Business and the Business Environment: Costa Coffee Case Study

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Business and the Business Environment
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Table of Contents
Introduction................................................................................................................. 3
LO1............................................................................................................................. 3
LO2............................................................................................................................. 5
LO3............................................................................................................................. 8
LO4........................................................................................................................... 13
Conclusion................................................................................................................ 16
Reference list............................................................................................................ 17
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Introduction
The environment of the business incorporates every external as well as internal
factor that has some influences on the business of the particular organisation. The
factors that can affect the business are changes in the social or economic aspects of
the country, trends of market, technological innovation, government activities,
suppliers, demands of the customers, labour force of the organisation, and other
such factors.
Costa Coffee is an additional service brand of the Coca-Cola Company that has
been established by Bruno Costa and Sergio Costa in 1971 (costa.co.uk, 2019). This
coffee shop organisation has the headquartered in the United Kingdom and serves
the nations of worldwide. At present, the chief executive officer of the firm is Dominic
Paul. The products produced and sold by this organisation are iced drinks,
sandwiches, tea, snacks, and coffee. In the year 2016, the yearly revenue of the
company has been one billion approximately(annual-reports, 2016).
The present study will provide explanation on the various kinds of organisations
based on their size and legal structures. Their objectives will be discussed as well as
the discussion will be provided on the functions of the organisation in the context of
its organisational structure. The situational analysis will be done to understand the
impacts of external as well as the internal environment on the business functions and
decision-making.
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LO1
You are required to explain three different types of organisations, their size
and classification to highlight the differences among them. This should
include their legal structure, size and scope, as well as their key stakeholders.
Private organisation
The companies in the private sector are owned as well as monitored by the groups
or individuals. These companies are not run by government but through individual
companies. The purpose of such organisations is to make most profit through trading
products to the consumers. The method of such companies for generating income
includes provision of better quality products to the customers than the competitors.
Costa Coffee is a private company that has been the subsidiary of the Coca-Cola
Company. The size of the company can be said as large as there are around 18,000
employees working in his company all over the world (statista.com, 2019). The legal
structure of the firm is of private limited company. This means that the firm’s
liability is restricted concerning private shares. However, it can have shareholders
and issue stock. Their shares cannot be traded on the exchanges of public. The
scope of the company is good as it has presence all over the world. The key
stakeholders of the private limited company as that of the Costa Coffee are
customers, suppliers, employees, and such that has influenced the business.
Public organisation
On the other hand, the local and national government control the public sector
organisations. The services provided by such organisations are essential for the
citizens of the country. These organisations are funded through the payment of the
citizens’ taxes. One of the examples of the public sector companies is British Army.
The purpose of this organisation is to provide defence service to the country’s citizen
and not to make profit. They try to maintain peace in the country by protecting from
terrorist attacks and combating trade of international drugs. This is a large business
as it has 81,500 employees or army personnel in the organisation (statista.com,
2019). It serves the people of the United Kingdom. The legal structure of this firm is
general partnership the people involved in this organisation are partnered in
fulfilling the goals of the business. The rights as well as responsibilities of every
member in the organisation are equal. Every member maintains the privacy of the
company and everyone is accountable to the government of the country. The
stakeholders of such an organisation are public and national government.
Voluntary organisation
The voluntary organisations are those that have the purpose of helping the people of
the country through funds or through services instead of making profit. For instance,
British Heart Foundation is a voluntary organisation that has the purpose of
reducing the heart-related diseases through researching the risk factors of heart as
well as circulatory diseases (bhf.org.uk, 2019). The size of the organisation is large
as there are more than 250 people working in the country. The scope of the
company is limited to the United Kingdom as it provides charity to the native citizen
only. The stakeholders of this organisation are partners who helped it in generating
funds such as Nationwide Bank, Tesco, and others, volunteers, local community,
and directors of the business. This is a charitable organisation therefore; its legal
structure is that of NPO or non-profit organisation. This means that its purpose is not
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to earn profit but to provide support to the citizens of the country by reducing heart-
related diseases.
