Business Health Check Report: Costa Coffee Analysis and Strategy

This report provides a detailed business health check of Costa Coffee, examining its objectives, internal and external factors, and potential areas for improvement. The analysis includes a PESTEL analysis, Porter's Five Forces, and a SWOT analysis to assess the company's market position and competitive landscape. The report also explores the application of the Ansoff Matrix to identify growth strategies, focusing on market penetration, product development, and market development. Furthermore, it evaluates the effectiveness of the business, proposes plans for improvement, and analyzes the current skills of management and staff, including plans for skill development. The report concludes with recommendations for Costa Coffee to enhance its performance and achieve its objectives in the competitive coffee market.

Business Health Check

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Objectives of businesses...................................................................................................3
1.2 Factors which affect the process of business....................................................................4
1.3 Improvement and changes to the business operations and processes...............................7
M1 SMART objectives .........................................................................................................8
D1 Analyse how Ansoff Growth Matrix helps in business improvements............................8
TASK 2 ...........................................................................................................................................8
2.1Effectiveness of the business.............................................................................................8
2.2 Develop plans for improving business and defining the value ........................................9
M2 Evaluate the impact of business areas of the organisation.............................................10
D2 Critically analyse development of plan in improving the business ..............................10
TASK 3..........................................................................................................................................11
3.1Evaluation of current skills of the management and staff...............................................11
3.2 Plans for the development of skills for management and staff......................................12
M3 Analyse the current experience, abilities and skills of management and staff .............14
D3 Methods that can used for developing skills of management and staff .........................15
CONCLUSION..............................................................................................................................16
RECOMMENDATION.................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Business health check is the way of analysing and examining both external and internal
environment by business organisation as this can help in making business sustainable and
successful (Abdelhak, 2014). It is related to process of monitoring where all necessary factors of
company are being evaluated which lay down negative impact upon growth, success, cash flow
and profitability. In present report the base company is Costa Coffee which is British
Multinational coffee house company situated in Dunstable. It was founded in 1971 by Bruno and
Sergio Costa. This present assessment includes objectives of business along with different
external and internal factors of business operations. It has been discussed about requirement of
potential improvement with the objective to make some modifications in operational functions of
organisation. Along with this level of effectiveness is been examined to know about necessity of
formulation of development plans for company. Lastly, this report covers discussion concerned
with current skills of employees by which organisation can be successful in competitive business
environment.
TASK 1
1.1 Objectives of businesses
The mission of Costa coffee is to save world from mediocre coffee and become worlds
successful coffee business in terms of customer preference and increased return on investment
(Arntz-Gray, 2016). The company Costa coffee offers products and services at international level
so they focuses on product development and market development so that there is increase in
profit and sustainability. The revenue of company is £1.167 billion and parent company is Coca-
Cola. It captures 39% market share and target high and medium class people. Also their aim is to
leave long term positive impression on customer's. The objectives of Costa Coffee are listed
below:-
 Expand product offerings in China, Middle east region and India.
 Increasing level of awareness among public related to social issues in developing
countries with the help of Costa Foundation.
 Focus on expanding markets outside UK and continuously focusing on offering better
loyalty and reward programmes

1.2 Factors which affect the process of business
Their are various factors which impact business processes. To identify and analyse these
factors different tools can be utilised which are as follows:-
PESTEL Analysis of Costa Coffee
 Political Factors- There is great influence of political environment on performance of
Costa Coffee. Their is increase in prices of products offered by Costa Coffee because of
high rate income tax (Brown, and et. al., 2014). As Costa coffee produces good quality
of coffee and producers earn increased profits from fair trade practices. Costa is
expanding its business at global level by opening new coffee shops which leads to
promotion of economy and provide employment opportunities to local people.
 Economical Factors- The various economic factors includes inflation rate, employment
rate and national income of country. Due to rate of unemployment the purchasing power
of customer's goes down as there is decrease in level of their income which leads to
decrease in sales for Costa Coffee. Also to remain in market aim of Costa is to offer
quality of products and services by reducing their prices and this help company to be
leading coffee brand in UK and international level.
 Social Factors- There is rise in demand for products of Costa as there is increase in
standard of living of people of UK (Chadwick, and et. al., 2012). Consumers are now
becoming aware and consider many social factors so Costa Coffee must focus on
fulfilling corporate social responsibility as this will help to attract and retain customer's
for long term. Also, there is increase in sales of coffee because now customer's have
decrease consumption of Alcohol.
 Technological Factors- The introduction of latest technology and software has provide
assistance to make innovations in their production and services. These factors help Costa
Coffee to create competitive edge by implementation of techniques and tools which will
help in increasing both productivity and efficiency. The company has enhanced their sale
by adoption of e-commerce methods and updates selling strategy. Also, management of
Costa has utilised technology with execution of electronic point of sales system (EPOS)

