Executive summary

Costa coffee is the leading coffee chain in UK beating Starbucks in 2010 which is the largest coffee chain in the world. The organisations objective of beco ing nu ber one coffee chain in the world is taken into the account and arketing research has been carried out to achieve arketing the objective. !n order to understand the strength and weakness of the organisation" e#ternal and internal audits are carried out using $%ST&% anal'sis" S()T anal'sis and i# odel. *ro the anal'sis that has been carried out" strateg' has been devised for Costa arket to achieve the

coffee for three 'ears to achieve the target. The i +le entation +rocess clearl' describes how the strateg' could be i +le ented in UK and in the international target.

Contents
%#ecutive su ar' ..................................................................................................................1

Contents.....................................................................................................................................2 Costa.........................................................................................................................................., Current arketing situation.......................................................................................................,

%#ternal -udit........................................................................................................................, $olitical.............................................................................................................................., %cono ic............................................................................................................................ Sociocultural....................................................................................................................... Technological...................................................................................................................../ %nviron ental..................................................................................................................../ &egal.................................................................................................................................../ !nternal...................................................................................................................................0 $roduct...............................................................................................................................0 $rice...................................................................................................................................0 $lace...................................................................................................................................0 $ro otion...........................................................................................................................1 S()T anal'sis .....................................................................................................................1 )bjectives and issues ..............................................................................................................10 2ision state ent..................................................................................................................10 3ission state ent................................................................................................................10 2

)bjective..............................................................................................................................10 3arketing strateg' ..................................................................................................................10 3arketing i +le entation .....................................................................................................11 Target arket and 3arket seg entation.............................................................................11 arket share in UK and in global environ ent...........................................11

!ncreasing the

*ocus on 4ualit' and new +roducts.....................................................................................12 %ffective o+erations to reduce the cost involved.................................................................12 Conclusion...............................................................................................................................15 6eference.................................................................................................................................15

Costa
Costa Coffee is the largest coffee chain in UK o+erates fro 7unstable" UK as its head4uarters. This is the second largest coffee chain in the world after Starbucks. This is wholl' owned b' (hitbread. Costa Coffee is the onl' coffee sho+ +roviding hand8 ade coffees to the custo ers a ong its rivals in UK. Costa coffee is s+ecialised in !talian coffee. !t ac4uired arket share of 50./9 b' the end of 2010 to beco e the largest coffee chain in UK. !t was found in 1:01 b' Sergio and ;runo Costa which was ac4uired in 1::. b' (hitbread. <ow the organisation has 1000 outlets in 21 countries.

Current marketing situation

The current arketing situation of the Costa Coffee could be identified b' e#ternal and ethods and odels which enable to conduct e#ternal and internal audits. There are several

internal audit in the organisation. The e#ternal and internal audit of Costa Coffee as follows=

External Audit
The e#ternal audit is carried out b' carr'ing out b' using $%ST&% anal'sis. This enables the researcher to carr' out anal'sis on several e#ternal factors like +olitical" econo ic" social" technolog'" legal and environ ental factors >-r strong. 3. -" 200/?. Political The change in the +olitical environ ent in UK in 2010 due to coalition govern ent brought in several changes in the +olicies. This has also affected the +oll rating of the +art' Ta# >2-T? rate. !t was decreased to 1.9 fro ainl' due to ta#ation +olic'. !n the last two 'ears" there has been a fluctuation in the 2alue -dded 10..9 and then it was increased to 10..9 and later in 2011" it was still increased to 209. This has shar+l' increased the +rice of the Costa +roducts. &ower the 2-T rate is the lower +rice of the Costa +roducts to the custo er. ;ut the increase would have a negative i +act on the sales which is due to increase in the +rice of the +roducts.