Comparison basis Large Micro SME’s
Examples Costa Coffee Beauty Boulevard
Ltd
LMA Recruitment
Size of workforce More than 18,000 Less than 10
(suite.endole.co.uk
, 2019)
Less than 250
Legal Structure Private Limited
Liability Company
Private Limited
Liability Company
Private Limited
Company
Revenue Structure Around one billion Less than 2 million Less than 50
million
(suite.endole.co.uk,
2019)
Scope 3,882 locations in
many parts of the
world
Functions in the
country
Has functions in
the country only
Table 1: Comparison between large, micro, and SME’s
(Source: Created by the learner)
You should also analyse how the structure, size and scope of different
organisations link to the business objectives and product and services offered
by your chosen organisation.
Private
The legal structure of the Costa Coffee is private limited company and it serves the
organisation by fulfilling its objectives of increasing profit of the business. The private
limited companies aim to make profit and this has helped the firm in determining its
objective (costa.co.uk, 2019). The size of the business is large and it has served in
producing more number of products to increase the business’ profit. The scope of
the company is good as it serves people all around the world as it has presence in
many countries. This has helped it to fulfil the business objective of making profit by
selling more products to the customers of many nations.
Public
The legal structure of the British Army is general partnership that has helped the
firm providing equal rights and responsibilities to every member of the organisation
(army.mod.uk, 2019). The service provided by this organisation is provision of safety
to the citizens of the country and this particular legal structure has assisted the
company and controlling the activities of personnel. The rights as well as privileges
provided to the members are equal. This would help the company in fulfilling its
objective of serving the people without self-consideration or of making profit. The
size of the business is high due to many numbers of personnel serving the country.
This has helped it in reaching the goal of providing safety to the people of a vast
country. The scope of the organisation is limited to the country as it serves only the
people of the native region.
Voluntary
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The legal structure of the British Heart Foundation is that of Charity or NPO. This has
served it in reaching its goal of reducing the risk of heart-related diseases by
researching and providing treatment to the patients without the aim of making profit.
The size of the organisation is large as more than 250 people are working in the
company as volunteers (bhf.org.uk. 2019). This has served in meeting the objective
through awareness of the cause in many regions of the country through the
volunteers. The scope of the company is limited to the country as it only serves the
people of the nation.
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LO2
Using your chosen organisations, explain the various functions within the
business and create an organisational chart to demonstrate the
interrelationships between different functions and how they link to
organisational objectives and structure
There are various kinds of organisational structures such as divisional, matrix,
functional, hierarchy, and others. The organisational structure of Costa Coffee is
functional (whitbread.co.uk, 2019).
Figure 1: Functional organisational structure of Costa Coffee
(Source: whitbread.co.uk, 2019)
As per this structure, the role of the members is static. The division is based on the
skills and characteristics of the members of the groups. The members of each
division have specialities in a particular field such as in marketing department the
members must have the capability of selling and promoting products. The levels are
divided based on the functions. For instance, the human resource department,
production department, marketing department, finance department, and such. Every
department of the firm tries to meet the objective of the company in their way. There
is connection between every department such as the human resource department
helps in recruiting and selecting candidates for the production, marketing, and other
departments (Gatewood et al., 2015). It has the role of providing training to other
departments’ members so that they would perform better to reach the goal of the
business.
The production department has the role of producing products that would be sold by
the marketing department. The marketing department aids in increasing the profit of
the business and uses the products that are made by productions department to
promote. The CEO controls the activities of every member and each department has
leader who provides guidance and manages the employees of the firm through
proper leadership and management. The members of every department would be
able to perform better to meet the goal of the business through this. In the functional
structure, the functions discussed above are performed effectively through the
members of every department. The purpose of this organisational structure is to
organise the tasks of each department separately so that there would not be chaos
in managing as well as directing the employees.
