Imperfectcompetition1– Costa Coffee will experience high product prices in the future as some of thefactors are affecting all the key markets including the prices of coffee andother supplies used by the business, technological advancement, and expansionand development techniques. The impact of these issues in the communication isimportant as it offers the Costa Coffee customers product as well as valuableinformation regarding the products and promotional offers. The products ofCosta Coffee have been developed to maintain the traditional taste to retainits current customers as well as attract more customers through good qualitycoffee, as the current market comprises of both local and internationalcustomers with a passion for the coffee and exceptional services offered byCosta Coffee. Starbucks are the strongest competitor to Costa Coffee with a considerableshare of market. Costa Coffee has a large share of the market compared toStarbucks the difference in this market share is marginal and therefore thedetermination of the price of the products and consumer influence among thecompetitors is not set by any of the them but set by market forces.
Number of Firms 2– Costa,the UK’s largest coffee shop chain, has more than 1,500 stores, more than twiceas many as the 658 it had in 20103.Furthermore, Costa has grown rapidly from under 2,500 stores to over 3,200today and is firmly established as the UKs favourite coffee shop chain. On thecontrary, when a firm promise that is avoided becomes an asset or a liabilityrecognised on the balance sheet as the assets or liability is recognised, theassociated gains or losses that had previously been recognised in equity areincluded in the initial measurement of the purchase cost or other carryingamount of the asset or liability.
When a gain or loss is recognised they aretransferred to the income statement, which the transaction that results from afirm commitment that is hedged affects the income statement as gains or lossesare recognised immediately in the income statement. There is no future economicbenefit arising from these assets as charges for the closure and impairment ofloss making Costa Stores principally in China and Europe (£11.6million). Thisoffset by a tax credit of £13.0million due to the change in the tax rate from20.
0% to 18.0%. As the UKs favourite coffee shop, with a network of over 2,000stores, Costa is well placed to capitalise no future market growth, but theycannot be satisfied.
Nature of the product4- Natureof products means the classification of the product and services consider itvarious attributes like: Tangible/Intangible, Separable/Inseparable,Variable/Invariable and Perishable/Imperishable. On the other hand, Productshave different characteristics and involve a different consumer purchasingbehaviour. They are different type of nature of the product in the wayconsumers buy them: Convince products – A convince product is a consumerproduct or service that customers normally buy frequently e.
g. articles such aslaundry detergents, fast food, sugar and magazines. In addition, these productsare usually low priced and planed in many to make them readily them readilyavailable when consumers need or want them. Convince products have mass promotion.
Shopping products – A shopping are aconsumer’s product that the customer usually compares on attributes such asquality, price and style in the process of selecting and purchasing e.g.furniture, clothing, used cares, airlines service etc. Shopping products haveadvertising and personal selling promotion. In addition, these products arehigh prices and are selective distribution and fewer outlets. Speciality products – A speciality productsare consumer products and services with unique characteristics or brandidentification for which a significant group of consumers is willing to make aspecial purchase effort e.g.
specific car, professional and high-pricesphotographic equipment, designer clothes or a Lamborghini etc. Specialityproducts are more carefully targeted promotion. In addition, these products arehigh price and are exclusive distribution in only one or a few outlets.Unsought products – Unsought products are those consumer products that aconsumer either does not know about or knows about but does not consider buyinge.
g. life insurance or pre-planned funeral services etc. Because of theirnature, unsought products require much more advertising, selling and marketingefforts than other types of consumer products. Unsought products have aggressiveadvertising and personal selling promotion. Costa’s product will comeunderneath convince products as people buy coffee frequently before going towork, after work or on a cold morning. Additionally, Costa Pronto is a new highspeed coffee on the go concept, which leads costa to give its customers coffeeon time, which will give Costa a competitive advantage. However, Costa’semployees working too fast can lead them mixing up orders and giving wrongorders to the wrong customers as customers will not pay and it will become aloss for Costa. Costa coffee has more than 3000 outlets and 4200 Costa Expressoutlets spread across 29 countries globally as it works with coffee growingcommunities worldwide to source of high quality coffee beansFreedom of entry 5– Costa must face the entry and exit barriers asinfrastructure and branding costa that are involved in the setup of the companyand if the business is unable to attract customers then it’s a loss for thefranchise owners.
