Case Study: Cappuccino Wars

1) The coffee culture of the United States has been taken up by a storm in the United Kingdome as well. The gourmet coffee consumption in the regions increased and the presence of four major chains of coffee in the country have enabled easy access to any type of coffee required or desired by the consumers. The reason for the increase and the popularity of the coffee bars in the region is mostly related to the lifestyle and the environment of the region. The United Kingdom is essentially a very cold region where one can feel cool winter chills even in the summer months of June and July. As a result, coffee as a beverage would have been very popular in the region. However the different hundreds of varieties made available to the consumers piqued their interest as well as their taste buds.

Previously the region was used to the unappealing black and grey coffee which did not come in many variations. However with the use of Brazilian coffee and Italian coffee making machines, the gourmet coffee bards were able to provide the customers with a diverse product offering which was delicious and attractive at the same time. The consumer as a result, is also willing to pay a high price for these coffees. The other strategy that was adopted by the coffee bars was to introduce a relaxing atmosphere and ambience at their shops. This attracted the customers to come in the shop, buy their beverages and spend some time socializing or simply catching up on current events or their work.

The other reason as to why coffee shops have become so popular in the region of UK is because of the convenience they offer. The wide spread of the shops has made its possible for the competing as well as same retailer owned shops to be located within a hundred yards of each other. This gives the customer the convenience and the choice of getting a coffee when ever they want and wherever they want. Aside from this the various flavours offered by the shops have provided the customers with an array of choices and customisation. The customers love making choices and this makes the experience of buying and consuming a complex and flavourful brew of coffee very attractive for the customers.

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Aside from this the factors would also include my personal opinion of the shop, the kind of coffee I want and the various forms of coffees that are offered by the shop. The traffic coming in and going out of the shop as well as the ambiance would also be a important facto of my decision making activity. Aside form this I would want the coffee to be healthy and prepared in a hygiene environment as a result cleanliness and hygiene would also play a crucial part in my decision of going to a certain shop for buying the coffee.

However if I have already visited the shop and bought a coffee from there, then my decision making factors would slightly change. By now I would have formed an opinion about the shop and would make my decision according to this. The opinion would be made up of my experience with the staff and the service, the experience of consuming the coffee as well my personal taste of the ambiance in the shop. The satisfaction that I derived form the coffee however would be the most important decision for me in the case of repeat purchase behaviour.

My decision to buy coffee can be a high involvement decision as well as a low involvement decision. Initially the decision to go to a shop for the first time would be a high involvement decision as I would be checking the place out and asking for reviews form people. However once I have been there the decision for going to the same shop would become a low involvement decision.

3) The leading coffee shops in the UK including Starbucks, Costa Coffee, Café Nero and Coffee Republic have all had been selling large amounts of coffee to the customers, however they have been unable to make any substantial amounts of profits. The main reason for this is that they are currently because of their expansion strategy and the product offering.

They are providing the customers with a highly diverse kind of product however the price they are charging is high and premium price based however it is not enough for them to cover the cost of the customizations and the high quality raw materials required in the manufacturing and processing of these coffees. Moreover the intense competition in the industry has made them restrict the level to which they can decrease their prices as the other company in the industry also follows the price decrease making the effect the sae. However the margin available to the companies is getting reduces

The other reason is that the expansion strategy especially by Starbucks is eating up into the target market scope and share of the branches of the various coffee bars. This has reduced the traffic coming in per bar, while the number of coffee bars have been increasing. This decrease in the traffic combined with the low margins has made the profitability of these bars almost non existent.

The option available to the coffee and related beverage retailers like Starbucks and other serious competitors is to improve the efficiency of their operations. The business will have to perform business process reengineering whereby the have to find out the various inefficiencies that exist in their business processes. Special attention has to be given to the cost inefficiencies present.

These need to be identified and improved on or eliminated. By getting more efficient in their operations the stores will be able to report profits for their operations. One of the main strategies that the companies might have to take up would be to close down its highly inefficient and loss bearing stores. Aside from this those stores which are not present at strategic location should be eliminated as well in order to cut down the costs of operations.

4) The coffee bars are usually located in the centres of the towns and the streets as this is where most of the traffic tends to pass from. The chance of getting a customer in these regions is very high. However in order to provide the coffee to places where the people actually require them would involve taking the shop to the consumers.

This would involve setting up a coffee kiosk in the school during lunch times or in the offices during lunch break. Aside from this the shops can be placed near the vicinity of large schools, colleges and office building. Placing the shop in such strategic locations will allow the customers to conveniently come to the shop themselves. Aside form this it is also possible to open a coffee bar inside a college campus as well. This is because the study cramming sessions conducted by the students require caffeine laden beverages and they would appreciate the presence of a coffee bar in such convenient vicinity.

Other locations where the presence of a coffee shop can be profitable for business as well as satisfactory for the customers would be near political and government offices, near army training camps as well as in hospitals. The presence of such coffee shops would be much appreciated in hospitals as people tend to have a lack of choice for beverages like coffee and snacks in the hospital. The coffee shops can also be located at prominent regional, national as well as international tourism spots and hotels. This would provide the tourists as well as the working staff to the coffee culture providing them will high quality coffee products at their convenience.

Reference

Thorburn, S., (2006), Analyst Comment, Marketing, p35-35, retrieved November 10, 2007

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