Marketing Strategy of Pacific Coffee Company - Business Plan Example

?Executive summary Coffee retail business is the most flourishing business in the economic recession. With every business facing difficulties in operations, coffee retail business enjoys growth (Roast Magazine, 2012). One such company is Pacific Coffee Company; subsidiary of China Resources Enterprise ltd. Due to the rapid growth of coffee consumption in the mainland China, the company has decided to blanket the market with company’s coffeehouses. It was found that the marketing strategies of the company were to some extent focused on becoming the largest retail of coffee provider and to attract the customers towards the company’s products. By this it was concluded that marketing strategy can play an essential role in the success of the company and to do so effective and efficient marketing strategies are required for the company to live up to their dreams. Some recommended strategies for the company were to enhance the implementation of technology into the business operations, expansion into new markets, diversification of the products, collaboration with banks, colleges and companies to allow selling of company’s products in their premises, promotional strategies, shifting the focus from retail business to under-serviced sectors, additional value creation and last but not the least online pre-ordering of the coffee to reduce the waiting time of the customers. By implementing above mentioned marketing strategies the company would have a competitive edge over the other players in the market. These recommendations would help the company to be the leader of the market with profitability, growth and greater opportunities. Table of Contents Executive summary 1 Introduction 3 Methodology 4 Situational analysis 4 Segmentation, Targeting and Positioning (STP) 6 Segmentation: 6 Targeting: 6 Positioning: 6 SWOT analysis 7 Strengths 7 Weaknesses 7 Opportunities 8 Threats 8 Recommended Objectives and Goals 8 Recommended Marketing strategies and Programmes 9 Penetrating the Market 9 New Target Audience 9 Global Expansion 10 Collaboration with Banks, Colleges and Companies 10 Expanding the Coffeehouses in Mainland China 10 Additional Value Creation 10 Introduction of iPhone Applications 11 Product Diversity 11 Promotional Strategy 11 Increasing the Service Time 11 Focusing on under-developed Sectors 12 Conclusion 12 References 14 Introduction Coffee retail business is one of the fastest growing businesses even in such economic conditions (Roast Magazine, 2012). Being inspired from the American and European coffee culture, Pacific Coffee Company (PCC) set its foot in Hong Kong market in year 1992 (Pacific Coffee, 2012a). Being a pioneer in such market, the aim was to provide the customers with “the perfect cup of coffee” in order to meet the thriving demand of the customers. With the passage of time, the company was known for its quality and a competitive position in the Hong Kong market (Pacific Coffee, 2012a). The PCC’s expansion in the Asian region was another success for the company. Due to the strong brand reputation, the company was able to expand in China, Singapore and Malaysia. With the main focus on Hong Kong’s coffee market, the company operates more than 100 shops in Hong Kong with 130 outlets in China, Singapore and Malaysia (Pacific Coffee, 2012a). With future expansion plan, the company’s 80 percent shares were bought by China Resources from Chevalier Pacific Holdings (Leung and Lui, 2010). The aim of this expansion was to expand the business in China a lot faster and to be the China’s largest coffee-shop operator (Syed, 2010). In this report, marketing strategies of PCC would be assessed along with the value creation process of the company. The research would also highlight the key strengths and weaknesses of the company’s marketing strategies to provide significant information to the readers. Moreover, it includes the environmental analysis and recommendations for the company to improve the profitability, market share and value creation process. Methodology The data collected for the report is extracted from secondary data. Newspapers and articles were used to extract information regarding the marketing strategies of the Pacific Coffee Company. Past researches were of great help and provided insight regarding the company and its customers along with extensive knowledge about the competitors and their position in the market. From these secondary sources a lot of information was extracted regarding the marketing strategies and the changing consumer confidence on the basis of which recommendations are made. These recommendations are based on marketing strategies and would help the company to boost their sales and market share in the region. Situational analysis Being one the tourist and shopping capitals in the world, Hong Kong has many competing companies in the food and beverage industry. One such infamous company is Starbucks, operating in more than 50 countries with almost 17,000 coffeehouses. Starbucks has almost 500 coffee stores in China and the company aims to boost the number to 1,500 in the year 2015. China is the second largest market for Starbucks after the American market (O’Brien, 2012). The China’s retail coffee consumption is expected to grow 34% by the year 2014 and to meet the rising demand of coffee