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Institute of Management

Nirma University

MBA (FT)

MICROECONOMICS

“Buttercupp Bakery”

August 8th, 2019

Bhaskar Mehta (191412)

Puru Sharma (191439)

Niket Garg (191434)

Divaxi Patel (191419)

Deepika Jain (191415)


S Topic Pages
No.
1 Executive Summary 1

2 About the company 2

3 Background of the industry 3

4 Research Planning and Design of Research 4


5 Principle Concepts of Micro-economics 5

6 Challenges faced during the research 9

7 Learning Outcomes 10

8 References 11

1

Executive Summary

Buttercupps is a cupcake Shoppe located in Vastrapur area owned by a couple


by Mr. and Mrs. Amar. Mr. Amar is an engineer from Nirma University and has
a degree in communication from MICA. His wife is the only chef who makes
delicious cupcakes. Buttercupp is a proprietorship consisting of a small staff.
They focus on quality and taste. they have a wide variety of flavours and they
keep innovating with new flavours. There is a story behind every selected
cupcake.They have a huge variety of cupcake flavours along with pre-ordered
cakes, cheesecakes, brownies, and cookies. They have a fixed price policy
either at Rs. 85 or 120. They import most of their raw material and never
compromise on taste. They have very fewer profit margins. we have also done
the swot analysis to understand the microeconomic aspects of the business.

1

About the Company

BUTTERCUPP

Amazing cupcakes, brownies, Bundt cakes and cookies made fresh everyday...

Buttercupps were established in the year march,2012. It is a small start-up by a


young couple. The owner is an engineer from Nirma University and has a
degree in communication from mica. his wife is the only chef at the company.
The company started 7 years back with 4 employees and still running
successfully with the same employees. They started with a different variety of
cupcakes and every cupcake has its own story. The utmost priority of the
company is to serve the best quality cupcakes. The company offers freshly
baked cupcakes, brownies, Bundt cakes, and cookies using the highest quality
ingredients - Couverture Chocolate, Homemade Fresh Fruit Purees, Pure
Vanilla, and Sweet Cream Butter. They also cater to different dietary
requirements including low fat, vegan, eggless and low cholesterol.

2

Background about the Industry

India is a food-loving country where every region has its own special cuisine
and Indians have never been very big on eating out. But everything is changing
now. The restaurant industry in India is growing at a rapid pace over the last
decade or so and the growth story is set to continue for the next few years.

There were nearly 22 lakh hotel and restaurants in India in 2002. The food
service or restaurant industry was worth a whopping Rs. 43,000 crores in 2010
and is growing at a healthy rate of 15-20 percent annually.

The restaurant industry went through a technological revolution in the last few
years with the emergence of the online food ordering service. The trend gave
rise to many entrepreneurs who began food ordering start-ups like TastyKhana,
TinyOwl, and Food Panda. Ordering good food was now possible with the press
of a button and the Indian consumer couldn’t be happier.

While the restaurant industry in India faces many challenges like high taxes and
food cost inflation, it remains a major engine of growth for the country’s
economy contributing significantly to its GDP, paying crores of rupees in taxes,
and providing employment to millions of people.

3

Research Planning and Design of Research

Buttercupp Bakery runs as an independent business organisation with a Gujarat


based owner. The bakery operates on a 6 day week with extremeley comfortable
timings of 2 pm to 7 pm. The bakery is situated in one of the upscale areas of
Ahmedabad, which definitely adds value to the business. The stand out point for
this bakery is the limited number of options and the top quality of the product
that they provide. This is primarily the reason why a major part of the customer
base for the bakery is HNIs and the new generations. The bakery has been in
operation for the past 7 years.

4

Principle Concepts of Micro-economics

1. Demand:
The demand of Buttercupp Bakery varies as per season. They operate on
pull-based demand.

During summer- the demand during this season is relatively low. This
majorly due to high temperatures, because of which people avoid foods
that have a high sugar content and are slightly heavy.

During winter- the demand during this season is the highest because
people prefer to have freshly baked warm cupcakes along with a cup of
coffee.

During monsoon- this season experiences moderate demand.

Occasions- The bakery experiences the highest demand during festival
seasons.

Hence it can be said that demand of Buttercupp Bakery is Seasonal
demand.

Demand Function
Q=f(P,I,TPQ,TP,S)
P- Price Of Products
I- Income
TPQ- Quality of product in terms of customer preferences
TP- Customer needs
S- Seasonal Factors

Demand



2. Supply:

The Bakery works on the principle of limited supply and sustainable
waste management. They import most of their key raw materials from
Europe. Especially Switzerland and Belgium for chocolates and cheeses.
They have a delivery buffer time of 15 days.
They work on the product concept of marketing, because they focus on
quality and not quantity. Their production is pull-based and not push-
based.

