costa coffee differentiation strategy

costa coffee differentiation strategy

Below is the pricing strategy in Costa Coffee marketing strategy: Costa Coffee has a diverse price offering in its marketing mix, though it is influenced by competition and is slightly premium. Intra-company sales can make the price lower since the company is, in some sense, paying to itself (or another company of the same group). It is involved in CSR activities and has set up Costa foundation to get associated with coffee-growing communities around the world. Also as a part of its promotional strategy of new products the company provides free samples to its customers to get the review about product and increase it purchase intention. The industrys growth was fueled by the lifestyle changes that were created by the Italian living. Costa Coffee is rated highly among other coffeehouses globally, where it follows Starbucks in size. Costa Coffee incorporated telemetry into Coffee Nations machines, allowing the company to Differentiation is the key aspect of the companys strategy. Has data issue: false Murray McGowan, Costa Express Managing Director, comments: We are delighted to extend our global presence with our launch in Canada, a dynamic, desirable and thriving country with an established coffee culture. a Breusch-Pagan Lagrange Multiplier Tests. Who will come out on top? Environmental international policies point towards countries' carbon neutrality (CN) as a key target. The largest coffeehouse chain being Starbucks and then followed by Costa Coffee. Generally speaking, target markets usually fall into one of three segments: demographic, geographic, and psychographic. The channel value chain deals with the strategies used by the Costa Coffee to deal with the outlets to reach the customers. Tea and other Beverages of Costa Coffee are the question mark in the BCG matrix. First, it operates over 1750 outlets in the United Kingdom. In terms of standard, Costa Coffee is highly flexible and able to adjust according to customer needs. Costa has various designs of products, which have helped it secure the large market in which it operates. In all cases, the results of Hausman Tests and Breusch-Pagan Lagrange Multiplier Tests confirm that a General Least Square Estimator with an RE regression is the most appropriate model for estimating these equations, as shown in table 3. It should have the equipment that is sufficient to sustain the future increase in productivity. No. Companies in this industry have to face the entry and exit barriers as infrastructure and branding cost are involved in the setup of the company and if the business is unable to attract customers then its just the loss for the franchise owner. Therefore, organizations need to keep up with the changes to remain in the competition. Actually, the first company in the world to produce CN certified coffee is a cooperative in Costa Rica (Birkenberg and Birner, Reference Birkenberg and Birner2018; Birkenberg et al., Reference Birkenberg, Narjes, Weinmann and Birner2021). We took the information from these studies and double-checked it through the MCCs' webpages. The Costa way. Distribution strategy in the Marketing strategy of Costa Coffee Costa Coffee has more than 3000 outlets and 4200 Costa Express outlets spread across 29 But, even when the product is available, each customer willthe experience of watching a specially trained barista prepare their coffee which will take around 4 minutes for a single cup. Just shows how quickly things can change. In order to mitigate this information asymmetry, Costa Rica's 2762 Law on the Regime of relationships between coffee producers, manufacturers and exporters was enacted in 1961 to regulate coffee berry prices in the country. MBA Skool is a Knowledge Resource for Management Students, Aspirants & Professionals. However, three main groups, which include middle class people, families with kids and working professionals, can be three target markets of Krispy Kreme. Regarding coffee growers' strategies, it is important that they become fully aware of the expected responses of prices with respect to different factors and which of those factors are under their control or not. The trend has been on the increase over the years. First are some external factors, such as the international price or the impact of multinational companies. Around 8 million tons of coffee were exported from producing countries in 2019 (International Coffee Organization, 2020), which makes coffee one of the most traded food commodities worldwide (Girotto et al., Reference Girotto, Pivato, Cossu, Nkeng and Lavagnolo2018). Regarding the specific environmental differentiation strategies that we have focused on, we find that organic production tends to get higher prices, while FT mills do not report having