Vision, Mission and Goals - Coffee Nero in Australia - Case Study Example

MARKETING FEASABILITY STUDY TABLE OF CONTENTS 2.0 COMPANY BACKGROUND Founded in 1997 by Dr Gerry Ford, Caffe Nero which is the Italian for black coffee which offers European style coffee house brand has grown to run 700 coffee houses today. The company has its headquarters in London and has operations in several countries including the UK, Poland, Ireland, Cyprus, the UAE, Turkey and the United states where its operations began in 2014. The company had been listed in London stock exchange in 2001 but was to be delisted in 2007 in a bid to give the company more flexibility necessary for business growth. In fact, most of its expansion overseas happened after its delisting. The company’s success has been attributed to its high quality coffee. In fact, the company has won numerous accolades thanks to its high quality coffee. For instance, Allegra strategies have rated the company as having the best quality of coffee among all the major coffee brands in the UK for eight consecutive years. Among its offerings include traditional espresso-based drinks including espresso, latte, Cappuccino and Macchiato. Other products include which are not necessarily coffee include Frappe Latte, fruit boosters and hot chocolate Milano among others (Doole, 2008). It is based on its success over the years that the company now wants to open operations in Australia with the Sydney branch as its first operation in Australia. It is hoped that it will replicate its successful structure in its Australian operations. COMPANY VISION, MISSION & GOALS The company has the vision of creating traditional Italian cafes across the world. It aims at being a place that serves very high quality coffee while acting as a meeting place for the neighbourhood. The company’s mission statement is making sure that its coffee and food offerings are excellent in all the areas it operates in in a bid to achieve their vision. The company will thus provide its clients with good quality coffee as well as a comfortable environment for its customers. In this regard the company’s goals for success are threefold and include providing a high quality and well defined offering, focusing on brand value as well as ensuring a selective site acquisition and a disciplined roll-out (Jared, 2011). The company will also endeavour to integrate into the local environment and culture thus making the customers feel comfortable with their offerings wherever they may be. SITUATIONAL ANALYSIS POLITICAL FACTORS The decision to move to Australia is backed by the existence of a conducive political environment for carrying out business. Australia is characterised by a long period of political stability. The country is a democracy that is governed by common law. In addition, the possibility of free trade is assured as the government does not interfere with trade. As such there is low political risk. It is also worth noting that the government regards the right to private property highly implying that there is security owing to strong protection under the law (Hamaizar, 2014). This includes not only physical properties or assets but also protection for patents while compliance to product standards is strongly enforced. However, the company ought to be careful in relocating to Australia especially as far as product labelling is concerned. This is because the law is very strict on this and incorrect labelling of coffee beans hence implying misleading and deceptive conduct which may lead to extensive fines for breach including expensive product recall requirement. ECONOMIC FACTORS As the company contemplates moving to Australia, there is need for it to know that the Australian coffee caffe industry is currently experiencing strong multinational competition with the coffee market becoming highly competitive. As a new entrant therefore, the company needs to offer a string competitive advantage to its customers while developing new strategies for reaching its new customers since it may be difficult to outspend the multinationals that are already established in advertising. In addition, the company needs to place emphasis on product differentiation and niche marketing opportunities if it is to be successful in the new market. One advantage of moving to the Australian market is probably the fact that there is growing demand in coffee consumption in the country. In the year 2014-15, Australian coffee segment was estimated to generate $1.3 billion worth of revenue. It is also worth noting that Australia’s coffee consumption has increased by 65% over the past 10 years with the growth being driven by pure coffee market. In a bid to take advantage of this, the company’s product focus ought to be on premium, roasted and ground coffee segment. In addition, the company as a new entrant should avoid instant coffee as much as possible since its consumption has greatly declined compared to other types of coffee. In this regard, the company ought to realize that its opportunity only exists in sophistication. There is also need for Coffee Nero to take advantage of the rising discretionary incomes which implies that consumers have more disposable income to spend on such discretionary items as coffee. This means increased demand for coffee especially the more premium product offerings that the company ought to focus on. The subdued economic climate been experienced in Australia has been favourable for the