The study evaluated the organization of Coffeeville, a Melbourne based cafe that has been in operations for three years in terms of expanding its operational scale. Ansoff’s matrix was the major framework used in determining the potential market growth opportunities and how they could be implemented to drive sustainability within the operations. The analysis was done on the basis of a number of factors including the potential contributions, the fit with the organisational objectives, external influences and the impact on the current business. Legislative requirements and codes of practise were also discussed along with the changes that the implementation process would warrant for Coffeeville.
Table of Contents
Description of the organisation.
Analysis of the marketing opportunities.
Potential contribution to the business.
Fit with organisational goals and capabilities.
Impact on current business.
External influences on financial viability.
Provable ROI and potential competitors.
Changes required to current operations.
Changes needed to current operations.
Changes needed to maintain current quality.
Estimation of resources.
Ranking of the market opportunities.
Legislation, regulation and codes of practise.
The concept of market expansion and market growth has arguably been one of the major areas of consideration for businesses irrespective of their industry or sector. Increasing levels of competition within domestic marketplaces and the emergence of agile competitors have been some of the most prominent drivers in this regard, compelling organizations to constantly look for avenues to enhance their brand outreach. The current study highlights potential marketing opportunities for Coffeeville along with an extensive evaluation of the opportunities in terms of commercial viability and profitability in the long run.
Coffeeville operates on the basis of a partnership structure and is currently entering its third year of operations. Run by Emma and Rufus Belcastram, the cafe has been relatively well received within the consumer market in Melbourne. However, there has been a recent upsurge in the number of domestic competitors, which has made it imperative for the business to either develop its products and further penetrate the current market or look towards international markets to facilitate expansion. The key products offered by Coffeeville include high quality and fair trade coffee and gourmet food and beverages, both of which are aligned to a fast and friendly servicing model. The target market for the organisation predominantly comprises of individual takeaway and sit-downs along with groups. Following an integrated marketing mix, Coffeeville seeks to increase its revenue through highly targeted marketing campaigns along with improving their ethical and environmental positioning over time.
An accurate identification of the marketing strategies would be of paramount importance when considering the long term sustainability of the brand. According to Bamiatzi et al., (2016), market expansion is one of most strategic measures that businesses can take to ensure sustained profitability irrespective of the levels of competition within the domestic market system. One of the most appropriate frameworks to determine the potential strategies and opportunities that brands like Coffeeville comprise of in terms of facilitating growth is the matrix developed by Igor Ansoff.
According to Loredana (2016), the framework is widely referred to as the Ansoff’s matrix and essentially breaks down market expansion in to four different approaches including market penetration and development, product development and diversification. While market penetration relates to improving the sales of existing products in existing markets, market development relates to entering new markets using existing products. Subsequently, product development focuses on introducing new products to existing markets and diversification comprises of completely new products and new markets.
Figure 1: Ansoff’s matrix
(Source: Dawes, 2018)
Considering the operations and the product offering of Coffeeville, the most suitable opportunities to facilitate growth would be to either enter new marketplaces or to introduce new products to the current marketplace. Since Coffeeville has been well received in the Melbourne consumer market, it could use the Australian heritage and focus on expanding into emerging Asian economies that are gradually beginning to open up to foreign organizations. Additionally, it could also expand overseas into new markets by offering exotic and ethnic meals as new product, especially since exotic food preferences are gradually on the rise in F&B consumer markets globally (Hartman, 2016). The strategy to enter new markets using new products and existing products are aligned with the strategies of diversification and market development respectively and can be substantially beneficial for Coffeeville in the long-term.
Similarly, the brand could also utilize the strategy of introducing new products to the existing consumer market within which they operate along the lines of product development. According to Saranga et al., (2018), product development strategies enable brands to limit the exposure to competition over time, thus inducing a larger potential for sustained profitability. Liquor and alcoholic drinks could be a beneficial addition to the diverse array of coffees and beverages that Coffeeville has on offer currently.
It has been estimated that the alcohol industry contributes over $19 billion to the economy on an annual basis (Herdy, 2018). Naturally, it could be immensely profitable for Coffeeville when discussing the scope and extent of product development. Additionally, Coffeeville could also introduce vegan meats into their menus, as it has also been a major trend in the Australian food industry (Clemons, 2019). It could assist the company in catering to the steadily growing number of consumers within the Australian consensus that prefer to eat plant based protein alternatives.