paid higher annual average prices, which suggests the necessity of further research for a fully fledged analysis of coffee differentiation strategies. Companies in this industry have to face the entry and exit barriers as infrastructure and branding cost are involved in the setup of the company and if the business is unable to attract customers then its just the loss for the franchise owner. (Reference Varangis, Siegel, Giovannucci and Lewin2003) noted that coffee grown between 8001,200masl is usually classified as hard bean (HB) and above 1,200masl as strictly hard bean (SHB). document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Click to email a link to a friend (Opens in new window), Click to share on Twitter (Opens in new window), Click to share on Facebook (Opens in new window), Click to share on Reddit (Opens in new window), Click to share on LinkedIn (Opens in new window), Costa Coffee Differentiation Manifested Marketing, Starbucks Relationship & Services Marketing Manifested Marketing Marketing Blog, Starbucks Related Diversification | Manifested Marketing - Marketing Blog. The present paper goes beyond these approaches by considering the effect of several groups of factors, including producers' strategic decisions, coffee characteristics and external elements such as the international price. This law is intended to solve the market failures due to this information gap and to establish equitable relationships between mills and growers in such a way that the price that mills pay for coffee berries must be based on the international prices they get. More specifically, we consider two particularly relevant certifications, which are Fairtrade mills and organic coffee. The content on MBA Skool has been created for educational & academic purpose only. One of the challenges facing Costa Coffee is determining the level of productivity of the staff, because the firm relies on the productivity of different units. As a part of its customer well-being process, it sources all its raw materials like coffee beans, tea leaves and many others from Rainforest Alliance Certified farms. With the advancements in technology, the company also updates its equipment accordingly. Costa Coffee also offers coffee machines under the brand Costa Express. It contains thousands of paper examples on a wide variety of topics, all donated by helpful students. The various products are designed based on the occasions and the time of the year, as well as customer needs. Regarding external factors, as expected, the domestic coffee berry prices have reacted directly to fluctuations in the international market. The differentiation strategy helps the company to design products that are suited for the various customers. Other products include tea, Costa ice, specialty drinks, and food. For example, in a study of coffee production in the district of Agua Buena, Costa Rica; Babin (Reference Babin2015: 99) concluded that Fairtrade price premiums were inconsequential in providing support for smallholder resistance to land-use change out of coffee production. You are free to use it for research and reference purposes in order to write your own paper; however, you Also, using a good strategy of marketing mix and identify the goals, aim long-term interests and be able develop a great social media stand. FT was one of the first certifications adopted by coffee cooperatives in the early 1990s. In other words, the products are semi- standardized. The interpretation is that coffee mills are willing to pay a higher price when berry yield is higher because they can save on inputs and production costs. Mason, OH: Cengage Learning. Most famous offering of Costa coffee are: Cappuccino, Latte, Flat white, Americano, Mocha, Expresso etc. The failure of the company may not necessarily reflect the failure of all employees. It faces competitors who strive to acquire a large share of the market. IvyPanda, 27 Mar. The food industry is a big industry in the United Kingdom, which is ranked 5th among the best and most profitable industries (Costa, 2013). Sick (Reference Sick2008) suggested that Costa Rican FT cooperatives or associations incur costs related to certification, processing, financing to buy coffee from its members, traceability, and export logistics. Costa Coffee is an organization that is highly ranked in its industry globally. 