Starting a Cafe: Analysis of External Environment, Competition, and Target Market

This report provides an analysis of the external environment, competition, and target market for starting a cafe business. It includes a discussion on PESTLE analysis, competitive advantage, and targeting young adults and teenagers as the primary market.

Introduction to Starting a Business
and Fundamentals of Marketing

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Analysis of External Environment.........................................................................................3
Competition and Competitive Advantage..............................................................................5
Target Market.........................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
This report is based on an idea of starting a cafe. Cafe is meant to provide is like an
restaurant in small form. It can also be said that cafe offers small eatery and drinks like tea and
coffee. Cafe is also known as coffee shop that provides a more clear idea what cafe is and what it
offers. Idea of cafe has been included in this report because of two reasons one is that owner
possesses relevant expertise that is professional education in cooking and bakery. Location for
cafe has been chosen which has Park in its one side and collage on other side both this element
assures that cafe business will be successful. This report includes PESTLE and Competitive
analysis and later discuss target market.
MAIN BODY
Objective behind opening a cafe is that its success will open new ways and enable to
open a big business in form of cafe chains which come under business of food chain. There are
various factors that requires to be considered while one in thinking to open a business. In context
of cafe which need to face strong competition from the starting and need to provide specific
elements that can contribute in taking advantage of competition (Rita, and et.al., 2018). Firstly
external factors are being analysed for cafe business which are known as PESTLE.
Analysis of External Environment
Political Factor- A cafe business initially possess very less chances of getting affected by
political factor. Because this factor includes political ideology and values and perception of
ruling party in UK. Food or cafe business do not get affected by any of this and that is why
initially owner do not need to consider that. However later when one cafe changes in cafe chains
this factor might affect the business.
Economic Factor- Economic factor includes consideration for economic status of people to
whom individual is offering its services. In context of cafe price policy have been kept
moderating that is affordable and reasonable for everyone and people will not have to think
before entering the cafe and price policy also have a space for those who like to sit in high end
cafe and restaurants. This way economic factor does not seem to have any negative impact
(Lowry, Michaely and Volkova, 2017). Moreover, target audience for the business is young
adults and teenagers who are always ready to spend their money at cafe and relevant services.
Social Factor- The only factor that need to be given focus is social factor for a business. This
factor includes values and opinion of people and society towards a product and service. In

context with cafe business it is important that those who are coming to cafe like taste of food and
drinks of the cafe and also the environment of cafe. Considering this factor look of cafe from
inside out have been designed which includes sophisticated modern architecture and interior
which is supposed to be like by everyone. In relation with food it can be said that initial
experiments with food and its taste have been successful. Cafe plan also includes offering diet
food and drink products and other food and drinks items will also be prepared considering health
factor as most of the people are becoming health conscious and related to social factor in food
business this is most important consideration in present day environment.
Technical Factor- Technical factors' does not have any significant impact and basic services
like pay from cards and digital payment services have been included in the business plan. Food
and drinks will be prepared in traditional way to keep their taste more organic and realistic.
Though when it comes to marketing café's marketing plan includes social media and digital
media marketing (Adamowicz and Ziółkowska, 2018). In future up-gradation in technical factors
that is concerned with marketing can be adopted by cafe.
Legal Factor- Not having a direct impact on regular business this is one most critical factor to
deal with. In legal factor one need to consider business structure and that is single proprietorship,
other legal requirements for the business is its registration and license. To acquire license for
running the cafe, procedure for food testing has to be completed by cafe and coffee shops. This
step is pending and soon will be completed by cafe before its starting.
Environmental Factor - Plan for cafe business includes due consideration on environmental
factor. Considering this factor plan has included not to use any kind of material that harms
environment and increase pollution. Business plan has also included that material that is required
for cooking is also of good quality that avoid all kind of harm on health of customers.
Considering environmental factor plan also includes that all the waste of cafe will be recycled
(Greene, 2018). This action has two-way impact recycling will reduce cost and also avoid harms
that environment can have because of waste.
After discussing features and impact of external analysis of business next important
consideration before starting a business is analysis of competition that cafe may have and how
and in what manners cafe can achieve competitive advantage.

Competition and Competitive Advantage
Competition refers to those who are working in same industry providing similar or
supplementary products and services. Competition can be simplify in a way that more than one
person is involved in a likely business and trying to win in business it means having more
customers and more financial benefits by offering something which have more value than those
what value is provided by competitors' product.
In relation with cafe industry competition is very strong as it is not something unique or
innovative and factors that enable cafe to win and stay ahead in competition is what extra and
specific value is provided by the food and drink products of a place and cafe that are different
from others.
Competitiveness in cafe industry and present competitive situation of cafe industry is very strong
as due to its increasing demand and success (SHTAL and et.al., 2018). There are various cafe
have been started and other than national and local coffee shops cafe also have to compete with
many international cafe. This clearly shows what kind of competition is being faced by coffee
shop industry. From the time cafe enters in market it needs to compete with coffee chains like
Starbucks, Costa Coffee etc.
To analyse competition for Cafe five forces model of porter have been used which
includes Threats to new entry, Threats of substitute, Bargaining power of suppliers, Bargaining
power of buyers and rivalry among existing firms. After analysis, it has been concluded that
threats to new entry are higher that created a challenge for starting business, threats of substitute
is also strong that is also a big challenge for cafe, when it comes to bargaining power of supplier
that is not a big challenges reason being there are various suppliers for the material which is
required to run cafe and prepare final products, bargaining power of buyers is also high and
propose a difficulty for business as there are many sellers and brand is new so chances of brand
loyalty are also not to gain competitive advantage.
Direct-indirect competitors for cafe are all the local cafe and international coffee chains
that are there in area where cafe is supposed to get started (Nguyen, 2016). In relation to this cafe
a big advantage lies in form of place as where cafe have been proposed to open only one cafe is
there in range of 5 kilometres and that is also local competitor. When it comes to indirect
competition restaurants and Fast food chains are strong competitors as they are offer food and
drink items and fast food chains are also an attraction for the target audience.