The de and for high 4ualit' coffee has been constantl' increasing for which the organisation holds coffee beans certification. The fair trade of the coffee beans also gains advantage b' high level of +roduct differentiation. To focus on the sustainable growth of coffee beans" Costa got its co +lete su++l' fro 6ainforest -lliance Certified far s. !n 200/" Costa setu+ a foundation to su++ort the coffee su++liers in different countries like Colo bia" Uganda" @uate ala and so on to i +le ent fair trade in the coffee beans. This has i ensel' su++orted the education and job o++ortunities of the local +eo+le.

Economic The UK govern ent has reduced the 2-T rate in 20018200: due to dee+ econo ic crisis with the ai of increasing the sales and accelerating the recover' in the region. This +olic' has su++orted the increase in sale to so e e#tent b' reducing the cost +rice of the +roduct. ;ut the shar+ increase in the une +lo' ent during econo ic crisis has led to the decrease in the +urchasing +ower of the +eo+le. This has led to decrease in the s+ending on non essential +roducts b' +eo+le affected the sales of coffee. The econo ' started to recover fro the crisis in 2010. !n order to increase the revenue of

the govern ent 2-T rate was increased. The inflation rate at that +eriod was also high" which all contributed in the increase in the +rice of the +roducts and ingredients. -long with that Costa being a of the organisation. !n this business environ ent" Costa Coffee ai ed at reducing the cost +rice of the +roducts and brought in changes in the custo ers and enu in order to aintain the +rofit levels of the organisation. Cost reduction has been one of the effective wa's during the econo ic crisis to retain the aintain the revenue generated b' the organisation. ;ut the organisation has to be aware of the 4ualit' of the +roducts which brings in the business to the organisation. There is a big o++ortunit' for the organisation to reduce the cost of the +roducts b' reducing the o+erational cost which constitutes the Sociocultural (ith the increase in the +o+ulation" o++ortunit' for the +otential business environ ent also increases. !n the increasing standard of living and education increases the de and for high 4ualit' +roducts fro Costa. The organisation has to . aintain the 4ualit' and increase the a#i u +art of the e#+enditure. ultinational organisation" changes in the foreign e#change directl' affects the organisation. The decrease in the value of +ounds decreases the +urchasing +ower

variet' of +roducts and services that is currentl' being offered. The change in the attitude and social environ ent has higher influence on the coffee houses. (ith the increase in white collar jobs and la+to+ and other gadgets" coffee sho+s are also considered as a +lace of non official eeting due to its environ ent. (ith the change in trend" Costa oved in +artnershi+ with the booksho+s to ada+t to the social change and that has contributed to the increase in the sales of both Costa and booksho+s. The changes that have been brought in the life st'le b' drink and drive rules" decreased the consu +tion of alcohol and boosted the sales of coffee in UK. (ith the changes according to the attitude and lifest'le" high level of success has been achieved b' Costa with +ublic through social and cultural co Technological (ith the increase in the i +le entation of technolog' in business has increased the business and +rofit levels of the organisation. (ith the i +le entation of technolog' b' Costa has enabled the organisation to attain co +etitive advantage in +roductivit'" efficienc' and +rofitabilit' in coffee brewing sector. Costa has also started to i +le ent technolog' in the anage ent with new %lectronic $oint )f Sales >%$)S? s'ste . This was first installed in 2010 to increase the efficienc' of retail sales in the coffee sho+s. Environmental (ith the increase in the environ ental awareness a ong the +eo+le it is i +ortant for the organisation to focus on the environ ental i +act b' Costa. The organisation should focus on long ter and sustainable strateg'. Costa alwa's was in focus on the environ ental i +acts anufacturing the coffee cu+s. *ro ade efforts to its vest to +rotect the environ ent. The coffee cu+ used in Costa is unication.

rec'clable because of the usage of sustainable +ul+ in dail' deliver' of the +roducts.

