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TEACHING NOTE
CASE 1
Mystic Monk Coee
Overview
This 4-page case requires that students consider the future direction of a monastery located in Clark,
Wyoming and evaluate the vision, strategy, and business model of the fledgling Mystic Monk coffee
business. As the case unfolds, students will learn of Father Daniel Mary’s vision to build a new Mount
Carmel in the Rocky Mountains and transform the small brotherhood of 13 monks living in a small home used
as makeshift rectory into 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, and a hermitage. Father Daniel Mary had
identified a nearby ranch for sale that met the requirements of his vision perfectly, but its listing price of $8.9
million presented a financial obstacle to creating a place of prayer, worship, and solitude in the Rockies. Father
Daniel Mary hoped to fund the purchase of the ranch through charitable contributions to the monastery and
through the profits of its Mystic Monk coffee business, which had earned nearly $75,000 during its first year of
operation.
Suggestions for Using the Case
This case was written as a leadoff case and was carefully crafted by the case author to require students to draw
upon most all of the concepts discussed in Chapters 1 and 2 to sufficiently prepare for a class discussion of the
case. The case involves issues relating to mission, vision, objectives, strategy, business models, and decisive
strategic leadership; the need for an action plan is obvious—these are the very things one looks for in a good
leadoff case. And the nature of the case virtually guarantees the stimulating kind of class discussion one needs to
get the course off on the right foot.
The assignment questions and teaching outline presented in upcoming sections of this TN reflect our thinking
about how to conduct the class discussion of the Mystic Monk Coffee case.
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It is really very difficult to have an insightful and constructive class discussion of the Mystic Monk Coffee case
To facilitate your use of study questions and making them available to students, we have posted a file of the
Assignment Questions contained in this teaching note for the Mystic Monk Coffee case in the instructor
resources section of the Connect Library. (We should also point out that there is a set of study questions posted
in the student section of the OLC for each of the 31 cases included in the 21st Edition.)
Auto-Graded Connect Case Exercise. The 21st Edition includes a fully auto-graded Connect case exercise
for 12 cases included in the text. The auto-graded exercises closely follow the assignment questions and analysis
included in the teaching note for the case. The auto-graded exercise for the Mystic Monk Coffee case requires
that students answer a series of multiple choice questions related to Assignment Questions 1-5. Question 6 is
Students should be expected to spend about 45 minutes to complete the exercise, assuming they have done
a conscientious job of reading the case and absorbing the information it contains. All of the questions are
automatically graded, and the grades are automatically recorded in your Connect grade book, which
makes it easy for you to evaluate each class member’s ability to apply many of the concepts discussed in
Chapters 1 and 2.
Videos for Use with the MMC Case. There are two videos that you may consider having students view prior
to class discussion of the case (or you may choose to open the class discussion with one of the two videos). Both
videos are posted at YouTube and can be access through the following links:
The length of the case makes it ideal for an in-class written case or a final exam case. Our suggested written
assignment questions are as follows:
1. As a new business school graduate who has relocated to Cody, Wyoming and supports the local foundation
to benefit the Wyoming Carmelites, you have been asked to prepare a strategic review and action plan
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2. Cody, Wyoming business owners have noted your quickly developing skills of analysis and growing
business acumen and have asked that you prepare a report for Father Daniel Mary that evaluates Mystic
Monk Coffee’s mission, vision, strategy, business model, and operations. Your report should also make
recommendations concerning strategic issues related to:
Assignment Questions
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. Does it appear that Father Daniel Mary has set definite objectives and performance targets for achieving his
vision?
3. What is Father Prior’s strategy for achieving his vision? What competitive advantage might Mystic Monk
Coffee’s strategy produce?
4. 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? its resources that enable it to create
and deliver value to customers?