coffee industry as it has led to higher levels of in-home coffee consumption hence boosting demand for in –home coffee products. It is however worth noting that there have been volatile coffee bean prices. This has resulted higher operating costs thus restricting growth in profit margins (William, 2011). Coffee Nero ought to bear this in mind. The country has also been experiencing high volatility in exchange rates. As such, the company as a new entrant may need to come up with strategies aimed at limiting the impact of volatility in exchange rates. Such strategies may include hedging such as forward contracts, futures contracts, currency options etc. SOCIO - CULTURAL FACTORS Australia is characterised by a strong coffee culture where consumers use coffee as social glue since Australians associate coffee with bringing people together. This is in line with the company’s vision of establishing and converting their caffe into neighbourhoods or meeting places. In Australia, coffee is viewed as an in-home caffe experience where consumers would want to have the same quality coffee at home that they receive in a caffe experience. As such, Coffee Nero has a chance to bring such kind of experience to Australia where people are increasingly shifting towards more expensive coffee brands as well as increased sales from pods and capsules such as Nespresso. Coffee Nero should however understand that Australian customers have a lot of expectations as far as corporate global citizenship and manufacturing practices are concerned. In this regard, consumers would want to exert their influences as a global citizen on companies where they would reject those corporates failing to demonstrate a sense of global corporate social responsibility (Josphine, 2010). In this regard, there is need for Caffe Nero to demonstrate a strong sense of corporate social responsibility including offering socially, ecologically and environmentally sourced coffee beans while engaging in fair labour practices. It is worth noting that the Australian population has increasingly become aware of their own health issues. In this regard, consumers are increasingly demanding that companies offer organically produced foods. As such, the company needs to ensure that it always sources from producers who are aware of the need to focus on healthier, ethical and organic food products. It is also worth noting that multiculturalism has greatly impacted consumption behaviour with consumers wanting to explore foods from foreign countries for taste pleasure. This is bearing in mind that a substantial portion (23%) of Australian population are multicultural and hence would actively seek imported goods for new taste experiences. As such, Caffe Nero as a new entrant and a potential importer of foreign coffees ought to capitalize on Australians demand for the notion of geography as a flavour. It is also worth noting that many Australians seek products that seek to express their personal success. In this regard, there has been growing demand for more premium products. In this regard, there is an opportunity for Caffe Nero to capitalise on growing demand for premium products that would attract larger margins. It is also worth noting that there is greater brand promiscuity amongst consumers. This implies an opportunity for caffe Nero to unsuit the companies that are already known in the market. With a good marketing plan and offering superior quality products, the company is likely to capture a substantial market share in Australia within a short time after entering the market. TECHNOLOGICAL FACTORS Major Caffe cafes have employed various technologies in a bid to improve their offerings as well as the level of satisfaction by customers. This is because new technologies create new products and processes. Examples of new markets that have been created by technological advances include computer games, online gambling, MP3 players as well as high definition TVs. In addition, online shopping, computer aided designs and barcoding are among the improvements to how business is done that have resulted from improved technology. As such, Caffe Nero ought to consider employing technology in a bid to reduce costs and improve quality of its offerings while leading to innovation. Thus, the company can be able to benefit consumers through technological advancement by offering superior product quality as well as unrivalled service quality hence improving operational efficiency. ENVIRONMENTAL FACTORS These include such factors as weather and climate change related factors. It is worth noting that there have been increased incidences of global warming worldwide which have resulted in major climatic changes occurring. This has resulted in increasing environmental awareness and hence people are increasingly becoming aware of this factor as an issue that companies establishing operations in Australia ought to consider. There has been growing desire to protect the environment which is increasingly having an impact on such companies as Caffe Nero (IBIS World, 2015). This is because customers are increasingly demanding more environmentally friendly products. As such, Caffe Nero will have to carefully vet all its suppliers for its Australian operations in a bid to ensure that they all engage in environmentally friendly practices if the operations are to succeed. LEGAL FACTORS As stated above, Australian government is a democratic government that has high regard for business