Case Study Analysis: Caffè Nero's Business Strategies and Performance

This case study analyzes Caffè Nero, a prominent coffee shop chain, examining its business strategies, market position, and competitive landscape. It begins with an introduction to Caffè Nero's history and offerings, followed by a literature review discussing industry competition and market share. A detailed SWOT analysis is presented, evaluating the company's strengths, weaknesses, opportunities, and threats. The methodology used, including limitations, is outlined. The results and discussion section explores pricing strategies, marketing efforts, and the importance of employee training and customer experience. The study concludes with recommendations for Caffè Nero's future, emphasizing the need for continuous improvement and adaptation in a dynamic market. The report highlights the significance of location, product quality, and effective marketing in driving business success. References support the analysis and findings.

INQUIRY BASED LEARNING
MODULE: (FY028)
CASE STUDY - CAFFÈ NERO
Student’s Name: Henrique Raphael Coleto
Student ID: 22101507

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Contents
Introduction ..................................................................................................................................... 2
Literature Review ........................................................................................................................... 2
SWOT evaluation of Caffè Nero ....................................................................................................... 4
Methodology ................................................................................................................................... 7
Results/Discussion ........................................................................................................................ 8
Conclusions .................................................................................................................................... 9
Recommendation ......................................................................................................................... 10
References.................................................................................................................................... 11

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Introduction
Since its founding in 1987, the firm has been sold three times. As a public limited
company (PLC), CFN traded its shares on the London Stock Exchange. Although the
firm was taken over via a management buyout in early 2007, it is presently owned by
private investors. At Caffè Nero, we are committed to providing our customers with the
best coffee and cuisine in a warm and welcoming environment. The importance of
establishing a neighborhood meeting place cannot be overstated in the quest for
economic success. Espresso and cold coffees, sandwiches, paninis, focaccia wraps,
pastas, soups, salads, pizzas, pastries, and cakes are all on the menu. Two-thirds of
Caffè Nero's income comes from beverages, while the remaining one-third comes
from food. Caffè Nero makes more money from food than the typical coffee shop, with
food accounting for around a quarter of total sales (Ali, 2020).
Literature Review
There is still a lot of competition out there. Caffè Nero has a market share of 10.8
percent, significantly behind Starbucks' 25 percent and Whitbread's Costa Coffee,
which has a market share of 20.7 percent. Ford, on the other hand, is now outpacing
the market's average increase. This industry is expected to grow by 14.4 percent,
according to Allegra's forecasts. This refers to the level of rivalry within an industry's
current businesses. Traditionally, profit is driven to zero by the rivalry between
competing firms in classical economic models. Companies aren't just uninformed price
takers in a free market; competition isn't ideal either. Rather, they are attempting to
get an edge over their competitors in the marketplace. Depending on the industry, the
level of competition between companies varies. There are numerous companies in an

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industry, but no one is the dominant one; this situation is likely to lead to poor margins
and profitability. Because the industry is growing slowly, competitors are competing
for market share. Fixed costs are high, which encourages companies to overproduce
and utilise their capacity to its fullest extent. It is difficult to leave a company with
significant exit costs because of the difficulty of selling specialised assets or the loyalty
of the management (for example, in long-established family enterprises). Customers
may readily swap suppliers since the products are so identical. The danger of new
entrants will be considerable in a highly competitive sector. Mobile phone
manufacturers like Motorola, Siemens, and Ericsson, as well as newcomers from Asia,
were putting increasing pressure on Nokia's dominance in 2004 (Blomberg, Kjellberg
and Winroth, 2012).
The SWOT analysis
The SWOT analysis is a summary of the results of internal and external audits that
highlights the company's essential strengths and weaknesses as well as the
opportunities and dangers that it faces. However, swot analysis is so beneficial and
logical that it may be underestimated in planning, but its simplicity frequently leads to
misdirected and poorly executed analyses It is often criticised for allowing companies
to produce lists without giving the concerns sufficient thought, and for often turning
into a dry academic exercise in data classification. A SWOT analysis isn't always
useful or unproductive on its own. Swot analysis' usefulness to a business is directly
related to how it is used. The extent to which swot analysis may help a company relies
on how managers apply the framework. Swot analysis may be a useful tool in the
formulation of a marketing strategy if done properly and effectively. When done