2020, ivypanda.com/essays/costa-coffee-company-analysis/. These data have been widely used by other researchers (see, e.g., Mosheim, Reference Mosheim2002; Blackman and Naranjo, Reference Blackman and Naranjo2012; Babin, Reference Babin2015; Naranjo et al., Reference Naranjo, Pieters and Alpzar2019, Dragusanu et al., Reference Dragusanu, Montero and Nunn2021; among others). Costa Coffee Company Analysis. However, an increasing number of them are pursuing alternative strategies involving product differentiation, which include geographic indications of origin, gourmet and specialty, as well as environmental certifications such as: OC, FT, Eco-friendly or shade grown, among others (see, e.g., Lewin et al., Reference Lewin, Giovannucci and Varangis2004). Also, the Costa Rican Coffee Institute and the Ministry of Agriculture have designed a strategy to reduce carbon emissions in the coffee sector. Costa Rica. Mission- To save the world from mediocre coffee. The company provides two variants in its beverages like small and large. The mission of Costa Coffee is to produce the best coffee in the world and become the best/ leading coffee business (Costa Coffee, 2014). Differentiation is when a company provides different offerings to suit different customer wants, which in turn allows them to create a competitive advantage. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The major factor why the food industry is big in the United Kingdom is because it is easy to enter. Therefore, the company will need more human resource, more assets, and more equipment in the future. 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To obtain this certification, FT producers must comply with certain environmental and social standards, which include paying a fair price to farmers, transparency and accountability, commitment to non-discrimination, ensuring good working conditions, facilitating capacity building, respect for the environment, and creating opportunities for economically-disadvantaged producers (Ruben, Reference Ruben and Ruben2009). WebThe adoption of differentiation as a secondary generic strategy allows Costa Coffee A proposal to build the next generation self-serve Espresso Bar to expand the customer base by emphasizing over the unique product features. The former refers to non-quantifiable aspects, while the latter is quantifiable. One of the promotional campaigns followed by the company is ShakeUpSummer which promotes companys cold coffee products. 5. McDonalds is also emerging as a competitor in the industry. Importantly, large, diversified companies such as MCCs are more able to take the market risk and offer the farmers higher prepayments for their coffee in exchange for paying a smaller final price. Each Costa coffee treats every customer with high regards and the overall experience of the cafe is majorly dependent on its employees. Pelupessy and Daz (Reference Pelupessy and Daz2008) concluded that the highest-quality coffees harvested in the highlands of Central America obtain better prices in international markets than coffee harvested in lowland areas, which tend to be of lower quality. Therefore, the OC certification is exclusively awarded at the farm level. This enables the firm to continue to sell to business executives on their way to and from work, by offering speed, and then on their lunch-break, by offering premium priced cakes and sandwiches. In other words, there is a possibility of the company recording dismal performance, even when some employees have excelled in their units. The company has expanded since its inception and has been able to handle the growth sufficiently. This has been the major factor in its success. Therefore, measuring the specific productivity of the employees becomes a challenge. We sent an email to the cooperative managers to check the exact period during which they were certified, and the proportion of coffee sold in the FT market. (Reference Varangis, Siegel, Giovannucci and Lewin2003) argued that roaster companies pay a premium for OC because final consumers are in turn willing to pay higher prices. Farmers may be willing to accept a lower but earlier payment rather than a higher but later payment. Comment * document.getElementById("comment").setAttribute( "id", "a8f0b969a0f567da586e1e5129b09c1e" );document.getElementById("i2e65971ac").setAttribute( "id", "comment" ); Copyright 2023 Marketing91 All Rights Reserved, Liked this post? Costa introduced the first Costa Skip to document Ask an Expert Sign inRegister Sign inRegister Home Ask an ExpertNew My Library Discovery Institutions University of London King's College London University of Reading Regarding the group of intrinsic quality variables, note first that yield (the amount of green coffee obtained from a bushel of coffee berries) is positively related to berry prices (coefficient 2), as suggested in hypothesis H2, which cannot be rejected either. On the other hand, Sick (Reference Sick2008) and Jena et al. In addition, Snider et al. They define the strategy that the organization is to employ. To determine the most adequate approach, the pooled, fixed effects and random effects (RE) versions of the two specifications (equations (1) and (2)) were estimated. They are able to produce high quality