Second Cup Ltd - Business Strategies - Case Study Example

HOSPITALITY INDUSTRY By Name: Course: Institution: Date: SECOND CUP LIMITED Second Cup Ltd is a company that was founded by Frank O’Dea and Tom Culligan in 1975. The company has grown over that last two decades due to innovations in the organization. The organization has a very vibrant management that helps it to have a quality product in the market. These innovations and the creativity in the organization have led to the organization becoming the largest coffee restaurant in Canada. Vision Statement The vision statement of Second Cup limited is to be “the coffee brand most passionately committed to quality and innovation”. This vision is clear and creates a depiction of what the organization wants to achieve as it grows. In addition this vision creates a motivation to the management of the organization to grow as there is an already set target. Mission Statement Second cup limited’s mission statement is “ to maintain the commitment of caring and building a strong, stable company that cares about our guests, our growers, our franchise partners, our employees and our environment”. The statement creates a clear path of what to follow to achieve their target. Specifically, this company’s mission focuses more on what it will do socially like being accommodative to the guests and caring about the coffee growers though it lacks a crucial aspect of the economic reality. The company also wants to achieve an annual increase of sales by $100 to $234 from the year 2017. It can only achieve this if the management is vibrant enough and hence the choice of the management is done diligently. In addition, the company seeks to increase the earnings per share from $0.5 to $0.7 by the same year 2017. A positive increase in store sales of greater than 5% is projected in the next 5 years. It is crucial to realize that, for every company to grow, clear targets must be set. By 2017, the company seeks to rebuild the brand image of the company, be the leading coffee restaurant in the Canadian market as well as attract world class partners to partner with them. It also aims to rebuild their locations so that they may provide their customers with a warm and inviting environment even to the potential customer. The targets must be SMART. The must be specific, measurable, attainable, realistic and timely. All the five factors must be present in a good target and hence more time is spent in the making of the best targets. This industry is very intense and has great rivalry. This is because there is free entry and exit into the market. The market in Canada is a perfect market meaning that all the participants have perfect information about the market and therefore the coffee restaurants compete on prices and customer preferences. The products in the market have a low differentiation and the suppliers are similar. The target market for all the restaurant is the same and the organizations face the same challenges and cost for equipment and expansion is the same. There are several established coffee restaurants in Canada that provide competition to Second cup limited. The major competing restaurants and coffee brands are McDonald’s, Starbucks and Tim Hortons. The market is diverse and the innovation in the target market is crucial (Baines and Mortimore, 2005). This market is large and has different demographic that expect different things from the restaurants hence the need to study the market. It is has been noted that most people who go to the restaurants for coffee are brand loyal and tend to stick to the restaurants that they first go to. This means that the restaurants must do a lot to attract more customers and especially to poach customers from the competitors. Therefore, each restaurant aims at gaining a competitive advantage over the others. Second cup limited in this quest, tries to differentiate their product through providing a comfortable place for the coffee drinkers. Slow and soothing music is another way that Second Cup Limited uses to attract more consumers. The restaurants especially targets the youth and hence the selection of music is done to favor the youths’ preferences. The organizations also have introduced loyalty programs. In this program, the customers are given points for every purchase they make at the restaurant. The points are redeemable in terms of discounts. If the customers has more points, the higher the discounts that the customers attract in their purchases. The company’s culture and the brand image are also important in the quest to attract more customers (Beane and Ennis, 1987). Business Strategy Second Cup limited has a strategy to differentiate their products due to the competition in the market. The company serves specialty coffee of good quality due to the uniqueness of the coffee beans they use. The company is able to offer high prices to the farmers who provide them with the best quality coffee beans. In addition they offer their products at a cheaper price than the other restaurants. The company has also embarked on vibrant customer satisfaction. It must be noted that customer satisfaction is a very fundamental factor that must be considered in as far as improvement of customer loyalty and development of the company’s growth is concerned. Customer loyalty ensures that there is high customer retention. It must be noted the satisfaction of the needs of the customers that a company has ensures that the customers realize full utility for their money. Utility is, therefore, a very significant parameter to be considered while dealing with customers. Second Cup Limited has embarked on ensuring that there are very close follow-up and appropriate after-sale services. A Better delivery system has been noted as strength for this company. The company has provided that there is strong and a reliable service of the products to the customers. It must be observed that Second Cup Limited has much organized logistical criteria of procuring the coffee beans and other product. This is to ensure that they accelerate the faster delivery of services to their customers. Threat of New Entrants: New entrant in the industry poses a major threat to the Second Cup limited. It is specifically so because the industry operates on a perfect market where there are no barriers of entry. The only advantage that this company holds is that there is an established customer base. The customer loyalty is high and the company also boasts of good establishment. However, the customer base combined with the established infrastructure in Canada helps the restaurants a competitive edge. Bargaining Power of Suppliers: Coffee shops require their suppliers for the coffee beans. They will also need suppliers for other products like utensils, cleaning products and other products. Therefore, the suppliers have a power to negotiate for a good price that they would like to supply goods at. The power to bargain by the suppliers has a major impact on the restaurants. In addition, due to the high prices of food products and the strength of the suppliers and their high number. There are a high number of suppliers in Canada that wants to supply to Second Cup limited and hence their power is low. Bargaining Power of Buyers: Coffee shop customers are highly sensitive to a slight change in the prices. This is because they can easily shift to the next restaurant. This means that there is a high bargaining power by the customers. Therefore the marketing team has to work extremely hard to maintain their customer base and attract new customers due to homogeneity of the products by the coffee shops (Abratt, 1993). Threat of Substitutes: Coffee shops have a major threat led homemade coffee. It is the largest substitute to restaurants coffee. Other drinks, like tea and soft drinks also pose a threat as they are equal substitutes. This industry wholly depends on the level and occupation of the customers hence unemployment, taxes and interest rates also affect the industry negatively. Political and economical stability is also factor that affects this industry directly. Rivalry among Existing Competitors: As discussed earlier, this is the major threat that Second Cup limited restaurant faces in the industry. The existing restaurants in Canada have a strong brand name and an already formed customer base. Competition is very fierce and they competition is based on the quality of coffee, the prices, variety of their products and the location that the restaurants are based. If the restaurant is big and the brand name is strong it will then pose a high threat that to other restaurants due to the economies of scale. In this case Second Cup has a competitive edge in Canada as it is located on the best locations and sells high quality foods at slightly lower prices. References Abratt, R. 1993, ‘Market segmentation practices of industrial marketers’, Industrial Marketing Management, 22, 79–84. Baines, P., Worcester, R., Jarrett, D., and Mortimore, R. 2005, ‘Product attribute-based voter segmentation and resource-advantage theory’, Journal of Marketing Management, 22, 1/2, 1079–116. Beane, T. P., and Ennis, D. M. 1987, ‘Market segmentation: a review’, European Journal of Marketing, 32, 5, 20–42. Read More