Costa Coffee-Business Strategy Analyses
The strategic tools used
Analyse the company’s history, development, and growth
The strategy tool used to analyze this question is the Critical success factors. As discussed below, there are various factors that have contributed to the development and growth of the company. The tool is chosen because it is possible to identify the factors in the case study.
Costa coffee began its operations in the United Kingdom in 1971. Costa coffee was brought into existence by two brothers Sergio and Bruno Costa. They served the first coffee to some caterers in London. In 1978, the company opened its first coffee shop. Four decades later the company had several laurels to its brands. By this time, the company had been able to venture in 29 countries. In 2006, the company opened a store in Dubai and 2007; Costa coffee became the UK’s most favoured coffee a rank that made it overtake the Brand Starbucks. In 2010, the company pioneered the launch of Flat White beverage. The company acquired Coffee Nation enabling it to launch the Costa Express a brand that was accessible to many customers. In 2012, Costa Coffee was awarded the best coffee chain in the UK and the whole of Europe. At this time, the coffee shop market was growing at a rate of 7-8 times the rate of the British economy.
Identify the company’s internal strengths and weaknesses (Value Chain Analysis)
The strategy tool applied to answer this question is the SWOT analysis. The strategy is applicable as the strengths and weakness are evident in the case study. The company has a management team that aims at expansion of the enterprise. The development and growth-oriented management have enabled the company to grow and expand in different parts of the world. Another internal strength is the ability of the company to produce high-quality coffee that satisfies the need of the market. The satisfied customers become loyal customers of the company as they will visit the coffee shops severally in a week. The weakness of the company is the uncertainty of the market need in future as the market for coffee has evolved considerably in the UK and other parts where the business operates. For the company to remain competitive in the market, it has to be innovative than its competitors to enable it to offer quality products to its esteemed customers.
Analyse the industry environment (PESTEL)
The industry environment while considering the PESTEL includes: political, economic, social, technology, ecological, and legal factors. These factors can yield either positive or negative impacts to a company. The strategy tool is applicable in the case study as the factors affect any business across all industries in an economy.
The UK has a stable political environment that has enabled the company to continue with its operation without interruption or fear of war. In the last decade, the economy of UK has been in a recession.
Despite this economic situation, the coffee industry has continued to do well. Indeed, the coffee industry records a growth rate of 7 to 8 times the economic growth.
The social factor in the UK and other markets of Costa coffee favours the operations of the company substantially. The UK culture has shifted from tea to coffee helping the company to expand tremendously.
The UK is among the developed countries hence the company has exposure to high technology. Adoption of the modern technology has reduced the operation expenses of the company significantly.
The cold seasons in Europe increases the demand for coffee enabling the company to increase its sales revenue.
Evaluate company’s strategic position
The corporate and business strengths of the company give the company a competitive strategic position. The SWOT analysis strategic tool helps identify these strengths. The Costa Company is the leading chain of the UK coffee shops. The company has 1552 outlets compared to its competitors Starbucks Coffee Company that has 757 stores and caffe Nero that owns 530. The market share by turnover of the company in 2012 stood at 44.1% that marks an increase of 3.7% from the previous year.
Analyse corporate level strategy
The strategy tool used to answer this question is the critical success factors. It is possible to identify the critical success factors in the case study hence the application of the tool. At the corporate level, the strategies include the following:
The most important success factor by the company application of the multi-channel strategy that involves the establishment of joint ventures, franchise stores, equity store and wholesale operations to enable the company expand its operations.
The company also plans to open 150 more stores in the United Kingdom to bring the coffee products closer to the customer.
Another corporate level strategy in the corporate social responsibly by the company to help the coffee growing nations like Uganda, Vietnam, Ethiopia, Columbia, Guatemala and Costa Rica to continue producing high-quality coffee berries.
Analyse business level strategy
The strategy tool guiding the answer of this question is the critical success factors. The tool is relevant to this question as the critical success factors can be identified in the case study. At the business level, the success factors include the following:
The business uses critical success factors as the business level strategy. The most crucial success factor that the company has embraced is the maintenance of high-quality coffee from the raw materials and the final product.
The plan to introduce “Added Extra”, the loyalty cards, and Wi-Fi take away enables the company to remain the most convenient in the market. The company plan to increase the around 80 drive-through operations would boost the activities of Costa Coffee further.
The introduction of the plant self-service Costa Express machines in the services stations is a strategy that helps the company offer quality services. Besides, the invention of the milky coffee by the firm was an innovative strategy that helped the company to deliver a new product in the market.
Analyse structure and control systems
The strategic tool used in answering this question is the Critical Success Factors. The tool is applicable as there are several structural and control systems that has enhanced the growth and development of the company. The company is an international firm operating in a total of 29 countries around the globe. The operations of the business are controlled in UK as it is it’s the mother land. The company has branches, joint ventures, franchises and wholly owned branches in different parts of the United Kingdom and other places such as in China. The control system is centralized in the United Kingdom, and most corporate strategic decisions are carried out there. The company has branch manager and outlet managers who coordinates the daily activities of the enterprise.
Understand strategic issues / challenges
The SWOT Analysis is applied in identifying the threats and weaknesses of the company. The most significant strategic challenge in the business is the ability of the company to continue maintaining a competitive advantage in the market. The ability of the company to continue dominating the market share is a real challenge. Any unforeseen change in customer preference for the company’s brands is also a real problem. The strategic planning and positioning required to face the stiff competition in the coffee shop industry is also a challenge. Costa Coffee Company faces competition from other companies like Starbucks Coffee Company and Caffe Nero Company.
