Unit 1-Exploring the business PDF

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Summary

Costa Coffee is very well known in UK and it was founded in 1971 in Italy by two Italian brothers: Sergio and Bruno Costa. Costa introduced the first Costa coffee shops in the UK in the early 1980’s and the main idea was to create and serve the finest authentic Italian coffee. Costa then expanded na...

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Evaluate the extent to which the business environment affects a given organisation, using a variety of situational analysis techniques

In this task, I will provide an overall assessment of the industry using situational analysis and making an overall assessment and conclusion as to whether my decision on how these factors affect the business.

External environment Political/Legal: Coffee beans are being grown in developing countries. Political and legal factors influence debates about child labour, working conditions, and taxes and tariffs. The political and legal business environment has a significant impact on corporate performance in order to attain long-term objectives. Costa Coffee is one of the most well-known coffee chain brands in the world. The impact of political decisions on Costa Coffee varies depending on the country. Costa Coffee operates in 32 countries, all of which have its own set of standards that must be followed. If the government is more business-friendly, corporation taxes will be lower, there will be less limitations on running a business, and it will be easier to obtain a licence to start a store.

Economic: The company can take advantage of the economic growth in developing countries to extend its market and dramatically raise its income. Developing countries such as China are fast developing, and as people's income goes up, their consumption habits change, which is good to the company. Costa Coffee is expanding rapidly in China, with plans to build 1200 new locations by 2022. Cultural/Social: Coffee is expensive, and people spend a lot of money on it. People go to coffee shops not only to drink coffee, but also to sit and relax. Social trends shift quickly, which has an impact on Costa Coffee's company. It could be due to a shift in people's income or a shift in their preferences. It will present a corporation with both an opportunity and a threat. In developing countries, where income growth led to a change in people's consumption habits, the company benefited. In China and India, people began to prefer going out for snacks, food, and coffee. People in the middle class now prefer to hang out in a café. Costa Coffee will be able to expand its customer base as a result of this. On the other hand, people are becoming more

health concerned, and many people now view coffee as being harmful to their health, and as a result, they may begin to avoid it completely. Technological: Due to the introduction of latest technology cheaper and better coffee machines are available in the market for home usage such as Senseo. The companies all over the world spending millions of dollars to remain technological advanced in this cut throat competition world. Costa Coffee is also keeping itself updated technologically. It is investing in technology to manage their HR and payroll processes. Costa Coffee is using Ceridian’s Dayforce Workforce Management Technology to plan staff scheduling to deliver accurate and timely payment of 18000 employees within its retail business, Costa Express and support centre. It has also joined hands with Barclay card to launch a reusable cup with integrated contactless payment technology that will allow its users to pay with a wave of their cup. It will help in tracking the payments, top up their balances and reuse the cup after wash.It will reduce the time taken to make payments and moreover it will encourage people to ditch single use cups. Environment: Due to increase of environmental awareness, coffee players have to be concerned regarding the method their coffee beans are manufactured, their method of supply chain and preparation and selling of their products and services.Costa Coffee has set the target to recycle 500 million cups by 2020 which is equivalent to its customers usage of the cups annually. It will incentive the waste companies to collect waste cups and send it to recycle plants. They also opened up roastery in Essex which is built to make sure zero waste to landfill, efficient machines to reduce energy consumption by 30 % etc. Market research: UK experienced as robust economic growth in the period of adverse economic trends. UK has a good GDP growth rate. There are vast coffee business opportunities. UK experienced a continuous progress in financial restructuring and development in financial risk management. The capital adequacy ratio is also higher in UK. There are several Coffee players doing their business and giving tough competition to each other. Starbucks and Costa Coffee are two most famous coffee players in UK. The demand for tasty food has been increased from previous many years. Currently, UK has more than 3000 outlets of branded coffee chains with a turnover of about £1.3b.It has been realized that it has grown more than 15% annual basis for the previous 8 years.It is expected that outlets of Coffee market in UK will be increased to 6000 to 7000 outlets to next 8 to 10 years with the estimated turnover of more than £2.5b.Across UK, company has around 1300 outlets .

Internal environment

Competition: There is extensive competition in Coffee market. Lager numbers of players are offering their products and services in UK. Starbuck and Costa coffee have extensive competition in UK market. Both are doing competition on the basis of high quality products and offerings. The other competitors include Café NERO, Coffee REPUBLIC, and other independent coffee shops. Today companies are using Porter’s five forces model for competition. Introduction of new or innovative technologies enable the organizational managers to better cope with competitive advantage and change. SWOT analysis

Strengths        

Costa Coffee is one of the leading coffee chain brands based out of UK Costa coffee is present at more than 3000 locations worldwide The company has a strong legacy since it was started in the year 1971 In 2019, the Coca Cola company had acquired the Costa Coffee company for $5 billion The coffee chain offers a wide variety of products including coffee, milk shakes, cakes, sandwiches etc As a part of its product extension, Costa coffee started offering canned coffee which is available at several retail stores The annual revenue of the brand is more than $1 billion Costa coffee is trying to achieve a premium image across the world.

