Mystic_Monk

After reviewing the Mystic Monk Coffee (‘MMC’) Case Study, the following key questions are asked: 1. Has Father Daniel Mary established a future direction for the Carmelite Monks of Wyoming' What is his vision for the monastery' What is his vision for Mystic Monk Coffee' What is the mission of the Carmelite Monks of Wyoming' 2. Is Mystic Monk Coffee’s strategy a money-maker' What is MMC’s business model' What is your assessment of Mystic Monk Coffee’s customer value proposition' Its profit formula' 3. Does the strategy qualify as a winning strategy' Why or why not' In evaluating whether Father Daniel Mary has established a future direction and vision for the Carmelite Monks of Wyoming, it is important to understand the precise definition of what makes a strategic vision as it pertains to the textbook to ensure consistency in our understanding of business acumen related to the questions above. A strategic vision “describes management’s aspirations for the future and delineates the company’s strategic course and long-term direction” (Thompson, Peteraf, Gamble, & III, 2014). Based on this definition, I would suggest that Father Daniel Mary has indeed established a future direction and vision; in essence, it is described as “creating a new Mount Carmel in the Rocky Mountains” (Thompson, Peteraf, Gamble, & III, 2014). In addition, he goes on to describe how he would like to transform the current brotherhood consisting of 13 monks in a small rectory to a 500 acre monastery “that would include accommodations for 30 monks, a Gothic church, a convent for Carmelite nuns, a retreat center for lay visitors” (Thompson, Peteraf, Gamble, & III, 2014). Ultimately, it would seem that the goal of the monastery is to worship God; however, by improving upon their facilities, they will be able to accomplish this by expanding their current facilities allowing them to serve more people (whether indirectly or directly). I do not believe, however, that Father Daniel Mary clearly outlines his vision for MMC, though. It is important to distinguish between the monastery and MMC as both are very different organizations whose goals may be aligned for very obvious reasons but MMC is a profit seeking organization that operates independently of the monastery. That being said, it would prove beneficial for Father Daniel Mary to identify a separate vision for MMC given the purpose of a profit driven organization that produces coffee. The mission for the Carmelite Monks of Wyoming is to execute on their strategic plans for greater growth thereby bringing them close to reaching their vision of acquiring the Irma Lake Ranch. More specifically, MMC seeks to grow in a very niche market (that of the U.S. Catholic population which consists of more than 69 million people) which will directly bring them close to their vision of a new facility. Indirectly, I believe their mission will also allow them to reach out to other Catholics and allow them to apply their dollars to an organization that shares their same values resulting in better results over the long-term. I believe that MMC’s strategy can become a “money maker” for a few different reasons. First, MMC has a strong grasp on its target market and how to market effectively to that market. In other words, MMC has created a very strong customer value proposition (why U.S. Catholics should buy coffee from them) that can resonate with others outside of this target market as well (think Christians, non-Catholics). In addition, it’s a very large niche market (69 million people just counting the Catholics) that will afford them the opportunity to grow by word of mouth. Moreover, if MMC ever desires to increase sales, it can leverage a formal marketing strategy as well to reach customers outside of its target market. I do have some concerns that MMC may have some challenges with regards to making money. This is related to the fact that MMC has relatively little control over its value chain. In other words, the case study states that while MMC uses only premium grade coffee beans (eliminating the possibility that MMC intends to compete based on price), coffee itself is highly elastic in that the retail price is fully dependent on the wholesale price. Due to the fact that MMC is dependent on wholesale growers, the prices will fluctuate resulting in a variable cost of production which may eat into Mystic’s profit. In addition, MMC is focusing its energy on a very unique market (the U.S. Catholic population) which means that MMC is reliant upon the good faith support of its customers as opposed to creating a truly unique product. As noted earlier, MMC has very little control of its value chain as most of its production is outsourced on some level relinquishing their control in the over-all process. If, perhaps, MMC sought to control more variables in the production process, it might be able to increase its value and thereby penetrate the premium coffee market. MMC’s business model consists of two critical elements: (1) the customer value proposition and (2) its profit formula. By reviewing the key financial metrics, we can better determine whether my personal assessment is correct. Based on the information provided, it is clear that MMC has a distinct advantage over its competitors in that there are no labor costs (the monks work for free). In addition, if MMC is able to operate under its non-profit status, it will further distance itself from its competitors in that it will not have to incur fixed costs such as corporate taxes, payroll taxes, etc. Given MMC’s limited production, I believe their fixed costs such as broker fees and shipping costs (for a total COGS of 52%) may decrease if they increase their production as these costs will go down on a per unit basis (in other words, the greater the volume produced, the less each per unit costs are due to economies of scale). This may be why there was mention of a new roaster that would allow for increased productivity. Moreover, MMC’s variable costs such as that of the 18% commission it pays out for affiliated websites only eats more into their profit margin. At this time, it would seem that MMC is only able to attain 11% net profit margin and, at this rate, it would be insufficient for MMC to reach $8.9 million in total earnings in a relatively short amount of time. If we look into the production capabilities even further, we learn that current monthly sales of $56k suggests that MMC is producing 540 lbs of coffee per day (22.5 lbs per hour). At 135 lbs per day, Brother Elias would need to work 7 days per week and, while labor is inexpensive, this is not a sustainable strategy. I’m inclined to believe that Father Daniel Mary will need to re-evaluate MMC’s capabilities from a production standpoint to determine whether their stated goal is reasonable in nature. I don’t believe that the strategy can be categorized as a winning one. This is primarily due to the fact that the strategy doesn’t seem to pass the three winning strategy tests: (1) the fit test (2) competitive advantage and (3) performance test. More specifically, the strategy doesn’t fit the company’s situation in that MMC does not have the production resources to meet their production requirements to reach their financial goals. Their production levels would need to increase dramatically in order to reach their desired sales while reducing their fixed and variable costs. In addition, MMC does not necessarily identify a true competitive advantage against their competitors other than the ability to quickly penetrate their target market; however, even this is something that is not sustainable or long lasting. Lastly, while MMC is turning a profit, their over-all performance is still lacking as they haven’t been able to gain control of their costs and value chain in order to truly provide value to their customers resulting in a competitive advantage. Their performance numbers are weak and have a long ways to go in order to reach their financial goals in a relatively reasonable amount of time. In conclusion, I believe has an opportunity to create a very successful business, however, I recommend the following changes in order to reach that success sooner than later: - Find additional human labor to increase production. - Leverage the experience of an outside consultant who has worked in this industry before to help manage the unforeseen. - Consider the purchase of a larger roaster in order to meet production needs. - Eliminate third party commissions and consolidate operations in-house. Works Cited Thompson, A. A., Peteraf, M. A., Gamble, J. E., & III, A. S. (2014). Crafting and Executing Strategy. New York: McGraw-Hill/Irwin.