200:" Costa started to use !veco which has aided in increasing the fuel efficienc' and the

;ut still there is concern regarding the environ ental i +act of wildlife > onke's? due to its T2 advertising which began recentl'. Legal Costa has alwa's et the standards of business and e +lo' ent laws and continuousl' ake sure works on the i +rove ent of safet' and health of e +lo'ees and consu er. To /

with the state ent" Costa signed with *ood Standard -genc' >*S-? in 200: to ensure that the' +rovide healthier food outside the countr'

Internal
!n order to understand the internal strength and weakness of the organisation ,$ anal'sis is carried out. This would enable the organisation to understand the ,$ factors that are +roduct" +rice" +lace and +ro otion >Kerin" Aartle' and 6udelius" 2001?. This would enable the organisation to focus on the factors for increasing the business of the organisation. Product The +roducts of Costa are the trade ark of 4ualit' and e#cellence which has brought business to the organisation. Costa +rovides variet' of coffee +roducts to its custo ers which enable the to attract different kind of custo ers. The introduction of new +roducts through different store na e called Costa 3etro in &ondon" 2011 has increased the sales of the organisation. This also aids in e#+ansion of the organisation to co +ete with the largest coffee sho+s in UK. The +roducts of Costa have been distinct fro high 4ualit' +roducts fro that of others all over the ake it difficult for world that rese bles the 4ualit'. This has beco e the trade ark for the organisation. The the s+ecial coffee beans +roduced for Costa the rivals to +rovide the 4ualit' which is +rovided to the custo ers b' Costa. Price The increase in the de and for the high 4ualit' +roducts in the recent ti es has increased the cost of the +roducts. !t is not +ossible to offer high 4ualit' +roducts at chea+er +rice. Though the cost of +roducts in Costa is not chea+er" the 4ualit' of the +roducts is e#+ectation of the consu er fro Costa is focused uch higher than the other rivals. The 4ualit' of the +roduct is a++reciated b' the lo'al consu ers. The uch on the 4ualit' which would increase the +rice of the +roduct. ;ut the +rice of the +roduct could be reduced b' reducing the cost involved in the o+erations area. This would gain co +etitive advantage to the organisation. Place The location of the Costa is also one of the i +ortant factors in contributing the sales of the organisation. 7ue to high 4ualit' +roducts which kee+s the +rice higher co +ared to the rivals would be +roffered b' +eo+le who is focused on high 4ualit' +roducts and in the areas where the +urchasing +ower of the +eo+le are high. This clearl' indicates that the business 0

targets the u++er and u++er sho++ing areas and its o+erations. Promotion Costa does not focus

iddle class +eo+le. 3ost of the Costa sho+s are located at ake it easier for

alls" in order to gain the advantage b' its location. Costa also focuses

on the inventor' and eas' trans+ort facilities while choosing its location to

uch on the +ro otion fro

its beginning. ;ut it has introduced

lo'alt' cards to its custo er to build strong relationshi+ with the custo ers. This also enables Costa to +rovide offers through the lo'alt' cards. The offers were highl' utilised b' the lo'alt' consu ers. This indicates the +erfor ance develo+ ent through the introduction of +ro otions through lo'alt' cards to its custo ers. The brand na e of Costa does all the advertise ent and the word of outh fro the custo ers acts as a ain referrals. Thus re+utation s+eaks for Costa in its sales. The re+lace ent of lo'alt' cards would also transfer the credits in the +revious cards and Costa does not charge for the lo'alt' card unless ulti+le cards are re4uested within / onths ti e. The +oints in the lo'alt' card could be used to +urchase +roducts in Costa" which increases sales and revenue of the organisation. Thus fro beco e the the e#ternal and internal anal'sis that has been carried out" it is clear that the ore +ositive signs for increasing business in the near future and to arket leaders within short +eriod of ti e.