and private property. As such, it has put in place a number of regulations that must be observed by businesses failure to which the business might attract differing levels of penalties from the authorities. As stated above, the government has put in place consumer protection laws that must be strictly observed by businesses failure to which the company risks fines that could be hefty at times. The company must also observe the failures competition laws that the government has put in place in a bid to ensure fair competition among businesses. The company must also engage in fair labour practices including observing the country’s workplace health and safety standards in accordance to the country’s employment laws and practices. Finally, the company must always bear in mind that the Australian legal provisions are strongly against business involvement in graft. As such, all efforts must be made in a bid to strictly abide with the law in a bid to avoid such vices. It is worth noting that observance of the laid down legal requirement will be a major determinant of whether the Caffe Nero succeeds in Australia or not. COMPETITIVE AUDIT As stated above, Caffe Nero will most likely encounter intensive competition in the Australian market owing to the ever increasing competition in the industry. The market is dominated by big multinationals, big Australian companies as well as the other small operations by individuals and small companies. In fact, there are thousands of companies that Caffe Nero will have to compete with in the $1.3 worth industry as stated above. Some of the biggest competitors that the company will have to compete with will include McDonalds. McDonalds Australia has continued to lead the competition for some times now. In fact, it is a global player and has one of the largest establishments globally (Goodfood, 2015). The company has more than 700 outlets in Australia and has been termed as a constant innovator who has an extensive network as a competitive advantage. Another major competitor is Starbuck’s. The company has been cited for its ability to innovate constantly adding new products to its coffee list. Just like McDonald’s, the company also boasts of an extensive network in Australia. Caffe Nero will also have to compete with the global player Gloria Jean’s Coffees. The company has more than 400 chains in Australia. In addition to offering high quality products, the company boasts of a good CSR record and has been cited for funding a $160,000 to the children’s charity. In other words, Caffe Nero will have to be highly innovative and offer high quality products while investing a lot in CSR if it is to succeed in the Australian market. SWOT ANALYSIS & IMPLICATIONS The following is Caffe Nero’s SWOT analysis as it plans on entering the Australian market as well as their implications. STRENGTHS i) The company is a multinational company that already has more than 400 stores in both Europe and America. This is a boost to its quest to establish a branch in Australia since it already have exposure to foreign markets having been dealing with differing cultural, economic and political environment. This experience can be replicated in this market for even greater success. ii) The company has been hailed for serving high quality coffee alongside its Italian style tasty food. As stated above, the company has been ranked as the best coffee café in the UK over a number of years. As such, the company can ride on these achievements to build a strong brand name and hence market. iii) The company has been able to successfully provide an environment of European coffee house that is a different concept from the market leaders McDonald and Starbucks. This in line with Australian coffee culture and hence will be an added advantage. iv) The company is known for n maintaining trust of customers owing to its ability to create strong relationships with customers and it will replicate this to the Australian market. v) The company is always keen and successful in selecting sites that ensure a disciplined environment. vi) The company boast of high amount of capital implying that it will be able to open as many stores as possible and capture and increase its market share day by day. vii) The company is known for always focussing on its brand values and the core product. The company also has high quality management who will be able to effectively manage its Australia operations (John, 2012). viii) The company employs highly qualified employees who are well remunerated and taken care of and hence it will be able to offer superior customer service in its Australian operations. WEAKNESSES i) Though the company is known for its new product development as well as innovation, there is possibility that their innovativeness may fade over time. ii) The company mainly depends on its main product of retail coffee and this may not be enough for it to diversify in a competitive environment. iii) The company’s aggressive expansion may lead to managerial and financial problems. OPPORTUNITIES i) As stated above, there has been increasing demand for coffee in Australia over the years. As such, the company could expand its business widely within Australia. The company could compete directly with McDonald’s and others through opening stores strategically and in areas that these giants have not focused on. ii) The company already has a big name in the global coffee industry. As such, it could take advantage