consumption in China (China Business News, 2011), PCC has decided to open more than 1,000 stores in order to be the largest retailer in China. The PCC’s parent company Chinese Resource Enterprise (CRE) aims to surpass Starbucks in the mainland China by blanketing the market with Pacific Coffee outlets. The current marketing strategy of the company is to meet the needs of the customers and to remain competitive in the Hong Kong market. With the support from CRE, the company has financial capabilities –cash of HK$14bn ($1.8bn) and capital expenditure of HK $7bn. To surpass the growth of Starbucks in China, the company is also moving forward with the acquisition plans (Syed, 2010). Another strategy implemented by the company to be the leader in the Chinese market was the launch of an iPhone application. By introducing this facility, the company aimed to remain ahead of its competitors and to increase the interaction of customers. This iPhone application was launched on 31st May 2011. The functions of this mobile marketing tool was to highlight the seasonable promotions, provide nutritional information of beverages, access membership accounts and topping up loyalty cards with PayPal and to locate the nearest PCC store through Google map. This in-house marketing reached almost 1,800,000 customers each year. After 5 days of its launch, the application was ranked 4th in lifestyle category (Idimsum, 2011). Talking about the value creation of Pacific Coffee Company (PCC), the company is perceived to have better taste and high quality, environment and service (Pacific Coffee, 2012b; 2012c, 2012d). This enhances the opportunity for the company to increase the price that would reflect that value. Through innovation the company has maintained value of producing high quality coffee and enhanced the customer’s response. To enhance the value, the company has provided the customers with an exceptional environment in the coffeehouses where the customers could sink in and blend. By providing the customers with an experience they can relate to their home places, they are emotionally connected to the company’s product. Due to this value creation, the customers see themselves as a part of the company and the experience of buying the company’s product makes them feel better. Along with this the company has provided the customer with different loyalty programs in order to attract more customers and increase the market share (Pacific Coffee, 2012e). The company is also working on international expansion with the help of the international franchise programs and support (Pacific Coffee, 2012f; 2012g; 2012h) Segmentation, Targeting and Positioning (STP) Segmentation: The company has segmented the Chinese region where the company aims to boost the sales by blanketing the market with the coffeehouses. The company’s main focus is Hong Kong and other countries in the Asian region. These countries include Singapore, Malaysia and China. Targeting: The company has targeted the young consumers who are seeking different coffeehouses for taste and quality. The company’s main focus is the younger generations and teenagers. To enhance the audience attention, the company implemented several marketing strategies aimed to change the perception and confidence level. Positioning: The company has positioned itself to bring the customers “the perfect cup” with an environment perfect for the customers anywhere and anytime. Being fond of the European and American coffee culture, the company has positioned its brand in western strategy. The coffee offered by the company is much similar to what the standard coffee shops offer. The pricing and the promotional strategies are even similar. SWOT analysis To measure the effectiveness of the current marketing strategies SWOT analysis would be applied. This analysis would allow viewing both the positive and negative side of the marketing strategies implemented by the company and its current position in the market. The SWOT analysis of Pacific Coffee Company is as follows: Strengths The key strength of the Pacific Coffee Company is their strong capital resource. The company is backed by the parent company; Chinese Resource Enterprise. Due to the strong support and resource availability, the company is able to open up its stores in different locality of Hong Kong. Being a local company of Hong Kong, the company enjoys good reputation among the customers and can swiftly respond to the changing market demand. The company also enjoys price advantage over its competitors due to the value creation process in the niche market and the brand is associated with high-quality products and services. The company is also known for its up-to-date technology implementation (Pacific Coffee, 2012b; 2012c, 2012d). Weaknesses The company is mainly dependent on the retail business due to which the company is unable to diversify. The company lacks the ability to produce a unique and fresh line of coffee due to which the company lacks far behind its competitors in attaining new customers and retaining old ones. This lack of diversity has caused the company a lot as the customers are shifting from the company’s products to competitor’s products. Opportunities The company has greater opportunity in Hong Kong and the company can still dominate the market by providing high-quality coffee products to its customers. The company has