Strategic Alliances for Sustainable Growth and Competitive Advantage

The assignment aims to analyze the business planning of Coffee Bar based on IBIS report and Porter's generic strategies. The report highlights the competitive environment in the Australian café industry, with a high GDP indicating a threat of new entrants. To achieve sustainable growth, Coffee Bar can employ strategic alliances as an alternative strategy to gain competitive advantages by utilizing resources and reducing costs.

Running head: MANAGEMENT
Business Management for Coffee Bar
Name of the Student:
Name of the University:
Author’s Note:

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Executive Summary
This present report deals with the business planning of the Coffee Bar based on the IBIS
report of café and coffee industry in Australia. However, it has been received that the in
Australia there is growing demand of the café industry. For this reason the cafe shops are rising
rapidly in from the last 5 years. In the context of Coffee Bar it has been received that if many
industries operate in a same market segment then huge competition occur that affects the
profitability of the organization. Porter Five Forces analysis has been carried out in this report to
understand the industry analysis in context Coffee Bar. Therefore, Porter Generic strategies are
beneficial for such organization to gain competitive advantages in the global market.

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Table of Contents
1.0 Introduction................................................................................................................................4
2.0 Industry analysis:.......................................................................................................................4
2.1 Porter’s Five forces model analysis in context of the Coffee Bar.............................................4
2.1.1 Industry rivalry....................................................................................................................4
2.1.2 Barriers to entry..................................................................................................................5
2.1.3 Bargaining power of the customers....................................................................................6
2.1.4 Bargaining power of the Suppliers......................................................................................6
2.1.5 Substitute’s product.............................................................................................................7
2.2 Porter Generic strategies............................................................................................................8
2.3 Alternative strategy....................................................................................................................9
3.0 Conclusion...............................................................................................................................10
References......................................................................................................................................11

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1.0 Introduction
The business plan refers to the formal statement of the business objectives to get a
suitable outcome from a business. However, to get competitive advantages in a business industry
analysis and the establishment of the strategy is crucial for any business (Jain et al. 2017). This
study deals with the business planning of the Coffee Bar that is a coffee shop and situated in the
Australia. The mission of such organization is to offer a unique and comfortable environment to
their customer to be more socialized within a relaxing circumstance while taking coffee and
food. For this reason, they offer free Wi-Fi and charging station to all of their customers to make
them comfortable in their coffee house. This business planning is based on the IBIAS world
industry research report that includes essential information about the coffee shop industry in the
Australia. This report is beneficial to develop a business plan for the Coffee Bar according to the
current market analysis of the coffee industry in Australia.
2.0 Industry analysis:
2.1 Porter’s Five forces model analysis in context of the Coffee Bar
Porter five forces model is important to understand the nature of the industry in the global
market. However to establish a business plan or to develop any strategy it is crucial for any
organization to carry out an industry analysis to understand their current market position.
2.1.1 Industry rivalry
This element of the Porter five forces is one of the vital determinants to identify the
profitability and the competitiveness of an organization in the global market (Rothaermel 2016).

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Any business organization has to compete strongly in a competitive environment that often leads
the organization to face financial loss in their business. A huge number of competitors refer to
the industry rivalry where the barriers are too high. According to the IBIS World industry report
the cafe and coffee shop in the Australia has been growing rapidly since last five years and it is
expected that this industry will grow by 7% over the coming five years. This ensures a huge
competition for the Coffee Bar in their café and coffee industry in Australia. Hence, the
competitors are equal size in this industry that brings a big challenge for the Coffee Bar in the
Australian market.
2.1.2 Barriers to entry
Barriers to entry or the threat of new entrants determine the way which may be easy or
may be difficult to the organization while taking entry in a market (Zhao et al. 2016). However,
if an industry has more profit and few barriers to take entry in a new market then rivalry
increases. Hence, it is difficult for the organization to grow their business in a market where
more competitors are present. As per the IBIS World business report of the café and coffee
industry, there is rapid emergence of the café shops in Australia from last five years. The number
of the products in the café industry in Australia is growing quickly that ensures that this
particular industry is now in the growth phase of the business. In the year 2012, the GDP of the
growth of the café industry in Australia is 2.5%. This gives a clear indication of the emergence
of the new entrants as high GDP attracts the investors in an industry. Hence, for the Coffee Bar it
is important for them to make a high barrier for the new entrants otherwise their profit will start
to fall.