organisation shows

SWOT analysis
S()T anal'sis enables the organisation to understand the strength" weakness" o++ortunities and threats of the organisation. This enables the organisation to devise business strategies accordingl' to i +rove the business and +rofit levels >-r strong. 3. -" 200/?. Strength 6e+utation for co fort" 4ualit'" value of one' and variet' of +roducts Weakness ;eing one of the largest co +an' in coffee industr' in UK" it has weak control over the industr' with its additional advantage of !T in the organisation &ack of fle#ibilit' co +ared to the rivals 1

7evelo+ ent in the global level %fficient technolog' +rocure ent su++ort for b' infor ation organisations

7elivers good custo er care service -bilit' to change according to the arket trend in a 4uick anner and less

2ulnerable to loss of staff &ack of essential skills with so e of the e +lo'ees

;etter

financial

status

!ts o+eration is li ited in the global arena

+roble s related to deficits

7uring the new +roduct develo+ ent cash inflow is unreliable

Opportunity $otential o++ortunities in %uro+e and China b' erging" taking over and strategic alliances (ide o++ortunit' in the e erging countries like !ndia and ;raBil %#+ansion of the organisation would +rovide diversification of the organisation fro centres to local sites Continuous e#+ansion +rovides big o++ortunit' to e#+loit the share 7ifficult for the rivals to ada+t new technolog' si ilar to Costa Current strateg' of e#+ansion hel+s in e#+anding in the global level ra+idl' arket its large su+er

Threats Costa is target for co +etition as it is the nu ber one in coffee industr' both locall' and globall'

%#+osed to +olitical +roble s in the global business arket

3anufacturing cost is currentl' being reduced in this sector b' outsourcing to low cost regions that would reduce the cost +rice of the +roducts. The +rice war should be considered as threat which has the +otential t drasticall' affect the business -bilit' to change its !T function to latest technolog' would also be a threat in future when it is ada+ted b' rivals

Ob ectives and issues

!ision statement
C)ur vision is to be the best hos+italit' co +an' that there is 8 a fa il' of related hotel" restaurant and leisure club brands recogniBed b' our +eo+le" guests and investors as leaders in each arket in which we o+erateD.

"ission statement
CTo serve the best coffee in the true !talian st'le.D

Ob ective
!ncreasing the scale" arket share and the +rofitabilit' of the organisation

7evelo+ +otential new +roducts that reaches the custo ers in significant scale -c4uiring new custo ers and retaining the e#isting custo er ! +rove the custo er service offered to the custo ers

"arketing strategy
(ith the the highest arket share of 50./9 b' the end of 2010 has enabled the Costa Coffee to beco e arket share holder in UK. !t o+erates in 110. outlets inside UK in Eanuar'

2011. !t has +lanned to e#+and it to 5000. This e#+ansion +rocess is focused in o+ening new outlets near universities" hos+itals and trans+ort interchanges. !t also o+erates ,,2 stores globall' where it is also e#+ected to increase its o+eration >www.whitbread.co.uk?. The following business arketing strateg' would enable the organisation to achieve the objectives in the arket and in UK. The ,$ arketing i# strateg' has been used in order to develo+ ne#t 5 'ears ti e. This would enable the organisation to beco e nu ber one in global arketing strateg' to achieve the objectives of the organisation which as follows=

Target

arket and 3arket seg entation 10

%#+ansion through +artnershi+ *ocus on the 4ualit' and new +roducts %ffective o+erations to reduce the cost involved

"arketing im#lementation
3arketing i +le entation clearl' describes the +rocess that are to be carried out which would enable organisation to achieve the objectives that has been set for the ne#t three 'ears. This would not onl' address the +ath in which the organisation would +roceed but also address the current issues in the organisation. (hen the current issues of the organisation are addressed" it would also boost the +erfor ance of the organisation.