 Environmental Factors- This factors is very much important for Costa Coffee as this
helps in long term growth and development. As there is more emphasis is given to protect
environment so, paper cups of Costa are prepared from sustainable wood pulp from
forest of Europe. Also, it has achieved first international environmental accreditation for
coffee roastery in 2012. along with this focus is given of reducing carbon emissions as
coffee machines automatically goes to sleep when not required which shows environment
concern of Costa Coffee (Chang, , and et. al., 2016).
 Legal Factors- All necessary patterns of business regulations are followed by Costa
Coffee. Also, they emphasis on continuous improvement of security and well- being of
consumer's and employees. This company produces healthy food products as it has
signed agreement with Food Standard Agency.
PORTER'S FIVE FORCES MODEL
 Competitive Rivalry- Their is fierce competition which is faced by Costa Coffee in food
service and coffee house industry. It helps company to identify about level of competition
for Costa coffee at marketplace. The company face high degree of competition as their
many competitors which are Starbucks, Dunkin Donuts and Mc cafe.
 Bargaining power of Costa Coffee Buyers- Customer's have strong influence in
international market as they have strong bargaining power. The various factors affecting
business of Costa coffee includes low switching cost, small size of individual customer's
and more substitutes are available to customer's.
 Bargaining power of Costa Coffee Suppliers- Costa Coffee has weak bargaining power
as it has medium size of suppliers and considered as external factor for company
(Ghaddar, and et. al., 2012). To compete against competitor’s suppliers frame and use
different strategies and competencies with various companies.
 Threat of substitution of Costa Coffee Products- This factor lay down major impact on
profitability of company as there are many substitutes available to customer's at
marketplace. Their is high threat for Costa Coffee as there are many close substitutes
available in market. Some of variants for Costa coffee products are drinks, instant
beverages, energy drinks and many more.

 Threat of new entrants and new entry- for every business organisation there is threat of
new entrant and substitute. In context of Costa Coffee, there are many companies which
have ability to take over this company so there is high degree of threat and competiton..
Major competitors of Costa Coffee at international level are Starbucks, McDonald's, Cafe
Coffee Day, Mc Cafe and KFC (Goins, 2013).
SWOT Analysis of Costa Coffee
Strengths
 It has strong presence at global level as
it is 2 largest coffee chain with 3401
stores in 31 countries.
 Costa coffee offers wide range of
products as compared to its competitors
(Hyppönen, 2015).
 The company has strong brand image
and visibility in market.
Weaknesses
 The market strategy of costa coffee is
inefficient and ineffective.
 The prices charged by Costa Coffee are
expensive so not affordable by
categories of all people.
 Costa coffee has low degree of
sustainability in case of competitive
advantage.
Opportunities
 Costa coffee has opportunity to pursue
aggressive marketing strategy for
expansion.
 This company can also focus on
developing healthier and low caffeine
products.
 It is enjoying competitive advantage
from its new parent company that is
Coca Cola.
Threats
 There is threat to increase in prices of
raw material for coffee beans.
 Now, customer's consider coffee as
unhealthy beverage.
 Also there is increase in indirect
competition for Costa Coffee.

1.3 Improvement and changes to the business operations and processes
The Ansoff matrix is known as strategic planning tool which assist leaders, marketers and
managers to formulate strategies for success and growth (Laws, 2015). This was propounded by
Igor Ansoff consist of growth strategies including market penetration and development, product
development and diversification which helps in identification of growth opportunities for
business organisation. With reference to Costa Coffee the various growth strategies are described
below:-
Market penetration – As per this with the help of market strategy a company can achieve
success and increase their profit by selling existing products and services of the company.
Market penetration is strategy with less risk as there is no or little investment. Also, company
focuses on effective utilisation of existing resources of the company. This strategy is not fruitful
for Costa Coffee as this will not help in increasing level of satisfaction of customers.
Product development- According to this strategy company develops new product and
launch in existing market. The main objective of this strategy is to attract more and more
customer's as this will help in increasing profits for the company. This is beneficial for Costa
coffee as this will help in attracting large number of customers by providing them with
innovative products.
Market development- In this growth strategy businesses emphasis on selling existing
products in new market. This strategy has high degree of risk as there is huge investment
requirement so as to establish product by capturing new market share. Costa Coffee offers coffee
and beverages so it has opportunity to launch its products in new market in more countries.
There can be financial loss to company as customer's are not linked to this company (Lehto,
2012).
Diversification- In this organisation tries to increase their market share by introduction of
new products in new markets. As per this strategy companies have high degree of risk because
product and market both are new for company. With reference to Costa coffee this will result
into financial loss and requires aggressive marketing for success of company.
M1 SMART objectives
A SMART objective is refer to as mnemonic of specific, measurable, achievable, relevant
and time bound. These objectives are created for increasing the performance and profit of the