products. The management of Costa Coffee is also composed of highly skilled personnel, which further increases the level of quality assurance. Hence, this completes the Costa Coffee marketing strategy & marketing mix. However, lowland producers can also increase their sale prices and survive in the coffee sector through market differentiation in terms of environmental and social attributes. However, there are also intrinsic conditions of the farm, such as adequate fertilization of plantations, that can increase the agroindustry yield of green coffee (weight of coffee seeds). This result can be explained as the combined effect of different factors. Stevenson, W. J. The Costa Coffee story began back in 1971 when Sergio and Bruno arrived in London with a burning desire to make great tasting coffee a part of everyday life. Marketing Strategy of Panasonic - Panasonic Marketing Strategy. Note: Each gray dot represents the annual average price reported by a buyer. The size of Costa Coffee restaurants, on the other hand, is big enough to hold their customers comfortably. The companies are not associated with MBA Skool in any way. Web(Caf Business 2009) Different marketing strategy of the two companies would be reflected later in this essay. Starbucks aims to deliver the best possible coffee to customers, regardless of time. (Reference Jena, Stellmacher and Grote2015) show that FT certification does not necessarily imply better prices for coffee growers (see also Bacon, Reference Bacon2005; Haight, Reference Haight2007; Weber, Reference Weber2007; Omidvar and Giannakas, Reference Omidvar and Giannakas2015). In this scenario, coffee growers face a problem of asymmetric information, as they usually lack knowledge about the expected evolution of international prices, which are highly uncertain and fluctuating. (LogOut/ They also need to keep up with the changes that occur in the business world, which means that they have to keep up with the change (Stevenson, 2011). They need to keep expanding to broaden their consumer base and profitability. It should maintain and improve on this trend for it to be well positioned for future competition. The price of coffee also varies according to the supplement added to coffee like extra chocolate, cream etc. The needs of customers also keep changing. According to the Costa Rican Coffee Institute (ICAFE, 2017), 43,035 coffee growers, 246 coffee milling companies, 76 exporting firms and 65 roasting firms were operating in Costa Rica in 2017. Secondly, we cannot reject our first hypothesis (H1) regarding the coffee berry prices reported by multinationals. (Reference Castro, Montes and Raine2004), in Central America coffee production supports 291,000 farmers and provides around 1 million seasonal jobs. The beverage giant does not currently have any hot-drink offerings or direct retail outlets. These efforts are expected to be rewarded by higher prices in the market. The company offers a lot of variants and flavours in coffee. Table 3. The names and other brand information used in the Marketing Strategy & Mix section are properties of their respective companies. Whitbread is financially strong having properties/infrastructure to support Costa coffee. Setting up a small roastery in Fenchurch Street, they committed to crafting the finest quality coffee. Being the experienced brand with strong foothold, the company uses differentiation as a tool to reduce the pressure by other brands. Samper (Reference Samper2010) claims that while growers in highlands tend to produce higher-quality coffee and earn significant price premiums, those in lower areas offer lower quality and focus on output volume instead. As the company continues to predict and anticipate more growth, it also plans for its capacity expansion. Following is the distribution strategy in the Costa Coffee marketing mix: Costa Coffee operates in nearly 3000 outlets spread over 30 countries. March 27, 2020. https://ivypanda.com/essays/costa-coffee-company-analysis/. The drink will literally move from introduction into decline, with no scope for extension strategies. Therefore, quality The brand has always had a strong focus on providing quality coffee and baked goods at an affordable price. Therefore, it should embrace technology in its production (Stevenson, 2011). Therefore, if FT mills operate inefficiently, these expenses can overcome the FT price premium before it reaches coffee growers. WebThrough differentiation generic strategy, Costa Coffee B Project Marlow positions its product offerings in a way to stand out and be different from the available alternatives. WebBusiness level strategy concerns with business operations and their performance within similar markets. This is a complete contrast to Starbucks. Samper (Reference Samper2010) argued that quality and