External Environmental Analysis of the Coffee Industry - Assignment Example

? Pret A Manger Table of Contents Table of Contents 2 Task 3 Task 2 7 Task 3 8 Task 4 11 Reference 13 Task Review the changing pattern in marketing planning and assess capability of your Chosen organisation to carrying out a marketing plan” Ans.1a- The researcher has selected Pret A Manger as the study organization in this paper. Pret A Manger is a famous food chain established in London during the year 1986. The company offers variety of foods including fresh sandwiches, salads, coffee, cakes, slices, bakery, cold drinks and many others to customers. Unique selling proposition (USP) of the company is its ability to offer foods cooked by natural ingredients and fresh material which are free from harmful chemicals (Pret A Manger, 2013a). The shop has established more than 290 shops across the globe but United Kingdom is the core business market for the company (Pret A Manger, 2013b). Schwartz (2004) has rightly pointed out that in previous occasions, companies establish marketing plan on the basis of its allocated budget but now companies decide marketing plan on the basis of its strategic objectives. Schwartz (2004) has also pointed out that modern marketers are emphasizing more on customer satisfaction and customizing the product offering as part of marketing plan. Sheth and Sisodia (2006) have also pointed out that changing pattern of marketing planning includes the marketer’s willingness to incorporate psychological, economic and informational shift of customers as integrated element of market planning. Pret A Manger (2013b) has reported that it earns annual revenue of 380 million pounds from its global business operation, and the company has reported that it has sufficient liquid asset to finance its strategic decisions. For example, recently Pret A Manger had struck a deal with by investing more than 1 million pound with Vitrue which is a social media management platform in order to target local youngsters who frequently use social networking sites (NMA Staff, 2012). Digital marketing strategy of the company has also helped them to achieve $280,000 increased in store operational revenue. Such examples are showing that Pret A Manger has sufficient capabilities in order implement new marketing plan which can be recalibrated in accordance with the customer demand. “Examine the marketing environment and analyse the internal factors and external factors (such as PEST) assessing the strengths/weaknesses and opportunities/threats in order to conduct a marketing audit” Ans.1b- As UK is the major business interest for Pret A Manger hence the researcher has decided to conduct a strategic audit of the coffee business of the company in context to UK business environment. Let’s try to shed light the coffee industry of UK in order to understand why companies including both restaurants like Starbucks, Pret A Manger etc and retail sellers like Nestle and Green Mountain etc are changing their marketing plan to cater to the demand of Britons. Market Value Market Value Forecast Market Volume Market Volume Forecast Market Share More than $2,500 million with growth rate of 4.8%. The sales volume coffee selling through retail channels and franchisee based restaurants will touch $3,000 million within next three years. 140.7 million kg with growth rate of 0.7%. The market volume will touch 150 million kg mark within next couple of years. Tata Global Beverages Limited and Starbucks are the market leader with consolidated market share of more than 29%. (Marketline, 2012a) It is evident from the above statistics that there is ample opportunity exist for Pret A Manger in order to penetrate more in UK coffee industry but they need to create a sustainable marketing plan to achieve a niche position. Now, the researcher will try to understand the business environment for Pret A Manger by considering both internal and external factors. PEST will be used to external environment analysis and Porter Five force will used for internal market audit. Table 1: PEST External Environment Characteristics Opportunity for Pret A Manger Political (P) Government has reduced the corporate tax bar for companies to 22% while the same government has taken steps for 24% budget cut in entertainment, sports and media expenditure. . Paying low corporate tax will ease the financial burden up to certain extent for the company. Economic (E) Conjoint impact of sovereign debt crisis and economic recession has contracted country GDP and per capita income of people by 0.7%. Flexible economic policy will help the company to expand its domestic operation. Social (S) Due to decrease in disposable income, customers are shifting to low cost restaurants and health awareness among people is increasing. Lifestyle change of consumers will help the company to attract customers who prefer fresh and healthy foods and beverages. Technological (T) Retailers have started using latest technologies such as radio frequency identity (RFID), enterprise resource planning (ERP) in order to facilitate business operation. In the last 3 years, there was 2.5% rise in technology integration by industry participants in the country. Implementing RFID will decrease the inventory holding cost for the company. (Marketline, 2012a & 2012b) It is evident from the above