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Analyse the advantages and disadvantages of the interrelationships between
organisational functions and the impact that they can have upon
organisational structure
The interrelationships between the diverse functions of the organisation would
influence the structure of the company. The advantages of the connection are that
there would be easy communication among the members of every department that
would facilitate their work. For instance, if there were need of sharing information to
the members of every department, the connection would assist in sharing
information (Shin and Konrad, 2017). Some other merits of the interrelation are that
there would be enhancement in cooperation of the work due to the connection
between the departments. However, there are some disadvantages of the
connection between the departments. The relations between the departments would
become difficult in the situation when some particular information is to be shared with
a specific department. This would hinder privacy between the departments as well.
The interrelationship can create difficulty for the supervisor or leader of each
department. The leadership style of a particular department’s supervisor might be
different from others that would affect the performance of the employees. There
might be the situation that a leader of a specific department provides rewards to the
members of that department and others do not. This would affect the behaviours and
attitude of the workforce of other departments. This might also affect the quality of
the services provided by them.
Provide a critical analysis of the complexities of different types of business
structures and the interrelationships of the different organisational functions.
There are some complexities and flexibilities in the various kinds of organisational
structures. In functional structure, the management is done properly as well as the
functions of the members are permanent. However, one of the drawbacks of this
structure is that the project management in this structure becomes difficult. Divisional
structure has some divisions based on the functional such as in automobile company
division of passenger vehicle, division of commercial vehicle, and such. Divisions
can also be made as per the geographical region. This helps the organisation
attends to the customers in less time as well as meeting the demands of the
customers faster (Dubey and Singhal, 2016). However, this structure too has
disadvantages such as thee would be redundant effort of the employees that would
increase the work pressure and affect their health and behaviour. The competition
between members of divisions would also become high that would influence the
organisational culture negatively.
The connection between various functions should positively influence the
organisation. The company should have a good organisational culture to reduce
competition among its members. There should be less chaos through proper
management of the departments. The organisation should improve communication
among the members as well as promote collaboration between the employees of
various departments. Equal treatment should be given to the workers of every
department.
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LO3
Using specific examples from your chosen organisation, use PESTLE to
identify the positive and negative impact the macro environment has upon the
business operations of your chosen organisation
Apply the PESTLE model appropriately to support a detailed analysis of the
macro environment that affects the operations of your chosen organisation.
Elements Factors Influence
Political  UK’s exit from EU
after Brexit vote
has decreased the
corporate tax rate
of UK to 19 percent
from 21 percent
(gov.uk, 2019).
 The average tax
rate in dairy
products has risen
to 44.6 percent
(bbc.com, 2019).
 Political Stability in
house of commons
is making UK more
stable for business.
 Increase in labour
pay is making it
difficult for
organisations to
strive.
 Workers from other
countries are not
being able to work
for UK easily.
Due to increase in
corporate tax, Costa
Coffee will require to pay
more taxes. This kind of
tax decrement will
increase their profit from
sales, which is positive
factor for business. The
rise in dairy products will
increase their production
cost, as they have to use
dairy products on daily
basis for their coffees.
Therefore, coffee prices
will be much higher and
sales may be decreased.
The political stability in UK
is idea for Costa Coffee to
expand their business and
make more profit. The
increase in labour pay is
increasing cost of
production for Costa
Coffee and this will harm
their business. Due to
Brexit vote, migration
workers are not being able
to work in UK and this will
become a negative factor
for Costa Coffee, as they
depend on these workers.
Economical  Rate of
unemployment in
UK has decreased
from 6.1 percent to
4.1 percent in 2018
(statista.com,
2019).
 The growth of GDP
has been
significantly
Due to less unemployment
in UK, people will be able
to buy more products
regarding leisure. They will
be able to afford Coffees
more from Costa Coffee,
as they will have the
required financial strength.
The GDP growth in UK is
making it easy for Costa
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decreasing over
last five years. It
has decreased to
1.4 percent from
2.35 percent in
2018 (statista.com,
2019).
 The disposable
income per capita
has risen in recent
times and it will
grow in future
(statista.com,
2019).
 Emergence of BRIC
market is an
important factor
(Gay, 2016).
Coffee to expand their
business, as the overall
economic condition of the
country is quite good.
