Coffee Consumption in the UK - Case Study Example

? Real Coffee LTD Table of contents Introduction 3 Part External Analysis 1 Analysis of the macro environment 3 Social 3 Economic 4 2 Industry Analysis 4 Part 2 - Internal Analysis 4 2.1 Marketing Issues 4 2.2 Human Resource Issues 5 2.3 Operation Issues 5 2.4 Financial Issues 6 Part 3 – Conclusions and Proposals 6 References 8 Introduction The growth of businesses in the UK market is depended on a series of factors. The increase of competition that characterizes most of the market’s sectors and the limitation of income under the pressure of turbulences in the global financial market are facts that need to be taken into consideration when setting the strategy of a business in the specific market. This paper aims to present the challenges that Real Coffee Ltd, a family business in Oxfordshire, has to face in order to secure its growth in the long term. Keeping its products at high quality and emphasizing on the quality of customer services have been considered as strategic priorities in Real Coffee Ltd. However, through the years the increase of competition has led to the need for the introduction of certain changes especially in regard to specific parts of the business, such as HR and marketing. These changes could be successfully implemented only if they were appropriately designed and supported by all members of the business. The trends that characterize the coffee shop industry in UK should be taken into consideration when developing such plan. The potential need of a transition period for alternating the existing strategy of the business should not be an obstacle for promoting change in Real Coffee Ltd. since the expected benefits would be significantly higher than the costs and the risk involved. Part 1 – External Analysis 1.1 Analysis of the macro environment Social The high percentage of population in UK is between 25 and 54 years old (Index Mundi 2013); the specific part of the population represents the 41.2% of the country’s population. Those between 55 and 64 years are just the 11.6% of population (Index Mundi 2013), a fact that needs to be taken into consideration when setting the target market of a business in UK. In addition, 80% of people in UK live in urban areas (Index Mundi 2013); in these areas the chances of businesses for growth seem to be increased compared to rural areas. On the other hand, the rate of ageing of population in Britain is quite high. According to a recent report, during the last two decades the number of people under 65 in Britain has been significantly increased reaching today the 5 million (Independent 2013); existing trends showing the rapid ageing of Britain’s population, a phenomenon that is expected to be continued, at least in the near future (Independent 2013). Economic The economy of UK seems to keep its strength, despite pressures in markets worldwide. Indeed, from July to September of this year an increase of the country’s economic performance by 0.8% was reported, a fact that allows businesses across UK to make plans for growth (BBC News 2013). The above growth was combined with an increase of GDP in UK; this increase was estimated to 0.7%, for the period between April and June 2013 (BBC News 2013). Even if this growth was limited it, still, shows the potential of UK economy to secure its performance even during periods of global financial crisis. Indeed, during the third quarter of 2013 a further increase of UK’s GDP was achieved; the increase was estimated at 0.80% and indicates the stable growth of UK economy, a growth that is highly based on the development of the services sector which represents the 75% of the country’s economy (Trading Economics 2013). 1.2 Industry Analysis In order to understand the potentials of Real Coffee Ltd to achieve a stable growth it would be necessary to refer to the performance of coffee shops industry, as this performance is affected by the industry’s competitive forces. The coffee shops industry can be characterized as a key part of UK market; in fact, in 2012 the industry’s performance reached its highest level achieving profits over ?1 billion, an income that has been reached for the first time for the specific industry of UK (Mintel 2013). The introduction of chains such as Starbucks has changed the industry’s trends resulting to the alternation of consumers’ preferences: due to Starbucks consumers across UK have become supporters of high quality coffee, as quality has been related to freshness and to the range of flavours available (Mintel 2013). Three are the strongest brands in UK’s coffee shop industry: Starbucks, Costa and Caffe Nero (Bacon 2013). These brands represent the 54% of UK’s coffee shop industry (Bacon 2013). The industry is characterized by strong growth, a trend that it is expected to continue in the future (Bacon 2013). The above brands try to further expand their existing customer base by focusing on marketing, on consumer convenience and on the quality of their coffee (Bacon 2013). Part 2 - Internal Analysis 2.1 Marketing Issues In Real Coffee