New Product/Variety Development
The final point of Jim’s proposal is contingent upon the company contracting with
producers. The development of superior, proprietary coffee varieties for use in
specific blends developed and marketed by Creolé Coffee would allow the company
to enhance its product quality relative to its competitors. Although product
development is not a specific component of Jim Brewer’s job description, he realizes
that all functions within the company are interdependent. In this case, the
procurement of a high quality input at a stable price allows the company to create
new high quality products, and thus guarantee the consumer superior value at a
consistent price. The development of new techniques and varieties that help achieve
these goals will ultimately contribute to the primary objectives of the company.
Final Considerations
Jim Brewer realized that much of the incentive for developing the proposal he was
about to give the Creolé Coffee Board of Directors resulted from high volatility in
the world coffee market during the mid-1990s. One question Jim asked himself was
“What if these recent fluctuations in coffee prices were short term phenomena?”
Although he firmly believed that the nature of the coffee market would result in
continued price volatility, he knew that the recommendations he was proposing
would benefit the company regardless of the level of price volatility. The
development of improved relationships and better coordination would enhance the
quality of the product and the efficiency of the process. Procuring inputs from
reliable suppliers as well as from the free-market would guarantee diversification
for the company. Finally, working with producers to enhance the quality of inputs
would allow the company to enhance its product quality relative to competitors.
What began as a reaction to price volatility resulted in a proposition that would
reshape the way Creolé Coffee did business, and potentially enhance the image of
the company. Jim would present his proposal to the board and await their decision.
Questions
1. Creolé Coffee will need 40,000 pounds of coffee beans during the month of
December. What tactics would the company employ in order to minimize
their risk? The company purchases the December contracts at 100.60
cents/pound. What are the implications for the company if the cash price rises
to 110.60 cents/pound or if the price falls to 90.60 cents/pound?
2. There is a high demand for high quality Hawaiian Kona and Jamaican Blue
Mountain beans3. What could Creolé Coffee do in order to ensure that they