the use of organic production systems are positively related to better prices for coffee growers in Costa Rica. The reason is that, in a highly competitive global coffee market, quality coffees are increasingly in demand and high-quality coffee can receive better prices than FT certified coffee. Required fields are marked *. It is imperative to note that the level of competition continues to intensify as companies continue being innovative owing to the advancement in technology. The most important marketing strategy followed by the company is to get word of mouth publicity from its customers as the brand Costa coffee not just provides coffee but also the experience. In the agricultural sector, some special focus has been given to coffee and livestock (ngel-Valds and Pintor-Pirzkall, Reference ngel-Valds and Pintor-Pirzkall2017; Birkenberg and Birner, Reference Birkenberg and Birner2018). Its brand of coffee has an Italian origin, which is a differentiation strategy. It used to supply to Italian coffee shops, as well as other caterers. Figure 1. Each outlet of Costa Coffee has very nice sitting arrangement. In fact, 92 per cent of coffee farmers have plots that are less than 5 hectares in size and 6 per cent have plots that are between 5 and 20 hectares (ICAFE, 2017; Dragusanu et al., Reference Dragusanu, Montero and Nunn2021). Therefore, FT certification can be one additional channel of coffee sales in international markets, which may complete the cooperatives' portfolio of clients, mainly when the world production rises. We received complete answers from COCAFE and four other cooperatives. It has been noted that these phenomena are clearly present in the coffee sector, as well as in other strategic activities dependent on absolute advantages linked to natural resources, such as soil productivity or climate. where there is high footfall. WebExpanding the coffee shop in France can achieve a positive income and profitability becoming a recognized internationally brand of coffee shop as Costa or Starbucks. Whitbread planned to list Costa as an independent publicly traded company which would have taken up to two years, but the company was under pressure from investors to turn its focus to its Premier Inn hotel operations. Is Costa owned by Coke. The use of a multi-brand strategy, moreover, emphasises this contrast. Nominal coffee prices. Costa Coffee Marketing Strategy comprises of not only its Marketing Mix, but also segmentation, targeting, positoning, competition and analysis like SWOT. The company leads the park in most of the countries in Europe where it operates. The domestic prices were originally in the domestic currency (colon). The remainder of the paper has the following structure. Regarding the independent variables, some of them are qualitative and some quantitative; the former pertain to buyers and coffee characteristics, while the latter refer to coffee berries yields and international prices. This fee might take the form of higher prices for goods they sell and/or lower prices for the commodities they purchase (Teece, Reference Teece1985: 237). Strategic management. Organic coffee in Costa Rica, Analysis of management and site factors to improve the sustainability of smallholder coffee production in Tarraz, Costa Rica, Price determinants in top-quality e-auctioned specialty coffees, Multinational Enterprises and the Global Economy, Adaptation in a multi-stressor environment: perceptions and responses to climatic and economic risks by coffee growers in Mesoamerica, Environment, Development and Sustainability, Fairtrade Coordinator for Costa Rica and Panam, Real estate sentiment as information for REIT bond pricing, Foreign direct investment and agribusiness chains in Costa Rica: toward a typology, The broad spectrum of possibilities for spent coffee grounds valorisation, Journal of Material Cycles and Waste Management. Can coffee certification schemes increase incomes of smallholder farmers? WebAbstract. professional specifically for you? Similar objectives were set in various countries around the world (see Zou et al., Reference Zou, Xiong, Xue, Zheng, Ge, Wang, Jiang, Pan and Wu2021), including Costa Rica. The coffeehouse was set up in 1971 by the Costa brothers, Sergio and Bruno. We utilize security vendors that protect and This seems simple right? coffee prices Costa Rica differentiation strategies multinational companies panel data analysis quality JEL classification Q11: Aggregate Supply and Demand Multinational companies (MCs) control value-added activities in several countries (Dunning and Lundan, Reference Dunning and Lundan2008). Agricultural policies in Central America promote high altitude coffee cultivation, as HB and SHB coffee enjoy more prestige and better prices in international markets (Castro et al., Reference