Strategic Management Plan: Coffee and Cake Ltd Analysis

This report provides a comprehensive strategic management plan for Coffee and Cake Ltd, a business operating coffee shops and a bakery in the West Midlands. The report begins with an introduction outlining the importance of strategic direction for organizational growth. The main body evalu...Read More

STRATEGIC
MANAGEMENT PLAN

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1. Evaluation of different strategic directions..............................................................................3
2. Most Appropriate growth Platform and Strategies..................................................................7
3. Strategic management plan......................................................................................................8
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
All the organizations need to set a strategic direction which can be helpful in developing
long-term strategies. Strategies helps the organizations to know the objectives, the ways of
achieving it, required resources and appropriate allocation of the resources. They are required to
deal with problems and challenges like intense competition, lower profit margins and expansion
of the organisation. The report will evaluate the strategic management plan for Coffee and Cake
Ltd. by evaluating different strategic directions and selection of the most appropriate approach as
well as developing a strategic management plan by conducting external and competitive analysis
of the company.
MAIN BODY
1. Evaluation of different strategic directions
Strategies play a very important in every organization whether big or small because these
are developed by examining all the factors by enhancing the ones who contribute positively
while reducing the negative impacts. These are majorly made to achieve the goals and objectives
of the company (Phan, 2016). Strategies gives a clear direction to the employees to follow in
order to attain long-term benefits by using the available resources and meeting the demands of
markets and stakeholders.
The description below will help the Coffee and Cake, which is a business having establishes
coffee stores and a medium sized bakery in West Midlands, to decide the type of strategy which
will help it to increase its sales and its overall growth (Kowalska, Soon and Manning, 2018).
Following models and theories will be used to evaluate the various types of strategic directions
from which the company can chose the best which can increase its sales rapidly by making a
rapid growth in both the coffee shops and the bakery.
Porter’s Generic Model of Strategies
Four generic strategies are suggested by the Porter which are adopted by the companies
to gain the competitive advantage (Lauer, 2019). It also evaluates the extent of the scope of
certain activities and the differentiation of products.
The best way Coffee and Cake can find to increase the sales and the customer base in the
emerging markets is to gain the competitive advantage over the competitors such as Costa and
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Starbucks in coffee products and Tesco and Boots in food products either by reducing the prices
or by improving its brand value. The various strategies of Porter’s generic model are as follows:
Figure 1: 4 strategies of Porter's Generic Model
Source: Porter’s Model of Generic Strategies for Competitive Advantage, 2018
 Cost Leadership
This can be achieved by the company by reducing the prices and become the lowest-cost
produces in the complete industry. The companies in order to enjoy the profits must make its
selling prices of the products less than the average prices of the industry. This are applied
majorly applied by the large-scale business by bringing little differentiation in their standard
products. Many discounts and offers are given to the customers in order to increase the customer
base and the profitability.
 Cost Focus
The companies here also take the advantage of selling products at lower-costs but in one or
small segments of market. The products are sometimes the similar product to the high-priced
ones which are sold by the companies at lower cost but are acceptable to some customers. These
products are generally referred to as “me-too’s”.
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 Differentiation Focus
The main aim behind applying this strategy is providing different products which are totally
unique from the products of the competitors. The company can face some issues to ensure that
the customers really demand for those unique products. This acts as a classic niche marketing
which helps the small businesses to gain higher profit margin by selling the differentiated
products in the niche market segment.
 Differentiation Leadership
This strategy focuses on targeting larger markets to achieve the competitive advantage by
selling differentiated products across the industry (Haas, 2019). The businesses following these
strategies charge premium price for providing some additional features like enhanced quality,
increased brand value and the very clear reasons to have the purchase. These are mainly applied
in the global brands which does not depend on reducing the cost to increase the sales and
compete in the market.
Justification
The Coffee and Cake must apply Cost Leadership by reducing the costs of the products to
increase the customer base and the profit margin. This will help the company to gain the
competitive advantage and the market share as well.