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improperly or carelessly, it may be a huge loss of time and other precious resources
that might be used to assure the former, not the latter. Using the SWOT model,
companies may examine both internal and external influences on their operations.
Internal components include the SWOT matrix's strengths and weaknesses. External
influences, such as opportunities and threats, have an impact on a person's life (Butu,
2013).
SWOT evaluation of Caffè Nero
Strengths
For an organisation, organisational strengths are the skills and competencies that
allow them to plan and execute their strategy. Strengths may be found in any business.
When it comes to marketing, for example, this is evident. In other circumstances, it's
a question of perspective, such as a tiny company's capacity to react quickly. If a
company is struggling, it's crucial to remember that it has its own advantages. It's up
for debate whether these assets are sufficient. (Jonathan 2006)
• A well-known name
• For the last eight years, it has been the top pick of UK consumers.
• The meals and coffee were of the highest quality and were prepared with
care and freshness.
• The idea is distinct from Starbucks, the industry leader (i.e. European versus
North American). High quality coffee and cuisine are backed by a meticulous
attention to detail in order to create a really authentic European coffee house
experience.

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• business concept and high-quality administration
• 5. A wide variety of products to choose from.
• Though Caffé Nero was a huge hit, management has stayed laser-focused
on the core business. There are several chances to speed up the rollout
both in the UK and abroad, but management is hesitant to compromise on
the essential brand principles.
• Having a company in a prime location is essential for success (high street,
shopping centre).
• Able and willing to acquire another rival.
• Reputation amongst the clientele
• Keeping the profits rolling in.
• The company's pre-tax profit has increased to £7.3 million.
Weaknesses
It is a company's inability to compete effectively due to deficiencies in one or more
resources or competencies. Some areas of a company's operations or activities are
weaker than others. Primark, for example, sells subpar goods, while British Airways
has a history of misplacing luggage. As a result, this is a case study on the two
companies' mutually exclusive strengths and disadvantages. Caffè Nero has a few
flaws that I've seen as a customer:
• Weak food industry compared to rivals.
• It's best to stick to the Italian manner.
• Most brand names are unknown.

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Opportunities
Opportunities are features of the environment that the company may exploit or
profit from. Whether or not a company is likely to succeed in its target market relies on
whether its business strengths meet or surpass those of its rivals. Tesco, for instance,
may be able to build a new location in China.
• Caffè Nero has several chances to analyse the external business
environment. To increase their profits in the future, Caffè Nero Group LTD.
should use the following opportunity:
• First and foremost, selling the brand name might bring in additional money
by starting a franchise firm.
• If you contract or invest directly in developing nations that grow and produce
tea, coffee, or any other food, provide the competitive pricing.
• Because the coffee and sandwich shop sector is booming, more money is
flowing into the United Kingdom.
Open new outlets in the Middle East and East Asia to remove international
commercial constraints (Gill, 2017).
Threats
Environmental factors that might prevent a company from reaching its objectives
and goals are known as threats. In the absence of defensive marketing activity, a
negative trend or development might lead to a decrease in sales or profit. This is an
environmental danger. A threat's severity and likelihood of occurrence should be taken

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into consideration when classifying it. The following are only a few of the numerous
dangers facing Caffè Nero right now:
• Starbucks, Costa, BB's Coffee, Subway, and McDonald's are all formidable
rivals.
• For example, the current financial suffering in the United Kingdom is an
example of an economic crisis.
• It's a constant battle with other companies on things like pricing, quality, and
even the environment.
For example, if Caffè Nero opens shop in Bangladesh, it will have to deal with the
risk of political instability. Because the political situation in Bangladesh is unstable.
Because of the prospect of new entrants, businesses are always under pressure.
Methodology
Limitations were found as a result of the investigation. Using a survey resulted in
a limitation since the researcher lacks control over the experimental conditions. It's
possible that participants gave incorrect answers to the questions, which would lead
to response bias. As a result, this is not a representative sample due to the sample
size constraint of only include the Highlands and Islands of Scotland. This study only
examines a tiny portion of the UK and does not represent the whole nation. In addition,
since the survey participants were not subject matter experts, they may have
misunderstood the poll's questions as a result of the convenience sample. Ethics
Framework was carefully reviewed before beginning Internet-mediated research
(IMR). Research participant information sheets were sent to all of the participants

