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Competitive Strategy and Positioning for Coffee Shop

1381 words (6 pages) Business Assignment

12th Nov 2020 Business Assignment Reference this

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Competition

  • Direct Competitors

There are several direct competitors in the area that offer similar products and services, hence competing for the same target market. For example, Starbuck and Gloria Jean’s are both quick-service chains that are well known for coffee and basic baked goods. There are also some of the coffee shops that has a fairly limited menu but does not a desired place for a target market.

My Coffee Shop competitive strategy is focused on the good quality of barista coffee, an extensive menu of breakfast and brunch, also the sophisticated atmosphere setting with a vintage theme as the identity of the café. By offering these products and services from the above, when the customer once have the experience, they will be excited to share their experience with family or friends and a higher chance to come back again as well.

  • Indirect Competitors

There are a few businesses around the area that serve food and beverages that could be a substitute product of My Coffee Shop. For instance, a fast-food establishment such as Mc Donald’s or Hungry Jack’s that offer breakfast and coffee that can reduce the number of a potential customer. Also, there is a beverage establishment that is trending in the market that offers substitute products such as milk tea, juice and fruit shake, which is a negative impact on My Coffee Shop.

The competitive advantage with these food and beverage establishment is that My Coffee Shop provides a portion of quality food and drink with a comfortable atmosphere for customer to dine in, rather than just fast food. Also, my coffee will have an add-on strategy that provides the customer with a range of beverage selection apart from coffee including fruit shake, juices and milkshake. With this in mind, My Coffee will not lose a potential customer and also gaining more profit to the business.

Porter’s Five Forces Analysis

  • Bargaining Power of Suppliers:

The power of bargaining of suppliers to My Coffee is considered to be weak. Even there is a possibility of raising prices, lowering quality and reducing the availability of products from a supplier that can impact the business. But since there is numerous competitive supplier available in the marketplace that gives a business a benefit to bargaining prices (Hooley, Piercy, Nicoulaud & Rudd, 2017).

  • Bargaining Power of Buyers

The bargaining power of buyers of My Coffee is moderate to high because there are many coffee shops around the area, which makes a higher number in competitors and give more substitutes for consumers. Also, the buyer is price sensitive since they are mainly a student from a university that close to the business area. So, a business to ensure the good switching costs so that the buyer would not drive the price lower (Hooley, Piercy, Nicoulaud & Rudd, 2017).

  • Industry Rivalry

The level of industry rivalry is moderate to high because a large number of café competing in market share. This might force My Coffee to drive the prices down or even loose in consumers. Otherwise, it can be a negative impact on potential profits and reputation. My Coffee should come up with a strategy such as a cost leadership or differentiation to influence the demand and stand out in the market (Hooley, Piercy, Nicoulaud & Rudd, 2017).

  • Threat from New entrants

The threat from new entrants can be both low and high. Firstly, My Coffee shop is a brand-new business, which is not a well-known brand name. The location and start-up costs are not an issue for the entry of new competitors in the market. On the other hand, there can be a few entry barriers such as patents, capital requirements or governmental restriction, which regulate the success of new entrants. However, if all the requirements are clear and the competitive stand out on their differentiation, this can be a greater threat (Hooley, Piercy, Nicoulaud & Rudd, 2017).

  • The Threat of Substitute Products

The percentage of the threat of substitute products is very high because of the different product available in the market with a lower price and benefits such as tea, juice, fruit shake, milk tea and as well as ready to drink beverages. Those substitutes are available from a various outlet such as fast food restaurant, vending machines and supermarkets, makes it convenient for customers to buy instead of buying from My Coffee products. This could lead to low switching costs of the business product to determines the threat of substitutes concern (Hooley, Piercy, Nicoulaud & Rudd, 2017).

The Differentiation Strategies

It is significant as an independent coffee shop to provide different products and services to customers to compete with other businesses for the same or slightly different price. To overcome the share market in the coffee industry, My Coffee Shop using a differentiation strategy such as loyalty program, unique design and atmosphere for a more valuable brand image as an alternative to competitors.

  • Design and Atmosphere

The design of My Coffee Shop will be vintage and more of an old-style café. Using a woodcut furniture could bring a unique attraction to the store since it is quite rare to be seen in cafeterias nowadays. Also, the music collection is fairly important for a café as well, a calmer and relaxing type of music could influence a number selling and purchasing behaviour in the business (Muhammad, Musa & Ali, 2014). Not only that but also my coffee shop provides a great customer experience paring with a free Wi-Fi service, which is necessary for target markets such as student and worker.

  • Loyalty Program

My Coffee Shop will be implementing a loyalty program, which is a system that encourages the customer to make regular purchases as an exchange for a reward. The program is available both on a physical card and Mobile Phone Application that will reward customer a free item from the menu when they reach the limited point. For example, one stamp for every single purchase and every 9th stamp it can be exchanged for a free item from the menu including food and beverage. This will provide customers with the opportunity to try out new items in which they are reluctant to spend on. This a differentiation factor because other Cafés are generally restricted to only drinks. Also, the specific program is linked to an account that the customer must sign up, which is then used to track purchase history to provide effective marketing campaign through email and instant messaging. My Coffee Shop will also use this program as a way of the cross-selling and upselling product by promoting additional stamps for certain items. As reinforced in the Journal of the Academy of Marketing Science, effective marketing promotion will help the business understand their customer to keep them satisfied which help boost referral through word of mouth to close friends and family. This provides a high level of differentiating as other Café generally does not keep track of customer record.

References

  • Hooley, G., Piercy, N., Nicoulaud, B. & Rudd, J. (2017). Marketing Strategy and Competitive Positioning. Retrieved from https://ebookcentral-proquest-com.ezproxy.laureate.net.au/lib/think/reader.action?docID=5175470
  • Muhammad, N., Musa, R. & Ali, N. (2014). Unleashing the Effect of Store Atmospherics on Hedonic Experience and Store Loyalty. Procedia – Social and Behavioural Science 130, 469-478.
  • Yi, Y. & Jeon, H. (2003). Effects of Loyalty Programs on Value Perception, Program Loyalty, and Brand Loyalty. Journal of the Academy of Marketing Science, 31(3), 229-240.

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