stores in

the existing restaurants (Kotler, 2010).

 The other whole distribution of (draught beer, tapped in kegs) will be done

through license beer wholesale distributors. This approach will help maximize the

profit and also enhance the production level of the newly opened business.

One pint = 16 Oz = 474 ml

(ii) One keg = half-barrel = 15.5 gallons = 124 pints

 The other major goal is to avoid risk, and the major financing will be done

through the private financial institution, as the personal investment can also lead

towards a huge and unbearable loss. Through this strategy, the company owner

has minimized the risk of unbearable loss.

The Rationale for Investing in a New Brew Pub

The rationale for the new brewing pub is based on the planning to initiate the new

business venture by keeping in view the pros and cons covering all the aspects. It is hard for

entrepreneurs to dispatch the bottling works without thinking about the dangers in question. The

proprietor of the current eatery intended to begin the distillery of made lager by getting the extra

space on lease and establishment of new hardware to augment the creation level. The proprietor

has likewise secured the promoting perspective through the dissemination of lager by keeping it

on the retail locations and through authorized holder discount vendors. The entire field-tested

strategy includes the greatest creation, upgraded yearly deals and benefit, and the principal

preparing programs for the workers (Michael, 2008). The other point is to deliver easily where

the taste and quality are the equivalents can be the equivalent, yet the cost is low.

Notwithstanding, it is legitimate to get the ideal degree of 225.4K liters per annum, and the

turnkey framework would consent to the state mixed drinks acts/codes, which are to follow the

last value, which is $150,000.

Preparation of Decision Making

Key decision making is considered to be the significant aspect for initiating a new

business venture, the owner of the existing restaurant has planned to start the new business

venture of brewing the crated beer, for this purpose the owner has planned to finance the

business, the making of the recipes for crafting the beer and the new tastes, the preparation of

marketing strategy which can enhance the customers in the target market, the brewing business

gain the success through the customer satisfaction which can also result into maximizing the

profit ratio. The taste of the beer can also be tested through the feedback of the customers

(Solomon, 2008). The key decision of the taste of beer will be made either to go with the existing

taste or to make some changes in the existing one.

Marketing Management

The proprietor of the current undertaking likewise designs another methodology to get

the extra space on lease for the establishment of the plant or framework on the turn-key premise.

The proprietor has made the operational procedure to work the new business of fermenting the

created lager as a different specialty unit. Additionally, the tasks of the business will be dealt

with by the current eatery, however, its new plant will be introduced in a different spot. The

framework will be introduced to create a lager with 25 distinct tastes. The proprietor centers

expressly around the taste by making the particular plans to make a crisp, and elevated level of

drinking brews (Michael, 2008). The significant choice with respect to the creation limit of the

made brew has additionally been founded on the yearly creation of 40 bbl. Which can without

much of a stretch satisfy the prerequisites of the clients and the customers inside the recognized

objective market.

The preparation of decision making is based on the financial management system, and the

marketing manager, as the major business strategies and marketing techniques, go side by side,

without which the key decision cannot be possible for the management of the brewpub. As today

is an era of a dynamic business environment and demands of the customers can be created

quickly to catch the customers and enhance the business worth. Marketing management and

financial management are key important factors that can play an important role in spreading the

business at a vast level. To formulate the preparation of the decisions making the owner of the

existing business has conducted the market research, that was based on the needs and demand of

the customers, the owner has also gather relevant data regarding the customers, their trend

towards the taste of the beer and above all the price or cost of beer concerning each taste, the

owner has also conducted the market research regarding the most popular designs to catch the

attraction for a wide range of tastes. The specific attention has been paid in preparation for the

customized taste of beer by the experts. The distribution of the crafted beer will be done by

keeping the beer at the retail stores, hotels, and major levels through the licensed holder

wholesale dealer. However, the assumption was:

One pint = 16 Oz = 474 ml

(ii) One keg = half-barrel = 15.5 gallons = 124 pints

One bbl = brewer’s barrel = 31 gallons = 2 kegs = 117.4 liters = 248 pints

(iv) One tank = 155 gallon = 5 bbl = 10 kegs = 587 liters = 1240 pints

(v) Maximum capacity of a 40 bbl Brewpub system (8-155-gallon tanks):

1 Tank 8 Tanks

Week: 1 X 1 = 1 X 155 g = 1,240 pints; 1 X 8 X 1,240 p = 9,920 pints

Month: 4 X 1 = 4 X 1,240 p = 4,960 pints; 4 X 8 X 1,240 p = 39,680 pints

Year: 48 X 1 = 48 X 1,240 p = 59,520 pints; 48 X 8 X 1,240 p = 476,160 pints

The aim is to maximize the production capacity of 40 bbl Brewpub, which can only be

done by reviewing the market and customers. Besides, the key performance indicators (KPI)

shows growth in the market size from 103% to 110% at the end of FY-3. Besides, the projected

penetration of the new products to the market is at 220%, which shows a significant growth in

the market. This will increase the sales, which, according to the KPI, is likely to rise to 36% at

year three from 31% a year one. Apart from that, the consumption of the new products in the

market is projected to rise to 31.53% at the end of the third year, which might be greatly

influenced by the rise in the wholesale distribution to 219,934 from 192,173 units at year one.