Target market and "arket segmentation

Costa Coffee has big a++eal in all the age grou+s. !t is not restricted to 'oung or grou+ of consu ers. The ature enu is designed in such a wa' to cater all categories of consu ers arket is seg ented to u++er iddle class

according to the +reference and 4ualit' of taste in the coffee. Since the organisation focus on high 4ualit' +roducts which has higher +rice" the e#isting custo ers were also fro has been identified that the u++er and the +rivileged class. Costa is clear that it is not focusing on the niche ature +eo+le" students and +rofessionals are arket. 3ost of its the research it ore attracted b' the

iddle and +rivilege class. *ro

+roducts of Costa. The new +roducts develo+ed in Costa 3etro were ai ed at the +rofessionals. This has been a great success and Costa has +lanned to e#+and Costa 3etro in several other +arts of &ondon and UK. Si ilarl' stores has been +lanned to o+en u+ new the universities and the hos+itals targeting the custo ers.

Increasing the market share in $% and in global environment

(hitbread +lc" the +arental organisation of Costa Coffee has ac4uired Coffee <ation for F.:.. illion >annualre+ort.whitbread.co.uk?. !t has been rena ed as Costa %#+ress adding to the nu ber of outlets to Costa Coffee in UK. %ven in the +ast Costa Coffee has ac4uired Coffee Aeaven in 200/ >www.inde+endent.co.uk?. Costa Coffee has e#+anded in UK through ac4uisition in the +ast which has +lanned to o+en u+ new sho+s in the +articular areas to increase the business of the organisation. Since the ac4uired Coffee <ation is located in Tesco stores and ostl' otorwa's" the organisation has +lanned to focus to o+en new 11

sho+s near the universities" trans+ort interchanges and hos+itals. This would enable the organisation to focus on their targeted custo ers. !n the global business environ ent" the organisation for s a +artnershi+ with the local co +etitor. This strateg' would enable to overco e the barrier of new entrants in the high +otential arket like China" !ndia and other e erging countries. This would enable the arket fro its +artners and e#+and in organisation to leverage the knowledge of the local

the region ra+idl' with its brand na e Costa. The +artnershi+ has enabled the organisation to o+en 1: new stores on 200:G2010 in %ast %uro+ean region. ;ut the +artnershi+ +lan in China and other e erging countries would enable the organisation to o+en China in 1::1 has ore than 200 stores in 2011G2012. This e#+ansion has alread' reached 100 stores in Eune. Starbucks which entered ore than .00 stores in China. ;ut the strateg' of +artnershi+ with local co +etitor b' Costa Coffee has enabled to reach 100 stores in short +eriod of ti e" would enable Costa Coffee to beco e nu ber one in China within ne#t three 'ears. Si ilar o+erations in UK and in the global arket would enable the organisation to beco e nu ber one in several new countries and retain its nu ber one +osition in UK.

&ocus on 'uality and ne( #roducts

- foundation was set u+ b' Costa to su++ort the education and job o++ortunities of +eo+le in coffee develo+ing su++lier nation such as Uganda" Costa 6ica" Colu bia and so on. The organisation has built around 11: classroo s and 22 schools" hel+ed 22 different co unities of coffee su++liers" education has been +rovided to 11"100 children and jobs to itted to raise F0.0"000 for this financial 'ear. 1:5 teachers. The organisation has also co

This would enable the organisation to develo+ sustainable su++lier with the increased abilit' to +roduce high 4ualit' coffee beans. The new +roducts introduced in Costa 3etro have been huge success and si ilarl' Costa develo+s new +roducts according to the trend in the arket. !t has co e u+ with several new +roducts for the Christ as festive season to increase the sales. (ith the sa e co its e#isting custo ers. it ent on its focus on 4ualit' and new +roducts" organisation would be able to achieve its objective of ac4uiring new custo ers and retaining