company. SMART objective of Costa Coffee is “To increase the sales of Costa Coffee by 50%
within 7 months”.
D1 Analyse how Ansoff Growth Matrix helps in business improvements
Ansoff matrix comprise of four strategies which assist organisation in determination and
identification of various growth strategies of business. The best growth strategy that can be used
by Costa Coffee is either product development or market development (Lencioni, 2012). This
strategy will help company to attract and retain more number of customers for long term and
increase its profit. Product development will help This company to grab profit in market
segmentation and increases the value of company by offering new rich coffee to customers
whereas market development help costa coffee to capture new market share by influencing new
customer's.
TASK 2
2.1Effectiveness of the business
In context of business, effectiveness is referred to quality of results which is derived from
activities and tasks which are completed by both employees and managers at workplace. In
context of Costa Coffee effectiveness of business can be built by use of various strategies which
will help to gain competitive advantage at international level. Effectiveness play major role in
every area of business as this helps to know about value of firm in minds of people in effective
way. Some areas where effectiveness of business is considered are given below:-
Marketing: This is concerned with exchange of relationship with management system in
business organisation. In context of Costa coffee different strategies are used so good
relationship is maintained with customer's. As this relationship is advantageous for company
which help in enhancing marketing growth in appropriate way. Thus it is important to maintain
effective relations with customer's.
Product and services: If organisation wants to grab opportunities than management
should focus on improving products and services by effective process. With reference to Costa
Coffee it offers various products and services such as cold coffee, hot coffee, ice-cream and
smoothies so as to cater needs and expectations of customer's (Lundén, and et. al., 2014).

Finance: The most important part for every business is finance and it is necessary to
prepare effective budget to accomplish objectives. In context to Costa coffee the products are
offered to medium and high class profile which help to increase profits and grab future
opportunities. Also, sales can be increased with motive to increase profitability.
Staffing: For making better effectiveness the management department of Costa Coffee
focus on providing training by various programmes by which their workers are aware about their
rules and policies in a perfect way (Philbin, and Kennedy, 2014). Therefore, it shows the
effectiveness of this business in a systematic manner.
Sales: Costa Coffee uses various kind of strategies like attractive offers on their product
or buy 1 get 1 offer so that they can enhance the sales of Costa coffee at their stores all over the
world which shows the effectiveness of this organisation and help to get increased profits and
sales effectively.
2.2 Develop plans for improving business and defining the value
The development plan is called as written document which describes about goals and
objectives, methods and strategies helpful in meeting objective and purpose of business in
effective manner. With reference to Costa Coffee, managers develop effective business plan with
objective to enhance sales and growth of company (Robson, and et. al., 2017). Therefore,
business plan helps in bringing new and innovative product at marketplace that can be inbuilt
chip in coffee cups for payment, for which they are required to follow some factors which are
described below:-
Marketing planning: As per this factor, management prepares effective plan so as to
attain higher level of skills. Various strategies can be utilised to fulfil customer's needs and
expectations. In order to attract more customer's effective marketing strategies can be adopted
and several websites, social media platforms can be used. Also, focus is given on increasing level
of awareness in minds of customer's.
Sales and productivity: Various tools and techniques like sales promotion, personal
selling can be used to influence and increase sales of company. This assist manager to increase
profits and sales of Costa Coffee by using various online channels for marketing and advertising
their products, services as well as their company.
Financial management systems: The management of Costa Coffee make effective
financial plan concerned with marketing, sales, finance management, and productivity of goods.

This system is very much effective for proper management and control of financial activities for
products of company. Manager of Costa coffee have adopted good financial system for
innovative product that is in-built chip in coffee cups.
Roles and responsibilities of staff and management: As per above analysis managers
allocate roles and responsibilities to their employee's as per their skills in order to generate
various kinds of policies and ideas which leads to effectiveness of company and its products. For
instance, role of customer executive is to solve issues of customer's and maintain their
satisfaction in effective and efficient manner.
M2 Evaluate the impact of business areas of the organisation.
There is positive and negative impact on areas of business organisation. The different
areas like marketing, finance etc. puts huge contribution for development company. At Costa
coffee, managers are dependent upon various strategies and policies which help to increase their
share of profit at marketplace (Porter and Tanner, 2012). As per business plan of Costa coffee
they have applied innovative techniques so that customers are influenced and market share is
increased. Also to attract more and more customer's creative promotional and advertising
strategies are offered by costa coffee in effective and efficient manner.
D2 Critically analyse development of plan in improving the business
In order to fulfil needs and expectations of customer's the business plan of costa coffee
put into application unique tools and techniques. The manager of company develops plans in
order to produce effective products. Development plan helps to analysis strengths, weaknesses,
opportunities and threats which further helps in making improvements in business effectively.
Therefore, business plan assists executives and managers of Costa Coffee to develop effective
plan which helps in accomplishment of goals and objectives in specified time frame. A effective
and proper financial system plays significant role for increasing satisfaction level of customer's.