Therefore, the company will be involved in advertisements and holding events to keep up with

the sales projection and penetration of the market.

Financial ManagementThe analysis indicates that the venture still has the capacity to achieve significant

improvements. This will be managed by having an elaborate approach to control the budget of

employees, utilities, and rent, as well as marketing. For instance, the budgeting of the critical

success factors such as retention of crucial employees such as technicians and marketing

personnel is necessary to improve the sales and the image of the firm. As of year three, there is

little attention to the critical success factors with only one critical technology personnel and two

marketers. Thus, the proper allocation will be done to improve the situation. Besides, the sales

projection of the products increased from 254,768 during the first year to 283,655 at the end of

3rd year, despite the fact that some of the products such as BR01-01 increased significantly

during the first three months between FY-1 and FY-2 and decreased at FY-3. This indicates that

there is a rise in the revenues as well as the profits from the sales. However, the crucial services

from the employees, payment of utilities, marketing cost, and loan payment, which has not been

indicated for the period, will be addressed to promote retention and improve on the services

offered in the venture.

Functional Areas

SWOT AnalysisThe owner of the business has conducted the SWOT analysis to support the decision

making regarding the opening of a new business venture of brewing a crafted beer. The SWOT

analysis is a shared procedure, and it also needs efficient and time cooperation from other

departments within the organizations, like the marketing, finance, and operations. It can also be

helpful in the identification of strategies through which an organization can achieve the external

opportunities, address the threats, build new strengths, and eliminate the weaknesses (The Mind

Tools Content Team, n.d.).

Strengths

 The new business venture can possess the ability to go for marketing strategies

regarding its product.

 If the new business can go to expand its products, this portfolio of branding can

be highly successful in the market.

 Strong capacity to deal with the community, has built a strong relationship with

the distributors and the dealers in which the dealers can promote the product and

also invest in the training of the sales team.

 A high level of customer satisfaction can also be achieved through the provision

of a high level of service.

Weaknesses

As the company is also new in the market, there is a lack of strategy to handle the

challenges of the new entrants and to avoid the loss in the market share. The inventory is highly

comparative with that of competitors. The company has not to forecast the demanding product,

which can lead to a higher rate of missing opportunities in the market. Moreover, it needs more

investments with respect to new technologies.

Opportunities

Upgrading of the economy and being successful in catching the attention of the

customers. An increase in the market share can also be counted as an opportunity for the

customers. Due to lower shipping prices, the cost of logistics has been decreased. Adaption of

new technologies to maintain high standards.

Threats

The supply of the product has not been made regular, which will be resulting in high and

low swings in sales. The currency fluctuation can also be counted as a major threat, and the

demand for the highly profited product is counted as seasonal, which can affect the profitability

of the company.

PESTLE AnalysisThe PESTEL analysis of the company is as below:

Political

The political factor describes the fact that the company is following all the legal

regularities while considering the business. It can be counted as the political environment can

affect the business much more; if it goes in favor of the company, there are more chances to

groom in the country.

Economic

Moreover, the economic factors and social factors like the trend of the people, social

status, and culture can also be responsible for a negative or positive impact. In addition to this,

the investment should be on the reasonable interest rate, which affirms that investors are showing

keen interest in investing in such a business.

Social

The social aspect of the business is that it might be considered a place to gather friends

and locals to socialize. In addition to this, the company has also increased the local population,

where people should come up with new ideas and share different cultural acts.

Technological

In addition, the new mechanical progressions. The new innovation can give more lift to

the improvement of another item (Jurevicius, 2018). It can likewise improve the gainfulness of

the organization.

Environmental

The environmental issue ought to be considered as a significant concern where the

organization ought to recognize the environmental concern. This additionally considers the

realities that the working of the organization ought not to hurt or corrupt the earth.

Legal

However, the legal issue of the tax and tariff can be major accountable factors that can

affect the company negatively or positively. Besides, there ought to likewise be more grounded

ramifications of the legitimate exercises and boycott smoking and so forth.

References

Jurevicius, O. (2018). PEST & PESTEL Analysis.

https://strategicmanagementinsight.com/tools/pest-pestel-analysis.html.

Kotler, P. &. (2010). Principles of marketing. 13th edition. London: Pearson.

Michael, B. (2008). The strategic marketing plan audit; Cambridge strategy UK.

Solomon, M. G. (2008). Marketing, real people, real choices 4th edition. Pearson Prentice Hall.

New Jersey, United States.

The Mind Tools Content Team. (n.d.). SWOT analysis: – How to develop a strategy for success.

Management Training and Leadership Training – Online. Retrieved March 25, 2020, from

https://www.mindtools.com/pages/article/newTMC_05.htm