Core Business Concepts of Bizcafe Simulation: How to Win?

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The game BizCafe is valuable for any student who wants to understand how to become an effective manager, deal with arising management issues, and ensure that all investments are as effective as possible. My specific areas of responsibilities were marketing and miscellaneous issues. For example, other members of the group asked my advice about the marketing strategies we could use, and I had to provide reasons such as why we sold a cup for $3.75 during the first periods or what exact number of radio spots the cafe paid for during various periods. To ensure that our marketing decisions were efficient and did not influence the start-up negatively, I had to examine major players in the field and evaluate their marketing experiences, decisions, and strategies.

During the first five periods, we relied on radio advertisement more heavily than during the fifth to ninth periods. As customer awareness of the cafe rose significantly, we could invest less in the radio advertisement.

As to miscellaneous investments and decisions, I convinced the members of the group that a purchase of a $4.000 oven was an effective long-term investment during the fourth period. Although such a decision was disputed at first, I successfully argued that this purchase would not have been useful during the first three periods, or the later ones, for various reasons. These reasons, along with other explanations about the decisions made, are discussed in the following sections.

Group Dynamics

I would evaluate the group dynamics as mostly positive, with a flexible group structure (the roles of the members changed depending on the current aim or group’s needs) and strong cohesion that was rarely disrupted by group conflicts. The flexibility of the roles in our group helped me to critically evaluate the decisions of others (and my own) because we never played the same roles during the project. For example, during the first periods, I was responsible for management decisions, but my role changed during the later periods where I was more focused on the operations, and another member of the group was responsible for management. Nevertheless, group conflicts did happen, although not as often as one could expect. Therefore, I think our group should have reconsidered the group influence on individual decisions. For example, during one of the periods, the group insisted that a particular decision (the lbs. of coffee purchased) was more favorable than the one presented by one member of the group. However, this decision ultimately resulted in wasted coffee, suggesting that the group’s decision about this particular investment was misjudged. Thus, our group needs to be more open to personal suggestions as well, even if they contradict with the opinion of the group majority.

Period 1: Report

During the first period, the management decisions were as follows: we hired two managers whose wage would be $800 per week. We had eight servers; their hourly wages were $12.75 per hour. We decided not to hire more managers since the cafe did not work weekend hours. At the same time, since the cafe had just been opened, we needed effective managers who could ensure the cafe and servers worked productively. It is for this reason that we decided to pay $800 per week, a wage that is slightly above the median minimum wage for cafe managers. The aim was to increase motivation but not exhaust the investment capitals, since we also had to pay the servers, purchase coffee, furniture, advertising, and obtain a high capacity machine. Since we just opened, we did not assume we would need many servers due to low customer awareness.

Nevertheless, by the end of the first period, the servers were overworked. I believe we should have hired more servers (at least 10 or 11) to support the core team. We sold medium cups for $3.75; a medium price in the coffee market that might appear to be too high for a newly opened café. However, since we purchased high-quality coffee, it was decided that such a price would not repel potential customers and would ensure the cafe did not sell underpriced products. The cafe bought 45 lbs. of coffee to cover the anticipated demand but wasted 20 lbs. by the end of the period due to the lack of orders, as well as high customer volume, resulting in some customers leaving the cafe before purchasing any products. The group realized the amount of coffee should have been smaller (approx. 35 or 45 lbs.) to avoid product waste. Shop hours were from 8 am to 8 pm, to service the working customers and those preferring to visit cafes after work or spend their leisure time in the evening. A prolonged evening shift would require more servers, so it was not supported.

The cafe was advertised online and on the radio; we decided to ensure general awareness since no or little presence in social media would decrease the potential number of customers and negatively influence competitive advantage while excessive awareness required a serious financial investment that was not possible in the first period.

The group purchased 5000 medium cups and high-quality coffee. The decision to purchase this number of coffee cups was supported by the assumption that no emergency purchases would be necessary in the case of increased capacity and a high flow of customers. High-quality coffee was purchased to ensure customer satisfaction but 45 lbs. was too excessive. New modern furniture was purchased for $4.000 to engender a creative, ready-to-work atmosphere for clients. The AutoFour High capacity machine is more expensive but also faster, and more productive, than the Duo machine, thus reducing service time. Overall, 770 cups were sold during the period, the revenue was $2.887.50, and the total expenses were $6.776.50 (net income $4.228.30). As can be seen, other decisions should have been made to decrease the costs.

