Costa Coffee Management

Document Type:Application Essay

Subject Area:Business

Document 1

Costa Coffee has since grown to become one of the most common coffee chains in the United Kingdom. The company has over 3,000 outlets in 31 countries. About 2,000 of these restaurants are in the United Kingdom while the remaining over 1,000 outlets operate overseas (Mason and Goza, 2017). Just like many other brands in the coffee industry, Costa Coffees also offers a vast range of coffee products in its restaurants which include frescato, iced coffees, teas and infusions, and hot chocolate. One unique factor about the Costa Coffee’s products is the ability to customize the products to meet the exact requirement of the customer without any extra charge. This feature allows Costa Coffee’s customers to order their preferences regarding flavors of caramel, hazelnut, vanilla; a variety of syrups, soya, full fat, or skimmed milk; caffeinated or decaffeinated coffee. The coffee industry is one of the biggest and fastest growing industry today. The industry is very competitive with Costa Coffee facing stiff competition from many local, national, and international players. The company’s major competitor is Starbucks, which is the largest coffee chain in the world. Other competitors include McDonalds McCafe, Dunkin Donuts, and Kentucky Fried Chicken (KFC). The global coffee market is growing at a constant rate which provides the coffee companies opportunities to exploit their potentials. Other than the UK, major markets for Costa Coffee also include the US and India. There are other emerging markets in developing countries which provide a big potential for the company to sell its coffee products.

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Business Environment This evaluation of the business environment provides an analysis of the strategic position of Costa Coffee in the Specialty Coffee Industry. It uses PESTEL analysis and Porter’s Five Forces to present the company’s external business environment and provide a summary of all major findings. It also considers the various strategic options available to the company and presents recommendations to increase and maintain a competitive edge over its competitors in the industry. Despite the global business environment of the coffee industry being very competitive, coffee is still the most widespread drink in the world, and its popularity is constantly increasing. It is the highest consumed beverage in developed nations such European countries and the United States. In the UK, the average retail selling price of the commodity significantly increased.

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The increase is attributed to the continuous premiumization of coffee in the United Kingdom. There is an increasing pressure for Coffee companies to trade ethically on the aspects of the society, environment, and economy. The source of raw materials for coffee production has gathered significant attention from politicians from the source countries as well as from the countries that consume the product. As such, Costa Coffee has to adhere to the environmental and social norms demanded by the politicians of the producers and consumers of coffee. The UK has also experienced political and electoral transitions and crises in the past two decades. In the period, there have been several political trends resulting from events such as the re-definition of the concepts of politics and power, greater public accountability, increased popular and local-level assertiveness, and the demand for democracy and reforms.

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For this reason, the company policies and strategies must integrate the economic aspects of its operation. Social factors With the rise in the middle to upper-middle class households in many provinces in the UK, many customers and potential coffee customers are becoming more health conscious. This trend makes coffee a less attractive choice as many people perceive coffee as being unhealthy to some degree. The availability of other alternatives such as health and energy drinks has made the customer share for coffee to drop. Furthermore, the increased diversification of tea with a focus toward premium and herbal teas poses more threats to the coffee industry. Purpose and Limitations of PESTEL analysis With the constantly evolving local and global business environment, consumers and companies are increasingly affected by the micro and macro-environmental business forces.

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These forces are external environment influences which companies must closely monitor and respond to. As such, the purpose of PESTEL is to monitor the micro and macro-environment issues that affect companies (Raynolds, 2009). By using the framework, Costa Coffee can identify new opportunities and threats. While PESTEL analysis is an effective tool in the analysis the external business environment affecting a company, it has various limitations. Costa Coffee’s Strategic Capabilities Costa Coffee is a multinational coffee firm headquartered in Dunstable in the United Kingdom. The company has ownership over a wide range of subsidiaries in the form of subsidiary ownership over Whitbread. Being the second largest coffee company after Starbucks, Costa coffee boasts of expansive market size. The company has a vision of becoming the most successful coffee business globally. For it to achieve this vision, Costa Coffee has to conduct an internal environmental analysis to establish its strategies and capabilities.

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Operations Other than in the UK, Costa Coffee operates in 31 other countries. It has over 2,000 stores in the United Kingdom and over 1,000 outlets throughout the world. The operations of Costa Coffee are either in the form of direct company-owned outlets or licensees (Mason et al. Outbound Logistics Costa Coffee uses little or no intermediaries in selling its products. The company sells most of its products in its outlets or licensed outlets. The company motivates these employees through generous incentives and benefits. Costa Coffee is recognized for its practice of taking care of its employees, a factor that is evidenced by a low turnover of employees in the company. Furthermore, the company conducts various training programs for its employees to set up a working culture which keeps its workforce efficient and motivated.

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These factors imply great human resource management at Costa Coffee. • Technology Development Costa Coffee is well-known for its application of technology in its processing and selling procedures. The company’s brand, store environment, supply chain and customer service are not easily replicable by other companies. These elements require massive investment and a committed human resource to accomplish. • Inimitable No other coffee chain can compete with Costa Coffee in the UK. Imitating the company’s brand awareness, fine quality of products, and efficient customer service requires a lot of time and relevant resources. As such, it is difficult to imitate Costa Coffee’s presence in the United Kingdom. Conclusion Costa Coffee has experienced magnificent success in the UK market making it one of the revered organizations in the region from the perspective of economic benefits.

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For Costa Coffee to maintain its position as a major player in the ever-competitive coffee industry, it has to strengthen its capabilities and improve on its weaknesses while being up-to-date with the emerging trends in the coffee industry. The major strengths that Costa Coffee boast of are its brand image and human resource while the weakness is its marketing capabilities. References Mason, A. Cole, T. I. The strategic fit between innovation strategies and business environment in delivering business performance. International Journal of Production Economics, 171, 241-249. Raynolds, L. T. Michl, K. Globalizing Coffee Culture: The Case of Starbucks. In Business Model Pioneers (pp. Springer, Cham. Yueh, L.

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