1. Sun Yat-sen University
Sun after storm
A Case Study on Pudong Coffee Shop
Dream Chasers
Sun Yat-sen University
Manager: LIU Mengning
Consultants: ZHANG Wei
HUANG Peilong
PENG Weijian

2. Outline B S C Goal: To help Pudong Coffee Shop weather the STORM.
A1 Storm before Sun
A. Case Overview
B1 A STORM Framework
B. Current Situation Analysis
C1 Strategy Positioning
C2 Strategy Map
C. Strategy Analysis
D1 Learning & Growth B S C
D2 Internal Process Perspective
D. Utilization & Implementation
D3 Customer Perspective
D4 Financial Perspective
E1 Income and Cash Flow Forecast
E. Net Cash Flow Forecast
E2 Break-even Point
E3 Overall Valuation
Goal: To help Pudong Coffee Shop weather the STORM.

3. Current Situation Analysis Utilization & Implementation
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
A1 Case overview
Social Conditions
Technical Conditions
Organizational Conditions
Revenue Conditions
Market Conditions
A STORM Framework Analysis
Strategy Analysis
Utilization &Implementation
Net Income Forecast
A SUN Solution

4. Current Situation Analysis Utilization & Implementation
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
STORM Framework
B1 Social Conditions
Industry Retrospect:
Growing Coffee Consuming in China
Broad Prospect:
Coffee: A symbol of fashion, elegance and noble
Huge gap in the market:
Chinese: 3 cups per year
American: 500 to 700 cups per year
Coffee has a blooming future in China.

5. B1 Technical Conditions
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
STORM Framework
B1 Technical Conditions
Positive feelings
11.Relax and watch the world go by
Joyful 11
5.Little waiting time
1.Wonderful environment
12.magazines
Comfortable 5 10 12 7 1
10.Taste and appearance
Satisfied 3 2
7. A variety of coffee
3.Decoration
2.Warm welcome
Common 9 13 6 4
Higher price
9.Long time waiting for coffee
Invalid 8
4.Less flavor and background music
Bad
8. Employees, who are friendly , familiar with coffee and professional in service
Awful
Negative feelings
Customer Experience Flow- Process of Pudong Coffee Shop

6. B1 Organizational Conditions
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
STORM Framework
B1 Organizational Conditions
Company Structure
Current situation
Owned the coffee shop
Father
Son
Managed the shop without salary and bonus from it
Full-time
Employees
Part-time
Employees
No training for the employees.
No adequate performance evaluation.
2 Persons
Training and development of employee are urgent.

7. B1 Market Conditions – Customer Characters
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
STORM Framework
B1 Market Conditions – Customer Characters
Occupations
Age
Time of Consumption
1.Professionals
2.International students
3.Residents
Accessible
Young customers are the majority
Lunch-time is the busiest period.
Target Market
Average expense of each customer
RMB 50
Average quantity of customers every day
About 50

8. GE Matrix of Judging Criteria
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
STORM Framework
B1 Market Conditions – Service Evaluation
Judging Criteria for Coffee Shops
(not listed in order of importance)
1. Beverages/food provided must be of good quality
2. Décor, temperature and noise levels
3. Free WiFi
4. Friendly staff
5. Excellent customer service
6. Presentation of food and food offering
7. Cleanliness and overall hygiene
8. Availability of space
9. Overall value for money
GE Matrix of Judging Criteria
Sustained advantages Region
high
low
Customers’ satisfaction
Of Pudong Coffee Shop
Importance of the criteria
Needed improvement Region 1 4 5 3 9 8 2 7 6
Certain attention should be paid to Free Wifi, Cleanliness and overall hygiene, & Presentation of food offering.

9. Current Situation Analysis Utilization & Implementation
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
STORM Framework
B1 Market Conditions – Competitors
Wages , Advertising and Food sales is weak compared with average of Local Region
Wages and remuneration
LOW
Depreciation of tangible assets
HIGH
Advertising and promotions
LOW
Beverage/drinks
HIGH
Food sales
LOW

10. Current Situation Analysis Utilization & Implementation
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
STORM Framework
B1 Revenue Conditions
Ratio
Year 2008
Year 2009
Analysis
Liquidity
Good
Current ration and quick ratio are near 1
Has adequate net working capital
1.225
1.026
43000
1.169
0.957
35000
Current ratio
Quick ratio
Net working capital
Activity
Good
Inventory turns over at fairly high rate
Inventory turnover
Asset turnover
20.464
0.951
10.244
1.047
Made small profit in 2008, but net loss in 2009
Decreased profitability
Profitability
0.035
0.575
0.034
0.075
Net profit margin
Gross margin
ROA
ROE
-0.015
0.548
-0.033
Poor
Solvency
Poor
Interest payment was quite large compared with net income
Times interest earned
Debt service coverage
2.125
0.61
0.422
0.1
Financial Situation: Poor profitability but good liquidity.

