Sajjad1994Dear Sir,
Prompt-
The following appeared in a memorandum from the owner of juniper cafe, a small, local coffee shop in the downtown area of a small American city: "we must reduce overhead here at the cafe .Instead of opening at 6 a.m. weekdays , we will now open at 8 a.m. weekdays .In weekends, we will be open from 9 a.m. until 4 p.m. . the decrease in hours of operation will help save money because we won't be paying for utilities , employee wages , or other costs during the time we are closed . this the best strategy for us to see the money and remain in business without having to eliminate jobs."
Response-
The memorandum of the café owner is about his concern on reducing the cafe overheads.
In order to reduce the overheads, the café owner assumes that reduced operational hours will certainly reduce the expenses.
The reasoning presented to achieve the desired outcome is flawed as owner has considered only positive factors of reducing the operation hours on weekdays and specifically on weekends.
He fails to consider the factors such as, peak hours of business, the schemes which he can use to attract more customers, offerings which can be added to the cafe and impact on its employees of reduced salaries.
First the argument relies on the assumption that overheads can be reduced only by means of reducing the operation hours.
The owner need to study on the patterns of business hours and make the strategy accordingly.
For example, many customers of cafe are those who go to walk in early morning and have coffee at the cafe before 8:00 am.
He explicitly states that the working hours on weekends will be 09:00am to 04:00 pm, it may be the case that many families go on coffee in the evening after 04:00 pm.
Secondly, he thinks that the best strategy to reduce the overhead is to reduce the expenses of utilities, employee salary and other costs.
It may impact him adversely as if the current employees get less salaries, they will opt for a different job; it is also possible that they join the competitor and the customers who know them will start going to that cafe.
As a result, the owner will lose the business and it will be difficult to get the employee at his proposed terms.
Third, the owner fails to consider what if he adds the new items to the cafe menu.
There can be an additional scope of earning profit by adding the offerings at his cafe.
For example, he can add cookies, puffs and sandwiches in cafe menu, and thus he will be adding the diverse segment of customers.
The customers who usually prefer to have these food items along with coffee.
This will ultimately add the revenues and thus there will be no need to worry about the overheads.
In conclusion, the argument is flawed as it is unidirectional and fails to consider the opportunities available to the business.
Also, the owner of Juniper Cafe has considered only the favorable outcomes while he should consider the above stated factors in order to concrete his decision of reducing the operation hours.
It is very important to analyze the event from both positive and negative perspectives before arriving at conclusion.
In this case of Juniper Cafe, I recommend the owner to analyze the opportunities as well.
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09 Aug 2021, 10:23
