Internal and External Analysis of Costa Coffee: SMART Objectives and Marketing Mix

This report analyzes the internal and external environment of Costa Coffee, identifies the customer segment, proposes SMART objectives and marketing mix. Tools such as PESTLE, SWOT and STP models are used in this report.

Running head: MARKETING AND MANAGEMENT
Marketing and management
Name of the student
Name of the university
Author note

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Executive summary
The aim of this report is to discuss about the internal and external factors being faced by Costa
coffee in their global business operation. Various analytical tools such as PESTLE, SWOT and
STP models are being used in this report. The identified factors helped to conclude the SMART
objectives along with the recommended 7Ps for Costa coffee. Tools for measurement and
evaluation are also being discussed in this report.

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Table of Contents
Introduction......................................................................................................................................3
Analysis of the internal environment...............................................................................................4
Analysis of the external environment..............................................................................................5
Customer classification of Costa coffee..........................................................................................7
Segmentation strategy..................................................................................................................7
Targeting strategy........................................................................................................................7
Positioning strategy.....................................................................................................................8
SMART objectives..........................................................................................................................9
Proposed marketing mix................................................................................................................10
Measurement and control..............................................................................................................11
Conclusion.....................................................................................................................................11
Reference.......................................................................................................................................12

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Introduction
Contemporary business organizations are operating in more intensely competitive market
scenario along with facing added challenges in terms of external and internal environment.
Moreover, the present business scenario demands innovative business policies of the business
organizations in order to gain the competitive advantages in the market (Urbancova 2013). Thus,
effective determination of the external and internal business environment is important for the
contemporary business organizations in order identify the major trends and implanting strategies
accordingly.
One of the major profitable and competitive business sectors is the FMCG sector. This is
due to the reason that, FMCG goods are in daily use for the consumers and are consumed in huge
quantity worldwide (Stjames.gg 2018). Coffee is one of the prominent FMCG products being
sold around the world due to being treated as one of the most effective refreshment mediums.
However, coffee sector is also highly competitive with the presence of various global brands in
the market. Costa coffee is one of the leading chains of coffee shops. They are having their stores
in more than 30 countries with having their base in the United Kingdom (Costa.co.uk 2018).
Currently, they are competing mainly with Starbucks in the global market.
This report will determine the internal and external business environment of Costa coffee.
Moreover, the segment and target market of them will also be identified. In accordance to the
identified factors, SMART objectives will be discussed and effective 7ps will be proposed.
Recommendations will also be provided in terms of measurement and control.

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Analysis of the internal environment
Strengths  Wider market reach helps them to cater to more market
segments.
 Having positive brand value in the market with being the second
largest coffee chain in the world (Iglesias, Ind and Alfaro 2013).
 Unique and distinctive taste of Costa coffee compared to their
competitors.
Weaknesses  They are still very much trailing behind Starbucks.
 Less marketing inclination compared to their competitors.
 Premium pricing is restricting their customer bases.
Opportunities  Huge opportunities are waiting for Costa coffee in entering in
more countries.
 Strategic relationships with different coffee brands will help
them to grow more rapidly.
 Diversification will help them to offer different products to the
customers.
Threats  Threats of new entrants in the market with having various
smaller competitors in different countries.
 Increase in the demand for tea.
 Trailing behind Starbucks for more period of time.

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Analysis of the external environment
Political  The increase in the value added tax by the government of the United
Kingdom is increasing the cost for Costa coffee.
 Creation of barriers in the recent time causing negative implications on
sourcing the coffee beans from the producing countries (Lester and
Barbee 2013).
 Entering in foreign countries also facing the unstable political scenario
in different countries.
 These factors are reducing the competitiveness of Costa coffee.
Economical  The global economy is increasing and thus the spending power is also
enhancing.
 However, increase in the competition is reducing the profitability.
 Emergence of global economical crisis is having negative implication on
the global business operation (Singer 2013).
 Thus, Costa coffee will face more competition and uncertainly in their
future course of business.
Social  Trend of accepting coffee shops is increasing more countries.
 Coffee increasingly accepted as major refreshment drinks in some major
tea drinking countries.
 Coffee shops are complimented with corporate and white collar jobs.
 The market acceptance for coffee is increasing in the global scenario.
Thus, it will be an opportunity for Costa coffee.
Technological  Coffee vending machines are rapidly becoming popular in the market.