analysis that there is plenty of opportunity exists for Pret A Manger to expand its business portfolio in UK but the company needs to understand its internal business factors in terms of SWOT analysis in order to prepare a formidable marketing plan. Strength Widely expanded distribution channel of the company throughout different areas of UK is probably the greatest strength of Pret A Manger. Although the company has not expanded its business in international context apart from Hong Kong but the company has enviable local presence in UK. Financial result of the company shows that Pret A Manger is showing double digit top line growth rate for consecutive year. The company has established strong brand presence by its fresh, free from chemical and close to source food offering. Pret A Manger has got plenty of awards for its extraordinary customer service and refreshing product offering (Pret A Manger, 2013b). Weakness Customer base of the company is due to its focus targeting strategy and its lack of willingness to expand business in international market. Although the company has established its presence in South East Asian market but still Pret heavily depends upon its revenue from UK business segment. Relying on ability to prepare natural & fresh foods as competitive advantage is ultimately creating barrier for them to diversify the offered food portfolio (Pret A Manger., 2013a). Opportunity The company has the opportunity to diversify its product portfolio and use the conjoint mix of differentiated product portfolio and brand loyalty to charge premium price for offering. Even the company should go for fair trade certification to their coffee products in order to achieve market niche status. Threat (Source: Brown, 2011) According to above diagram, Pret A Manger will face competition from above competitors such as Nestle, Starbucks, Dunkin Donuts etc, who are more resource (both financial and non-financial) rich in comparison to Pret. Hyper saturation of UK coffee market due to presence of many big players might be eat up the profit margin of Pret A Manger. Task 2 “Examine the main barriers to marketing planning and the ways of overcoming those barriers you have identified. First explain what is meant by barriers with examples” Ans.2a- McDonald (1992) has defined marketing barriers as the obstacles contributed by internal and external factors which can create problem for companies to implement a particular marketing strategy. McDonald (1992) has given some examples for some common type of barriers in the marketing plan implementation such as, 1- isolating the marketing division from other operational divisions so that the marketing planning division does not get operational and resource support to implement a plan, 2- confusion between top level management and marketing division regarding the importance of marketing plan implementation, 3- failure of the marketing division to prioritize the marketing objectives to achieve etc. For overcoming first two barriers, researcher will coordinate with top level management of Pret A Manger in order to clear out the confusion regarding the importance of marketing plan and also request them to provide budgeted resources a and operational help for implementing the marketing plan. To overcome the problems regarding prioritization of objectives, the researcher will create two types of marketing plan such as strategic and tactical in order to give proper guidance to the team. Task 3 “Formulate a marketing plan for a chosen product or service of the chosen organization by analyzing the SWOT factors and setting marketing objectives” Ans.3a Marketing Plan for Pret A Manger can be briefly explained in the following manner; Objective To increase market share by 5% within next two years in UK and earn annual revenue of more than 40 million pound from its coffee selling division within next three years. Product Offer at least 15 variants of coffee such as Black Filter Coffee, Black Americano, Espresso, Mocha, Hot Chocolate etc to customers along with the tagline that the product is free from any chemical and pesticides. Retail selling of instant coffee powder will also be part of the plan. Price The price of cup of coffee should be increased by 10p to 13p in order support the expenditure caused by implementation of new marketing plan. Distribution Opening at least 10 to 15 new restaurants in UK for next one year and also partnering with retailers to sell Pret A Manger branded coffee beans. Promotion Sales promotion in the form of discount, electronic display, and local celebrity endorsed TV commercial, billboards, print advertisement and social media advertisement should be used. (Source: Pret A Manger, 2013c) Promotional plan of Pret A Manger can be summarized in the following manner (from July 2013 to December 2013 has been shown in the table); Table 2: Media Calendar-2013 Jul Aug Sep Oct Nov Dec Advertising Frequency News Paper 3 4 5 5 6 6 Magazine 1 2 2 2 2 3 Television 1 Radio 12 11 8 18 22 30 Sales Promotion 1 1 Digital Marketing 2 2 2 2 3 4 “Develop marketing strategies based on the marketing mix variables, including the need to developing new product/services and a pricing strategy. You should justify the choice of marketing mix strategy” Ans.3b According to research report published by Mintel Oxygen (2012) customer