an opportunity to gain the loyalty of the customers with continuous innovation, making the company more competitive in the marketplace, as the local market is reporting rapid growth and development (Roast Magazine, 2012). Being in the growth phase, the company is now in greater position to expand in the global market to compete against other businesses offering coffee products in the market. Threats The threat for the company includes the new players in the market offering diversified and creative coffee products at cheaper price than the company. To maintain the competitiveness in the market, the company would have to use their expertise and experience to tackle the situation. Moreover, the company would be in pressure to set its price and to meet the quality standards. Recommended Objectives and Goals The recommended goals and objectives for the company to live up their dream of being the leader in the coffee retail business in Asia are as follows: Increase the number of coffeehouses up to 200 in hypermarkets to increase the interaction between the customers and the company. To blanket the Chinese market with at least 1,500 coffeehouses till 2015. To enhance the interaction between the customers and the company through social media such as Facebook and Twitter. To increase the brand recognition in China up to 20 percent by promoting the company’s product through advertisements. To increase the market share of the company by 20% till 2014 and continuously improve the market share of the company. To create additional value to the customers to enhance their interaction with the company and to attain new customers while retaining the old ones. To use the advancing technology in favour of the company and to introduce applications that would be able to solve customer’s queries and to gain their feedback regarding their experience at the company’s coffeehouse. To improve the overall service time and to install online ordering system. To develop the under-developed sectors such as distribution and brewing. Recommended Marketing strategies and Programmes Being chosen as a marketing manager, the alternative marketing strategies that would be implemented to tower the projected profitability, market share and value creation in the forth coming years would be as follows: Penetrating the Market The essential market of the company would remain the same; Hong Kong but in order to be the first choice of the customers in other regions as well, the company would penetrate the market by increasing the number of coffeehouses; increasing market share. By doing so, the company would be able to increase the customer’s awareness regarding the company’s product. New Target Audience The company would not only tend to cater the younger generation but the company would also focus other customers that could be the potential customers of the company. To do so, the company would find new coffee-drinkers in the region where it operates, eventually increasing the profitability margin and the market share. Global Expansion The company would use the extensive resources available to explore new markets where the company has not yet developed. This could be the best possible way to enhance the market share and profitability ratio. This marketing strategy would also give the company an edge to create value for its customers. Collaboration with Banks, Colleges and Companies The company also has an opportunity to meet the needs of the customers by opening coffeehouses inside the premises of banks, colleges and companies. This could be made possible by collaborating with these banks, colleges and companies to allow the company to setup its coffeehouse in their premises. This would not only enhance the sales of the company’s product but will also act as an awareness program for potential customers. Expanding the Coffeehouses in Mainland China To meet the explosive growth of coffee consumption in mainland China, the company would open coffeehouses in every nook and corner. This would provide the company with an opportunity to meet the rising demand and would eventually lead to increase in profitability and market share. Additional Value Creation To create value for the customers, incentive and loyalty programs would be arranged. This would help the company to retain old customers and an opportunity to attain new customers. The company would also arrange programmes to provide the customers information regarding the different variety of coffee available at the company’s coffeehouses and also regarding the nutritional knowledge. Introduction of iPhone Applications Introduction of the iPhone application was a great success for the company. This would be carried forward where the company would use the advancing technology in its favor to solve the queries of the customers and to gain their feedback. This digital marketing tool would help the company to introduce itself to the new customers while gaining feedback from the old customers. Product Diversity The Chinese are traditionally inclined towards high liquor consumption. The company would use this as an opportunity to introduce new products such as cold coffee mixed with Chinese liquor. The idea behind such a product is to provide the customers with something different and unique. Being a Hong Kong based company, the company is very well aware of the region’s culture and their demand. This