Therefore, these two
factors will make the
business environment
positive for Costa Coffee.
People have more
disposable incomes in
recent times. This
increases their ability to
spend more on food
products, which are not
directly linked to their daily
necessities. This will
increase the sales of
Costa Coffee, as people
will spend more in their
products. The emergence
of BRIC market is making
it easy for Costa Coffee to
sustain as countries like
China, India, Brazil and
Russia is giving raw
materials for Coffee at
cheaper prices.
Social  Citizens of UK are
now consuming
over 95 million cups
of Coffee daily. This
rate has risen about
25 million from
2008
(independent.co.uk,
2019).
 The rise in vegans
has reached to 3.5
million, which is
quite astonishing
(independent.co.uk,
2019).
 People are opting
for customised
coffee and they are
experimenting with
herbs, spices and
floral flavours.
Citizens in UK have
become addicted to
Coffee and it has become
a daily product to spike
their mornings. The
soaring rate of increase in
consumption of Coffee is
giving Costa Coffee to use
this opportunity for
increasing their sales. This
is definitely a positive
influence for this company.
The recent trend in
veganism and adoption of
vegan options in foods is
changing habits of people.
Costa Coffee has not yet
thought about coffees
without animal products.
This will not let them
capture the vegan
customers and this may
decrease their sales at
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great amount. The
negative influence of this
factor is evident. The
recent trend in mixing
coffee with various spices
and herbs may give Costa
Coffee more opportunity to
increase their product
ranges. This can act as a
positive factor if they can
capture this opportunity.
Technological  UK is the fourth
country, which has
high level of
communication
technology
(independent.co.uk,
2015).
 The usage of social
media in marketing
has been a recent
trend (Tuten and
Solomon, 2017).
 Technology has
increases the
competition in food
market.
 Cyber security is a
major issue
recently.
Top-notch communication
technology can give Costa
Coffee opportunity to
communicate efficiently
with customers. This will
increase their sales and
can be considered as a
positive factor. Costa
Coffee can use social
media for their BTL
advertising. This will let
them to reach towards
their customers more. This
can easily become a
positive aspect for their
business, as they will be
able to increase their
market hold. The rise in
technology is making the
competition more difficult
for Costa Coffee. Many
competitors are easily able
to access vital data and
give competition. This will
make business difficult for
Costa Coffee and can
make a negative impact
on their profit, as other
companies may cause
buyers to shift. The
organisation may face
some trouble due to cyber
security issues. Their
important data may be
hacked, which will become
problematic for their
business.
Environmental  The recent
environmental
This kind of environmental
degradation in UK has
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degradation in UK
is growing. The
usage of plastic has
increased
(legislation.gov.uk,
2019).
 The recent use of
disposable coffee
cups and straws
are a big factor in
UK.
recently been a concern
for government. Wastage
from food joints are
increasing regularly.
Therefore, the UK
government has
implemented strict laws
like “Environmental
Protection Act 199” to
decrease the impact of
environmental damage. If
Costa Coffee fails to follow
these laws, then
government can revoke
their license. Costa Coffee
will have to use disposable
coffee cups and straws.
The price of these items is
higher than normal plastic
ones. This may increase
their selling price of
coffees, which will become
a major problem and affect
negatively for the
company.
Legal  UK government has
strictly imposes
some rules for
organisations.
“Health and safety
act of 194” is
mandatory to follow
(legislation.gov.uk,
2019).
 “Minimum wage act
of 1998” is a vital
legislation for
organisations
(gov.uk, 2019).
 “Food protection act
of 1990” by UK
government is
necessary to follow
in food sector.
Costa Coffee will require
to follow these acts
properly. They have to
ensure that employees are
not working under
unhealthy environment in
any circumstances. They
are liable for safety of
workers in their business
premises. They have to
ensure that they are not
delving into dangerous
activities during working
hours. If under any
circumstances, an
employee is injured, then
the company will be
severely punished for this.
Therefore, this may
become a negative factor
for them if they do not
adhere to this law. The
“national minimum wage
act” states to give 8.21
pounds per hours to
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