Costa coffee pestle analysis 2018

Running head: STRATEGIC PLAN 1

STRATEGIC PLAN 4

Strategic Plan

Purdue Global University

Constance Dent

Strategic Plan

Costa Coffee Company

Costa Coffee is global coffeehouse company that was started in 1971. Costa Coffee was initially owned by the Costa family before it was sold to Whitbread in 1995. The company was later acquired by The Coca-Cola Company on 3 January 2019 at a cost of $5.1 billion (Costa, 2019).

Costa Coffee Markets

The table below highlights the current markets where Costa Coffee operates.

Europe

Asia

Africa

UK

Poland

Russia

Spain

Ireland

Hungary

Czech Republic

Germany

France

Latvia

Portugal

Malta

Kazakhstan

Bulgaria

Lebanon

Jordan

Indonesia

Vietnam

Oman

Cambodia

Bahrain

Philippines

Cyprus

Kuwait

Saudi Arabia

Qatar

China

India

United Arab Emirates

Egypt

Morocco

Financials

During the 2018 Financial Year, Costa Coffee reported an annual revenue of £1,292 million representing a 7.5 percent increase in revenue from the Financial Year 2017. From this, the total revenue from United Kingdom was £1,131 million while the oversea branches made contributed £161 to the total revenue. The total return on capital was 46.0 percent (Costa, 2019).

Mission, Vision, and Value Statements

Mission: “To save the world from mediocre coffee” (Costa, 2019).

This mission statement strives to capture the attention of the target audience by making them understand that Costa’s coffee is unique from the common one found in the market. However, this statement fails to explain to people what the characteristics of mediocre coffee are.

Pros

· It helps people understand that the company’s coffee brand is unique and totally different from others.

Cons

· The mission statement is not sufficient since it does not tell people which brand of coffee is referred to as coffee.

Vision: “Our vision is to be the best hospitality company that there is – a family of related hotel, restaurant and leisure club brands recognized by our people, guests and investors as leaders in each market in which we operate” (Costa, 2019)

The vision is meant to place Costa as the helm of hospitality industry in the market, that is, Costa is simply the best. However, the fails to tell the customers what is it that they have that makes them the best in the hospitality industry.

Pro

· It gives the target audience an overview of the company’s major facilities

Con

· It fails to give the unique features of the company’s facilities in order to make them attractive to the target audience

Value Statement: “Our People are the foundation of the Costa business” (Costa, 2019)

This statement is meant to make customers feel appreciated and valued by the company –a good strategy of luring them to become loyal to the company. However, the statement is one way since it is meant to drive consumer loyalty without stating what the company intends to do in order to benefit the customers.

Pro

· It helps the company to make its key stakeholders feel appreciated

Con

· The company fails to highlight the key strategies it has adopted to make the key stakeholders feel appreciated.

Product Description

The company deals with:

· Cold drinks which includes fruit coolers and Frostino

· Cakes and pastries among them croissants, brownies, and cookies

· Hot drinks like coffees, hot chocolates, and teas

· Savory snacks such as breakfast and sandwiches.

Moreover, the company has a chain of coffee dispensing machines located in major shell petrol stations. These machines are known as Costa Express (Costa, 2019).

Brand and Product Features

The company deals with finer coffee that is unique and tasty in the bid to offer maximum satisfaction to consumers. Costa’s coffee comes in different flavors among them Americano, Cappuccino, Expresso, Flat white, and Latte. The company also has Costa Express machines which helps consumers to access our product at convenient points at any time of the day (Costa, 2019).

International Market

The company is intending to expand and extend its presence in the African market which remains highly unutilized. Currently, we are found in only two African countries –Egypt and Morocco. However, there is dire need to establish our branches in the Nigerian market. Nigeria is among the most successful countries in Africa with a GDP of $397.47 billion (Zahonogo, 2016). The country’s economic state offers a good opportunity for the company to invest there and get good returns. Partnership with major filling stations and local joints within the country will be a good strategy of trying to penetrate the new market. This will enable the company set up Costa Express machines which will be dispensing coffee for the customers at specific points identified by the company.

There are two major tools which will be used by the company to analyze the environment and make necessary moves which will be crucial to enable the company to venture into the new market successfully. These tools include SWOT and PESTEL analysis. There are a number of opportunities linked to the new market. First, the company will be able to grow its revenue. Secondly, by expanding to other countries like Nigeria, the company will be able to increase its market share in the hospitality industry (Živković et al., 2015).

Entering the Nigerian market will be advantageous since it will help the company increase market dominance, market share, as well as increase in sales. The disadvantages are the threats from terror groups like Boko Haram, political instability in the country, a lot of money required for the initial investment, as well as lack knowledge on the market dynamics in the country.