Additionally, the coffee culture is still new to thedeveloping countries and in the developed countries there is a lot ofcompetitions between the local, national and international as the averagerevenue per customer of Costa Coffee is much less than its competitors. Relationshipbetween demand, supply and price6: Demand – The coffee shop market has seenunprecedented growth in the past and the coffee shop has fast become the placeof choice for people to meet and work. There is a growing demand for greatquality coffee than before.
However, this trend has room to continue as coffeeconsumption per capita in the UK is still relatively low in comparison to manyother countries. Costa over the past years is logical that they need to upgradetheir systems and infrastructure to cope with the greater demand the businesswill impose them. Costa Fresco is designed to meet their customers demand foran enhance food offer while food capture represents around 40% of transactionsacross the estate, their Costa Fresco store has a higher food capture rate of60%, highlighting consumers demand for fresher food and providing customerswith an opportunity to offer a wider product offering across the estate. Supply7 – Costarecognisee’s that their responsibility is to ensure sound social, ethical andenvironmental practices within their operations, supply chain and in everymarket in which they operate. Costa coffee supply chain management is affecteddue to provision of coffee and to substantial flow of data in among the variousstakeholders as the coffee supply chain involved: Thefarmers provide raw materials that include the coffee beans that meets costa’squality expectations. The private traders are the ground agents that activitiesto acquire coffee form the individual farmers and prepare if for manufacturingas the private traders select their coffee purchase based on the desirablecoffee quality.
Processing plants are the manufacturing centres that transformthe coffee beans into ready products meeting the roast quality. The primarysuppliers are the major suppliers with a strong relationship with Costa Coffeeoutlets and ensure that all replacement orders and other material are readilyavailable for Costa Coffee. Distribution are the movement of processed coffeefrom the suppliers to the warehouses. The warehouses are the storage facilitiesused by Costa that serve all local outlets and the thousands of express coffeepoints. Costa Coffee seeks to build strong relationship with their supplierswith an aim of maintaining high standards for all their supplies needs. Prices – TheCross elasticity of demand (XED)8 measuresthe percentage change in quantity demand for a good after a change in the priceof another e.g.
an increase in the price of tea by 10% and the quantity demanded for coffee increase by 2%, then thecross elasticity of demand: Substitute goods will have a positivecross-elasticity of demand: Weaksubstitutes like tea and coffee have a low cross elasticity of demand as shownin the graphs. If the price of tea increases, it will encourage some people toswitch to coffee. However, people can favourite for a particular drink is moreimportant than a small different in price. For example, Starbucks Coffee andCosta Coffee, these goods are closer substitutes as the difference is muchsmaller. The price of Costa increases, more customers will switch to anotherbrand such as Starbucks and with close alternatives, the Cross elasticityDemand will be higher. Additionally, Costa aims to increase brand loyalty andmake consumers less willing to switch to another brand as prices rise1 http://cassmba3.weebly.com/ 2 https://www.whitbread.co.uk/content/dam/whitbread/pdfs/investors/reports-and-presentations/annual-reports/2015-16/Annual_Report_and_Accounts_2015_16.pdf 3 http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/12033580/Mapped-the-spread-of-coffee-shops-across-the-UK.html4 http://smallbusiness.chron.com/classification-products-marketing-65394.html5 https://www.ukessays.com/essays/marketing/strategy-for-coffee-house-in-the-united-kingdom-marketing-essay.php6 https://www.whitbread.co.uk/content/dam/whitbread/pdfs/investors/reports-and-presentations/annual-reports/2015-16/Annual_Report_and_Accounts_2015_16.pdf(Page 136) 7 https://www.coursehero.com/file/14735942/Management-Supply-Chain-Management-in-Costa-Coffee/8 https://www.s-cool.co.uk/a-level/economics/elasticities/revise-it/cross-price-elasticity-of-demand