Costa Coffee: Strategic Management Analysis for Hospitality Industry

This report provides a comprehensive analysis of Costa Coffee's strategic management within the hospitality sector. It begins with an overview of the company, its history, and its position in the market. The main body of the report then delves into the corporate-level strategies, including stability, expansion, reattachment, and combination strategies, evaluating their implementation and effectiveness. The report further examines business-level strategies, focusing on Costa Coffee's marketing mix (product, pricing, place, and promotion) and its cost leadership strategy. Finally, the report explores functional-level strategies and concludes with recommendations for future strategic directions, offering insights into how Costa Coffee can maintain its growth and success in the competitive coffee shop industry. The report is designed to provide a detailed understanding of the strategic decisions that have shaped Costa Coffee's performance.

Hospitality Strategic
Management

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Overview of Case Study Organisation...................................................................................3
Corporate Level Strategy........................................................................................................4
Analysis and evaluation of strategic decisions.......................................................................6
Business Level Strategy.........................................................................................................6
Examples of Costa Coffees Strategic Decisions ...................................................................6
Analysis of the Business level strategies................................................................................8
Functional level strategy.........................................................................................................8
Recommendations for Future Strategies..............................................................................10
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Hospitality refers to the activities and services associated with taking care of the guests or
customers. Through the services of hospitality, a company can provide the customers a long-
lasting impression of being served and value for money satisfaction. Hospitality industry
constitutes of several business models such as hotels, café, restaurants, bars, tours and travel
services. In all these business models one thing in common is the business provides the services
and not a one-time used tangible product (Okumus and et. al., 2019). The quality of being a
good host of the guest and customers and providing a satisfying experience gives the company a
good hospitality impression. In this report Costa Coffee’s, a hospitality leader, analysis is done
based on its strategies and performance in the respective sector. Founded in 1971, the brand will
be successfully completing its 50 years of existence in which the company has made its
reputation of provide unique experience to the customers. The company achieved success and
growth through the effective execution of the various strategies. In this report a brief analysis for
the understanding of the corporate level, business level and functional level strategies of Cosa
Coffee is done. In order to continue the growth and success of the brand, it must implement
changes and simultaneously adapt to the changing market, which is discussed in the report.
MAIN BODY
Overview of Case Study Organisation
Costa Coffee is a coffee shops company that was founded by the Costa brothers. As
already mentioned, the company was founded in 1971 in Britain by the Italian brother Bruno and
Sergio Costa. The initial business for the company was to supply roasted coffee been in the
British market. This was brought out as there was a high demand of Italian prepared coffee in
which the Costa brothers made out a multinational company (Konovalova, and et. al., 2018).
Headquarter of the company is based in Dunstable, UK. Since being founded by the Costa
brother the company has seen some ups and downs and changes at the owner position of the
brand. Costa Coffee was acquired by Whitebreads in 1995. Under the control of Whitebreads the
company developed and opened multiple franchise of the brand. With the complication in
providing the quality and a drop in the profitability the Whitebreads sold the brand to Coca Cola
in 2019 in a deal worth 3.9bn Pounds. The brand currently has over 4000 coffee shops in about

30 countries out of which England has the most followed by China and U.A.E. The brand has a
good Asian market that appreciate the quality and uniqueness that the brand offers the customers.
The company has a large number of employees that was 20,000 as of 2018 after which
the number grew as the brand grew under Coca Cola. Costa Coffee is well known for its
simplistic service delivery. With the stores associated with a unique fragrance of the
multinational chain, the customers are satisfied with the long existing simple menu offered by
the brand. Environmentally concerned, the brand has maintained a good image in the market by
practising paper made coffee cups and associating the brand in the protection of coffee producing
rainforest (Moutinho and Vargas-Sanchez, A. eds., 2018).
Corporate Level Strategy
The growth and success of every business depends upon the strategic management. It is
the strategic management that defines the structure and working of the company. From the vision
of the company to the delivery of the services everything is decided by the process of strategy
making and its implementation. For an effective strategy management, a theory of three part
hierarchy organisational theory. In this hierarchy the Corporate level of strategies are places at
the pole position because of the important role it plays in setting the base and working of a
company.
Definition
Corporate level Strategy are practices that set the mission and vision of the company and
with their execution a company can become certain of the level of operations and their ground
execution. Corporate level of strategies formation decides the market to be served by the
company along with the enhancing the performance of the company in the existing market.
There is a further division in the corporate level strategies that are, stability expansion,
reattachment and combination strategies (Elfimova, Y. and Radishauskas, 2018). This further
division of the strategies specifically focus on an objective of the company and through their
execution the company can make appropriate changes.
Stability Strategy: When a company enters a market, its primary objective is to achieve
stability, i.e. the company reserves enough revenue to achieve a position of self-sustainability.
To complete this primary level of objective a company must focus on knowing its customers and
proving them satisfactory quality and services. Here the Costa Coffee must ensure that the
marketing and promotional strategies are being executed and giving positive result to Costa