Bowman’s Strategy Clock
This model examines various options for strategic positioning such that the company can
achieve the most competitive position in the market. It basically works on two dimensions- price
and perceived value (Echchakoui, 2018). Following are the positions of the model among which
the Coffee and Cake will chose one which enhances its position in the market:
 Low Price and Low Value Added
This is not as much competitive as it does not involve differentiation of products neither
increasing the value. It is normally the strategy of bargaining. It ensures that nobody can
undercut it.
 Low Price
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This is the strategy of cost minimisation. The profit margins on each product are not
much high but the increased volume of outputs can give a great profitability.
 Differentiation
Its main focus is on branding along with improving the quality. No other company can
beat the product with high quality and strong brand awareness. This also helps in increasing the
number of loyal customers.
Figure 2: Different Positions in Bowman's Strategic Clock
Source: Bowman’s strategic Clock (Strategic Positioning), 2018
 Hybrid
The company can apply this by reducing the prices and also by differentiating the
products. If it involves the added value also, then this can be the effective strategy for
positioning.
 Focused Differentiation
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This strategy is mostly applied by the companies with highest brands because this
believes in selling the highest quality products in terms of perceived value at premium prices.
This is done by targeted segmentation, promoting and distribution.
 Risky high Margins
This is the strategy of high risks because the company following this does not give any
extra offers based on perceived value but sells at higher prices. The company earns a high profit
margin but for a very short time as the customers will find better options to do the purchase with
extra offers.
 Monopoly Pricing
The Monopolists do not focus on the value instead it gives no alternatives. They set the
prices on their own because the industry has one business to offer certain product.
 Loss of Market Share
The companies apply this strategy by setting standard prices with not much perceived
value which does not give them much opportunities to win in the competitive market because the
competitors sometimes provide higher value at the same prices.
Justification
The Coffee and Cake must follow the Low-Price Strategy because it will not give much
profits initially but will give long-term profits and also a very strong customer base thereby
increasing the profitability.
2. Most Appropriate growth Platform and Strategies
From the above models of strategic direction, the best platform and strategies for Coffee
and Cake Ltd are Cost leadership strategy and Low-price Strategy. According to porter’s
generic strategies, Coffee and Cake Ltd can select Cost-leadership approach to gain market share
which is currently shifting to major coffee and food & beverage companies. The company can
reduce the prices and become the lowest-cost producer of baked items and daily coffee in the
industry. The selling price of its food segment such as cakes, pastries and breads can be
decreased below the average prices of the industry and a slight differentiation in the standard
products can be introduced. Many discounts and offers can be given to the customers in order to
increase the customer base and the profitability. As per Bowman’s Strategy clock, Low-price
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strategy could be implemented in the company. It will ultimately help in increasing the customer
base and help in the expansion objectives as customers tend be get attracted to lower prices from
well known bakeries as they don’t compromise on their quality.
3. Strategic management plan
STRATEGIC OBJECTIVE
The objective of the plan is to understand and evaluate the strategic directions available
for the family business of Coffee and Cake Ltd that are suitable for the company in long term in
context of business growth, expansion of the company and dealing with the intense competition
in the market.
VISION & MISSION
The mission of Coffee and Cake Ltd is creation the best baked delicacies and offering the
addressing the daily coffee and beverage requirements with its heritage touch to the people
across West midlands. The vision of the company is the plan to expand its environment friendly
initiative and increasing the reach to customers across the country.
ENVIRONMENTAL ANALYSIS
The determination of external factors that affect the business operations of the company
and can help in addressing the current problems in the business performance and the expected
challenges for expansion of the company (Rothaermel, 2016).
POLITICAL FACTORS
The major political factors that impact the Coffee and Cake Ltd are the effects of post
Brexit Referendum which has led to problems in expansion plans of the company across Europe,
problems in exporting, dealings with export customers in Ireland, as the British food industry
relies on EU for groceries import. An increase in taxations such as Value added Tax and ban on
imports from certain countries could be challenging for the company (Strong and Wells, 2020).
ECONOMIC FACTORS
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The instability of economy in macro terms like increasing unemployment and inflation
levels can impact the choice of food items, as certain premium segment or healthy items cost
higher. It can also tend people to shift to cheaper and easy choices from other companies. This
could also lead to increased consumption of ready to eat meals and fast food. The company has
to keep its revenue up and pricing policy can be disrupted to meet consumer needs in such times.