11. C1 Strategy Positioning
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
C1 Strategy Positioning
Intertype
Starbucks
UCC
Intratype
Pudong Coffee
Italian-style restaurant
Ice-cream Café
Others
In the intertype, Pudong Coffee Shop has to compete with various coffee shop. Thus, Pudong Coffee Shop should cut down its cost to jostle for the similar demanders.
In the intratype, Pudong Coffee Shop has to satisfy the local customers. Thus, to compete with other local family-owned cafes, Pudong must find its own features
FOCUS STRATEGY
Cost Leadership
Differentiation
Enhance Profitability

12. Current Situation Analysis Utilization & Implementation
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
C2 Strategy Map
Use Balance Scorecard to Implement the strategy
Enhance Profitability
Differentiation
Cost Leadership
Financial
Perspective
Balance Gross Margin Rate
Boost Sales Growth
Enhance Asset Utilization
Customer
Perspective
Boost Market Shares
Enhance Customer Satisfaction
Retain Customer Loyalty
Enhance Service Level
Wider Product Range
Budgeting Control
Internal
Perspective
Continuous Improvement of Internal Process
Increase Labor Productivity
Learning & Growth
Perspective
Adjust Employee Structure
Improve Employee Competence
Enhance Employee Satisfaction

13. Utilization & Implementation
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
Utilization & Implementation
Measure Level
KSF
Indicators
Actual
Average in Industry
Target*
Finance
Gross Margin Rate
Beverages/Drinks
28.5%
21.9%
22%
Food sales
26.3%
32.9%
33%
Sales Growth
Sales Change from Prior Year
1.6% 5%
Adverting Intensity
3.2%
4.8%
Customer
Customer Value
Revenue Per Customer 5-
43.2 50
Satisfaction
Satisfaction Survey
>90%
87.2%
95%
Market Shares
Revenue/Total Consumption in the Local
33.3%
43%
Operation
Budgeting control
Utilities as % of Total Revenue
5.2%
Utilities change from prior year
23.1%
15%
Service Required
Revenue of take-away/total
>1%
N/A
10%
Learning &Development
Employee Structure
Part-time staff/full-time 4
Employee Competence
Revenue/per employee
232,500
320,000
Employee Satisfaction
>80%
90%
To transfer KSF into targets using Benchmarking Approach

14. D1 Learning and Growth Perspective – Action Plan
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
D1 Learning and Growth Perspective – Action Plan
Enhance Employee Satisfaction
Improve Employee Competence
1.Salary
Basic Wage:2700
Use the Proportionate Commission related to
every customer serviced (3%)
2.Work Hours
Full-time employees: 8h is required.
Arrange them to 2 shifts:
Part-time employees: 6.5h is required.
Arrange them to 4 shifts:
Employee training plan
Train employees for at least 10 hours per month and invest ￥300 per month.
Performances recording
Rank the performance results and give the best one 10% bonus
8: :00
14: :00
Adjust Employee Structure
To employ one more full-time employee
Keep the current structure
Morning
8: :30
Noon
12: :30
Afternoon
14: :30
Evening
18: :00

15. D2 Internal Process Perspective - Action Plan
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
D2 Internal Process Perspective - Action Plan
Purpose
Targets
Action
Redesign layouts
additional expense of ￥3000
Bio-material and lower-wattage bulbs
Utilities as % of Total Revenue:
Utilities change from prior year:
5.2%
Service
required
Save Utility
5.0%
Energy-saving idea
Personal responsibility system
23.1%
15%
Encourage Take-away Service
Reduce Customers’ Waiting Time
Check the waiting time though observing
Provide Take-away Service to Passers-by
Set an employee particularly
In the morning (8:00-9:00)
Boost Take-
away Rates
Take-away Rate:
Budgeting
Control
>10%
<1%

16. D3 Customer Perspective - Action Plan
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
D3 Customer Perspective - Action Plan
Enhance Customer Satisfaction
Customer retention and absorption
Boost Market
Shares
Enhance Profitability
Provide light music
Do customer satisfaction survey of 200 samples every 3 month
Decorate the walls and bar counter with ￥2000 to￥3000
Found a member club
Develop campus agent at the cost of ￥300 per month
Set ￥1000 to hold coffee culture competition once a year
5% off for old patrons’ bringing new customer.
Develop 3 new types of coffee flavor every 6 month
Provide 3 special offers every week