Weakness

  

Costa Coffee is present in a limited number of countries as compared to some of its global competitors Limited marker share growth owing to many substitutes available from competitors to local players at every location Costa coffee is sold at higher prices compared to Starbucks and this effects the consumer mindset especially in developing economies.

Opportunities

  

Acquisitions or forming strategic alliances with other coffee companies can help boost the business for Costa Coffee Expanding in various consumer markets with a higher youth population who has a high purchasing power can be an opportunity for the company Continuously expanding its menu and offer snacks & beverages based on local interests can attract a new set of customers

Threats

  

The company has a threat from existing coffee chains and fast food outlets Intense price competition means lesser margins and higher operating costs for Costa Coffee Economic recessions or a pandemic can hurt the business as people reduce their expenditure

Conclusion Overall, Costa coffee has done well in the UK and is well received. As can beseen from the above analysis, the UK market still has great potential to be created. To meet the requirements of more people, Costa can consider the product more bidding, developed more taste and style of the coffee, also can produce more well made with coffee as the theme of related products. To Expand market share, although has held the British market first, the market share of international students is exceedingly small, can be in this part of the group making the personalized marketing plan. At the same time strengthen the brand added value propaganda, keep and enlarge own advantage. Porter 5 forces

Power of Customers

Costa's environment is highly pleasant, which is one of the reasons many customers choose this brand; however, the price is similar to Starbucks, which is considered as a premium brand. More and more British people accept and love the elegance, romantic leisure, and life art of coffee as the quality of life improves and the pace quickens. As a result, most average consumers are less concerned with coffee prices and more concerned with service quality.

One of the most important elements affecting Costa Coffee's operations is customer bargaining power. Customers can simply switch from Costa to other brands due to the low cost of doing so. Customers can also avoid Costa if they so desire because there are other options. As a result of this part of the Five Forces analysis methods, client bargaining power should be one of Costa Coffee's top priorities.

Competition rivalry

Costa coffee is the leader in retailing and roasting of specialty coffee in the world. Major competitors include Starbucks, Caffé Nero, Seattle's Best Coffee and secondary coffee providers such as McDonald's, Burger King and Dunkin Donuts. The competition is nowhere near to Costa coffee volume of operations and sales. Consumption of coffee is not dependent on the price of the product but also on the differentiation between each product and several value adding variables such as the quality of customer services, brand, brand recognition and image of the company.

Threats of new entrants

It shows that new entrants have significant but not strong effect on Costa Coffee’s business. New entrants can compete against Costa because of the moderate costs of doing business and supply chain development. However, new entrants find it difficult to compete against established brands like Costa and Starbucks because it is very costly to develop a strong brand.

Threat of Substitutes

Tea and alcohol are both threatening substitutes, and the British love of black tea is well known. In the afternoon, drinking a cup of black tea is a wonderful experience. Fruit juices, fizzy drinks, these are also popular with young people. Customers can easily shift to substitute because they do not need to spend for the shifting process. In addition, many of these substitutes cost less than Costa’s products. Thus, Costa must consider the threat of substitutes.

Bargaining power of suppliers

Coffee is the second largest traded commodity in the world. Central and South America produce majority of coffee traded. Starbucks depends upon both outside brokers and a mutually direct contact with exporters for supply of premium coffee beans.

The quality of coffee beans sought by Starbucks is very high, proving to be a potential threat to the company. Only suppliers which meet Starbucks coffee standards are able to supply to the giant company. The supplying industry only has few firms which can deliver the quality giving them considerable bargaining powers.

5C’s

Competitor There is extensive competition in Coffee market. Lager numbers of players are offering their products and services in UK. Starbuck and Costa coffee have extensive competition in UK market. Both are doing competition based on high quality products and offerings. The other competitors include Café NERO, Coffee REPUBLIC, and other independent coffee shops. Today companies are using Porter’s five forces model for competition. Introduction of new or innovative technologies enable the organizational managers to better cope with competitive advantage and change.

Opportunities

 

Acquisitions or forming strategic alliances with other coffee companies can help boost the business for Costa Coffee Expanding in various consumer markets with a higher youth population who has a high purchasing power can be an opportunity for the company



Continuously expanding its menu and offer snacks & beverages based on local interests can attract a new set of customers

Threats

  

The company has a threat from existing coffee chains and fast-food outlets Intense price competition means lesser margins and higher operating costs for Costa Coffee Economic recessions or a pandemic can hurt the business as people reduce their expenditure

Company

Strengths        

Costa Coffee is one of the leading coffee chain brands based out of UK Costa coffee is present at more than 3000 locations worldwide The company has a strong legacy since it was started in the year 1971 In 2019, the Coca Cola company had acquired the Costa Coffee company for $5 billion The coffee chain offers a wide variety of products including coffee, milk shakes, cakes, sandwiches etc As a part of its product extension, Costa coffee started offering canned coffee which is available at several retail stores The annual revenue of the brand is more than $1 billion Costa coffee is trying to achieve a premium image across the world.