SOCIO-CULTURAL FACTORS
In current times people are becoming more health conscious and unhealthy food segment
like cupcakes could be not preferred by families. The expectations are becoming more dynamic
and choices for nut free, vegan items, egg free cakes and decafs are increasing. The trends tend
to shift people are attracted to more newer ideas and traditional way of operations and food
segment could impact Coffee and Cake Ltd (de Vries, Veer and de Vries, 2018).
TECHNOLOGICAL FACTORS
As more and more consumers are going online, the use of social media and online orders
have increased. This has been a major threat for Coffee and Cake Ltd as it only operates offline.
This not only affects revenue but customer reach as the companies with online presence are more
popular and known amongst today’s generation. Also, the emergence of wi-fi outlets is
increasing so company has to improve its infrastructure accordingly.
LEGAL FACTORS
The major legalities include patent and intellectual property rights, which is a weak threat
for Coffee and Cake Ltd as it is up to date with legal requirements. However, the company has to
beware of food, health and safety regulations and standard at all times.
ENVIRONMENTAL FACTORS
The company has to start focussing upon environment friendly packaging and proper
waste disposal to avoid any disobedience of environmental regulations. The consumers have
started appreciating eco-friendly initiates and the company could include organic food items and
going completely plastic free, especially single use plastic (Lee, 2017).
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COMPETITIVE ANALYSIS
The major threat Coffee and Cake Ltd is facing currently is of intense competition which
has led to shift in customer base and decrease in revenue. A competitive analysis is described
using Porter’s five Force model for the company. (Lewis, 2017)
THREAT OF NEW ENTRANTS
This is a high degree of threat for the company as there are emerging coffee brands and
shops across West Midland and London who are operating in a very trendy and creative way.
Examples include: Creative Coffee Hub, Yay Coffee, The Songbird Ice-cream café and Creative
Space which provide additional and lucrative services to customers like offers and discounts,
creative seating arrangement and Wi-Fi facilities etc. They tend to gain attention of customers
looking for a change and wanting to try new things (Douglas and et.al., 2018).
BARGAINING POWER OF SUPPLIERS:
This is a moderate level threat for the company as it already has established and loyal
suppliers. But when expanding across new parts of the country, a change of supplier is highly
possible.
BARGAINING POWER OF BUYERS
This is a high-level threat for Coffee and Cake Ltd as today’s customers are king of the
food and beverage industry and can easily shift to other brands if any uniqueness or price
flexibility is not offered by the company.
THREAT OF SUBSTITUTES:
This is a low degree of threat as many substitutes for coffee and snack items are not
available and in general customer prefer an established shop according to their location and
needs from where they can get their daily coffee.
OVERALL COMPETITIVE RIVALRY:
The overall competitive rivalry for Coffee and Cake Ltd is very high with emergence od
large coffee brands who have opened up a lot of chains across the country such as Starbucks
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(900 stores), Costa ( 2000 stores), Caffe Nerro (700 shops), Cafe2U, Coffee#1, Muffin Beak,
Puccino’s, Soho Coffee etc. People start preferring these brands due to easy availability. The
food section is facing competition from Boots and Tesco meal deals who have started providing
lunch time and ready to eat snacks (Schoja, 2016).
STRATEGIES
 Coffee and Cake Ltd can focus of utilisation of its tangible resources that have been
accumulated since 1948 when the company started its operations across West Midlands.
These include cash & cash equivalents, inventory, infrastructure of its 12 stores, strategic
locations of the coffee shops. The company can install more advance equipment like
dough proofer, advanced OTGs and ovens, cold storages, in the bakeries and shops for
increasing production and stock management. Infrastructural changes in outlets can be
done by improving the ambience and design, creative seating arrangements and providing
wi-fi facilities to customers.
 The company currently includes Bread products, small cakes and pastries, Large & high-
quality cakes and Espresso and cappuccino in product segment. A product expansion and
diversification strategy can be implemented by including affordable lunch preparations,
low cost coffee variations, health friendly breads, vegan baked items, dietary and diabetic
friendly cookies, snacks etc.
