The Evolution of the Gobal Trade Distribution Processes of Costa - Case Study Example

hе Еvоlutiоn оf thе Glоbаl Тrаdе Distributiоn Рrосеssеs оf costa Name: Unit: Course Name Supervisor: Submission date: Outline: Introduction Discussion Conclusion References Тhе Еvоlutiоn оf thе Glоbаl Тrаdе Distributiоn Рrосеssеs оf costa Introduction The industry of brewing coffee has been experiencing many changes over the last two decades especially in the operations of the coffee brewing companies. There have been mergers and acquisitions taking place and varying branding strategies have emerged (Allegra Strategies, 2009; p.2). These changes have resulted to increased competition among the companies. The two leading global players coffee houses in the world are the Starbucks of United States of America (USA) and Costa of the United Kingdom (UK). This paper will analyse Costa Company and explore reasons behind its success in gaining a big share of the global market and remaining to be a leading global distributor of coffee. Costa Costa is a multinational company; it is a renowned coffee house worldwide. The company is based in the United Kingdom and it is a subsidiary of Whitbread (Martin, 2011; p. 39). The company boasts of being the largest coffee chain in UK and it ranks second in the world, after the USA based Starbucks. Costa came into existence in 1971; its founders were two Italian brothers Sergio and Bruno Costa. Its main activity was to the supply of roasted coffee to caterers and people who specialized in Italian coffee shops. It came to be a subsidiary of Whitbread in 1975 through acquisition (Allegra Strategies 2004, p. 4). Since then, the company has grown tremendously in the UK and internationally. Costa coffee company has its presence in over 35 countries across the world. Currently it has 1375 restaurants in the UK, 2500 express vending facilities and 800 outlets world. Risks and risk management Just like any other business venture, there are many risk challenges facing Costa Coffee. The main risk Costa faces being the market risk that is brought about by the competitors. For instance, according to in the global arena, Starbucks is the main competitor and its prices are cheaper compared to those of Costa Coffee. Coffee is classified as a food product. This means in the handling and distribution of the product, the set health and food handling procedures should be followed. Thus in handling the coffee, Costa is faced with the risk of health and safety (Financial Times 2007, p.4). This calls for continuous monitoring and inspection of the beans from harvest to the time they become a cup of coffee. There are also legal risks that affect its operations. Different states have different legislation on the use of fresh ingrientients, this is in relation to moisture content of the beans and how they are handled. In addition, there are risks that relate to intellectual property (IP). The risk of copying design, product and concept of other companies has been a great issue for many multinationals. For instance, a legal challenge can occur between Starbucks and Costa if they copy from one another. Reputational risk is also a major concern for Costa Coffee. The fact that the main method of operation is through franchise, a failure in one shop can damage its reputation and consequently lose a big market share (Sullivan, 2011). To mitigate the risks Costa has a risk management process that is carried out through risk matrices that are aligned to the business model of the company. Costa has set strategic goals, the matrices are used to analyse risks of each strategic goal. After identification and analysation of the risks , prioritisation is done depending on either the risk is low, medium or high, the prioritisation is depended on the probable impact of the risk (Rodenberg 2013, p. 14, 16). The matrices together with the set controls normally undergo regular reviews. The management of the company carries out the regular review. The process of risk management that applied by Costa involves: i. The risks are linked to the strategic objectives of the company. ii. The management then analyses the risk taking into consideration the chances of the risk happening and its likely impacts on the business iii. After the anylising , the management puts in place the key control measures and the mitigating actions to be taken iv. The company then ensures that steps are taken to ensure the risks and the possible controls are reviewed on quarterly basis. The following table is an example of risk management process in Costa Coffee. Risk identified Mitigating control Monitoring and assurance Current status of the risk Serious health and safety risk that relates to the coffee taken Streamline food safety policies and to ensure that there is a detailed policy for the source. Predict other potential health issues in the supply chain Regular updates on the food safety are reported to the managing board Stable Risk relating to market: increased competition which is affecting the market share of the company The managing team discusses and comes up with actions to outperform the competitor. Data is produced and the executive teams monitors how the company share has/is being affected Costa is improving Risk of operation,: high labor turn over of key employees The company to continue giving the crucial employees the right rewards and recognition The human resource manager monitors the key employees leaving the company and conducts investigation to ascertain the reasons for the leaving. The department carries succession plans regularly stable Business structure The organizational structure is hierarchical. At the apex is the management board that oversees the smooth operations of the different coffee shops the distribution of the coffee beans and sourcing of the coffee from the world market. After the management board, follows the Costa business structure for the different shops. The manager in charge of the store is the head of a shop, followed by the assistant manager. After the assistant are the team leaders and finally the team members (Martins 2011, p. 43). Business model Costa business model is based on four components which stem from Whitbread, they include the winning teams, customer heartbeat, profitable growth and working together as a force for good (Ivan and Sanja 2011, p.13). These components are realised