Ltd. marketing is not considered as of key importance for business growth. The reason is, probably, that competition in the coffee shop industry is quite strong. The industry’s major brands, such as Starbucks and Costa, dominate the market and support quite costly marketing plans. Real Coffee Ltd. is not able to cover the costs of a marketing scheme that could compete the marketing plans of competitors; therefore, avoiding any effort for promoting the business through a marketing plan has been considered as the best solution especially if taking into consideration the limited profits of Real Coffee Ltd. compared to those of its rivals. Still, word of mouth as a means for covering the marketing needs of the business is highly used in Real Coffee Ltd. The effectiveness of this marketing scheme could be evaluated by checking the performance of the business the last 20 years. The business currently includes six coffee shops; there is no reference to plans for further expansion so it is assumed that the income of the business does not allow such initiative. Still, between 2008 and 2013 the business achieved a growth of 20%. However, this growth can be considered as related to the lack of any investment on business, especially in regard to key sectors of the business such as equipment, marketing or HR. Therefore, the performance of the business cannot be considered as secured; a marketing plan should be introduced, aligned with the needs of the business and existing resources, so that the viability of the business in the long term is not threatened. 2.2 Human Resource Issues The HR sector of Real Coffee Ltd. is related to a series of problems: a) the selection process is not appropriately organized; the need for additional staff is not published, as normally, but rather vacancies are covered by people in the owner’s social environment. This practice discourages existing employees who are not motivated in performing high since they do not expect for their position in the organization to be improved. In addition, this practice prevents candidates with high skills in communication and team-working to apply for a position; b) employees do not stay long in the organization; temporary schemes of recruitment are preferred emphasizing on the change of staff periodically. Through this practice there is no time for employees to develop their skills neither to build a proactive relationship with customers. It is for this reason that customer service in Real Coffee Ltd. is below the required levels meaning that customers cannot feel that they are in a friendly and welcoming environment; c) investment on the development of HR is almost zero; no training schemes are available to staff; in this context, employees are often unaware of customers’ expectations, as related to the nature of the specific business. 2.3 Operation Issues In Real Coffee Ltd. emphasis is given to traditions: the interior of coffee shops has remained unchanged since their opening, a practice that has been based on the need for keeping operational costs low. This practice does not seem to bother existing customers but it could be an obstacle to the expansion of the business customer base, which will be unavoidable in the near future. The coffee shops of the business are easy accessible, a fact that it is considered as one of their major advantages compared to competitors. Also, the long hours of operation, from early morning to late the afternoon, offers to the business the potential to cover the needs of a high range of customers, for example, those who need a breakfast before their work but also those who seek for a lunch at a relatively fair price. The high range of products available to the coffee shops of Real Coffee Ltd. is quite important: in this way, the business is able to secure customer loyalty and to keep its market position despite the existence of powerful rivals, such as Starbucks and Costa. 2.4 Financial Issues The owner of the business has managed to keep profits high by following a specific strategy: emphasis is given on the quality and the range of products offered to customers but prices of products are rather high, compared to competitors. Customers may appreciate quality of products but they may decide to choose the products of a competitor if the balance between price and quality appears to them as fairer. Part 3 – Conclusions and Proposals The review of operations and strategies of Real Coffee Ltd. has led to the identification of a series of problems. Particular emphasis should be given to the marketing and HR sectors of the business. In regard to the marketing practice of Real Coffee Ltd the following suggestions can be made: existing marketing practice, as limited only to the use of the word of mouth, should be differentiated; a marketing plan that would be of low cost could be introduced, since the funds available for the support of such plan are rather limited, as revealed from the issues highlighted in the case study. Such marketing plan would be based on social media and on Internet (Palmer 2012). The business could develop