Coffee Shop Market Analysis

This assignment analyzes the UK coffee shop market, exploring trends such as high spending on coffee and employee use of work time for personal errands. It examines consumer behavior and preferences, referencing sources like consumer psychology research and Tim Hortons' marketing strategies. The analysis includes case studies of Starbucks and Tim Hortons, highlighting their management practices and brand authenticity within the competitive UK market.

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Strategic marketing
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Executive summary
Strategic marketing is all about identifying needs of consumers so that a marketing plan
can be created for attainment of customer satisfaction; profitability and increased performance.
The process is carried out by providing valued products and service offering to consumers in
comparison to competitors
The present study is about strategic marketing of Tim Hortons wherein it is making an
attempt to enter in London by opening its outlet. Hence a PESLTE analysis of the UK coffee
market has been carried out followed by assessing market entry strategy, segmentation, targeting
as well as porters generic strategy.
It has been found out that start up business is the best market entry option for Tim
Hortons in the nation. This is followed by utilizing differentiation as porter’s generic strategy. It
can then make use of demographic, geographic as well as psychographic segmentation and
differentiation targeting strategy for the consumers.
It has further been recommended that the company must be aware about Brexit issue;
environmental sustainability norms; decreasing purchasing power of people while making an
entry to London. Thus value for money offerings must be provided to the consumers for gaining
a greater market share.
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Table of Contents
1.0 Introduction............................................................................................................................. 5
2.0 PESTLE analysis of UK coffee market so as to assess the opportunities and threats to be
faced by Tim Hortons and providing solutions for the same.........................................................5
2.1 Pestle analysis...................................................................................................................... 5
2.2 opportunities for Tim Hortons in UK market.......................................................................8
2.3 Recommendations................................................................................................................8
3.0 Describe the modes of market entry for Tim Hortons in UK and recommend the most
appropriate one.............................................................................................................................8
4.0 The concept of market segmentation and targeting for Tim Hortons in UK market..............10
4.1 Segmentation......................................................................................................................10
4.2 Targeting............................................................................................................................ 11
5.0 Explain porter’s generic strategies and apply the one that is suitable for Tim Hortons in UK
market......................................................................................................................................... 12
5.1 porter’s generic strategies................................................................................................. 12
5.2 Recommendation................................................................................................................14
6.0 Conclusion............................................................................................................................. 14
References................................................................................................................................... 16
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1.0 Introduction
Strategic Marketing is a technique by which a company is effectively able to differentiate itself
from the rival firms. This is done by focusing on provision of better value to the consumers in
comparison to competitors (Richelieu and Korai, 2014). The present study has made an attempt
to study the strategic marketing of Tim Hortons which is a Canadian based coffee shop and is the
largest quick service restaurant in the nation. The coffee shop is not just about serving great
coffee but also delivering highest quality services so as to become a leader in everything that is
being done by the company (Tim Hortons, 2018). The firm is making an attempt to bring the
coffee shop from Scotland to London and that is why Ashanti marketing Solution has compiled
this report. This report emphasis of the study is thus on assessing the internal and external
environment to be faced by the company in London. Emphasis will be given on carrying out a
Pestle analysis, market entry points, segmentation and targeting strategy for the company
followed by Porters generic strategy.
2.0 PESTLE analysis of UK coffee market so as to assess the opportunities and threats to
be faced by Tim Hortons and providing solutions for the same
2.1 Pestle analysis
This section has given an emphasis on carrying out macro environmental analysis for Tim
Hortons coffee shop in London. This will assist in analyzing the likely opportunities and threats
to be faced by company followed by providing solutions for it.
Figure 1 Pestle analysis diagram
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(Source: Richelieu and Korai, 2014).
 Political – The political scenario of London is quite stable thereby assisting in proper
operations of Tim Hortons. In the present times, London shares good relations with
Brazil which can be used as a source of opportunity by Tim Hortons to increase its
overall performance. The government in UK supports the new business ventures by
providing Corporation tax relief on purchase of assets like vehicles, furniture and
computer during first year of business. Research and Development (R&D) Relief is
provided to the businesses (Business startups and taxes in UK, 2018). The employers of
Tim Hortons will further be required to pay National Insurance contributions on the
earnings and benefits of the employees. The payable amount is thus dependent on what is
the earning of employee and their category letter of National Insurance (Voigt, Buliga
and Michl, 2017).
 Economic – The Brexit issue may affect the operations of Tim Hortons because of
changes in policy structure. It estimated that the country’s decision to leave European
Union might lend of economic downturn in the country followed by lowering of
consumer spending. This worked upon by offering value for money products and services
to consumers to get a substantial market share in order to survive the recession.