 Establishing a social media presence for the company by creating a website and start
home delivery services, at least within the radius of the stores. The website should be a
user-friendly interface and give specifications of all products and customisation options.
 Acquisition of another bakeries or coffee shops is also a suitable strategy for expansion as
the financial strength of the company is good. This can help Coffee and Cake Ltd to
expand its reach and enter into new markets. Apart from that strategic partnerships can
also be done.
 Market penetration can be implemented by lowering the cost of its existing products or
by including a lot of offers and promotions. The aim would be to gather larger market
share and customer base. This can be done by intensive marketing, social media
campaigns and even direct sampling.
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PERFORMANCE EVALUATION
KPI: Key performance indicators for the company can be determined for monitoring the business
performance:
 Increase in the profit margin by 25%
 Reduction in operating costs
 Management of raw material costs by switching to low cost suppliers for 30% of the food
segment
 Reduction in planned and non-planned downtime by 10%
 Improving brand equity
 Total quality management of all departments in the shops
 Environment friendly packaging and reduction in usage of single plastic within 1 year of
operations.
BENCHMARKING
External benchmarking to compare the performance standards with other rival companies
of the same industry in terms of customer base, market share, pricing policies, product segment,
marketing techniques etc. Using a third-party data collection approach can save time and cost.
The company can revise its existing strategies and set baselines for improvements (John and
Eeckhout, 2018).
CONCLUSION
From the above report it can be concluded that the best strategic direction for the
company can be cost leadership and low-cost strategy. The strategic management plan of the
Coffee and Cake Ltd describes external analysis which emphasises on political, technological
and socio-cultural factors. Competitive analysis of the company using porter’s five force model
implies the highest threat of new entrants, bargaining power of buyers and overall competition.
Strategies devised include utilisation of tangible resources, establishing social media presence,
market penetration through intensive marketing campaigns, acquiring/partnerships for expansion
and product development and diversification.
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REFERENCES
Books and Journals
de Vries, H.P., Veer, E. and de Vries, K.V., 2018. An examination of SME social media use in
the food industry. Small Enterprise Research, 25(3), pp.227-238.
Douglas, J., and et.al., 2018. Investigating the success of Independent Coffee Shops and Cafes in
the UK: Findings from a Pilot Study. In proceedings of the 21st Excellence in Services
International Conference, Paris.
Echchakoui, S., 2018. An analytical model that links customer-perceived value and competitive
strategies. Journal of Marketing Analytics. 6(4). pp.138-149.
Haas, Y., 2019. Developing a generic retail business model–a qualitative comparative
study. International Journal of Retail & Distribution Management.
John, L.K. and Eeckhout, L. eds., 2018. Performance evaluation and benchmarking. CRC Press.
Kowalska, A., Soon, J.M. and Manning, L., 2018. A study on adulteration in cereals and bakery
products from Poland including a review of definitions. Food Control. 92. pp.348-356.
Lauer, T., 2019. Generic Strategies, Outpacing and Blue Ocean-Discussing the Validity of Three
Strategic Management Theories Using Case Studies from Airlines and Grocery
Retail. Theory Methodology Practice (TMP). 15(01). pp.57-66.
Lee, M., 2017. Accountability for environmental standards after Brexit. Environmental Law
Review, 19(2), pp.89-92.
Lewis, R., 2017. Porter's Five Forces of competitive advantage.
Phan, P., 2016. Strategic purchasing practices: the case study of PAUL Bakery UK.
Rothaermel, F.T., 2016. Strategic management: concepts (Vol. 2). McGraw-Hill Education.
Schoja, V., 2016. Determining Consumer Behaviour in the Catering Industry: A Case Study Of
Starbucks UK. Anchor Academic Publishing.
Strong, H. and Wells, R., 2020. Brexit-related food issues in the UK print media: setting the
agenda for post-Brexit food policy. British Food Journal.
Online
Bowman’s strategic Clock (Strategic Positioning), 2018. Available through:
<https://www.tutor2u.net/business/reference/strategic-positioning-bowmans-strategy-
clock>
Porter’s Model of Generic Strategies for Competitive Advantage, 2018. Available through:
<https://www.tutor2u.net/business/reference/porters-generic-strategies-for-competitive-
advantage>
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