Period 2: Report

The previous period resulted in stressed managers and overworked servers, as well as 20 lbs. of coffee wasted. Since the managers had to cope with stressful situations, and subsequently lacked motivation, the group decided to raise their wage to $840 per week. More servers were hired to avoid burnout: 17 servers now received $13.25 hourly. The increase in wages led to a rise in coffee prices: a medium cup was priced at $4.15, a medium price for quality services and organic coffee. 35 lbs. of organic coffee were purchased. Due to previous product waste, the group decided to decrease the amount of purchased coffee. However, this decision led to a 25 lbs. emergency purchase from local sellers that was more expensive compared to coffee purchased in bulk. Nevertheless, this was necessary to cover demands and the rapid flow of customers’ orders. The price of organic coffee is also quite expensive; this is why overall expenditures rose during this period.

No medium cups with logos were purchased because the remaining cups could be easily used. The group also decided that the shop hours needed to be extended: the cafe was open from 7 am to 11 pm. The decision was supported by the fact that many customers prefer visiting the cafe not strictly after the work (at 7-8 pm) but together with their friends or partners closer to 9-10 pm.

The group also decided to purchase insurance ($600) since more servers were hired, expensive equipment was used every day at the highest capacity, and emergencies that can frequently happen in the food industry (burns, cuts, slips on wet floors, etc.) needed to be covered.

Online advertisement generally remained at the same levels as the first period since it was working effectively and attracting new customers. However, it was decided to increase the number of spots on the radio to ten to increase brand awareness among those customers who rarely use social media (middle-aged parents, senior citizens, and people who consciously avoid social media).

We were able to calculate customer satisfaction was 51.4% and brand awareness 22.7% (compared to 41.1% and 5% during the first period).

This time, 1876 medium cups were sold. The managers were reported to be unhappy, and we decided to review our wage decisions during the next period. The YoY growth rate was 31.92%, whereas revenues increased to $7.691.6, but total expenses were $8.427.44 (net income $1.349.68). The overall increase in expenses was linked to increasing wages, newly hired staff, the purchase of expensive products, and additional investments in radio advertisement.

Period 3: Report

It was decided to open the cafe during weekend hours to increase customer flow, since families and some of the customers who have specific working schedules were mostly able to visit the cafe only during weekends. Although the customer flow was expected to decrease during lunch hours, there were more customers in the evening. Managers’ wages were increased by 10% ($930 per week); a third manager was hired as well. Since the customer flow increased, we had to hire three servers to cover emergencies such as sick leave or stress. The hourly wages remained the same ($13.25). We spent $2.999.25 on management and $2.848.75 on staff.

The group decided to decrease the price of coffee by $0.10 (a medium cup was $4.00). Moreover, 20000 medium cups were purchased to ensure that the coffee would be sold in cups with the brand logo only to enhance brand awareness.

Overall, $4.200 was spent on advertising. Online advertisement maintained a general awareness of the brand, while ten radio spots were seen as the best option because brand awareness was still not deemed sufficient.

80 lbs. of organic coffee were purchased; still, the cafe had 28 lbs. of emergency purchases due to the increased number of customers who placed multiple orders, thus increasing product expenditures.

Additional expenditures included a customer survey ($50): we agreed that this step was necessary for our understanding of possible existing issues in service and product quality. The survey consisted of 20 questions about service, ambiance and pricing, and required approx. 5-7 minutes to complete. We decided not to overload the survey with questions since many of our customers had a short time-frame in which to get back to work after their lunch break or business meetings. The customers’ ratings were the following: 4/5 price, 4/5 ambiance, and 3/5 service. Following these results, the management realized that needed to pay more attention to employee training and service quality.

In summary, customer satisfaction was 62.1%, brand awareness 40.1%, and 3365 medium cups were sold during this period. The YoY growth rate was higher compared to the previous year: 57.60%. Net income was $2.127.03.