17. Current Situation Analysis Utilization & Implementation
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
D4 Financial Perspective
Enhance Profitability
Balance Gross Margin Rate
Beverages
/Drinks
Decrease the drinks’ price lightly to 3% to expend its sales.
Pay attention to the invest, develop 5-7 different types of blend coffee
Encourage take-away service with the budget of ￥2000 for packaging
Food sales
Increase the price to 5%
Develop 3 types of coffee every 6 months
Enhance the variety of breakfast, add 3-4 kinds of food
Boost Sales Growth
Sales Change from Prior Year
Consider all aspects when starting a renovation
Advertisement and promotions as % of Total Revenue
Increase invest in marketing promotion and advertising to 4.8%
Irregular preferential price with 20% off
Enhance Asset Utilization
Depreciation of tangible assets
Keep the depreciation rate

18. E1 Forecast Income Statement for year ended:
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
E1 Forecast Income Statement for year ended:
E1 Forecast Cash Flow statement for year ended:
E1 Forecast Balance Sheet
31st December 2010
31st December 2009
31st December 2008
Revenue (beverages/drinks)
427,800
485,000
465,000
Revenue (food sales )
641,700
445,000
450,000
Total revenue (food and beverages)
1,069,500
930,000
915,000
Cost of sales
(441,000)
(420,000)
(389,000)
Gross profit
628,500
510,000
526,000
Less Operating expenses:
Depreciation of tangible assets
(82,000)
Wages and remuneration
(155,520)
(130,000)
(110,000)
Rental
(200,000)
Utilities (lighting and heating etc.)
(53,475)
(48,000)
(39,000)
Garbage collection
(11,100)
(10,000)
(9,000)
Advertising and promotions
(51,336)
(30,000)
(25,000)
General and administrative expense(training and
development)
(14,400)
Total operating expenses
(567,831)
(500,000)
(465,000)
Operating profit for year
60,669
10,000
61,000
Interest payable on loans
(18,368.7)
(23,710)
(28,700)
Profit (loss) for year
42,300.3
(13,710)
32,300
31st December
2010
2009
2008
Goodwill
Furniture and fittings (net)
Inventories
Cash at bank
Total assets
Owner’s equity
Bank loan payable
Trade payables
Total liabilities and owner’s equity
31st December
2010
2009
2008
Operating cash flow
Operating profit (loss) for year
10,000
61,000
Add: depreciation
82,000.0
82,000
142,669.0
92,000
143,000
Changes in working capital:
Less: Increase in inventories
1,900.0
(6,000)
(38,000)
Add: Increase in trade payables
(14,869.0)
16,000
191,000
111,331.3
102,000
296,000
Investing activities
Nil
Financing activities:
Repayment of loan including interest
(100,000.0)
(100,000)
=Overall cash flow (deficit) for year
29,700.0
2,000
196,000
Add: Opening bank balance
198,000.0
Equals: Closing bank balance
227,700.0
198,000
The forecast of these accounts is based on the forecast income statement and forecast balance sheet.
The forecast of these accounts is based on the assumption Li has made for 2010, and other accounts are predicted based on the set targets mentioned before.
The forecast of these accounts is based on the assumption Li has made for 2010.
Keeping positive net working capital is of importance, which guarantees the healthy operation of the company
With all the implementation mentioned above, Pudong Coffee Shop will have promising net income in 2010
With the increasing profitability, total assets and owners’ equity will enlarge fast, especially after 2012 when depreciation of tangible asserts finished

19. E2 Break-even Point Analysis
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
E2 Break-even Point Analysis
Cost Behavior Analysis
Fixed cost: Depreciation, Rental, Utilities and Ad & Promotions
Variable cost: Cost of sales, Garbage collection
Mix cost: Wages and remuneration,
BEx= TFC/(p-VC)
Based on the assumption and the analysis above ,we can calculate: Total Fix cost(TFC)=82,000+65, ,000+48,000+30,000=￥425,000 Break-even Sales Volume(BEx)=425,000.00/(50-35)= ￥ 28,333 Total Fix Cost(TFC)=
82,000+65,000×1.2+20,000+53,475+51,336+14,400=￥479,211
Break-even Sales Volume(BEx)=479,211/(50× )=27,383
Year 2009
Year 2010
Assumption:
Labor Equivalent : 1 part-time = 0.5 full-time
In the year 2009, half of the sales volume comes from part-time employees, and the other half comes from part-time ones.
Half of the wages and remuneration is fixed cost. The graph of cost behavior of wages and remuneration is shown below:
The formula of wages and remuneration :
Assumption:
Unit cost 35 yuan
(According to the case, The average cost of a cup of coffee in these international chains amounts to between Yuan 30 and 40.)
Thus, sales volume should be counted as :
The Year 2008: Sales Volume=￥915,000÷35=￥11,114.27
The Year 2009: Sales Volume=￥930,000÷35=￥12,000.00

20. Current Situation Analysis Utilization & Implementation
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
E3 Overall Valuation of Pudong Coffee Shop
Period
Net Cash Flow
Discounted Rate
Choose the interest rate of long-term bank loan 7% as the discounted rate.
n=5
Make forecast cash flow statement in the next five years.
Assumption:
1. Free from going concern;
2. Run at the same growth rate of 2010 in the next five years.