new product would serve the purpose of attracting new customers in the region and to outdo Starbucks in the China. Promotional Strategy The recommended marketing strategy would be to increase the value of the customers. The customers would be provided with free coupons upon their frequent purchase of coffee from the company’s coffeehouses. This coupon would allow the customers to avail free coffee from any coffeehouses of the company and at anytime of the day. This would bring in more customers and would outperform the expected result. Increasing the Service Time The company would also focus on increasing the overall service time. To tackle the issue, the company would install online ordering system where the customers could login their accounts to pre-order foods and drinks. This would give the customers an advantage that they would not have to wait long enough for their orders. This would enhance the customers experience with the company and would somehow encourage the customers to remain loyal to the company. Focusing on under-developed Sectors The company has given too much importance to only retail business while ignoring the other sectors of the business. The company should also give importance to other under-developed sectors such as distribution and brewing. To be the market leader, the company should bring these sectors to the same level as retail business. By doing so, the company would be able to reap impressive profits from all dimensions the company operates in. Conclusion It could be concluded that marketing strategies could play an essential role in the success of a company. The effectiveness and efficiency of the marketing strategy could help the organisation to eliminate the weakness or turn the weakness into its most powerful weapon which the company could use to outdo its competitors. Being in the retail business, Pacific Coffee Company faces stiff competition from Starbucks in Hong Kong and mainland China. Starbucks is the leader in the retail business in mainland China because of its effective marketing strategies. These marketing strategies give Starbucks a competitive edge over Pacific Coffee Company in the region. To overcome the changing consumer’s confidence and geo-demographics of the target market the company is recommended with some marketing strategies. These marketing strategies would help to tower the expected profitability, market share and value creation process in forth coming years which highly revolves around incorporation of technology in the company’s structure. This incorporation would effectively address the problems and would provide complete solutions for changing consumer perception regarding the company’s products. The other recommended strategy is to cover the Chinese market with coffeehouses to create awareness regarding the company and its products. References China Business News. (2011). HK coffee chain eyes mainland expansion. Available from http://cnbusinessnews.com/hk-coffee-chain-eyes-mainland-expansion/#axzz2EuiBgG91 [Accessed 12 December 2012] Idimsum. (2011). Pacific Coffee mobile application. Available from http://idimsum.hk/en/showcase-eng/item/pacific-coffee [Accessed 12 December 2012] Leung, S. and Lui, M. (2010). China Resources Acquires Hong Kong’s Pacific Coffee, to take on Starbucks. Bloomberg. Available from http://www.bloomberg.com/news/2010-06-29/china-resources-to-buy-80-stake-in-pacific-coffee-from-chevalier-pacific.html [Accessed 11 December 2012] O’Brien, R. (2012). Competition Heats Up in race for dominance of China’s coffee market. Available from http://contextchina.com/2012/10/competition-heats-up-in-race-for-dominance-of-chinas-coffee-market/ [Accessed 12 December 2012] Pacific Coffee. (2012a). Our Company. Available from http://www.pacificcoffee.com/eng/aboutus/index.html [Accessed 11 December 2012] Pacific Coffee. (2012b). Our Beans. Available from http://www.pacificcoffee.com/eng/product/ps_bea.htm [Accessed 11 December 2012] Pacific Coffee. (2012c). Our Machines. Available from http://www.pacificcoffee.com/eng/product/ps_mac.html [Accessed 11 December 2012] Pacific Coffee. (2012d). Coffee Solutions. Available from http://www.pacificcoffee.com/eng/services/so_cor.html [Accessed 11 December 2012] Pacific Coffee. (2012e). Our Loyalty program. Available from http://www.pacificcoffee.com/eng/members/index.html [Accessed 11 December 2012] Pacific Coffee. (2012f). International Franchise: Our story. Available from http://www.pacificcoffee.com/eng/franchise/index.html [Accessed 11 December 2012] Pacific Coffee. (2012g). International Franchise: Our support. Available from http://www.pacificcoffee.com/eng/franchise/fr_support.html [Accessed 11 December 2012] Pacific Coffee. (2012h). International Franchise: Our franchise. Available from http://www.pacificcoffee.com/eng/aboutus/index.html [Accessed 11 December 2012] Roast Magazine. (2012). The new frontier: specialty coffee’s emergence in China, India, the Middle East, and Russia. Available from http://dts8coffee.com/files/DTS8_Roast_Mag.pdf [Accessed 13 December 2012] Syed, S. (2010). Deal of the day: China Resources Enterprise acquires Pacific Coffee, aims to beat Starbucks. Available from blogs.ft.com/beyond-brics/2010/06/29/deal-of-the-day-china-resources-enterprise-acquires-pacific-coffee-aims-to-beat-starbucks/#axzz2EuYJeqKq [Accessed 11 December 2012] Read More