through the company’s strategy and set measures that ensure goals are achieved. Quality control The Costa coffee is operated on the principal that places the importance of quality before the cost. The quality control starts from the type of the coffee beans they use. The coffee is made from some of the world’s finest coffee beans. The quality control is also based on the environment of operation and that of the esteemed customers, thus there is a perfect environment which ensures that the food safety regulations are maintained and that the customers have a perfect surrounding for enjoying the coffee. The quality is controlled from the bean to the cup. Qualified team that ensures that the selected beans for use are of the highest quality and with the proper moisture content does the sourcing. The beans are then stored following the set guidelines food safety and health (Martins 2011, pp. 41-43). Quality is also realized during the blending and grinding. The grinding of beans is done under the watchful eye of the Costa team. The company uses Ferrario grinders which ensure high standards and aroma of the coffee is maintained. Thus, Costa coffee ensures that no other person or party is involved in its process of realizing quality coffee gets into the cup, it supervises and monitors the whole process. Expansion Costa is operated as a franchise business; this has been one of the reasons for the first growth and expansion. The franchising license ensures that the franchisee can use the logo of the Costa Company and its brand. However, Costa remains with the responsibility of inspecting the new franchised shops to ensure that they remain within the set quality standards (Sunday Times, 2008). These shops obtain their coffee from Costa Coffee. The company has expanded greatly since the acquisition by Whitbread in 1995. The company is geographic, has branches all over the world, and continues spreading. The first international store for the company was realised in 1999 this was in Dubai. Costa has an international franchise partner in UAE, the Emirates Leisure Retail (ELR) which opened the 100th store in Abu Dhabi in December 2013. At present, Costa coffee has over 2300 stores, which are mainly found in UK, Asia, parts of Middle East, Europe, and India (Rodenberg 2013, p. 9). Marketing mix of Costa Product The brand name used by the Costa coffee shops is their signature; the logo represents luxury which is the theme of the company, exhibited by warm tones and relaxing colours. The product is the exceptional service and the cup of coffee (Rodenberg 2013, p. 12). Price Products of Costa are priced highly compared to their competitors. The reason behind the high prices is the exceptional service offered and the great taste of their products. The pricing has led the company to concentrate on the higher and middle class in the targeting (Rodenberg 2013, p. 13). Place In order to set a shop, a thorough competitive analysis of the location is normally carried out putting into consideration the exposure, location, and accessibility of the location. In addition, Costa considers the availability of the transport facilities as key to the location (Rodenberg 2013, p. 19). Promotion The main promotion criteria applied by the Costa is through the brand name. The other awareness is normally carried through the word of mouth; the promotion is mainly based on the reputation. Costa verses Starbucks According to (Luiselli, 2005, p 31-46) Starbucks is the world leading coffee brewer. Compared to Costa, Starbucks has a large product line which includes variety of products such as tea, juices, smoothie, hot chocolate, special coffee, health organic sandwiches and pastry. This is unlike the Costa that have limited products. The two companies have remained to be the main competitors in the global arena. Costa does depend on its own roaster and does the blending of its coffee. The coffee that is normally sold in its shop is a blend of Robusta coffee and Arabica; the ratio used is 6 parts of Arabica coffee to four parts of the Robusta coffee (Rodenberg 2013, pp. 7-12). Sourcing and distribution The beans are sourced from all over the world, mainly from the developing countries. This means that Costa coffee does not plant its own coffee but relies on selected farmers from the developing countries. As a result, the company has started a foundation to help the farmers. This foundation is part of its corporate social responsibility and so far, it has build over 22 schools in the areas it gets its coffee. Costa does direct sales of the coffee in their coffee shops and is involved in the distribution of the coffee through supplying to supermarkets and other outlets (Martins 2011, p. 41). Conclusion Costa has remained to be a market leader in the UK for many years due to the strategies and branding measure that have been put in place. The company has always remained dedicated to high quality service which has given it the much desired success. The company has a policy which enables it to utilise the right knowledge management tools that are essential for the people with diverse cultures. The company has remained committed to advancing toward its long term goal of being the dominant and stable coffee brewing company in the world. References Allegra Strategies. (2004). UK Coffee Bar Market, retrieved http://www.allegra.co.uk/pdf-files/2004-12-00-fs.pdf 29/3/2014 Allegra Strategies. (2009). UK Coffee Bar Market Still Growing despite Recession retrieved http://www.foodbev.com/report/uk-coffee-bar-market-still-growing-despite-recession 29/3/2014 Financial Times. 2007. Costa Tops Table of Coffee Outlets, retrieved http://www.allegra.co.uk/pdf-files, pp.2-5 29/3/2014. Ivana, M.and Sanja, N. (2010). Costa coffee.The Guardian, 4 March, p.13. Luiselli, K. (2005). Costa Coffee: Self Serve Coffee Machines. Circle Pines MN:AGS publishing, pp31-46 Martin, G.S. (2011). Costa Express: Growing Business Success. Bristol: Morton Grove, pp. 38-45. Sunday Times. (2008). How Starbucks colonised the world. Retrieved http://business.timesonline.co.uk/tol/business/industry_sectors/leisure/article338109ce 29/3/2014. Sullivan, A. (2011). Costa launches heritage branding in UK. Marketing magazine http://www.marketingmagazine.co.uk/News/MostDiscussed/964788/ Rodenberg, J. (2013). Costa Coffee Verses Starbucks. London: Business Intelligence, pp. 4-24. Read More