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2.1.3 Bargaining power of the customers
Bargaining power of the buyers leads them to show their demand for the low price and
high-quality product from any organization. However, the lower price is associated with the
lower revenue and production of the high quality product increases the production cost. Hence,
this situation leads an organization towards the lower profit (Moreno-Izquierdo et al. 2016).
Consumers are too price sensitive that brings a big threat for Coffee Bar in their business.
According to the IBIS world report, many Australian café and coffee shops has been started to
develop new products to increase their sales. They focus on the preference of new consumer and
produce new products to satisfy their customers. Hence, for the Coffee Bar, it is important for
them to develop products based on the consumer's discretionary income and the nature of
lifestyle (Laari et al. 2017). This will be helpful for them to cope up with the increased
bargaining power of the consumers. IBIS report of the café industry reveals that some customers
treat the coffee as a luxurious substitute, which is affordable. Keeping this in mind Coffee Bar
needs to set their product price that can lead them towards the profit.
2.1.4 Bargaining power of the Suppliers
Supplier's bargaining power leads the supplier to claim high price for the low-quality
materials (Safari et al. 2016). This leaves a direct effect on the profit of any organization as they
have to pay more for the low-quality ingredients. Based on the IBIS report it has been found that
there are many rising coffee shops in the café and coffee industry in Australia that ensures the
high demand of the raw materials. As a result, there is less number of suppliers in comparison to
buyers. This is a big threat for the Coffee Bar as such growing number of coffee shops in the
single market leads them to pay the high price for the low-quality raw materials, which affects
their economic stability.

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2.1.5 Substitute’s product
Introduction of the alternative products by the organization is significant for the
innovator while it may bring the threat for the other organizations (Hu and Yang 2016). IBIS
report shows that there are many competitors in the Australian café and Coffee industry and they
try to develop new innovative products according to the demand of the customers. However, is
an organization offers a good quality product with low price then it may bring a threat for the
Coffee Bar in the Australian market. Hence, by differentiating the product Coffee Bar can
achieve a unique position in the Australian café industry.
Figure 1: Porter’s Five Forces Model
(Source: Hu and Yang 2016)

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2.2 Porter Generic strategies
The value proposition is a marketing statement that is used by the business organization
to identify that why the customer will purchase their products (Ko and Liu 2017). According to
the mission of Coffee Bar, they want to provide a comfortable environment to their customers
while purchasing their products. For this reason, they offer free Wi-Fi network to their customers
to be more socialize while enjoying the coffee and food. This focuses on their value proposition
as providing such opportunity they will able to sell their product and to attract their customers. In
order to create a successful value proposition use of Porter’s generic strategies will be helpful for
such business.
Porter generic strategies include cost leadership, differentiation, and focus that are
beneficial for a firm to determine the situation of a firm whether the profitability of the firm is
below or above of the industry average (Rothaermel 2016). Cost leadership leads the
organization to become a low-cost producer in the global world. Sources associated with the cost
advantages vary based on the industry structure. In the context of Coffee Bar, they want to
expand their business as it is one of the important objectives of their business. Hence, cost
leadership will lead the organization to cut their operation cost, which enables them to increase
their profit as well to expand their business.
Differentiation strategy focuses on the product differentiation. However, product
differentiation makes a firm unique in the industry and the products are valued by the consumers
(Menon and Yao 2017). In order to build the customer base that is the prime objective of Coffee
Bar they need to offer unique service r product to the customers. This will enhance the belief of
the customers towards their service, however, offering free Wi-Fi in the cafe is a unique idea of
Coffee Bar to develop their customer loyalty and maintain value proposition.

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The focus strategy includes cost advantage and the differentiation in the target audience
(Haas and Stuebiger 2017). However, by using such focus strategy Coffee Bar will be able to
identify their target segment in the global market. This is beneficial for them to gain competitive
advantages as based on the demand of the target market this organization will be able to develop
their service and products.
Figure 2: Porter Generic Strategies
(Source: Haas and Stuebiger 2017)
2.3 Alternative strategy
A strategic alliance is an effective alternative strategy to achieve the competitive
advantages in the international market (Bayraktar et al. 2017). However, these alliances can be
made between two or more industries working in the same field. In the context of Coffee Bar,
this organization needs to be careful and should not cross the limit between the collusion and the
strategic alliances. However, strategic alliances can be applied by the business to utilize the

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resources that enable the firm to expose at the point of expense in comparison to the other
competitors, which is effective to obtain competitive advantages.
3.0 Conclusion
The above piece of work focuses on the business planning of the Coffee Bar according to
the information of IBIS report. Hence, it has been found that industry analysis is crucial for the
business organization while developing a new business plan. According to IBIS report, there is a
huge number of growing café shops in the Australian market that highlights on the huge
competition. Therefore, high GDP of café industry in Australia ensures the threat of new
entrants. Apart from this the Porters five forces and Porter generic strategies are applied by this
firm to achieve sustainable growth in the market.

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References
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