Figure 2 Population of United Kingdom
(Source: United Kingdom Population, 2018)
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On a positive note, the above chart suggests towards a growing trend in its population as
65.81 million people joined the city in 2017 which was 0.7 percent more than 2016 (65.38
million). This can assist Tim Hortons in bringing diversity with respect to its menu items
(Brown, 2018). A positive has also been observed in money spending by Britons in cafes
which is of 2210 pounds on a yearly basis (Jarvis, 2017). (UK unemployment rises at fastest
rate in almost five years, 2018). This issue can be sorted by Tim Hortons by offering good
wage rate to the employees so that they happily serve the consumers who come to visit the
coffee shop. It is thus required to work on its recruitment and selection front so as to offer
jobs to the able candidates.
 Social–. Britons spend more time in office than going out for lunch breaks; there will be
an increasing demand for the coffee. (Kitto, 2017). Reports further suggest that core
clients of coffee market in London are young millennial as well as parents of kids under
16 years of age. Hence, the company can create ads for this segment to lure them towards
the product offerings of the nation. Tim Hortons should introduce small portion of coffee
for attract the kids.
 Technological – London is a technology advanced nations and the citizens there like
visiting those coffee shops that are imbibed with technologies. Tim Hortons can use this
trend as an opportunity and provide options to the consumers in form of mobile ordering;
Wi-Fi facility; phone charging mats among others (Timothy, 2015). Technical soundness
is also required in marketing on social media platforms and posting attractive pictures on
sites like Instagram (Broadway, 2014). The company is further required to make use of
new equipment and machines such as hi tech gadgets and ingredients so that hot and cold
variants of coffee served to the consumers at the same time.
 Environmental – Tim Hortons can use environmental sustainability practiced by
consumers in London as a source of opportunity. This can be done by cutting on
packaging the waste so that an edge can be gained over the competitors. It can further
advertise its company as the one that adheres with environmental friendly norms and can
also support the practices related to go green. The company should start focusing on
Biodegradable packaging in UK market to reduce generation of waste and known as
environmental friendly firm (Bryer, Lebson and Montalvo, 2015).
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 Legal – Tim Hortons must be in tune with laws within UK such as data protection;
adhering with fix working hours for employees maintaining a competitive pay scale as set
by government and also following health and safety regulations. The company is also
required to be away from the scandals related to tax evasion so as to save its overall
market reputation. In another area, as company will start its operations as a start up in UK
hence it is required to adhere with legal compliance in the area of data security and
protection among others (Capurso, 2016).
2.2 opportunities for Tim Hortons in UK market
The Brexit issue may be disadvantageous for the company, as very few consumers will visit
coffee shops because of decreased purchasing power (Capurso, 2016). The GDP of nation is
growing at a faster rate than expected on account of Brexit issue but still it has been slowest
since 2012 (Partington, 2018). Tim Hortons is need to be careful and should not expect good
sales figures in the start. There may further be an increase in interest rate on a sooner basis,
which may affect overall working of the company. Unemployment in UK is on rise in present
times followed by a decreased wage structure. UK government may soon make a legal move by
demanding 25 pence tax on every cup that has been used (Cowburn, 2018).
Increasing population on a yearly basis is an opportunity to the business. London shares good
relations with Brazil. Good brand loyalty shown by Britons for quality products provided by the
company. New equipment and machines such as hi tech gadgets and ingredients will differentiate
from the competitors. The company can further work on coffee waste by using it as a landfill or
in fabricating the furniture present in the shops.
2.3 Recommendations
It has thus been recommended to Tim Hortons that the company should adhere with all the legal
policies as set by UK government so as to avoid being part of any scandals from the very start.
There is also a need to offer diversified product so as to meet the needs of increasing population
in London. The company is further required to be the technologically updated in the area of
marketing, product making among others.
3.0 Describe the modes of market entry for Tim Hortons in UK and recommend the most
appropriate one
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Modes of entry into international market described as channels, which employed by the
firm to gain an entrance into new nations. While making an entry into coffee market of London,
Tim Hortons can make use of strategic alliance wherein it can pool resources with a smaller
coffee chain and create a separate business entity. The formal process involved in setting of
strategic alliance is inclusive of developing a good strategy which should address the mission
and vision of partnership, carry out market analysis as well as competitive assessment. Then the
next step is to select a partner who can align with the firm strategically as well as culturally
(Richelieu and Korai, 2014). Last step is of structuring the alliance followed by managing it. The
process of strategic alliance will aid Tim Hortons to get information about market of London as
well as the resources that has been owned by another firm. It will thus relieve the management
from set up time and cost (Bryer, Lebson and Montalvo, 2015).