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 Self service is also gaining popularity in the recent times.
 Major players are initiating smart coffee shops by providing facilities
such as free Wi-Fi.
 It is important for Cost coffee to invest more in initiating latest
technologies in order to compete in the market.
Legal  Stringent laws in relations to employee health and safety are
introducing.
 Costa coffee has to adhere with different safety norms in having their
stores in different countries.
 Also important to adhere with food safety laws and legislations.
 Overlooking any of these will cause negative word of mouth for them in
the market.
Environmental  Costa coffee sources their coffee beans from the coffee plantation in
selected countries. Environmental degradation and climate control is
having negative implications on them (Eisenack et al. 2014).
 They should also look after the negative impact of the coffee plantation.
 There are laws in relation to the environmental impact of the business.
 Costa coffee should initiate sustainable strategy in sourcing their raw
materials.

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Customer classification of Costa coffee
Segmentation, targeting and positioning model (STP) will be used in order to determine
the customer segment of Cost coffee along with their targeting and positioning strategies.
Segmentation strategy
Costa coffee mainly involves two types of segmentation strategy, geographic and
demographic. In terms of the demographic segmentation, Costa coffee segments their customers
in terms of age groups, occupation and income level. They target both the teenage and adults
customers due to the fact that, coffee is targeted to all customers across every age group. In terms
of occupation, mainly the professionals are selected due to the fact that, they are in the need of
frequent coffee breaks and sorts of meetings are being done in the coffee shops itself. In terms of
income level, customers from the top of the pyramid are targeted due to the reason that, they will
pay extra for variants of coffee (Babin and Zikmund 2015). In terms of geographic segmentation
they classify the customers based on their locations.
Targeting strategy
Costs coffee involved selective targeting strategy in order to offer products according to
the taste and preference pattern of the customers. Thus, the product strategy of Costa will be
different in country A and country B. selective targeting strategy also helps them to offer
different products according to the trend of the particular age groups (Horvat, Antic and Jeremic
2015). High quality is being maintained in order to justify the premium pricing for the higher end
customers.

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High price
Low price
High customer
experience
Low customer
experience
Costa coffee
Starbucks
Caffe Nero
Pret a Manger
Positioning strategy
The above positioning map shows that, the positioning of Costa coffee is distinctive from
their competitors. While Starbucks, the key competitor of them concentrates more on user
experience, Costa is more products oriented in the premium market offerings.

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SMART objectives
Recommendations 1. Training program 2. Storing facility 3. Quality control
Specific Training should be given
in accordance to latest
business requirement.
Effective storage
facility will help in
effective inventory
management.
Initiation of stringent
quality control
process in ensuring
the quality.
Measurable Can be measured by
meeting the diverse
customer requirement.
Storing the materials
for long time period
with same quality
content.
Non-emergence of
any health issues.
Achievable Effective fulfillment of
customer requirement will
attract more customers
and revenue.
Costa is already
having expertise in
storing of coffee
beans
Qualified human
resources are
required for quality
control.
Realistic Trained and equipped
employees will lead to
introduce newer variants.
Will not face the
issue of shortage in
case of any mishaps.
Enhancement of
customer satisfaction
by providing quality
products.
Time 1 year is enough for
implementation.
1 year will be enough
given the expertise of
Costa.
2 years will be
required in setting up
the infrastructure for
quality control.