TASK 3
3.1Evaluation of current skills of the management and staff
The management skills are defined as various competencies, attributes and capabilities
that manager must possess in order to accomplish goals and objectives of organisation. Every
individual has different set of skills which helps in managing flow of operational functions of
company (Saaty, and Vargas, 2013). Their is requirement of developing abilities and skills of
employees so that there is increase in productivity and efficiency of company. Some of common
abilities the staff is required to inculcate within themselves are as follows:-
Technical skills- These skills are referred to as knowledge, expertise and experience
required to accomplish complex processes, tasks, and actions which are related to information
and physical technology. To perform various activities in organisation employees as well as
managers are required to have programming and latest required techniques important for
hospitality industry. In context of Costa Coffee the management team is required to train and
educate staff by focusing on improving their performance. This will help in increasing growth of
business and quality of services.
Operational skills- To carry day to day business operations manager and employee both
are required to have necessary skills for success of company. These skills includes decision-
making, people-handling, business negotiation and conflict management skills. In context of
Costa Coffee, the manager need to focus on developing people-handling skills for the purpose to
retain and maintain satisfaction level of customer's.
Managerial skills- Every organisation or company is required to have proper and
complete knowledge to manage activities efficiently. The various management skills includes
organising, planning, staffing, communication, delegation decision-making and proper
motivation (Thorat, and Neuman, 2012). With reference to Costa coffee managers must
emphasis on developing positive work culture so that employee's remain motivated and their
must be proper channel of communication between managers and employee's. As proper
management leads to long term success and growth of organisation.
Current skills- Every employee and manager must be dynamic in nature with changing
business environment as this helps in carrying out business operations effectively. The
appropriate skills will allow organisation to accomplish goals and gain competitive advantage at

market. In context to Costa coffee, the skills required by management and staff which are to be
developed are as follows:-
Decision making- both manager and leader are responsible for taking decisions as they
are knowledgeable and capable enough to delegate roles and responsibilities to each employee's
or team member so that activities can be performed and completed on time. In context of Costa
coffee, both manager and employee's should have ability to take proper decisions which can be
related to management of resources and working of company (Tong, 2013). Effectively
decision-making leads to enhanced performance and good relations with everyone which helps in
achieving targets of company.
Problem solving- in every organisation conflicts arise because of many problems due to
miscommunication among staff members and employee's. In context to Costa coffee the
management committee must provide clear and correct information to staff and allow them to
take decisions to overcome conflicts and reduce problems while working in organisation.
Communication skill- their must be effective communication channel for transferring
information between employees and staff so that no conflicts arise as this would lead to
inefficiency. With reference to Costa Coffee, two way communication process must be followed
among customer's, employee's and staff as this will help in proper balance of operational and
management functions in the company.
Teamwork skill- Teamwork helps to achieve objectives of company in creative and
unique manner. If there is team work in Costa coffee than this would help in achieving goals and
objectives by collaborative efforts among team members. The manager of Costa Coffee should
give chance to every individual team member to show their innovative skills and competencies.
Also, leaders and managers on regular basis motivate staff members which will help in
improving performance of company (Uronen, and et. al., 2017).
3.2 Plans for the development of skills for management and staff
Their are various competencies, skills, capabilities and knowledge which helps managers
and employees to perform their roles and responsibility in effective and efficient manner. Their
is positive impact on company if employees are highly skilled and talented. If employees are
unskilled than there will increase in training cost and will put negative impact overall
performance of company. Along with this skilled staff and management assist organisation to

accomplish targets of Costa coffee on time. Therefore,plan for development of skills of both
management and staff is described below:-
Objective to be
learned
Proficiency
targeted
Opportunities for Development Time allotted
Risk management 10 Business environment is dynamic
and complex in nature so there
are many risks associated with it
and its management is necessary.
Their are many risks which are
prevailing in market and
organisation. A manager should
be capable enough to manage and
handle risk that arise while
performing various operational
functions and activities. The
managers of costa coffee should
develop skill for risk
management so that risks and
problems can be handled in
effective and efficient manner.
For developing
risk management
skills time
required is 70-80
days.
Planning skills 10 Planning is thinking in advance
for future goals and objectives.
The manager and leader must
have effective planning skills for
performing business activities
and accomplish set goals and
objectives. Their are many day to
day operations so to perform
them effectively their must be
proper planning done in advance.
Time needed for
development of
planning skills is
60-70 days.

