First Direction Of Growth– Investment And Growth: In This Part You Can Use The Bcg Model, Report Examples
Analysis of Costa Coffee in UK
Strategic planning is crucial to enhancing business sustainability in the face of the modern business world dynamic factors. Thus, the analysis focused on Costa coffee strategic planning covering growth strategies for various products as well as the overall business and international strategy for the business. With the use of analysis tools including the BCG matrix, strategies have been devised given the findings in PESTLE and SWOT analysis. Such strategies identified include vertical integration to increase efficiency and sustainability as well as divestiture of some products to increase investments in the star products being the specialty drinks that have potential increase market share and sales level. In terms of internationalization, it has been proposed that the business should expand operations to Brazil through franchise and joint ventures. That owes to the economy and the market’s suitability for the business models, Costa products as well as ease of doing business in Brazil. Finally, it has been recommended that the business should use the Starbucks performance as the benchmark for is improvement strategies because Starbucks is the market leader.
Strategic planning is a crucial process for a business that is seeking growth. That is because of the process’ ability to identify areas that need to be addressed and ways of addressing the issues. That involves evaluating business capabilities; market opportunities and then devising suitable strategies to harness the business capabilities to utilize available opportunities in both local and international markets. In that respect, the following is an analysis of Costa coffee business and recommendations of suitable strategies given capabilities, market positioning as well as market opportunities (Sengupta, 2005). The report begins with the identification of three growth strategies covering investment and growth, growth through vertical integration or blue ocean safety and an internationalization strategy. Finally, the reports present an evaluation and recommendation for internal improvement and turnaround.
Identification and Evaluation of Growth Strategies
Owing to the increasing competition in the UK market as well as varying customer needs, in addition to opportunities in emerging market, the business will pursue three growth strategies. Those strategies will focus on three grow aspects including investment and growth that identifies the business areas needs and potential hence investing in growth areas while managing resources application for each. The other will entail growth by adopting a corporate strategy that will seek to position the business efficiently and strategically in the market. Finally, there will be an international actional strategy that will identify a new personal market and propose a venture through suitable entry and development series (Sengupta, 2005).
Business Units (SBU’s).
Costa coffee business has various business units whose market success varies. In that respect, using the BCG matrix identifies the nature of the business units and their needs for investments and resources. The units can be summarized as follows.
Tea holds low market share for the business compared to is competitors such as Starbucks and operate in a slowly growing market. Thus, is not worth investing in as it generates low cash returns. Recommendation of the product line would be divestiture.
Cash cows (Coffee)
Coffee is the most profitable product for the business and should be milked to provide more cash. The cash from coffee should be invested towards supporting the stars for further growth. Thus, investment in the cash cows will be a means to induce growth but only to support them to maintain the current market share. Strategies for these products will involve development and diversification into new brands. (Costa, 2015a)
Stars (Specialty drinks)
The product operates in high growth market and has maintained high market share for the business. Stars are the cash generators as well as the cash users for Costa. They are the key products that the company should invest in as they are expected to be cash cows generating cash flows. In that view, market penetration and product development are recommended. Costa. (2015b).
Question marks (Mocha and hot chocolate)
They require closer consideration as they hold low market share in a fast-growing market is hence consuming large amount of cash and making losses. It contains the potential to increase market share and become a star, which would later become cash cows. Strategic choice will include product development and some divestiture. (Costa, 2015a)
In view of the analysis, the business should focus on its star products being the specialty drinks. That is because its is the product expected to have significant market share growth given the changing market needs and consumers purchasing power. In that respect, cash should be directed at the coffee products that have reached maturity and only requires maintenance support such as product differentiation.
Second Direction – Growth through Blue Ocean Strategy, Horizontal or Vertical Integration.
The process will involve the company expanding operations into different areas on the same production path. Such strategy will include engaging in a complete process of sourcing for raw materials to the sale to the end user. That will be a vertical integration which will help the company reduce costs as well as improve efficiency decreasing transportation cos, reducing turnaround time, as well as enhancing sustainability in terms of materials sourcing. That owes to the increasing pressure for businesses in the food and beverage industry to enhance sustainability by ethically sourcing for their material. The strategy will involve the business directly engaging in production of is raw materials, processing, packaging, distribution and sale in the coffee shops. (Varley, 2002)
Third Direction of Growth – Internationalization
Internationalization will offer an opportunity for growth given the opportunities in emerging markets. In addition, the internationalization will offer the company an opportunity to serve varying market needs as well as serving customers unmet needs across the globe. Internationalization will entail selection of the suitable markets as well as development as summarized below. (Cateora, Graham & Gilly, 2012)
Market Selection Process:
Brazil has one of the key emerging markets offering opportunities for various businesses in various industries. That owes to the countries growing economy, infrastructure as well as population. (Index Mundi, 2015). The country is characterized by well-developed agricultural and service sectors, as well as a rapidly expanding middle class. The economy outweighs other South American countries, and it is Brazil it's expanding its presence in world markets. (CIA, 2015) It has steadily improved its macroeconomic stability since the year 2003 hence enhancing is suitable for potential growth in demand for coffee products. The country in also marked by the business environment that entails easier business setup, as well as business operations requirements. Further, the market has a growing use of western products and lifestyles hence being a suitable large for the UK based brand. Finally, with Brazil being an emerging market, I is marked by low competition as many multinationals are in heir earlier stages of market entry and development. (PWC, 2010).