21. Current Situation Analysis Utilization & Implementation
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
E3 Forecast Income Statement for the Next Five Years
E3 Forecast Cash Flow Statement for the Next Five Years
E3 Forecast Balance Sheet for the Next Five Years
Year
2010
2011
2012
2013
2014
Revenue (beverages/drinks)
427800
491970
565766
650630
748225
Revenue (food sales )
641700
737955
848648
975945
Total revenue (food and beverages)
Cost of sales
(441000)
(463050)
(486203)
(510513)
(536038)
Gross profit
628500
766875
928211
Less Operating expenses:
Depreciation of tangible assets
(82000)
Wages and remuneration
(155520)
(189734)
(235271)
(296441)
(374112)
Rental
(200000)
Utilities (lighting and heating etc.)
(53475)
(61496)
(70721)
(81329)
(93528)
Garbage collection
(11100)
(12321)
(13676)
(15181)
(16851)
Advertising and promotions
(51336)
General and adminstrative expense
(14400)
(16560)
(19044)
(21901)
(25186)
Total operating expenses
(567831)
(623608)
(691432)
(696180)
(803205)
Operating profit for year
60669
143267
236779
419883
531319
Interest payable on loans
(18369)
(12655)
(6557)
Profit (loss) for year
42300
130613
230222
Year
2010
2011
2012
2013
2014
Goodwill
400000
Furniture and fittings (net)
164000
82000
Inventories
42100
48339
50756
58370
70044
Cash at bank
227700
368978
565449
Total assets
833800
899317
Owner’s equity
460890
591503
821725
Bank loan payable
180779
93433
Trade payables
192131
214381
194481
229731
241217
Total liabilities and owner’s equity
2010
2011
2012
2013
2014
Operating cash flow
Operating profit (loss) for year
60,669
143,267
236,779
419,883
531,319
Add: depreciation
82,000
142,669
225,267
Changes in working capital:
Less: Increase in inventories
1,900
(6,239)
(2,417)
(7,613)
(11,674)
Add: Increase in trade payables
(14,869)
22,250
(19,900)
35,250
11,487
129,700
241,277
214,462
447,519
531,132
Investing activities
Nil
Financing activities:
Repayment of loan including interest
(100,000)
=Overall cash flow (deficit) for year
29,700
141,277
114,462
Increasing total revenue and profit.
Satisfying cash flow for the next five years.
Total assets rapidly increase as well as the owner’s equity.

22. Current Situation Analysis Utilization & Implementation
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
E3 Overall Valuation of Pudong Coffee Shop
2009 ￥
2010
￥29700
2011
￥134298
2012
￥243277
2013
￥476569
2014
￥612014
1/(1+7%)-1
￥27,757
1/(1+7%)-2
￥117,301
1/(1+7%)-3
￥198,586
1/(1+7%)-4
￥363,572
1/(1+7%)-5
￥436,357
Total PV: ￥1,143,574
NPV=￥
Though the shop experience a financial storm this year, it has a profitable future.

23. Current Situation Analysis Utilization & Implementation
Case Overview
Current Situation Analysis
Strategy Analysis
Utilization & Implementation
Net Cash Flow Forecast
Uncertainty
New Entrants in the local region
Mitigation:
Use CRM system to enhance customer loyalty
Increasing Price of the Materials
Mitigation:
Develop new non-coco products
Rapid Inflation
Mitigation:
Increase the price

24. A STORM framework Analysis
Summary
A STORM framework Analysis
Social Conditions
Technical Conditions
Organizational Conditions
Revenue Conditions
Market Conditions
A. Case Overview
B. Current Situation Analysis
C. Strategy Analysis
Learning &Growth Perspective
Internal Process Perspective
Customer Perspective
Financial Perspective
D. Utilization & Implementation
A SUN Solution
E. Net Cash Flow Forecast
Management Accounting Approaches such as Benchmarking and Balance Scorecard are applied to help Pudong Coffee Shop go from storm to sun.

25. Sun Yat-sen University
Thank You for Your Time!
Dream Chasers
Sun Yat-sen University