The company can further enter the market through the option of Franchisee by payment of a
royalty fee. In this regard, Tim Hortons can permit another firm to sell its product and service
offering while the other firm gets a label, trademark as well as an idea of selling product. The
procedure in franchising is inclusive of assessing as to whether the business in franchisable or
not. This is followed by carrying out an assessment of the brand as well as undertaking a
competitive franchisee strategy. The blue print of franchise is required to set which will include
fees; presence of multi or single unit opportunities; territory sizes, Proprietary products and
sources of supply among others (Broadway, 2014). Then comes legal protection of brand and
trademarks followed by developing Franchise Disclosure Document and final agreement.
Corporate structuring is also required to be done followed by advisor consulting and working
over launch and post launch consultations. This strategy will be beneficial for the company as
there will be a huge reduction in chances of business failure and the products will further get an
already established market share. This will save the cost and work related to market testing.
However, the company is further required to focus on key issues such as ownership, control,
length of agreement, capabilities and resources possessed by local firm as well as governmental
intentions.
The third entry mode is of joint ventures where in more than two independent firms joins
together so as to attain better position within the market. Both the firms will get a control over
the company and can divide the assets, expenses as well as revenues. The steps in joint venture
are inclusive of finding the right partner with whom the partnership can be carried out
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successfully. This should be followed by entering into a written contract with the partner which
includes sharing and reporting of profits; bringing resources; action plan among others. Devising
a Marketing Strategy is also an important step in joint venture followed by providing proper
training to staff members so that they can handle the new consumers (Bryer, Lebson and
Montalvo, 2015).
As per my view points, joint venture seems to be the best strategy for Tim Hortons to make an
entry into London coffee chain market. This is as Tim Hortons can easily explore the coffee
market by joining with a local firm in London. There will also be a decrease in economic and
political issues that are faced by firms when they make a direct entry. This is as brand image of
other firm can provide an advantage to Tim Hortons. In this regard, the management is required
to select that firm for the purpose of joint venture that shares common values and objectives.
These are in form of delivering superior product offering to the guests via innovation and
leadership. It should also be the one that promotes responsible agronomy practice and is
committed towards overall development of the community.
4.0 The concept of market segmentation and targeting for Tim Hortons in UK market
4.1 Segmentation
The process of segmentation is the one in which there is a division of large and heterogeneous
markets into small segments. This technique usually assists the company in serving the
consumers in an effective manner by meeting up there overall needs and requirements. It has
been known that market segmentation done by Tim Hortons has been its strong reasons for
success all over the world. The same strategy can be applied by the company in UK market. In
this respect, Tim Hortons can make use of multivariate demographic segmentation by utilizing
two or more variables so as to predict the consumer behaviour in the best possible manner. The
segmentation can be done through age being minors; middle aged and old aged people
(Broadway, 2014). Then comes the income segment where consumers can be segmented into
low, middle and high income. Gender can also be used as source of segmentation in form of
male and females.
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Figure 3 Areas to be covered by Tim Horton in UK
As per geographic segmentation, Tim Hortons can cover Cambridge, Birmingham and
Manchester such as various areas of UK. Other than this psychographic segmentation can also be
used by Tim Hortons wherein consumers can be divided on the basis of lifestyle choices such as
heavy, middle and light drinkers as well as social class such as elite and middle class (Broadway,
2014).
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4.2 Targeting
Targeting is the technique where there is a selection of potential consumers to whom product
offerings of the company can be served. The process involves for segmenting the entire market;
selecting appropriate segments and assessing as to what products can be sold to them. In this
regard, there are different kinds of strategy to target consumers but the one that used by Tim
Hortons in the UK market is Differentiation targeting strategy. This will aid in fulfilling the
needs of consumers in the best possible manner (Richelieu and Korai, 2014). Hence different
consumer segments as discussed in segmentation section can be targeted through the specific
marketing mixes that are designed to meet the needs. This is required to be done on account of
the fact that same product or service cannot be offered to all the segments (Liu and Levin, 2018).
For example, consumers who fall in old age segments have different needs with respect to
consumption of coffee in comparison to kids or adults. Same applies to lower, middle or high
income groups as they cannot buy coffee of same prices. In this regard, adult population over the
age of 25 years can benefit from the coffee shop that is open for 24 hours. The people in the age
group are true coffee lovers and need to get a caffeine fix whenever the need arises. Children can
be targeted by rolling out advertisement campaign that is full of vibrant colors, cartoons,
attractive gifts among others. Small sizes can be made exclusively for them so as to increase the
overall sales and revue figures (Heiens and et.al., 2017).
The operations of Tim Hortons in other nations have further revealed that women love its brand a
lot. The reason for the same is on account of the fact that it provides good service rather than just
coffee. With female consumers it can follow the ideology that when a company is able to reach
at people’s heart then there pockets are not far behind. This will assist in making the consumers
to become faithful coffee drinkers within UK for any time during the day rather than just in
mornings (Voigt, Buliga and Michl, 2017). Differentiation can further be made with the product
offering such as providing cookies; donuts, small sized drinks and other bakery products to kids.