Castro, Montes and Raine2004; Pelupessy and Daz, Reference Pelupessy and Daz2008). Those groups in which the buyer i only reports purchases for one year during the sample period were not included in order to reduce the bias that could be introduced by companies that bought coffee in a speculative and non-systematic manner. It appears your prediction was wrong. March 27, 2020. https://ivypanda.com/essays/costa-coffee-company-analysis/. The use of technology was a huge boost in the service portion of their vertical integration. In what follows, we detail each of the factors under consideration. As mentioned earlier, Costa Coffee operates in an industry that is highly competitive. The company also engages in product development, which is a very significant factor for the future performance of Costa. Annual average prices of coffee berries reported by mills in US$ per bushel from 20072008 to 20152016 coffee harvests. WebThe four strategies are summarised in the figure below: The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry Coefficient 8 reveals that MCCs have paid, on average, 16.8 per cent less than other types of coffee mills. Also in Costa Rica, Senz-Segura and Ziga-Arias (Reference Senz-Segura, Ziga-Arias and Ruben2009: 130), using sampling matching techniques found that growers that sold coffee to non-FT mills reached higher incomes, bore higher expenditures levels, and enjoyed better perception of their organization. Costa coffee also sells its products to businesses and caterers for example the company sells its vending machines to corporate offices and colleges under the brand name of Costa express. In addition, it owns about 1100 outlets in the overseas countries (Costa, 2013). Also read Costa Coffee SWOT Analysis, STP & Competitors. Change). Coefficient 10 shows that, as expected (hypothesis H4), higher prices have been paid for organic than for a conventional coffee. In recent years, Dunkin Donuts has also been focusing on making its products more health-conscious. View all Google Scholar citations c Given that logIP does not vary between the groups of the panel, controlling for temporal effects was not carried out because the international price (logIPt) captures these effects. Table 1 shows basic statistical information about the domestic price and the international price. Costa coffee also modifies its menu according to the country in which it operates to gain more customer base. Some steps have already been taken in this respect. Forecasting can either be qualitative or qualitative. Nominal coffee prices. Wheelen, T. L., & Hunger, J. D. (2012). This is a much more effective and affordable way to reach your customers and generate business. In the international market, the company is operating in over 30 countries and has about 1100 stores. Within this system, we take a specific price indicator for Other mild arabicas, which is how Costa Rican coffee is classified (ICO, 2011). The coffee value chain is made up of coffee growers, coffee milling companies, exporting firms and roasting firms. To address these problems, we use the Panel Corrected Standard Errors and the Prais-Winsten estimator, which allows us to correct the problems of heteroscedasticity and autocorrelation following a first-order autoregressive process, even when the panel data is not balanced (Baltagi and Wu, Reference Baltagi and Wu1999; Freybote, Reference Freybote2016), as is the case in this study. First details the completed background research and product concepts for Costa Coffee. The employees are trained on how to handle customers and how they should conduct themselves when in the organization. (Reference Varangis, Siegel, Giovannucci and Lewin2003), Pelupessy and Daz (Reference Pelupessy and Daz2008), and Samper (Reference Samper2010). Coffee bars have 5% penetration in India which itself portrays the opportunity lying ahead. Lets hope consumers find the coffee good enough to be worth the wait. Some of them are external to the control of the coffee growers, such as the international price of green coffee or the power of multinationals; others, such as the altitude where the coffee is harvested or the berries' yield, are related to coffee quality but difficult to modify by coffee growers. Among such forces, we identify three groups. Hostname: page-component-75b8448494-2jmwc Costa coffee also markets its merchandise to companies and florists. Coffee growers who aim at being certified as OC must comply with a strict package of technological and environmental standards, including the following practices in their farms (Van der Vossen, Reference Van der Vossen2005; Blackman and Naranjo, Reference Blackman and Naranjo2012): (i) using composted organic matter rather than chemical fertilizer inputs.

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