E))ective o#erations to reduce the cost involved

The organisation u+graded to 3aster 6oaster which has the abilit' to +roduce /. tonnes +er week which is al ost double the current ca+acit' of +roducing 5. tonnes +er week. This 12

would clearl' reduce the cost involved in the o+erations that would increase the +rofit levels of the organisation. The organisation started using !veco in 200: increased the ca+acit' of dail' deliver' and fuel efficienc'. This not onl' contributes to the financial growth of the organisation but also su++orts the green environ ent. The increased +rofit levels could be used to e#+ansion +rocess and other +lanned o+erations which would reduce the overhead of financial re4uire ents of the organisation. Si ilarl' training +rogra es are ade effective b' increasing the nu ber of da's to the new e +lo'ees. This would give ti e for the new e +lo'ee to get custo ise with the environ ent and co8workers. This has found to +roduce better results co +ared to the +revious ethod of training in several industries. This would enable the e +lo'ee to deliver high 4ualit' custo er service and also aid the organisation in reducing the e +lo'ee turnover rate. Aigh 4ualit' custo er service would increase the custo er satisfaction while the reduction in e +lo'ee turnover rate decreases the e#+enditure in hu an resource +rofit levels to the organisation. anage ent. -ll this contributes to the higher revenue and

Conclusion
- brief arketing research has been carried out on the Costa Coffee to understand the strength and weakness of the organisation. This has enabled to the researcher to set objectives for ne#t three 'ears. !n order to achieve the objective of the research" a++ro+riate strateg' has been devised fro the different anal'sis like $%ST&%" S()T and 3arketing i# carried out on Costa Coffee. The i +le entation +rocess enables to clearl' i +le ent the strateg' devised to achieve the objective of the organisation.

*e)erence
1. Kerin" Aartle' and 6udelius. >2001?" Marketing, The Core. ,th %dition. 3c@raw Aill $ublishing". 15

2. -r strong. 3. - >200/?" Aandbook of Human Resource Management Practice >10th edition? Kogan $age " &ondon 5. -nnual re+ort (hitbread htt+=GGannualre+ort.whitbread.co.ukG+dfsG0:10G(hitbread8-680:108Section8)ur8 ;usinesses.+df -ccessed on= 22.12.2011 ,. Costa foundation htt+=GGwww.costa.co.ukGcosta8foundationGtargets8and8achieve entsG -ccessed on= 20.12.2011 .. Current +osition of Costa Coffee htt+=GGwww.whitbread.co.ukGwhitbreadGourbrandsGcostacoffeeGwhereweare.ht l -ccessed on= 20.12.2011 /. -i of Costa Coffee

htt+=GGwww.whitbread.co.ukGwhitbreadGourbrandsGcostacoffeeGwherewe+lantobe.ht l -ccessed on= 20.12.2011 0. $%ST&% anal'sis" )#ford Universit' +ress htt+=GGwww.ou+.co GukGorcGbinG:0101::2:/501G01studentGadditionalG+ageH12.ht -ccessed on= 22.12.2011 1. !nfor ation Technolog' in Costa htt+=GGwww.tore#.co GglobalGhos+italit'Gasusedb'Gcostacoffee -ccessed on= 21.12.2011 :. ! +act of +olitical factor

1,

htt+=GGwww.thisislondon.co.ukGstandardGarticle8251/.55,8coalition8under8+ressure8 as8liberal8de ocrat8su++ort8+lu -ccessed on= 22.12.2011 10. -c4uisition of Coffee Aeaven htt+=GGwww.inde+endent.co.ukGnewsGbusinessGnewsGcosta8+a's81/55/ 8for8 coffeeheaven811,1:50.ht l -ccessed on= 02.01.2012 11. Custo er focus in Costa Coffee htt+=GGwww.whitbread.co.ukGwhitbreadGourbrandsGcusto erfocus.ht l -ccessed on= 02.01.2012 12. Costa Coffee su ar' ets.do

htt+=GGen.wiki+edia.orgGwikiGCostaHCoffee -ccessed on= 11.12.2011 15. Costa Coffee o+erations htt+=GGwww.costa8business.co.ukG -ccessed on= 21.12.2011

1.