Teens can be offered sugary products and caffeine such as ice capps; coffee; smoothies and
sandwiches. The product offering to young adults can be coffee; sandwiches; quick service; good
deals etc. Low sugar options can be provided to the old age people along with regular coffee.
5.0 Explain porter’s generic strategies and apply the one that is suitable for Tim Hortons in
UK market
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5.1 porter’s generic strategies
The Cost Leadership strategy – This strategy is applied when a company is leader in the
market with respect to cost. Tim Hortons is a successful restaurant chain in the Canadian market
and so it has access to capital required to enter into the UK market. The company has effective
technology and logistics and by investing into these it can cut its costs down to enter into the new
market (Bryer, Lebson and Montalvo, 2015). However, the organization also has a risk in
implement cost leadership strategy as it would not be able to cut labor, materials and facilities
cost while entering into the London market. This is because in UK labor is not cheap and being
a new market for the organization materials and other facilities would also be costly to it. The
company is further required to maintain itself in the heavily competitive market of UK when it
comes to coffee chain. This can only be possible if it keeps the cost low in comparison to its
other competitors like Starbucks, Gloria Jean’s among others. Other than this, there is further a
need to bring a cut on the overall operational cost so that profits can be met. This can be done by
keeping minimal staff members, reducing on the furniture kept within the premises; keeping
automated ordering kiosks among others (Richelieu and Korai, 2014).
Differentiation strategy - This strategy involves providing effective products or services to the
customers different from that of competitors. In order to enter into the UK market, Tim Hortons
will have to provide exclusive services to its customers by understanding their local needs. It has
to involve more specialization in coffee and donuts for which it is well known. It has to create a
different brand image in the London market (Mason, Cole and Goza, 2017). This is possible by
conducting a thorough research of the London market, carrying effective marketing as well as
delivering high quality services. However, Tim Hortons will have to be agile while
implementation differentiation strategy otherwise it will have the risk of competitors in future. It
is further essential to maintain its uniqueness of products so as to be able to compete with other
coffee chains in UK. This can be done by introducing other new flavors and recipes from all over
the world which will help in serving all types of consumers who are coming to UK as travellers
as well.
Focus strategy - Companies that focus on small or niche markets by understanding the unique
needs of the niche market will follow this strategy. Tim Hortons will first select a niche market
in London by understanding the customer needs. With this, it can also develop a unique low cost
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strategy to attract customers of the selected niche market only. The company will have to
provide well specified products and services to the customers of its niche market (Richelieu and
Korai, 2014). With this, it can also build a strong loyalty among the small group of customers
that it will serve. However, Tim Hortons will have to face certain challenges while applying
either cost focus or differentiation focus strategy. This is because it would not be enough to focus
only on one small market as this requires providing 'something extra' to the small group of
customers (Voigt, Buliga and Michl, 2017).
5.2 Recommendation
In order to enter successfully in London market, Tim Hortons should adopt differentiation
strategy. This is because Tim Hortons is a successful brand in the Canadian market with
specialization in coffee and donuts. The company has enough resources to conduct research and
development in new market so as to understand customer needs of the local market (Swinburn
and et.al., 2015). In addition, Tim Hortons can further specialize its coffee and donuts in order to
attract new customers. The organization also has the capability to provide effective customer
service by conducting training and development programs for labor to help them understand the
new market. On the other side, adopting cost leadership strategy would be riskier for Tim
Hortons s as its labor and material cost will increase in the new market of London and eventually
cost cutting would be difficult (Morhart and et.al., 2015). In addition, focus cost and focus
differentiation strategy will also be difficult for Tim Hortons to apply in London market as there
are many coffee restaurants in London that have occupied small markets. Also, Tim Hortons will
have to provide highly unique products and services in such niche markets to gain competitive
advantage and this would eventually increase cost for Tim Hortons. Thus, it can be
recommended that Tim Hortons should adopt differentiation strategy in order to enter London
market (Bryer, Lebson and Montalvo, 2015).
6.0 Conclusion
From the report, it concluded that it is a good option for Tim Hortons to make an entry to UK
market. This is as the political scenario of the nation is quite stable and there is also a presence of
coffee culture in the people. However, the company can face issues due to economic downturn
on account of Brexit issue; lowering of consumer spending among others. This can be sorted out
by offering value for money products to the consumers and utilizing good technology in its
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operations. The most suitable entry option for the company is of start up as the strategy will
provide ease to management in terms of freedom of choice and low cost involvement.
Demographic, Geographic as well as psychographic segmentation can be used by the company
followed by differentiation targeting strategy. The same has been adopted by the company in
other nations as well which has given a firm a grand success. Similar technique can be applied in
UK as well so as to attain success.
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7.0 References
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UK unemployment rises at fastest rate in almost five years. 2018. [Online]. Available through:
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