Discussing competitors drag attention to a major factor that is competitive advantage.
Cafe is new and about to start so it does not have any advantage in form of brand loyalty and
goodwill of the business. Advantage for the company lies in what it has to offer and how
business communicate their message in most convincing ways (Wei and Davis-Ngatai, 2017).
This cafe also have some advantage in its offerings and marketing strategies that are-
Diet food Menu- Looking at increasing number of people who are very conscious about their
health and fitness diet food menu have been proposed in business plan. This is a big point and
feature for gaining competitive advantage.
Less no. of direct competitors- Direct competitors for the cafe are also very limited in number
providing an advantage for the cafe.
Place- Target customer group of the cafe is young adults and its place that is located around
collage and Park gives it an advantage to attract its customers towards itself.
All these features of business plan and what are naturally available to cafe can work as its
competitive advantage.
Target Market
Target market of cafe is young adults and teenagers who are more likely to spend their
money at cafe. For targeting customers and market STP (Segmentation, Targeting and
positioning) strategy have been used. On the basis of this strategy market was firstly segmented
on psychographic and demographic basis. This is important as cafe business can serve to only
those customers who are in a limited access (El-Sherie and Ghanem, 2016). Psychographic
segmentation includes segmentation on the basis of thought, perception and interests. This
concluded that teenager and young adults are more likely to spend their time at cafe and middle
and old age people are less likely to go to such places and are more likely to go to restaurants.
Segmentation was later followed by targeting and number of young adults and teenagers living in
and occupying he area where cafe has been proposed to open were higher. This also suggested
that cafe should include teenagers and young adults in their target market. All the features and
strategies applied suggest that teenagers and young adults should be target audience this not just
specify who will be the target market but also justify its selection.
In relation with these it is advisable that cafe should focus on its marketing strategies and that
needs to be specific as the aidience is teenagers who are all well aware of all the strategies that
are used for marketing and this target market is also used to of different innovative marketing

strategies that are applied to them by various companies (Gujral, Rauzela and Chuchu, 2016). In
relation with marketing cafe should not only use traditional marketing techniques and social
media and digital marketing techniques because teenagers are well aware of all these techniques
and these efforts are usually ignored by them. They are need to be convinced by showing brand
personality, teenagers these days are very brand conscious and get attracted towards brand and
brand personality and for that cafe can use its unique architecture and interior.
Teenagers should be convinced by user generated content that refers to what users think about a
particular brand, and they have not yet aware of that. This will convince them to use services of a
particular place and cafe. To use customer reviews is must because for this target group this
matters.
Social groups should be targeted. Teenagers are most likely to get affected in their group. For
instance opinion of one friend is accepted by all the others and social group of teenagers and
young adults is most likely to be their friends (Huang and Wood, 2017). They need to be
delivered content when they are in group. When targeting teenagers as potential market these
strategies are very effective in context of marketing.
CONCLUSION
This report included various aspects that are required to consider before starting a
business. Cafe business that have many competitors direct and indirect. These are required to be
dealt tactfully. And as all the businesses come up with their own significance and individuality
business that have been proposed in this report have also managed to do so. Cafe in most cases
having advantage and only threat is restaurants that might resist those people who are not its
target market but are likely to visit cafe for once or twice as experience. Cafe have come up with
diet food and drinks that are a big advantage over competition.

REFERENCES
Books and journals
Adamowicz, M. and Ziółkowska, K., 2018. Assessment of Investment in the Café Service
Sector. Economic and Regional Studies (Studia Ekonomiczne i Regionalne). 11. (673-
2018-4262), pp.108-90.
El-Sherie, T.A.E.F. and Ghanem, M. S., 2016. Free Wi-Fi Service as a Competitive Advantage
in Public Cafés. International Journal of Heritage, Tourism, and Hospitality. 8(1).
Ferreira, J. and Ferreira, C., 2018. From bean to cup and beyond: exploring ethical consumption
and coffee shops. Journal of Consumer Ethics. 2(2). p.20834.
Greene, D. L., 2018. Why CAFE worked. In The Theory and Practice of Command and Control
in Environmental Policy(pp. 93-111). Routledge.
Gujral, M., Rauzela, M. and Chuchu, T., 2016. An Application of the Marketing Mix and Online
Marketing as a Business Strategy for SMME Cafés in South Africa. Journal of
Economics and Behavioral Studies. 8(3). pp.14-25.
Huang, Y. and Wood, B., 2017. Identify successful sales and Marketing strategies that affect
customer loyalty in a small coffee shop.
Lowry, M., Michaely, R. and Volkova, E., 2017. Initial public offerings: A synthesis of the
literature and directions for future research. Foundations and Trends® in Finance. 11(3-
4). pp.154-320.
Nguyen, H., 2016. Supplier Selection Process in Café Industry.
Rita, M. R and et.al., 2018. How entrepreneurs anticipate the future market: An initial approach
of a future market anticipation model for small businesses. Journal of Small Business
Strategy. 28(1). pp.49-65.
SHTAL, T. V and et.al., 2018. Methods of analysis of the external environment of business
activities. Revista ESPACIOS. 39(12).
Wei, H. and Davis-Ngatai, P.S., 2017. How to gain a competitive advantage in the healthy fast
food industry?.