SWOT Analysis of Costa Coffee: Impact on Customers, Competitors, Employees and Society

This report provides a SWOT analysis of Costa Coffee and its impact on customers, competitors, employees, and society. It includes an analysis of the internal and external environment of the company, economic-environmental factors, and the behavior of the company. The report also discusses the company's strengths, weaknesses, opportunities, and threats.

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ECONOMICS
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3/12/2019

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Contents
Introduction......................................................................................................................................2
Company brief.................................................................................................................................3
Internal environment........................................................................................................................3
External economic environment......................................................................................................5
Economic-environmental factors.................................................................................................5
Impact of the behavior of company 300..........................................................................................9
Customers....................................................................................................................................9
Employees/ suppliers...................................................................................................................9
Competitors................................................................................................................................10
Society.......................................................................................................................................10
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

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Introduction
A company needs to analyze the internal and external environment of the company, before
making any decision related to business. The reason being, a company is influencing industry,
and is getting influenced from the industry, which increases the need for the company to assess
the external environment (Boone, 2016). Moreover, the company’s behavior is also influencing
various stakeholders like employees of the company, customers of the company, and competitors
of the company and also affecting overall society. This will be discussed in detail while
considering an organizational case that is of Costa coffee.

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Company brief
Costa coffee is a multinational coffeehouse, based in London, established in 1971. This is one of
the popular coffee shops, which has expanded the business in various nations. The parent
company is Coca-cola Company, which is one of the largest companies in the beverage industry.
The costa coffee, initiated the business as a supplier of roasted coffee wholesaling to caterers,
and also as an Italian coffee shop as specialists. This is the 2nd largest coffee chain globally and
found to be largest in United Kingdoms (costa.co.uk, 2019).
The major products of the company include hot drinks that include teas, coffee, and hot
chocolates; cold drinks that include fruit coolers and frosting; cakes and pastries, which includes
brownies, cookies, and croissants; and savory snacks including breakfast food items and
sandwiches (Chan & Khodakarami, 2014).
Internal environment
Considering the internal environment of Costa coffee, it can be analyzed through a SWOT
analysis of the company.
Strengths
 Widespread operations – The Company has the operation in the various nations, and
various locations within a country, which is responsible for the decrease in risk for the
company.
 Premium quality – The quality is the key strength of the company, for which the
company is able to ask for higher prices from the customers.

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 Brand recognition – The company is the largest coffee shop in Uk, which reflects the
strong brand recognition globally.
 Brand positioning as a premium (Bull & Sitas, 2016)
Weakness
 Major competition – Starbucks is the major competitor of the company, and stand in the
first position for the coffee shops globally, and the gap between two positions is very
much.
 Need for more aggressive strategy – The company requires a more aggressive strategy to
beat Starbucks.
 Lack of advertising – The advertising and the promotional strategy of the company is not
intensive.
 Price – The price of the company is higher than that of Starbucks, which could be a
weakness for the company as it can target only higher income group (Chan &
Khodakarami, 2014).
Opportunities
 Market expansion – The Company can gain opportunity through expanding business in
the market, which is not tapped by the company yet.
 Product differentiation – The Company can increase the products and service to be
offered to the customers.
 Innovation through services – In order to sustain in the industry and retain the existing
position, the brand must include innovation and become more of service oriented
company (Finne, 2017).

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Threats
 Indirect competition – Other beverages can be indirect competition for the company,
which can be a threat to the company.
 The decrease in brand value – In case the company do not comes up with any innovation,
it can be possible to lose the brand value in the near future.
 Change in customer preferences – The customer taste and preferences can be changed in
the near future, which could be a threat to the company (Hunt & Bicen, 2017).
The aim or the objective of the company is to expand its product offering to the customers,
leaving a positive impression on the customer’s mind. Moreover, the company mission includes
saving customers from mediocre coffee globally (Salar & Salar, 2014).
External economic environment
Considering the industry in which the company operates is very competitive industry due to ease
of entry into the industry, although a Costa Coffee major competitor is Starbucks, as both are the
premium brands in coffeehouse industry (Kolk, 2016).
Economic-environmental factors
For analyzing the economic environment of the company in the United Kingdom, various factors
include taxes, exchange rates, which affect the business in the nation. These factors include
 Tax rates – The corporate tax of UK, as per statistics are decreasing since years, which
reflect the opportunity for the firm to increase revenue and impact positively on the
company, this can be identified from the figure below, which shows statistics from 2006
to 2018 (theglobaleconomy, 2019) .

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Figure 1 : (Source: (theglobaleconomy, 2019)
 Corruption – This is another factor which affects the business. As per the figure below,
which include the control of corruption in the UK, the control seems to be strong, which
is positive for the company to do business in the UK (theglobaleconomy, 2019).
Figure 2: (Source: (theglobaleconomy, 2019)

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 Exchange rates – As per the exchange rate of the UK considering with USD in February
2019 was 0.789, which is fluctuating in the nation (theglobaleconomy, 2019).
Figure 3: (Source: (theglobaleconomy, 2019)
 Globalization – This can be reflected through economic globalization index of UK, which
indicates the economic flows among the nation and rest of the globe in terms of
international investment and international trade. As per the statics, this index has been
shown the increase in value, as presented in the figure below (theglobaleconomy, 2019).