In respect to the target market, the business will focus on the youthful segment ha accounts for a significant portion of the Brazilian economy. In addition, he focus will be on the urban population given that the economy y is experiencing an increased urbanization. The urbanization has greatly influenced lifestyles hence demand products as people increasingly adopt the on the go lifestyle (PWC, 2010).
Market Entry and Development Process:
Brazil has a suitable business environment and policies regarding foreign investment. In that respect, there are various strategies that business can apply for venturing into the market. Those strategies will include a blend of franchise and joint ventures. The franchise will entail offering he licenses to operate the brand to local investors (Euromonior, 2014). The process is well developed in BNr4azil with suitable regulations and laws governing he business system. On he other hand, joint venture will involve partnering with local investors jointly and directly to own he business venture in the market. The two strategies have an advantage in that local investors have a good understanding of he market hence will enhance marketing and establishment of suitable distribution systems (Kotler & Keller, 2006).
Identification and Evaluation of Strategies for Internal Improvement and Turnaround
Internal improvement for the business will be seeking to achieve a number of goals. Such goals will be increasing competitiveness order o position he business suitably compared to the competitors. Some of the leading competitors that the business will be seeking to benchmark is success include Starbucks that has market leadership in the global coffee market. Thus, the business will be seeking to increase market share, sales volume, and profitability margin with an aim of achieving the same level and exceeding that of Starbucks.
Owing to technological advance, as well as increase in outsourcing opportunities, the business will seek to enhance operational effecting by embracing outsourcing strategy. That will entail the engaging other service providers in carrying out operations that are not key to the business operations. Such operations to be outsourced management of the distribution chain o experts. In addition, the company will outsource market research and promotion activities to independent consultants who will provide expertise and skills. That will help the business focus on product development. (Keller, 2013).
Performance management will be enhanced as a means of increasing the capacity to perform he business' key operations effectively. That will be done through training, as well as giving the staff assignments that introduce new operational and marketing skills in addition to establishing higher level of responsibility. That will encourage as well as strengthen overall performance while helping employees adapt to the changing business and workplace environment. (Hill, 2014)
It will also involve employees and processes rating that entails evaluating employee performance against standards in he performance plan and summarizing their performance by assigning a rating for operational and marketing activities. Further, rewarding will be enhanced as a means providing incentives and recognizing employees for their performance while also acknowledging contributions to the business mission.
Conclusion and Recommendations
The analysis of the UK coffee industry indicates increasing competition and change in various macro factors. The two requires change in business strategy as a means of enhancing the business sustainability as well as enhancing performance. Thus, the strategies will focus on growth strategies ha mainly focus on serving the changing market needs while enhancing organizational efficiency in operational and products, as well as market development (Sengupta, 2005).
In view of the increasing market competition, Costa coffee needs to enhance competitiveness and sustainability. In that respect, the business needs to increase its market share. Also, given the available opportunities and the business capabilities, Costa coffee priority should be in its internationalization strategy. (Varley, 2002) That is because the strategy has the potential easily to increase market share, and general more cash flows given the Brazilian market's growth, as well as the country suitability for he business products. Thus, the business should quickly organize for franchises to venture into the Brazilian market where it is expected to establish itself as a market leader. (Hill, 2014)
In conclusion, the recommended strategies can be summarized as including increased investment in specialty drinks that act as the star while drawing cash from the coffee which is currently the business cash cow. Further, a vertical integration is proposed to enhance operations and marketing efficiency. That will help in understanding the market and tailoring products as well as the delivery systems to its needs. In addition, international market entry in Brazil is proposed with franchise and joint venture entry methods that will enhance market understanding.
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Costa. (2015a). A drop of history in every cup. Retrieved from, http://www.costacoffee.ae/costa-coffee/the-costa-way/history/
Costa. (2015b). Costa history. Retrieved from, http://www.costacoffee.com.cy/history
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