The potential contributions to the business could entail a substantial increase in the profitability along with a progressive growth in the scale of the consumer base that Coffeeville serves. While market development strategies allow companies to expand their consumer bases and pull in new consumers, they also tend to improve the overall awareness of the brand (Filatotchev, Su & Bruton, 2017). Moreover, the expansion into overseas territories could also see Coffeeville accumulating foreign reserves, which would inherently be a boost to the domestic Australian economy over time.
Diversification into new markets within new products could allow the business to tap into emerging trends and patterns within global consumer bases, such as the rise of exotic meals and vegan meats. It would also be beneficial in terms of reducing the competition for Coffeeville while also allowing the brand to benefit from a first move advantage in the case of vegan meats as the concept is relatively nascent (Milosevic, 2017). Profitability and enhancements in brand awareness would also be entailed in a diversification strategy along with a larger potential to accumulate financial resources over time.
Product development could be beneficial towards the local reputation of Coffeeville within the Melbourne consumer market, thus allowing it to improve its current market share and generate higher profit margins in the long run. Additionally, a sound approach towards developing their existing products would also be aligned with the strategic directions of the company in terms of how it strives to maintain superior quality standards and increase revenue.
The strategies discussed in terms of either expanding into emerging economies with new products or existing products and develop existing markets through product development strategies are certainly aligned with the goals and capabilities of Coffeeville. One of the key strategic directions for the brand is to become an ethical and environmentally responsible company, and diversifying their product offering by integrating vegan meats would certainly be a step in the right direction. Furthermore, the brand also seeks to increase their revenue through targeted marketing strategies, which are imperative for expansion into both domestic as well as international marketplaces.
Figure 2: Rise in vegetarianism within Australia in 2012 and compared to 2016
(Source: Roy Morgan, 2016)
Coffeeville would also have to focus on training and motivating their staff members, especially when considering expanding overseas. According to Adjibolosoo, (2018), an efficient workforce is one of the key success criteria of a successful expansion strategy. Compliance and adherence to regulatory provisions would also have to be maintained to the fullest possible extent, especially since the brand wants to be recognised as an ethical and environmentally responsible company.
Considering how Coffeeville has been in operations for over three years in Melbourne, it would be safe to assume that the brand has a strong appeal within the domestic consumer market and comprises of adequate finances. Naturally, it would enhance its chances of securing additional funds in this regard when seeking to expand its domestic presence or expand internationally as consumer confidence is one of the major factors that sponsors and investors look for when financing a brand.
The strategies of diversification and market development along with product development would certainly have pronounced impacts on the current operations of Coffeeville. One of the most important areas of considerations would have to be cost benefit analysis of the chosen growth strategy, as the financial implications would be relatively immense. The foremost implication in terms of expanding into overseas territories would be the additional requirement of setting up the operations from scratch or partnering within a local organisation. Similarly, product development would entail a considerable investment into R&D, both of which could prove to be a financial drain on the company in the absence of sound financial management.
Another major impact that Coffeeville could witness in terms of introducing liquor or vegan meats into its product offerings is the lash back from the non alcoholic and meat eating consumers within Melbourne. The brand is relatively well received and has come to be known within the local consumer market. However, an abrupt change in its business operatives could lead to a substantial amount of negative press if poorly planned (Bocken, 2017). Naturally, it would be crucial that the company strategically plans the implementation of their chosen growth strategy to ensure profitability and value generation to the fullest possible extent.
A number of external influences would determine the financial viability of the growth strategies, especially when considering the strategies of expanding into overseas economies and bringing in new products within the current market system. As mentioned by (Lin & Chang, 2017), the political stability and the economic fluidity within the host country are some of the major aspects that determine the success potential for an expansion move. Naturally, the markets that Coffeeville would expand into would have to entail the same along with a relatively high ease of business formation index.
The demographic factors and the social preferences within the consumers would also have to be catered and would be major factors when considering how vegan meat is still nascent and alcohol beverages can be difficult and expensive to incorporate within a cafe model. The pros and cons of the strategy would have to be carefully evaluated by Coffeeville prior to implementation as failing to do so could lead to substantial losses for the company in the long run.
Tax impositions and alcohol tariffs would also have to be considered in both the domestic markets as well as the international markets chosen by Coffeeville for expansion (Dal Bianco et al., 2016). Poor management of the tariffs may pish the company into losses, which could subsequently affect their profitability and asset debt ratios negatively over time.