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Figure 4: (Source: (theglobaleconomy, 2019)
Considering the industry in which the company is operating, Costa coffee has increased the
number of coffee shops in the United Kingdom from 2008 to 2018. The number of Costa coffee
shops in the nation is presented below in the figure (statista, 2018).
Figure 5: (Source: (statista, 2018)

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Impact of the behavior of company 300
The behavior of the company is influencing various stakeholders of the company. For instance:
Customers
The impact of the company’s behaviors can be reflected through the elasticity of demand of the
company due to the change in prices of the company.
From the diagram above, it can be said that the elasticity of Costa Coffee is relatively elastic, the
reason being the company’s is dealing with luxurious products. It can be said that the original
price of Costa coffee product (P1), when decreases, shifting from P1 to P2, reflects a greater
difference in the quantity or demand of the products sold. This means that a slight decrease in the
price of the company can influence customer behavior to a large extent, because of the customer
loyalty towards the company, which is reflecting the elasticity of demand. The elasticity of
demand is greater than one for Costa Coffee (Finne, 2017).
Employees/ suppliers
Considering the employees of the customer, and farmers of the company growing good quality
coffee for the company, the company has initiated various corporate social responsibility
programs like rainforest alliance (costa.co.uk, 2019). According to this program, the company

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claims its coffee to be cent percent certified as rainforest alliance, which brings education,
healthcare, and sustainable crops to workers, farmers or the company and their family, which
ensuring that the land of its farmers are used optimally and are best-taken care of (costa.co.uk,
2019).
Moreover, costa foundation is also providing farmers who are growing coffee and their
communities an opportunity to gain an education. This CSR activity of the company was held
responsible for building educational facilities and schools in various nations which have also
impacted society as a whole (Chan & Khodakarami, 2014).
Competitors
The impact of the company to its competitors is a negative impact. This means, an increase in
demand for the products for the company, impact negatively for its competitors and vice versa.
The company has affected its competitors and also gets affected by the competitors. In the UK,
the costa coffee is ranked at first position, affecting the Starbuck, its direct competition to a
greater extent. Moreover, the increase in the opening of stores in the nation, affect the coffee
shops in that area to a great extent (Chung et al., 2015).
Society
Considering the society, the sustainable act of the company has influence society. For instance,
the company is gradually working for environmental sustainability through a reduction in the
impact of the company through recycling activities, the use of technically advanced machines,
and the use of renewable energy. Moreover, the impact of the company operates on society is
through generating employment (costa.co.uk, 2019). The company has increased the store's
number gradually in various nations, for which the company has provided jobs to many

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unemployed residents of the nation. Moreover, to save the environment, the packaging of the
company was changed, that is the use of paper cups (costa.co.uk, 2019).

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Conclusion
From the report, it can be concluded that Costa coffee is a multinational coffeehouse, based in
London, established in 1971. This is one of the popular coffee shops, which has expanded the
business in various nations. This is the 2nd largest coffee chain globally and found to be largest in
United Kingdoms.
The company’s strengths include widespread operations, Premium quality, Brand recognition,
and Brand positioning as premium which has affected the business and the behavior of the
company has also affected the customer behavior and demand, competitors strategy, employees
that are farmers, suppliers of the firm, and society as a whole through its corporate social
responsibility, which includes rainforest alliance program, costa foundation program, and
environmental sustainability.

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References
Boone, A., 2016. Preparing for the ingestion of SWOT data into continental-scale river models.
In EGU General Assembly Conference Abstracts, 18, p.11068.
Bull, J.W. & Sitas, N., 2016. Strengths, Weaknesses, Opportunities and Threats: A SWOT
analysis of the ecosystem services framework. Ecosystem Services, 17(1), p.99.
Chan, Y.E. & Khodakarami, F., 2014. Exploring the role of customer relationship management
(CRM) systems in customer knowledge creation. Information & Management, pp.27-42.
Chung, K.H., Yu, J., Choi, M.G. & Shin, J., 2015. The effects of CSR on customer satisfaction
and loyalty in China: the moderating role of corporate image. Journal of Economics, Business
and Management, 3(5), pp.542-47. Available at: http://www.joebm.com/papers/243-
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costa.co.uk, 2019. costa-foundation. [Online] Available at:
https://www.costa.co.uk/responsibility/costa-foundation/.
costa.co.uk, 2019. home. [Online] Available at: https://www.costa.co.uk/.
costa.co.uk, 2019. responsibility/environment. [Online] Available at:
https://www.costa.co.uk/responsibility/environment/.
costa.co.uk, 2019. responsibility/our-cups. [Online] Available at:
https://www.costa.co.uk/responsibility/our-cups/.
costa.co.uk, 2019. responsibility/rainforest-alliance. [Online] Available at:
https://www.costa.co.uk/responsibility/rainforest-alliance/.

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Finne, A., 2017. Communication-in-use: customer-integrated marketing communication.
European Journal of Marketing, 51(3), p.445.
Hunt, D. & Bicen, P., 2017. The FREE (Firm Resources and External Environment) Framework
as an Alternative to SWOT: An Abstract. In Academy of Marketing Science Annual Conference,
p.49.
Kolk, A., 2016. The social responsibility of international business: From ethics and the
environment to CSR and sustainable development. Journal of World Business, 51(1), pp.23-34.
Salar, M. & Salar, O., 2014. Determining pros and cons of franchising by using swot analysis.
Procedia-Social and Behavioral Sciences, pp.515- 519.
statista, 2018. number-of-costa-coffee-stores-in-the-united-kingdom-uk. [Online] Available at:
https://www.statista.com/statistics/283302/number-of-costa-coffee-stores-in-the-united-
kingdom-uk/.
theglobaleconomy, 2019. United-Kingdom/corporate_tax_rate. [Online] Available at:
https://www.theglobaleconomy.com/United-Kingdom/corporate_tax_rate/.
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https://www.theglobaleconomy.com/United-Kingdom/exchange_rates/.
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https://www.theglobaleconomy.com/United-Kingdom/kof_econ_glob/.
theglobaleconomy, 2019. United-Kingdom/wb_corruption. [Online] Available at:
https://www.theglobaleconomy.com/United-Kingdom/wb_corruption/.

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