Weakness

  

Costa Coffee is present in a limited number of countries as compared to some of its global competitors Limited marker share growth owing to many substitutes available from competitors to local players at every location Costa coffee is sold at higher prices compared to Starbucks and this effects the consumer mindset especially in developing economies.

Strategy Producing the best quality of coffee is the strategy that Costa Coffee employs. This has been the major factor in its success. It focuses on making a difference in the coffee industry through offering unique features in its products. Differentiation is the key aspect of the company’s strategy. However, Costa Coffee also focuses on the affordability of its coffee. It, therefore, produces coffee that is affordable to virtually every class of people in its market niche. Costa Coffee produces coffee based on the needs of its customers. The company listens to what the customers need and responds to that. Its brand of coffee has an Italian origin, which is a differentiation strategy. It offers coffee that is unique from what is offered by most of its competitors. Strategic management is important because it helps an organization to achieve its goals. It also contributes to operations management. The operations that an organization engages in are all geared towards achieving its goals. On the other hand, the goals of the organization are an integral part of its strategic management. Operations should be aimed at maintaining high quality of production, as this will give them a competitive advantage. Costa Coffee is an organization that is highly ranked in its industry globally. This means that it has been able to observe quality production and able to satisfy its customers in the long run. It should maintain and improve on this trend for it to be well positioned for future competition.

Climate

Political/Legal: Coffee beans are being grown in developing countries. Political and legal factors influence debates about child labour, working conditions, and taxes and tariffs. The political and legal business environment has a significant impact on corporate performance in order to attain long-term objectives. Costa Coffee is one of the most well-known coffee chain brands in the world. The impact of political decisions on Costa Coffee varies depending on the country. Costa Coffee operates in 32 countries, all of which have its own set of standards that must be followed. If the government is more business-friendly, corporation taxes will be lower, there will be less limitations on running a business, and it will be easier to obtain a licence to start a store. Economic: The company can take advantage of the economic growth in developing countries to extend its market and dramatically raise its income. Developing countries such as China are fast developing, and as people's income goes up, their consumption habits

change, which is good to the company. Costa Coffee is expanding rapidly in China, with plans to build 1200 new locations by 2022.

Cultural/Social: Coffee is expensive, and people spend a lot of money on it. People go to coffee shops not only to drink coffee, but also to sit and relax. Social trends shift quickly, which has an impact on Costa Coffee's company. It could be due to a shift in people's income or a shift in their preferences. It will present a corporation with both an opportunity and a threat. In developing countries, where income growth led to a change in people's consumption habits, the company benefited. In China and India, people began to prefer going out for snacks, food, and coffee. People in the middle class now prefer to hang out in a café. Costa Coffee will be able to expand its customer base as a result of this. On the other hand, people are becoming more health concerned, and many people now view coffee as being harmful to their health, and as a result, they may begin to avoid it completely.

Technological: Due to the emergence of modern technology, cheaper and better coffee machines, such as the Senseo, are now available on the market for home use. Companies around the world are investing millions of dollars to stay technologically sophisticated in this era of fierce competition. Costa Coffee is also keeping up with the times in terms of technology. It is putting money into technology to manage their human resource management and business functions. Costa Coffee is employing Ceridian's Dayforce Workforce Management Technology to organise staff scheduling so that 18000 employees in its retail operation, Costa Express, and support centre are paid accurately and on time. It has also partnered with Barclaycard to offer a reusable cup with built-in contactless payment technology, allowing customers to pay with a wave of their cup. It will assist in keeping track of payments, topping up their balances, and reusing the cup after it has been washed. It will shorten the time it takes to make payments and encourage consumers to stop using single-use cups. Environment: Due to increase of environmental awareness, coffee players have to be concerned regarding the method their coffee beans are manufactured, their method of supply chain and preparation and selling of their products and services.Costa Coffee has set the target to recycle 500 million cups by 2020 which is equivalent to its customers usage of the cups annually. It will incentive the waste companies to collect waste cups and send it to recycle plants. They also opened up roastery in Essex which is built to make sure zero waste to landfill, efficient machines to reduce energy consumption by 30 % etc. Customer

Costa Coffee's Customer Survey, which can be found at www.feedbacktocosta.co.uk, is an online form that tracks customer satisfaction. The information gathered from the questionnaires will aid the company in making improvements to the store and its surroundings in a variety of ways. Using the online survey to provide feedback is a terrific method to keep the firm up to date. This is beneficial to both you and the firm. First, you may tell the firm exactly what happened, and they will pay attention. Second, the company will be made aware of the issues you encountered, and they will work diligently to resolve them....