of this to do co-branding with other manufacturers of coffees in Australia. iii) The company has been known for its innovativeness in other markets where it operates. As such, it has the opportunity of replicating this in the Australian market. THREATS i) The company’s main threats are McDonald’s and Starbuck owing to the fact that they have operations all over the world and hence the financial muscles to compete with Caffe Nero. As such, the company must develop a very good strategy for countering such giants. ii) The company’s survival in Australia is also threatened by the small private operations as they threaten its expansion. Implications of the SWOT analysis Arising from the SWOT analysis, it is clear that the company has a very good chance of succeeding in the Australian market. This arises from its superior offerings as well as its innovative nature (Jan-Benedict and Marnik, 2015). However, strategies to sustain itself and win in the highly competitive environment need to be developed if the company is to achieve its marketing and growth objectives. MARKETING OBJECTIVES The following are the company’s marketing objectives that will be pursued on its entering the Australian market. i) The company will aim at having open 750 operations in Australia within the first four years of its operations in Australia. ii) The company will aim at gaining at least 2% of the Australian market within its first year of operations, 4.5% within the second year of operations, 6% within the third year of operations and 7% within the fourth year of operation in Australia. iii) The company aims at increasing the Caffe Nero brand awareness by attracting and retaining 5,000- 10,000 customers within the first month of its Australian operations as well as capturing 15,000 and more Facebook and Twitter followers likes within the first two months of its Australian operations. iv) The company will also aim at achieving 30% of its sales being return sales in its first year of operations. v) The company thus aims at becoming the Australian coffee industry market leader with the first 5-10 years of its operations in Australia. SEGMENTATION PROFILE In order to gain a significant market share in the Australian market, the company aims at segmenting the market along two major lines. These will include demographic segmentation in which the target market will be based on the age of the customers, their gender, income as well as family lifecycle. In addition, the company will also use geographical segmentation for its Australian market. This will be based on the regions of Australia, the market size and market density. As far as demographic segmentation is concerned, we will mainly target men and women who are between the ages of 26 and 45 years. The market is estimated to compose 45% of our total business and the largest segment. The reason behind targeting this segment is because the segment consists of the most active members of the society who are mainly employed. As such, these people are bound to have some money to spend on the company’s offerings over office or business meetings. With the increasing disposable incomes, we are certain that the company will draw a lot from these groups that are still active socially despite having relatively large amounts of money at their disposal (Newmarketingblogs,2010). We will also target young adults between the ages of 18-25 years. We are optimistic that this group will compose 35% of our entire business. This is because although they don’t earn a lot, they are mostly students and they do not have much use for the little they earn as well as their pocket money. This means that they would be more than willing to spend on our products especially during their outings and during game events as they are the majority audiences. Finally we will still segment our market along geographical lines. In this respect, the company will strategically locate its operations in upscale locations, near schools and colleges, universities, offices and major business establishment. In this respect therefore, our first operation will be opened in Sydney’s central business district. REFERENCES Hamaizar, Z2014, A to Z in entrepreneurial practice, London, Rutledge. John, D2012, Caffe Nero, Retrieved on 31st August 2015, from; http://research-methodology.net/caffe-nero/ Jared, B2011, New market entry: Carrying on a thorough market feasibility study, International Marketing Journal, vol. 11, no. 2, pp.19-28. Doole, I2008, International marketing strategy, New York, Taylor & Francis. Jan-Benedict, S&, Marnik, D2015, Marketing strategies for fast moving consumer goods, Retrieved on 31st August 2015, from; http://www.ft.com/cms/s/0/a8d405c8-f2b0-11dd- abe0000779fd2ac.html#axzz3kOx0H1lw William, M2011, The marketing plan: How to prepare and implement it, Sydney, Prentice Hall. Josphine, B2010, Marketing due diligence, London, Rutledge. IBIS World, 2015, Cafes and coffee shops in Australia: Market Research Report, Retrieved on 31st August 2015, from; http://www.ibisworld.com.au/industry/default.aspx?indid=2015 Goodfood, 2015, Australia’s top 5 coffee gifts to the world, Retrieved on 31st August 2015, from; http://www.goodfood.com.au/good-food/drink/australias-top-5-coffee-gifts-to- the-world-20150108-12jzfu.html Newmarketingblogs, 2010, Marketing strategies, Retrieved on 31st August 2015, from; http://newmarketingblogs.blogspot.co.ke/2010/10/segmentation-targeting- and-positioning.html Read More