groups of UK can be segmented in the following manner; Segment Age Group Annual Income Level Psychology Segment 1 18-25 > $30,000 They are not much brand conscious but have health benefits of product Segment 2 26-50 $30,000-$65,000 Prefer to purchase products after detailed analysis of product benefits. Segment 3 35-65 >$60,000 These customers hardly care about product benefits and they purchase product on the basis of brand name and premium price of the product in order to enhance social status. (Source: Mintel Oxygen, 2012) In the marketing plan, Pret A Manger should target segment 1 and segment 2 customers and position itself on the basis of offered health benefits such as low calorie, fresh, free from chemical, close to source coffee to customers. According to the research work of Brown (2011), in UK, competitors of Pret A Manger such as Nestle, Starbucks have already started focusing on low calorie hot drinks hence this is the right time for Pret A Manger to offer new line of coffee products complemented with their positioning statement in order to attract customers. According to Poulter (2013) Pret A Manger has already increased price of its coffee by 11p in order to address increasing cost of operation and resources. Presently, coffee products of Pret A Manger costs around ?1.70 to ?2.10 but in the proposed marketing plan, the company needs to increase the price by another 10p to 13p, otherwise, it will not be profitable for the company to bring variety in coffee product offering by using natural ingredients Poulter (2013). The company should target festival seasons such as spring, Christmas, Halloween in order to increase frequency of advertisements which can attract more customers towards restaurant. Using local celebrities will also help the company to communicate the marketing message to customers in convenient manner. Task 4 “Explain what is meant by ethics in marketing and examine the ethical issues in marketing that you may need to consider when developing a marketing plan” Ans.4a Research scholars such as Hunt and Vitell (2006) have defined ethics in marketing practices into two parts such as, 1- Substantive- following the code of conduct, legal system of a particular country and not discriminating participants in the marketing plan implementation on the basis of class, gender, nationality and not disrespecting the interest, values and beliefs of customers and 2- Procedural- not practicing any wrong means such fraud, misrepresentation, accessing crucial document of other competitors by illegal means etc. The researcher will also consider the above mentioned issues while implementing the marketing plan. “Discuss how the consideration of consumer ethics in general affects the marketing planning process in your chosen organisation” Ans.4b Armstrong and Kotler (2012) Fifield (2007) have stressed on the consumer value aspect of marketing plan because delivering value to customer is the core objective of any marketing strategy. Marketing plan has been proposed after considering different form of consumer ethics such as not hurting the interest of customers by restricting the broadcasting of improper content in TV commercials, not delivering any irrational claim in the advertising or misleading advertisement and providing the full ingredient information behind the product. None of the advertisement of Pret A Manger will contain racially biased messages in order to respect the sentiment of customers. Such ethical consideration in marketing plan will definitely increase the clarity, acceptance and credential of marketing communication message which will ultimately help Pret A Manger to generate brand awareness. Reference Armstrong, G. M. and Kotler, P., 2012. Marketing: An Introduction. 2nd ed. New Jersey: Pearson Education. Brown, H., 2011. External Environmental Analysis of Starbucks and the Coffee Industry. [pdf] Available at: [Accessed 13 June 2013]. Fifield, P., 2007. Marketing Strategy. London: Routledge.  Hunt, S. D. and Vitell, S. J., 2006. The general theory of marketing ethics: A revision and three questions. Journal of Macromarketing, 26(2), pp. 1-11. Marketline., 2012a. United Kingdom - Hot Drinks. [online] Available at: [Accessed 13 June 2013]. Marketline., 2012b. United Kingdom - Hot Drinks. [online] Available at: [Accessed 13 June 2013]. McDonald, M. H. B., 1992. Ten Barriers to Marketing Planning. The Journal of Product and Brand Management, 1(4), pp. 51-64. Mintel Oxygen., 2012. Chocolate Confectionery - UK - April 2012. [Online] Available at: [Accessed 13 June 2013]. NMA Staff., 2012. Pret A Manger plans to scale up social media activity. [online] Available at: [Accessed 13 June 2013]. Poulter, S., 2013. Storm in a coffee cup brewing as Pret a Manger hikes the cost of a Cappuccino by 11p. [Online] Available at: [Accessed 13 June 2013]. Pret A Manger., 2013a. Our Menu. [online] Available at: [Accessed 13 June 2013]. Pret A Manger., 2013b. About Our Company. [online] Available at: [Accessed 13 June 2013]. Pret A Manger., 2013c. Hot Drinks. [online] Available at: [Accessed 13 June 2013]. Schwartz, B., 2004. The Paradox of Choice: Why More is Less. New York, NY: Harper Perennial. Sheth, J. N. and Sisodia, R. S., 2006. Tectonic Shifts, The Geoeconomic Realignments of Globalizing Markets. New Delhi, NY: Response Books (Sage). Read More