Strategy

Notably, the Costa Coffee will be seeking to adopt a transnational strategy which is far much better than global and multi-domestic strategies. According to Buckley & Ghauri (2015), transnational strategy helps the company to adjust to the needs of the local people within the countries it operates while at the same time ensuring quality and efficiency. Even though Costa maintains the brand and menu of the products it offers, the company will strive to adjust the products to reflect local tastes.

Resources

Considerably, entering a new market requires a lot of resources. These resources can either be physical, financial, human, and intellectual. Physical resources will include building which will host main offices as well as major coffee outlets, equipment, and distribution networks. Intellectual resources will include the brand and trademark under which the company will operate. Human resources will include employees who will ensure that company’s daily operations are taken care of. Financial resources which will include cash to facilitate all the organizational activities including the acquisition of licenses, insurance, rent, among other things (Noe et al., 2017).

SMART Goals

Notably, entering a foreign market is not an easy task since it requires a lot of planning and positioning to gain a comparative advantage in the highly competitive market. Considerably, there are several SMART goals that Costa Coffee must set in order to establish itself in the Nigerian market. These goals are specific, measurable, actionable, relevant, and time bound (Lasserre, 2017). Costa Coffee goals include:

· Commanding a significant percentage of the market share –at least 30 percent –in the first year of operation

· Strive to establish strategic partnerships which major hospitality companies in the country in order to increase our market networks

· Make at least three significant acquisition in the first year of operation in the Nigerian market

· Formulate strong marketing campaign in order to build a strong brand awareness and customer base will sales of at least $300 million in the first year.

Global sourcing, production, logistics is crucial and advantageous to Costa Coffee. There are a number of advantages linked to this strategy which include: low production and operation cost, increased quality of products, reduction in time of production and distribution of products, as well as source of competitive advantage in the market (Lasserre, 2017).

The elements of strategic partnerships, merger, acquisition, and joint venture will be beneficial to Costa Coffee in the Nigerian market. The benefits of these moves include:

· Easy penetration in the market

· Strong consumer base

· Increased market share

· Higher returns

· Competitive advantage (Fatima & Shehzad, 2014).

The value chain relationship between Costa Coffee and other Coca-Cola subsidiaries can either be strategic or collaborative. The two involves the concept of cooperation whereby Costa Coffee will collaborate with other subsidiary Coca-Cola to distribute their products under one umbrella in the bid to minimize costs and bring a competitive advantage in the market.

Diversification Strategy

Diversification strategy is crucial to Costa Coffee especially in the new market since it ensures that the company has a diversified portfolio in the market. This means that a company spends its capital in producing many products rather than a single product which helps it to have a greater competitive advantage as well as huge market share (Kim & Rasheed, 2014). The advantages of diversification strategy include:

· Capital preservation

· Generation of high returns

· Minimization of risk of loss

Evaluation of Costa’s Diversification Strategy

Costa Coffee is known as a coffee company. However, the company has chosen a diversification strategy whereby it is producing other products which helps to increase the revenue as well as spread the risk of making any kind of loss. Apart from coffee, the company deals with other commodities including:

· Cold drinks which includes fruit coolers and Frostino

· Cakes and pastries among them croissants, brownies, and cookies

· Hot drinks like hot chocolates and teas

· Savory snacks such as breakfast and sandwiches.

· Coffee cream, lemonade among others (Costa, 2019).

References

Buckley, P. J., & Ghauri, P. (Eds.). (2015). International business strategy: theory and practice. Routledge.

Costa, (2019). Full Menu. Retrieved from: https://www.costa.co.uk/menu/ [Accessed July 19 2019].

Costa, (2019). Home. Retrieved from: https://www.costa.co.uk/ [Accessed July 19 2019].

Fatima, T., & Shehzad, A. (2014). Analysis of Impact of Merger and Acquisition of Financial Performance of banks: A case of Pakistan. Journal of Poverty, Investment and Development and Open Access International Journal, 5, 29-36.

Kim, K. H., & Rasheed, A. A. (2014). Board heterogeneity, corporate diversification and firm performance. Journal of Management Research, 14(2), 121.

Lasserre, P. (2017). Global strategic management. Macmillan International Higher Education.

Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human resource management: Gaining a competitive advantage. New York, NY: McGraw-Hill Education.

Zahonogo, P. (2016). Trade and economic growth in developing countries: Evidence from sub-Saharan Africa. Journal of African Trade, 3(1-2), 41-56.

Živković, Ž., Nikolić, D., Djordjević, P., Mihajlović, I., & Savić, M. (2015). Analytical network process in the framework of SWOT analysis for strategic decision making (Case study: Technical faculty in Bor, University of Belgrade, Serbia). Acta Polytechnica Hungarica, 12(7), 199-216.