Considering the steady growth in the vegan meat industry globally, Coffeeville’s expansion into new markets and the introduction of vegan meats within their product offerings could be significantly profitable. One of the prime examples in this regard has been the growth of Beyond Meat, one of America’s most recognized vegan meat manufacturers. The sales of the company were roughly a $100 million as of 2018, but a year later, the company’s valuation rose to over $10 billion, which is 50% more than the globally renowned burger chain Wendy’s (Arends, 2019). However, investment would be sufficiently required in this regard, and the returns could require about a year or two in terms of generation. The most significant competitors would include Starbucks Coffee, Costa Coffee, Dunkin Donuts along with Tim Horton’s.
The introduction of alcohol within both domestic markets and international markets would certainly require a heavy investment, especially in terms of obtaining the necessary licenses and certifications. Considering the operations of Coffeeville within Melbourne, a liquor license would amount to roughly $429.50 (Victorian Commission for Gambling and Liquor Regulation, 2020). Additionally, the stocks and the additional equipments would roughly amount to another $100,000, which would take a minimum of 12 months to turn profitable for the company. Competitors in this regard would include Eau De Vie, Bar Americano, Beneath Driver Lane along with several other local bars.
Focusing on R&D to further develop their coffee strains and bring in improvements within their gourmet food could be substantially expensive. Australia being a developed economy is home to a number of lavish restaurants and eateries that offer premium food at premium prices. Naturally, while competing with the larger and more premium food and beverage organisations within Australia and specifically in Melbourne, the return on investment would certainly take a longer period as opposed to the other two strategies. The most prominent competitors would include Vue De Monde, Lume, Flower Drum Restaurant and others.
The changes required in terms of implementing the identified marketing opportunity of introducing the liquor and vegan meat within their product offerings within Australia would predominantly relate to employee training, marketing and a sound approach towards financial management. Cutting down operational costs along with securing external financing measures would also be imperative to cushion the business in the case of an unprecedented circumstance.
The changes needed to maintain the current quality of customer service would primarily be related to a targeted emphasis towards training and familiarizing the staff members with the new equipments and working operatives. E-learning along with on the job training would be the most suitable in this regard (Arroyo-López et al., 2017). The resources have proven to be extremely beneficial, especially when considering the nature of operations within the service industry.
The estimation of the resources for the identified strategy of introducing liquor and vegan meat into their Melbourne establishment has been presented in the form of a budget as follows:
Procurement of equipments
Certifications and licenses
Staff training and orientation
Table 1: Estimation of the resources required
The marketing opportunities in terms of either increasing the product offering within the domestic market of Melbourne or expanding into emerging economies would each comprise of their individual set of implications. While overseas expansion would lead to increased consumer awareness and a larger profitability potential, localised market development within Melbourne could lead to an improvement in terms of the long term sustainability for Coffeeville. Additionally, the financial implications would also be considerably lesser when seeking to develop the domestic market due to the prior experience and availability of local skill sets and awareness of consumer preferences (Alkasim et al.,2018).
Based on the evaluation conducted in the sections above, the opportunities could be ranked in terms of the viability and the likely contribution to the business. The ranking order has been presented as follows:
Likely contribution to the business
Develop the local consumer market in Melbourne by introducing liquor and vegan meat
Develop the local consumer market in Melbourne by introducing liquor and vegan meat
Table 2: Ranking of the growth strategies
One of the key legislations that Coffeeville would have to abide by would be the “The Competition and Consumer Act 2010 (CCA (Federal Register of Legislation, 2020)).” It outlines the various directives and provisions that businesses must maintain while serving consumers along with maintaining competition within the market system and operating ethically.
The “Fair Work Act 2009” would also be a key legislation that Coffeeville would have to keep in mind while engaging in any of the growth strategies domestically (Federal Register of Legislation, 2020). Australian regulations are relatively strict regarding employment and labour laws, and they must be complied with when considering sustainability in the long term.
Additionally, operating as a food and beverage caterer, Coffeeville would also have to adhere to the Food Standards Code as prevalent within the state of Victoria (Food Standards Australia and New Zealand, 2020). It is crucial to ensure that the provisions are maintained to prevent legal repercussions and consumer quality violations while implementing the growth strategies.
The brand would also have to factor in international regulations and domestic enactments in the case of expanding into an overseas economy, which would typically comprise of taxation, employment, anti competition and ethical operations provisions.
In conclusion, it was identified that the marketing opportunity of introducing new products to the domestic consumer market within Melbourne would be the most financially and operationally viable strategy for Coffeeville. Various strategies including market development, product development and diversification were evaluated and analysed based on their fit with the brand along with the potential returns, and the strategy of product development was found to be the most suitable. Vegetarianism and alcohol consumption were steadily on the rise within the Pacific nation, and Coffeeville could certainly tap into the same albeit in a carefully planned and strategically oriented manner.
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