Macro-environmental factors refer to the set of external forces which influence the development of the company but are not under its control. These factors include economic, technological, political, social, legal and environmental factors. In respect of the given case study, the Australian coffee and café industry is influenced by numerous macro environmental forces and it is vital for future business success that relevant opportunities and threats are identified in the planning stage. This will allow the business owners to mitigate the impact of the possible threats and to capitalize of market opportunities.
In term of market opportunities, the new coffee shop café venture in the local suburb will experience the following market opportunities;
Social: According to the case study, Australia has a robust coffee culture which is the major driver behind the success of cafes and coffee shops industry. Australians love quality coffee, which has led to the increased revenue in the industry. The trend of premium foods and health quality are projected to further improve the market growth and will sustain the small and speciality operators.
Industry revenue: It is projected that the industry will continue to grow over the next five years due to the increasing customer base. Industry revenue is forecasted to increase at an annualised 1.7% to $10.8 billion.
Economic: Profitability in coffee industry is highly volatile and is affected by factors such as weather. This will present a threat to new ventures in the industry since this has led to decline in market prices over the years and will continue to negatively affect the industry.
Competition: Small and specialised operators are expected to perform well in the market as compared to franchised counterparts. Yet, due to possibility of high returns the industry is highly competitive and which threatens the sustainability of the business. Business entities will have to stand out in the market through differentiation.
Product life cycle helps to inform business decision making, form promotion to pricing, to cost-cutting or expansion, by breaking the products journey in the market into four stages. These are; introduction, growth, maturity and decline.
Introduction or development is the stage in which a product is first brought into the market, before there is a proven customer base and before it has been completely tested in every aspect. The growth stage entails acceleration of product demand, while in the maturity stage, demand again decreases. Finally, in the decline stage, product begins to lose customers which leads to downward drift in sales.
In the given case study, the café and coffee industry is regarded as a mature industry due to its underperformance compared to the overall economy. However, this is not true for the local suburb venture. This is mainly due to the fact that while the overall industry is growth at a relatively slow pace, small cafes that can differentiate themselves in the market experience increasing return on investment. Moreover, small ventures are able to deliver the ambiance and the personalised care which is not the hallmark of the entire industry which makes it reasonable to presume that the effect of the relative slow growth in the industry will not permeate into the small ventures. Moreover, the key here is to find a niche market to which the business caters to, as a niche market base can provide a continuous revenue stream that can counter the effects of the market.
Market segmentation is concerned with separating the market into smaller homogenous groups of customers who share similar wants and needs. This helps to concentrate the marketing efforts to get better results. Such segmentation can be based on psychographic, socio-cultural, demographic and behavioural characteristics.
According to the market opportunities identified in the initial analysis the new coffee venture should focus its marketing efforts on the below mentioned customer profiles.
Customer profile 1
Description - Come often, spend little time, prefer eco-friendly products and does not like plastic of Styrofoam packaging. Like to know the origin and manufacturing process of the product to ensure that it is sustainable.
Age range - 25-45
What’s most important to them? - Eco friendly and sustainability
How to market to them? - Using sidewalk promotions to draw them in. Loyalty rewards and sustainable products will bring them back up
Preferred channels? - Loyalty app, email
Customer profile 2
Description - Want high quality products which differentiates them from others. Key emphasis is on differentiation, quality and luxury. Our most common customers for quick coffee and pastry
Age range - 35-55
What’s most important to them? – High quality and differentiation
How to market to them? - Delivering a luxury experience with high quality coffee with strong aroma. Special memberships can be provided, and, emails and social media can be used for promotion
Preferred channels? - Email, Facebook, direct mail, Instagram
Marketing mix includes the major areas of focus for the marketing plan. It includes a set of actions and tactics which can be employed by a company in order to promote its product and brand in the market.
Marketing mix for the new café venture is mentioned below.
Price – The café will use competitive pricing during its initial run to establish itself in the market and to attract customer base, along with premium pricing for premium options.
Product – the product portfolio includes eco-friendly and high-quality coffee. The products are further divided into different categories such as high tide, mocha, italiano etc to cater for the needs of the customer base.
People – Waiters will be the first one who will make contact with the customers in delivering the product.
Processes – Waiters will approach the customers and will share the menu; customers can decide what the want and place their order. Waiter will them send the order to the barista who will give the requested products to waiter. Finally, the waiter will deliver the products to the customers.
Physical – Good aroma and ambiance, along with pop music to deliver a great customer experience.
Communication and promotional mix to support the launch and first 3 months trading of the café:
Promotions (Word of mouth)
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