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Proposed marketing mix
Product Products should be made healthier in order to create distinctive image among
the consumers. More fusion products should be introduced in order to create
product differentiation (Kjellberg, Azimont and Reid 2015).
Price Flexible pricing should be initiated in order to cater to the middle of pyramid
and to increase the customer bases. Customer footfalls will get increased by
this.
Place Stores should be in elite areas in order to enhance the brand value. Moreover,
size of the stores will vary in accordance to the size of the market (Hollensen
2015).
Promotion Social media marketing should be initiated in order to determine the
customer trend and preferences along with identifying the customer feedback
of their existing products (Menon et al. 2015).
Physical
evidence
Packaging will be made more attractive with the use of bright colors to
attract customers. Recycled and food grade materials will be used.
Positioning Products will be positioned as more affordable in order to gain more
customer and market share (Gummesson 2014).
People Initiation of the employee training will help to provide more effective
customer services.

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Measurement and control
Key performance indicators will be used in order to determine the effectiveness of the
marketing plan. Few indicators will be rate of customer acquisitions, customer attrition and
average time for delivery (Mladenovic et al. 2013). Operations will be gauged in terms of these
performance indicators. Moreover, employee feedback mechanism will be initiated in order to
gain the operational insights from the point of the employees. Customer relationship
management should also be initiated in order to identify the customer feedback regarding the
service.
Conclusion
Thus, from the above discussion, it can be concluded that, effective implementation of
the suggested steps in this report will help Costa Coffee to enhance their organizational
effectiveness in the global market. Various threats and opportunities are being identified in this
report, which should be effectively mitigated by them in order to have more future certainty in
their business operation. The current segmentation, targeting and positioning strategies are also
being discussed in this report, which helped to identify the current marketing strategies being
practiced by them.

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Reference
Babin, B.J. and Zikmund, W.G., 2015. Exploring marketing research. Cengage Learning.
Costa.co.uk. (2018). Our Story - About Us | Costa Coffee. [online] Available at:
https://www.costa.co.uk/about-us/ [Accessed 17 Feb. 2018].
Eisenack, K., Moser, S.C., Hoffmann, E., Klein, R.J., Oberlack, C., Pechan, A., Rotter, M. and
Termeer, C.J., 2014. Explaining and overcoming barriers to climate change adaptation. Nature
Climate Change, 4(10), p.867.
Gummesson, E., 2014. Productivity, quality and relationship marketing in service operations: A
revisit in a new service paradigm. International Journal of Contemporary Hospitality
Management, 26(5), pp.656-662.
Hollensen, S., 2015. Marketing management: A relationship approach. Pearson Education
Limited.
Horvat, A., Antic, S. and Jeremic, V., 2015. A new perspective on quality characteristics
determining supply chain management of coffee production. Engineering Economics, 26(3),
pp.239-244.
Iglesias, O., Ind, N. and Alfaro, M., 2013. The organic view of the brand: A brand value co-
creation model. Journal of Brand Management, 20(8), pp.670-688.
Kjellberg, H., Azimont, F. and Reid, E., 2015. Market innovation processes: Balancing stability
and change. Industrial Marketing Management, 44, pp.4-12.

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Lester, S. and Barbee, I., 2013. The challenge of cooperation: regulatory trade barriers in the
transatlantic trade and investment partnership. Journal of International Economic Law, 16(4),
pp.847-867.
Menon, A., Bharadwaj, S.G., Adidam, P.T. and Edison, S.W., 2015. Effective Marketing
Strategy-Making: Antecedents and Consequences. In Proceedings of the 1997 Academy of
Marketing Science (AMS) Annual Conference (pp. 224-224). Springer, Cham.
Mladenovic, G., Vajdic, N., Wündsch, B. and Temeljotov-Salaj, A., 2013. Use of key
performance indicators for PPP transport projects to meet stakeholders’ performance objectives.
Built Environment Project and Asset Management, 3(2), pp.228-249.
Singer, M.M., 2013. The global economic crisis and domestic political agendas. Electoral
Studies, 32(3), pp.404-410.
Stjames.gg (2018). About us. Available at: http://www.stjames.gg/stjames_cafe.php [Accessed
on 14th February 2018]
Urbancova, H., 2013. Competitive advantage achievement through innovation and knowledge.
Journal of Competitiveness, 5(1).