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3. Pricing Strategy:

They have a unique pricing strategy. Regular cupcakes sell for Rs.85 plus
taxes and special flavors sell for Rs.120 plus taxes. They have decided
the price based on their raw material consumption and their profit.
There is no customization and hence this type of pricing is generally
termed as Fixed Pricing.
Initially, they began with a price of Rs. 65/cupcake; this was when the
INR to USD conversion was Rs. 45/Dollar.
With the growth of their business and addition in labor etc. their prices
eventually went up to Rs. 80/cupcake.
During VAT application all raw material import was applicable for 5%
input credit. After the implementation of GST this 5% input credit was
no longer applicable. Thus, they had to increase the price by 6.2%.
One of their best selling products at one time involved Ferrero Rocher as
a key ingredient, when the price of Ferrero Rocher was increased in
India, it impacted their cost of production to such an extent that more
than 70% of their selling price was for one ingredient. Not inclined
towards hiking the price of the product, it was discontinued. Their profit
margins are limited to 25%, which is low compared to the industry
standard, this because the ideology of the proprietor is not profiteering
but customer satisfaction.

4. Market:

Though it is sort of perfectly competitive market scenario. They have
loyal customers due to their consistent quality and pricing strategy. They
cater to a Niche market and thus their business is very minutely
influenced by competition. The company ideology doesn’t believe in
competition, rather it believes in self-growth through constant
innovation of their product.

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5. Elasticity

Ep = ( dP/P)/(dQ/Q) (P- price; Q-quantity; Ep- Price elasticity of demand)
= (20/85)/(150/250)
= 0.14

The percent change in demand is less than the percent change in price.
This shows the inelastic demand of the product.


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Challenges faced during the research


• Absence of data to support research: Amar, the owner of ‘Buttercupp
Bakery’ was very forthcoming and spoke with utmost respect. Due to
corporate constraints he couldn’t let the numbers or the data out because
of which it became little difficult to set the objectives and the targets right.
• Getting an appointment with the owner: After the initial meeting, it was
difficult to schedule subsequent meeting with the owner due to clashes in
his meetings.
• Aligning survey questions with the research questions: Aligning what the
project wants from us with the questions we were asking was a task. We
had to ask the owner simple, straight forward and the right questions which
he would be able to understand easily without hesitating. Hence setting the
right questions was important.
• Not sharing information: The owner was comfortable sharing the basic
pricing etc. with the team but was reluctant in sharing the sales data, as
that was confidential and against his company policy.
• Difficulty in getting the set of questions right that needed to be asked: As
all the team members had some certain questions in their mind, it was
slightly difficult to get that set of right questions that needed to be asked as
everyone’s perspective differs.

9

Learning Outcomes

Some of the learnings that we had during this research can be noted down as:

• How firms in food industry operate in a dynamic food environment


(Gujrati, North Indian, Italian etc) and modify their core operations
according to changing customer needs and demands.
• Since restaurants must maintain thousands of raw materials, how do they
match cost of individual product with final revenue and calculate their
profit.
• How is the competition in terms of local food, international food and
other restaurants operating in the vicinity affected their business and
sales.
• How to prevent raw materials which are perishable from getting wasted
and maintain stock of such raw material.
• On what basis do they decide to expand their business in terms of number
of branches and franchise.
• How to manage their business in terms of staff and inventory during off-
season and peak season.

10

Reference
• https://www.google.com/search?client=firefox-b-
ab&biw=1280&bih=607&tbm=isch&sa=1&ei=DEB3W6SUH4bd9QOZ25LACw&q=seasonal+de
mand&oq=seasonal+demand&gs_l=img.3...19195.23148.0.23356.21.17.2.0.0.0.512.2142.0j2
j1j3j0j1.7.0....0...1c.1.64.img..13.8.1968...0j0i67k1j0i10i24k1.0.wOToGek8KPA#imgrc=VarhFq
YmIWky8M:
• https://www.google.com/search?q=the+fixed-price+keynesian+model&client=firefox-b-
ab&source=lnms&tbm=isch&sa=X&ved=0ahUKEwiP846chvXcAhXFeisKHW7qA4wQ_AUICigB
&biw=1280&bih=607#imgrc=q8eUIejS1wsBPM:
• https://www.zomato.com/ahmedabad/theka-1-thaltej/photos
• https://www.google.com/search?q=break-even+chart&client=firefox-b-
ab&tbm=isch&source=iu&ictx=1&fir=rlTxXLjnhLFiXM%252CXeO2_yzTkClW5M%252C_&usg=
AFrqEzcn8xbrQYbK2FFpxDG1AfM55RDtEw&sa=X&ved=2ahUKEwifwrPJhvXcAhXDfysKHWT8
BE8Q_h0wI3oECAMQCg&biw=1280&bih=607#imgrc=o9ZUxxC86c4PYM:
• https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&
ved=2ahUKEwil9f-
kt_HjAhXElOYKHWc8Bz4QFjAAegQIABAC&url=https%3A%2F%2Fwww.Buttercuppp.com%2F
&usg=AOvVaw0f2n4hhN_geJS5vNxWIoOH


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