Therefore, managers and
employees should have effective
planning skills which will assist
them to plan and manage daily
business activities effectively and
efficiently.
Situation analysis 10 Their are many situations in
business organisation where
managers have to take prompt
decisions for benefit and long
term growth. It is essential for
Costa Coffee to emphasis on
developing skills to overcome
situations so that productivity and
effectiveness is maintained. Also,
this will help in achieving
objectives and targets of Costa
Coffee in less time period.
The time
required for
developing
situational
analytical skills
is 40 – 50 days.
M3 Analyse the current experience, abilities and skills of management and staff
The managers and employees of Costa Coffee have skills, experience and abilities for
effective management of operational functions which are necessary to be performed. The staff of
Costa Coffee comprises of both Highly skilled and less skilled so there is need for development
of skills of employee's having poor expertise so as to enhance their skills and abilities. For
growth and development of company it is required to have effective and appropriate functioning
of activities and tasks of company. It can also be analysed that for continuous improvement
managers of Costa Coffee prepares plan for development of skills and abilities of employees and
staff on regular basis. This framework helps to improve and enhance different skills like
planning, risk management and many more as this further helps in sustainable growth and

profitability of organisation (West and Dawson, 2012). The management of Costa Coffee is able
to provide quality product and services to their customer's which further helps in increasing
satisfaction level of customer's as well as proficiency of organisation for long term.
D3 Methods that can used for developing skills of management and staff
In every organisation there are many skills which are required to be developed for both
management and staff. Their are various methods which can be utilised by companies for
development of skills of both management and staff (Abdelhak, 2014). The enhancement of
skills involves admitting mistakes, effective communication, leadership mindset, seek out
additional opportunities and many more. In context of Costa Coffee, the different ways adopted
by managers for developing skills are explained below:-
1. Provide adequate learning opportunities - To develop skills of management and staff
organisation can provide training sessions, motivation and chance to learn about skills
and have proper & complete set of skills which will help to improve efficiency and
effectiveness.
2. Individual Training: This method is useful in providing training within employees to
each individual in organisation. In context of Costa Coffee the manager must lay
emphasis on giving training sessions to staff members, as this helps in improving work
quality and produce more effective outcomes by performing operational functions of
company. Therefore, individual training helps in improving quality of services and
products which are offered to customer's. Also this helps employee to increase their
ability to attract and retain more and more customer's.
3. Workplace Training: This training is also known as on the job training method which is
utilised to train employees at workplace for developing their skills and capabilities. With
reference to Costa Coffee, the management mainly emphasis on communicating new and
updated policies to employee's. Also, give training and development on continuous basis
with the motive to enhance performance at both individual and team level. Along with
this it includes monitoring of staff as this will help in boosting morale of employee's and
help to produce quality of services and products.

CONCLUSION
From the above report it can be concluded that it is important for business organisation to
monitor and evaluate position in market. This helps in identification of strengths and weaknesses
and grabbing opportunities which leads to enhanced profits and growth. The business
environment is very much complex as this consist of internal and external factors which affect
functions and operations of company. This report also assists in examining the effect of these
factors on businesses. Further to know about strengths and opportunities organisation can
conduct PESTLE, SWOT and porters five forces model. These strategies also help in increasing
profitability and efficiency which assist managers in expansion and growth for sustainability
within marketplace. Also, there are various changes taking place in environment so to increase
skills training and development programmes are scheduled for managers and employees. Lastly,
development plan helps to increase skills, competencies and abilities of management and staff.
RECOMMENDATION
From the above analyse it can be recommended to managers of Costa Coffee that they
must emphasis on continuous evaluation of factors putting impact on business operations. The
company can also make improvements in their range of product and services by application of
latest technologies and software. There can be development of training and development
programmes for employees and managers as this is concerned with increasing skills and
abilities . This will lead to increase in problem-solving and effective decision-making. Costa
coffee can adopt aggressive interactional marketing strategies for expansion and diversification
of business at global level. Also, costa coffee can develop plans to overcome issues of customer's
in effective and efficient way. Lastly, it can be recommended to Costa Coffee that for growth
managers should adopt both product and market development to increase sales and growth
opportunities.

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