Evaluate organisation’s responses
The business responds to its challenges by identifying the Critical Success Factors and making use of it to enhance the growth of the company. To cope with strategic challenges, the company has remained innovative through introduction of new products and ensuring that customers are not only satisfied but also delighted by offering quality coffee products. The company has also opened many branches and outlets both in UK and other parts of its market to bring the services closer to its customers. The introduction of the milky coffee, production of Coffee Expresso take away outlets and the plant self-service machines in the stations has helped the company respond in a competitive manner to the competition from other businesses.
Make recommendations
The strategic tool applicable in making this recommendation is the Critical Success factors. The company can consider the following factors in its operations: The Company should continue with its innovative procedures and policies in the delivery of its products. The company should innovate other products by differentiation the current products to create a variety of the products for the customers to choose. The company should also conduct a market research to know in advance any change in preference or clients behaviour in the market. The research will help the company remain competitive as its operations will aim at satisfying the current and also the changing needs of the customers. The company should also expand its service in new markets to increase its customer base and reduce the impact of cyclical economic situations as all the market cannot be in a depression. The practice will serve as a diversification strategy for the company. Besides, the company can adopt extensive advertising and promotion strategies to create awareness of the existence of its quality products in the market to increase sales.
Internal & external factors responsible for company’s development & success
The strategic tool used while answering this question is the critical success factors. The success factors are clear in the case study. The ability of Costa Coffee to produce quality products is the key internal factor that has led to the development and success of the enterprise. The market in Europe requires quality products and unless a company is able to produce such quality products the development and success of the company will remain a dream. The company has been able to accomplish this by importing high quality coffee berries from tropical rain forest regions. The level of innovation is another internal factor that has enabled the company to remain competitive in both the domestic and international market. From the growth and development history of Costa Coffee Company, it is evident that all through, the company’s management is development and success oriented. The aims of the management, therefore, have always to expand and grow the company to an international firm an objective that has become a reality. The external factors favouring the company’s development and success is the political stability, the socio-cultural factors in Europe and the level of technology in the continent. Political stability has enabled the company to carry out its operations in peaceful environment hence creating confidence to invest in capital expenditures without fear. The social factor comes in to boost the activities of the firm as the European culture is shifting its preference from tea to coffee. The change of customer behaviour creates a ready market for its products. The modern technology enables the company to produce high-quality coffee that is now preferred by most consumers in the UK. High-level technology also reduces the operation overheads enabling the company to achieve a high rate return to capital employed.
The company’s internal strengths and competencies (Value Chain Analysis)
The critical success factors are applicable in answering this question. There are several internal strengths and competences contributing to the success of the company as discussed below. The internal strengths and competencies of the company lie on the efficiency and effectiveness of the production of products. The coffee produced by the company is ranked the best by the most consumers. The quality helps the company compete fairly in the coffee shop industry. The efficiency in production means that the firm is able to produce at the minimum possible cost while effectiveness means that the business can use the resources as per the budget and yield the desired results. The competence in serving and satisfying the customer’s needs makes the company the most preferred. Consequently, the firm increases its sales revenue enabling it to continue with the tremendous growth and expansion.
Identify corporate & business level strategies
The corporate level strategies of the company apply the critical success factors. It is possible to outline the factors from the case study. The factors include:
Engagement in corporate social responsibility to the communities that produce coffee. The practice targets at helping the communities continue with these productions as well as to enable them increase the scale of production. The company conduct corporate social responsibility to safeguard the sources of their raw coffee.
At the corporate level, another strategy involves opening more coffee stores in the United Kingdom to expand the business and also save on transportation of products to these markets. The expansion plan assists the company to increase its market base.
The introduction of the Coffee Expresso take away is among the corporate level strategy that aims at offering diverse products to the target market. The business level strategies include an all time production of quality coffee.
High quality coffee improves the goodwill of the company hence creating loyal customers to the company’s brands. The strategy permits strategic planning as the demand can be predicted from the past trend because loyal customers will be expected to come back in future. The introduction of the milky coffee is also a business strategy that boosts the company’s sales.
The plan to increase the drive-through operation proofs to be an essential strategy in expanding the business.
The idea to plant self-service Costa Express Machines in the service stations is a strategy that enabled the company to grow significantly.
Identify strategic issues / challenges
The strategic tool used to answer this question is the SWOT Analysis. It is possible to identify the weaknesses and threats of the company. As the business operations of Costa Coffee Company are increasing there is a challenge of the ability of the company to manage all its outlets both efficiently and effectively. Management of large firms is a challenge and, therefore, the company has to employee experienced, ethical and qualified managers and employees to ensure a continued growth of the company. There is also a challenge to the company to remain competitive in the coffee shop industry due to the level of competition in the industry. The business also has a challenge to investigate any future change of behaviour or preference by its customers that is likely to affect the enterprise negatively.
Prepare recommendations for development
The recommendation is based on analyses of PESTLE, Critical Success Factors, and the SWOT analysis. These as strategic tools that when put together yield viable recommendations that the company can apply for development. The company should invest more in research in its business environment. A research of the possible change in consumer taste and preference in the future will enable the company to plan appropriately. A research on possible change in economic and political environments would enable the company to venture or exit in certain market if they prove to be favourable or unfavourable respectively. The company should also consider entering other regions in the global market to enable it diversifies its market as well as increasing the number of target customers. The company should give customer satisfaction the first priority in all its operations. Customers provide a market for the coffee hence the company cannot exist without customers. The firm can also consider acquiring other companies in the coffee shop industry to accelerate its development through an increase in asset base, skilled managers and a wider customer base.