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during the study, and the whole procedure was completely anonymous. To finish a
dissertation, all participants agreed to participate in the survey and were notified that
their answers would be used for research reasons.
Results/Discussion
High quality coffee may be had for a fair price at Caffe Nero, which encourages
producers to maintain their high standards. It is common for cafe Nero to purchase
their high-quality products from farmers and give them a fair price in order to enhance
their social and agricultural conditions. Moreover, their items aren't too expensive, yet
they deliver high-quality meals. Caffe Nero's marketing strategy should follow a price
plan such as: Pricing must be competitive and profitable.
Every firm relies heavily on its location. Caffe Nero refers to the location of the
store's point of sale; in this case, Caffe Nero has selected a commercial district in
Britain as the point of sale. They have more business locations than any other locality
does. There are other cafe Nero locations around the United Kingdom, and they want
to build a branch in the region in the future.
For their seasonal product introductions, LAW Creative collaborated with Caffè
Nero to develop a "look." Recently, there was a successful summer frappe marketing
that received a lot of media attention. The launch of a new muffin line necessitated a
marketing strategy to attract customers from the street. Sales increased by 28 percent
after the activity was put into place. The marketing of Caffe Nero is critical to the
company's success. When they give out free coffee to customers as a promotional
offer, it has a big impact on attracting new customers. According to this study,

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marketing for a business is an important factor in increasing sales, and as a result, the
firm has generated significant money in recent years. Caffe Nero is one of the most
vibrant and stylish coffee retailers in the UK, with over 400 locations around the
country. There are more than 3000 employees at Caffe Nero, all of them are highly
qualified. If Caffe Nero wishes to gain a competitive edge, they must find and train the
best people possible and put them through their paces. And this organization hires
baristas, trainee managers, and store managers from all around the globe. In this
report (Gill, 2017),
Evidence that Caffe Nero's success is due in part to their employers, and their
current efforts are aimed at meeting the needs of its consumers.
It is the goal of Process-Caffe Nero to keep their menu fresh and engaging.
It all starts with Caffe Nero's staff of coffee experts.
Caffe Nero strives to enhance their coffee-making methods.
The importance of physical proof cannot be overstated in the service sector of any
business. In order to ensure customer satisfaction, Caffe Nero now uses more
comfortable tables and chairs, as well as pleasant music, in their establishments. As
a result, consumers are more likely to return to Caffe Nero at least once a day. In this
report, it is said that the corporation will benefit from this action in the future (Ali, 2020).
Conclusions
Caffè Nero Group Ltd.'s situation analysis shows that the firm has a great deal of
potential for a successful European growth from the market. As a result of this, the

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company will be able to enter the foreign market via franchising, where it will be able
to take advantage of their Continental-style brand image, right promotion campaigns,
relatively low prices, and a relaxing atmosphere for leisure and a cup of nice coffee to
penetrate the market.
Recommendation
Maintaining Caffè Nero's strong brand image in the home market requires a
substantial investment of resources, since the brand positioning is fundamental to the
company's business strategy. Another suggestion is to keep an eye on the competition
and new entries in the market, so that you can plan and protect your market share in
the local market. Finding investors is critical to the company's internationalisation
efforts, since they must cover the expenses of entering new markets and developing
long-term plans. Furthermore, the connection between the franchisor and the
franchisee is critical to the success or failure of the company's internationalisation
since the franchisor relies on the franchisee's desire to run a successful business
(Shafer, 2011).

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References
Ali, D.G.A. (2020). The effect of advertising and demographic factors on the consumer
market share of juices and soft drink in Latakia Governorate. International Journal of
Agriculture & Environmental Science, 7 (5), 102–107. Available from
https://doi.org/10.14445/23942568/ijaes-v7i5p115.
Blomberg, J., Kjellberg, H. and Winroth, K. (2012). Marketing shares, sharing markets:
Experts in investment banking, 1st ed. Basingstoke: Palgrave Macmillan.
Butu, M. (2013). Shareholder activism by hedge funds: Motivations and market’s
perceptions of hedge fund interventions, 1st ed. Hamburg, Germany: Diplomica
Verlag.
Federal Trade Commission. (2016). Market Share Quotas. North Charleston, SC,
USA: Createspace Independent Publishing Platform.
Gill, L. (2017). Capture the mindshare and the market share will follow: The art and
science of building brands, 2013th ed. Basingstoke: Palgrave Macmillan.
Shafer, R. (2011). Grab more market share: How to wrangle business away from lazy
competitors, 1st ed. Nashville, TN, USA: John Wiley & Sons.
Shareef, M.A. and Dwivedi, Y.K. (2016). Mobile marketing channel: Online consumer
behavior, 1st ed. Cham, Switzerland: Springer International Publishing.