5. Does the strategy qualify as a winning strategy? Why or why not?
6. What recommendations would you make to Father Daniel Mary in terms of crafting and executing strategy
for the monastery’s coffee operations? Are changed needed in its long-term direction? its objectives? its
strategy? its approach to strategy execution? Explain.
Teaching Outline and Analysis
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 Coee? What is the
mission of the Carmelite Monks of Wyoming?
Students should have little trouble recognizing that Father Daniel Mary’s vision for the Carmelite Monks of
Wyoming is to recreate Mount Carmel in the U.S. Rocky Mountains and transform the small brotherhood
of 13 monks living in a small home used as makeshift rectory into 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, and a hermitage. However, students should also recognize that there is no clear evidence in the
case that Father Daniel Mary has articulated a vision for Mystic Monk Coffee.
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2.
Does it appear that Father Daniel Mary has set definite objectives and performance targets
for achieving his vision?
Students will find it very difficult to argue that Father Daniel Mary has set definite objectives or performance
3.
What is Father Prior’s strategy for achieving his vision? What competitive advantage might
Mystic Monk Coee’s strategy produce?
Students will generally agree that Father Daniel Mary is relying on charitable contributions to the monastery
and profits from its Mystic Monk Coffee enterprise to fund the purchase of the Irma Lake Ranch. Students
should also recognize that MMC does have a deliberate strategy, although it may be only tacitly understood
among the monks. The case doesn’t discuss to what extent Father Prior has articulated the strategy to
Brother Java (Brother Elias) and the other monks involved with MMC’s operations, but students should be
able to identify the following elements of MMC’s focused differentiation strategy:
nExclusive use of high quality fair trade Arabica and fair trade organic Arabic beans
nVariety of blends, roasts, and flavors to appeal to a broad range of coffee preferences
nFocus on U.S. Catholic consumers and those wishing to support the mission of the Carmelite Monks
of Wyoming. An appeal was made to Catholics “to use their catholic coffee dollar for Christ and his
Catholic church.”
nWord of mouth advertising among loyal customers in Catholic parishes across the U.S.
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4. Is Mystic Monk Coee’s strategy a money-maker? What is MMC’s business model? What is
your assessment of Mystic Monk Coee’s customer value proposition? its profit formula? its
resources that enable it to create and deliver value to customers?
Even though MMC’s business model has a compelling customer value proposition, there is reason for
students to challenge the overall soundness of the business model. MMC’s attractive differentiating features
and competitive pricing create a strong customer value proposition, but its profit formula is suspect. Other
than the lack of labor expense, MMC enjoys no cost advantage and many of its non-differentiating activities
involve higher than normal costs because of its low production volume. The company’s cost of sales of 30
percent, broker fees of 3 percent, and inbound shipping costs of 19 percent contributed to a cost of goods
sold of 52 percent. Even though students might argue that some indirect operating expenses (37 percent of
revenues) are largely fixed and might go down as volume increases, most of these expenses are somewhat
variable and will increase with volume. MMC’s current sales and 11 percent net profit margin are quite
insucient to generate $8.9 million in cumulative earnings within a reasonable amount of time.
Students are also likely to note that MMC generates losses on all sales coming from affiliate Web sites since
the company pays an 18 percent commission on these sales, but has a net profit margin of only 11 percent.
5. Does the strategy qualify as a winning strategy? Why or why not?
There’s merit in directing students to the three tests of a winning strategy presented on page 9 of Chapter 1
of the text if you’ve chosen to schedule Mystic Monk Coffee as the lead-off case for the course. Assessments
made by students may include the following arguments and comments:
nDoes the strategy fit the company’s situation? You should find the class more or less evenly divided
in whether to classify MMC’s strategy as a winner. The strategy fits the external situation nicely since
the market for specialty coffees had grown at an annual rate of 32 percent between 2000 and 2007
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to reach $13.5 billion. Also, students should note that the retail sales of organic specialty coffee had
grown to $1 billion by 2007. MMC’s focus on Catholic consumers in the United States represents a large
market for MMC—and one that would arguably become very loyal customers. Students who suggest
MMC lacks a winning strategy are likely to point to a poor fit between MMC’s strategy and its internal
situation that requires monks to devote most of their day prayer and worship.