Period 4: Report

There were no significant changes in management and staff during the fourth period since the managers were motivated to perform at the expected level and servers did not experience burnout and stress because we hired three new employees. The wages for servers remained the same; labor compensation was above the average wage level for employees in the food industry because the group wanted to motivate employees to provide higher quality services. Overall, $2.999.25 was spent on management and $3.276.06 on staff. Since the customer survey had shown that services in the cafe were not the quality we expected, it was decided to hire new employees to increase the cafe’s rating.

At the same time, we also decided to purchase 150 lbs. of organic coffee since we were introducing a new bakery to customers; from this, we expected that coffee sales would increase. Nevertheless, by the end of the period, 45 lbs. of coffee were wasted. Therefore, we should have possibly purchased fewer lbs. of coffee since the number of medium cups sold also decreased (3278).

There were positive changes as well. Buying an oven was a long-term investment that potentially could increase future sales of both coffee and baked goods because many customers, especially those who visited the cafe with children, often purchased bakery items together with their drinks. The oven cost $4.000; 968 units from the bakery were sold during this period.

Customer satisfaction was 68.4% and brand awareness 64.5%. Customers rated the cafe as following: 4/5 price, 5/5 ambiance, 4/4 service. As can be seen, we were able to increase customer satisfaction for service by hiring new employees. Revenues were $15048 and expenditures were $10475.31 (net income $2802.33). The YoY growth rate was 31.75%, which is a lower rate compared to the previous year.

Period 5: Report

During the fifth period, it was decided to decrease the working time on Sunday to 9 am – 9 pm. Therefore, managers’ wages were also cut, although only slightly ($910 per week). Overall, $2.934.75 was spent on management and $3.799.69 on staff. The increase in expenditure on staff was due to the newly hired employees (26 servers overall). Servers’ wage also increased to $13.70 per hour to improve service quality.

There were significant changes in marketing. Since the cafe attracted various types of customers (students, business workers, families, employees from other shops), it was agreed that a choice of small or large cups were necessary. Thus, a small cup was priced at $3.15, a medium cup at $4.00, and a large cup $4.30. Since the difference in pricing between a medium and large cup was not very significant, it was expected that customers would prefer buying a large cup, whereby increasing the sales of large cups and the revenues related to them. The logo is also more visible on a large cup, which slightly increases brand awareness. We ordered 10,000 small and large cups to cover expected customers’ demand for the various cup sizes. We also slightly decreased the amount of purchased coffee; 145 lbs. were purchased and 36 lbs. wasted. Nonetheless, cost cutting positively influenced customer satisfaction. Pricing was rated 5/5, ambiance 5/5, and service 3/5. To improve customer experience, satisfaction, and ambiance, we decided to hire a free HS jazz band that was positively received by customers.

Customer satisfaction was 70% and brand awareness increased to 80.7%. The revenues were $16.607.10, and the expenses were $13.217.77 (net income $1452.88). The YoY growth rate was -48.15%.

Period 6: Report

We decided to motivate the managers and servers by increasing wages: $920 per week (managers) and $14.00 hourly (servers). The aim of this decision was to see whether customer satisfaction and service could improve. Three new servers were hired to decrease workload.

The pricing policy was also reviewed to cover the expenses produced by staffing and other purchases: the cost of a small cup rose to $3.28, a medium cup to $4.16, and a large cup to $4.47. To avoid product waste, we purchased 115 lbs. of organic coffee. Nevertheless, an emergency purchase of 13 lbs. was still needed to cover placed orders.

Since customer flow continued to increase, we expanded the cafe ($1.000 rent) and purchased a Duo espresso maker ($3.000) to ensure quick service delivery and decrease the rate of possible customer complaints. 2114 small cups, 1649 medium cups, 865 large cups, and 1402 baked goods were sold during this period.

Customer satisfaction decreased slightly (69.9%), whereas brand awareness grew (86.2%). We decided to decrease the number of radio spots to five since brand awareness had been growing steadily for the past several periods.

Overall, the price ratings fell (4/5), but satisfaction with service grew (4/5). Our main focus was to maintain perfect ambiance, which was successful during this period (5/5). The net income was $6.613.48; the YoY growth was 355.20%.