its own website and an account on a popular social media site, such as Facebook (Palmer 2012). Through these portals the business could communicate with its customers without being in conflict with the market’s major brands, an issue that creates concerns for the owner of the business. In addition, such a marketing plan could result to the expansion of the firm’s existing customer base: instead of focusing on people over 50 years old the business could also address younger people, a fact that could lead to the increase of business profits. Changes should be also introduced in the firm’s existing HR practices. Temporary and part-time recruitment should not be the only option for employees. Permanent positions should be also created in the coffee shops of the business, allowing the increase of employee motivation and the improvement of customer services (Cameron and Quinn 2011). At the same time, the introduction of a training scheme for employees at all levels could help to the improvement of employees’ communication skills and the increase of employees’ commitment to the organization (Schwientek 2008). In addition, existing vacancies should be appropriately published so that highly skilled candidates have the chance to enter the business. Indeed, through the introduction of a selection and recruitment process the business owner would have the chance to select the candidates who are most capable to respond to the business needs, including the development of a friendly and welcoming environment for customers (Daft 2010). Through the above strategies, high employee performance could be secured a fact that would also support the stabilization of business performance at high levels. In regard to its operations Real Coffee Ltd. seems to perform rather high. In fact, apart from the renovation of the business existing coffee shops no other changes would be suggested in the existing operations of the business. Such renovation may not be emergent in regard to current customer base of the business but it would be inevitable if the business would try to expand its activities, addressing the needs of younger people, as suggested above (Summers 1998). Finally, the financial strategy of Real Coffee Ltd should be set under evaluation. As already noted, the owner of the business has focused on the quality of products and has tried to keep operational costs low. However, in the long term this practice should be changed. Since competition becomes continuously stronger, the business would have to decrease its prices (Alvesson and Sveningsson 2007). At the next level, when selecting the products that will be offered to customers, emphasis should be given to offers and discounts so that the balance between profits and expenses is kept stable (Carnall 2007). Increasing the investment on the renovation of its coffee shops would not threaten the financial status of the business since the relevance cost would be covered from the profits generated from the increase of customer base, as analyzed above. References Alvesson, M. and Sveningsson, S., 2007. Changing Organizational Culture: Cultural Change Work in Progress. London: Routledge. Bacon, J., 2013. “Brewing up plans to beat the competition.” Marketing Week, August 22, 2013. Available at http://www.marketingweek.co.uk/trends/brewing-up-plans-to-beat-the-competition/4007619.article Accessed at 8 December 2013] BBC News, 2013. “UK GDP: Fastest growth for three years.” October 25, 2013. Available at http://www.bbc.co.uk/news/business-24668687 [Accessed at 8 December 2013] Cameron, K. and Quinn, R., 2011. Diagnosing and Changing Organizational Culture: Based on the Competing Values Framework. Hoboken: John Wiley & Sons. Carnall, C., 2007. Managing Change in Organizations. Essex: Pearson Education. Daft, R., 2010. Organization Theory and Design. Belmont: Cengage Learning. Independent, 2013. “Demographic time bomb: Government 'woefully underprepared' to deal with Britain's ageing population.” March 14, 2013. Available at http://www.independent.co.uk/news/uk/politics/demographic-time-bomb-government-woefully-underprepared-to-deal-with-britains-ageing-population-8533508.html [Accessed at 8 December 2013] Index Mundi, 2013. UK Demographics. Available at http://www.indexmundi.com/united_kingdom/demographics_profile.html [Accessed at 8 December 2013] Mintel, 2013. “Coffee consumption in the UK: from coffee plebs to connoisseurs.” April 29, 2013. Available at http://www.mintel.com/blog/drink-market-news/coffee-consumption-in-the-uk-from-coffee-plebs-to-connoisseurs [Accessed at 8 December 2013] Palmer, A., 2012. Introduction to Marketing: Theory and Practice. Oxford: Oxford University Press. Schwientek, R., 2008. Operations Excellence: Smart Solutions for Business Success. Oxford: Palgrave Macmillan. Summers, M., 1998. Analyzing Operations in Business: Issues, Tools, and Techniques. Westport: Greenwood Publishing Group. Trading Economics, 2013. “United Kingdom GDP Growth Rate.” Available at http://www.tradingeconomics.com/united-kingdom/gdp-growth [Accessed at 8 December 2013] Read More