6. What recommendations would you make to Father Daniel Mary in terms of crafting and
executing strategy for the monastery’s coee operations? Are changes needed in its long-
term direction? its objectives? its strategy? its approach to strategy execution? Explain.
Student recommendations are likely to fall into two groups, with one group suggesting that the vision be
scaled back dramatically and the other group recommending an action plan to dramatically increase MMC’s
revenues and earnings.
Students arguing that Father Daniel Mary’s vision should be scaled back drastically will be able to support
such a recommendation with several facts from their analysis:
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Students arguing that Father Daniel Mary should stick with his current vision must make a number of
recommendations for improving Mystic Monk Coffee’s strategy and business model. Appropriate
recommendations include:
nBefore making specific recommendations to revise MMC’s strategy and business model, students must
first determine to what extent donations can be relied upon to generate funds necessary to purchase
the Irma Lake Ranch. In our calculations, we’ve assumed that one-half of the funds necessary to
purchase the ranch will come from charitable contributions.
nFather Daniel Mary should request that the Catholic Church send priests or others not constrained by a
cloistered life to develop a strategy with Cody, Wyoming business people to maximize the potential of
the foundation established for the benefit of the monastery. It’s likely that the Cody, Wyoming business
people don’t have the know-how or time to generate substantial contributions to the foundation.
nFather Daniel Mary should also utilize the resources of the Catholic Church to find major donors willing
to contribute to the creation of a new Mount Carmel. However, Father Daniel Mary’s efforts might be
limited by the Catholic Church’s charitable giving requests for competing projects and needs.
nMost students will recommend that MMC immediately reduce commissions paid to affiliate Web sites,
since the current 18 percent commission cannot be supported.
nStudents should recognize that even under the most favorable scenario, Father Daniel Mary will be
required to schedule additional 6-hour shifts for MMC reach $1 million in annual profits.
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nStudents should also recommend strategies that will allow MMC to increase sales to support higher
levels of production. Possible recommendations include:
• Send e-mails to Catholic churches in the U.S. asking that MMC coffee be used for church events
and that parish members be told of MMC’s Internet coffee sales.
• Provide churches purchasing MMC coffee with a sign promoting MMC that could be placed near a
coffee urn. The sign could improve awareness of MMC among members of Catholic parishes.
• Target coffee shops located in communities with large Catholic populations for wholesale purchases.
• Promote the Wyoming Carmelite’s vision of a new Mount Carmel and MMC coffee at Catholic
religious conferences. MMC might consider providing conferences with free MMC coffee and
promotional materials.
nStudents supporting contract manufacturing may also suggest that First Colony or similar coffee
producer might be able to help Mystic Monk Coffee gain access to specialty retailers who might wish to
carry the brand.
nStudents who argue forcefully against contract manufacturing should be challenged by the instructor to
consider the logistical problems should the Wyoming Carmelites be able to purchase Irma Lake Ranch
and move MMCs operations to the new Mount Carmel. The ranch was at the end of a 7-mile private
gravel road. Inbound and outbound logistics during much of the year would likely be extremely
dicult given the duration of Wyoming’s winters.
Epilogue
Mystic Monk Coffee has added several new blends and coffee accessories at its Web site since the close of the
case. You can visit www.mysticmonkcoffee.com to see the monastery’s latest coffee offerings.
The monastery had also established the New Mount Carmel Foundation, Inc. to support Father Daniel Mary’s
vision of creating a new Mount Carmel in the Rocky Mountains. The foundation website (http://www.
newmountcarmelfoundation.org) provides photo galleries, videos, news and other information related to the
foundation’s efforts to develop funding to build the mountain monastery.