Period 7: Report

The decisions in management during the seventh period related to human capital; two more servers were hired to increase customer satisfaction with the service (a total of 31 servers). Their wage was also increased to motivate them to improve their performance at work ($14.20 hourly).

Referring to the surveys made during the previous period, we decided to decrease product prices to increase customer satisfaction: $3.23 for a small cup, $4.10 for a medium cup, and $4.40 for a large cup. Furthermore, the amount of coffee we purchased (135 lbs.) was just right to meet demand; no coffee was wasted, and we experienced no related expenses as well.

It was decided that employees needed on-going training. We assumed that staff training would positively influence customer satisfaction. Thus, $1,200 was spent on a training program. The customer rating of service improved (5/5); therefore, the training program was deemed an effective solution to the issue of service quality. The ambiance was rated 5/5 as well, but pricing remained at 4/5.

Customer satisfaction and brand awareness grew to 75.1% and 90.6% respectively. Net income increased as well ($7.926.12), whereas the YoY growth was 19.85%.

Period 8: Report

We decided to increase wages to support and enhance motivation to deliver quality services, both by managers and servers: $925/week and $14.25/hour respectively. We also hired one new server to maintain equal distribution of orders and services. At the same time, we decided to decrease prices again to evaluate whether this would influence customer ratings and strengthen our competitive advantage with our rivals: $3.19/small cup, $4.05/medium cup, and $4.35/large cup. While this decision did not increase customer ratings of the pricing policy, it did help us to remain a strong competitive force in the area.

We purchased 142 lbs. of organic coffee but still had to make an emergency purchase (1 lb.). As can be seen, it is difficult to calculate the right amount of product to be purchased since demands vary from period to period.

One of the major expenditures during this period was the introduction of Internet access in the cafe. We spent $1.000 to provide controlled internet access that significantly facilitated the working process of employees and increased customer satisfaction, as well as the length of stay since some of the students could use our Internet access to prepare for lectures and eat/drink at the same time.

Despite the decision to decrease prices, customer satisfaction slightly dropped to 74.2%. Still, brand awareness continued to grow and was 91.2%. We maintained a general awareness of the brand in social media and paid for five radio spots to promote the cafe to potential customers who do not use social media. The price was rated 4/5, while both ambiance and service received 5/5.

The net income of this period was $9.720.24, and the YoY growth rate was 22.64%.

Period 9: Report

The management decision made during this period was to fire one of the servers to slightly decrease staff expenses; the services were not negatively affected by this decision as customer satisfaction grew as well. We also increased servers’ wages to $14.40 per hour since we observed that their motivation and the quality of delivered services were directly linked to financial decisions about their salaries.

In the marketing section, we decided to decrease the cost of a medium size cup to $3.95 since it was the most popular size among customers. This was done to increase competitive advantage and customer satisfaction with pricing, which had been rated 4/5 during previous periods.

We purchased 155 lbs. of organic coffee but wasted 17 lbs. Additional investment was necessary to purchase a coffee roaster since the trend to drink freshest roasted coffee was growing gradually and could help us attract more customers.

Price, ambiance, and service were rated 5/5. Customer satisfaction increased to 85.2% and brand awareness to 96.4%. Net income was $6.323.88, and the YoY growth rate was -82%.

Skills Learned

This simulation game has shown me how theory and practice can differ when one is implementing even the smallest project. I realized that negative net income should not be feared, particularly in the beginning of a business project since businesses were very rarely capable of generating revenue right from the start.

I was also able to see clearly how efficient decision-making is the key to any successful business because all operations, across all areas, are influenced by the initial decisions made. At the same time, it is also essential to continually monitor results of each area during every period to evaluate how efficient the decision-making process was, and what issues needed to be considered in the future. Using forecast models can help facilitate the decision-making process and successfully prepare for any potential management, marketing, and operational issues.

Human capital should not be overlooked as well. Employee satisfaction directly related to sales efficiency and maximization of employee value. In any business, human capital needs to be motivated enough (per different tools, including financial ones) to maintain the sustainability of efficient sales and the highest levels of customer service satisfaction.

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