Coffee. This strategy is one of the most important strategy as it help in the initial success and
stability of the company. This stability is achieved through the process of market research and
forgetting the customers for the quick start of the company's sales.
Expansion Strategy: This is a second line strategy that helps the company to evaluate its
position in the market. This is done by looking at the stats and sales along with the revenue
generated and the number of retained customers. When a company has achieved a market
position and is sure about the working and stability of the existing venture then with the
application of expansion strategy a company works towards expanding the company not just in
the national market but also in the international market (Poddubnaya, 2019). Over the 50 years of
expire ice Costa Coffee has expanded its market to more than 30 countries following the
expansion strategy and the company has benefited and achieved the success exponentially. The
expansion strategies is the later step as it helps in the process of growth of the company in terms
of international and national market.
Reattachment Strategy: The role of this strategy comes in play when a company
observes a bad performance from any of its ventures of franchisee. The focus of reattachment
strategies is to make little investment in the venture and try to get more outcome. The strategy is
set to redefine the working of the particular outlet as it hasn’t been improving up to the mark of
brand expectations. The reattachment strategies follow a well defined planning an organizational
set up in order to enhance the performance of the company. This strategy is are set to bring the
accounts to no loss situation first as the company has been observing loss through its particular
out let. Redefining involves the changes that are to be brought to enhance the performance.
Combination Strategy: This set of strategies are brought out when a company is set to
adapt a mix of all the three discussed strategies, that are stability, expansion and redefining
strategies. In order to obtain maximum result in quickest of time companies effectively perform
all the strategies simultaneously. The main reason for the time when Costa Coffee followed this
strategy is when the company faced a rapid change in the market it expanded to. The
combination strategy is a successful way of growing the company through various strategies
implemented a the same time in order to achieve the result according to the aims and objective of
the company. The combination of all the strategies requires a higher level of supervision but is
expected to prove out to be efficient and productive in enhancement of performance of the
company.

Analysis and evaluation of strategic decisions
Analysis of the strategic decision of Costa Coffee is the process of finding out the
efficiency with which the company have implemented corporate level strategies. Started with the
services of providing coffee beans to the local vendors in UK to having more than 4000
coffeshops worldwide Costa coffee has made quite significant growth in the 50 years of
existence. The company has successfully implemented the corporate strategies (Law, and et. al.,
2018). (Franco, and et. al., 2020). (Li, and Singal, 2019). With the appropriate calculation for
stability of a coffee shop the company has focused on the supporting planning strategies that help
in the achieving stability. These functions are the promotional events and marketing done with
the complete understanding of the local market and potential customers. Costa Coffee had to
close its operations in Pakistan due to bad market conditions. Although the multinational brand
applied reattachment strategies in order to develop the working of the coffee store according to
the market but the results were satisfying from the level of the company and hence the company
closed its operations. In other Asian countries Costa Coffee had applied combination strategies
as the company has to go through a drastic change from a market and achieved satisfying
results.
Business Level Strategy
A business strategy is defined by which the organisation has use to achieve its goals and
objectives. This can generally used to achieve its long term business planning. Although it is all
about how the peoples can act in the whole organization and helps to make the decision and put
the resources for obtaining the objectives of the company. Now in the context of costa coffee
will discuss about some of the market strategies. Marketing strategies of the costa coffee
analyses which will cover the 4ps and would explains the costa coffee strategy (Ali, and et. al.,
2018).
Examples of Costa Coffees Strategic Decisions
Product strategy of the costa coffee:as the costa coffee is the well known brand that
covers the coffee chain globally. Costa coffee sells their coffee as they are offering its main
product in the marketing strategy. The company offers their lots of flavours in coffee like mostly
they are offering, cappuccino, Americano, mocha and Expresso . The company always try to
give the new flavours to their customers, so that they are fully satisfied with the brand. And the
customers first choice will always remains constant.

Costa coffee pricing strategy:The costa offers their products at always on the premium
range because their brand value and also do focus on the brand high quality. Also they are giving
so many offers to their customers and provide them discount on some special days. So, that the
customers can get attracted and always do prefer the costa coffee brand (Martínez-Martínez, and
et. al., 2019).
Costa coffee place and distribution strategy:costa coffee have nearly 4000 outlets that is
all over in the 31 country. But in India the business of costa coffee is in the limited way and also
this is not growing because of the several brand already present in India like coffee cafe day. So
the costa coffee have decided to target the upper middle class and the rich peoples. As well as
costa coffee also made their menu according to the place in which they can earn more customers
and can build their brand image.
Costa coffee promotion and advertising strategy: costa coffee promotion is not make
available on the televisions and media. This brand only focus to do mouth advertising they
believe to follow the word of mouth publicity. This is the only brand that doesn't only provide
the coffee but also provides the good experience. Because this coffee really tastes good and
influence the customer to come again. Often this also provides the samples for their customer to
taste first then decide to purchase ( Horng, and et. al., 2018).
Costa Coffee cost leadership strategy: Costa Coffe is a business chain that is known in
the entire world for its performance and quality services offered to the customers. Because of the
uniqueness in the experience provided to the customers and in addition to the brand image
product holds in the market, the coffee shops continues with the cost leader strategy that is the
price set up by the company is done on its own preferences. The customers are expected to pay
the slight higher prices as compared to the competition because of the quality of the services that
the company is providing the customers.
Differentiation Strategy: Costa coffee being the world famous brand is always in search
of providing something different and unique to the customers in order to continue to thrive with
the services. Costa Coffee in a while comes up with the new products and drinks that attract the
customers. The differentiation is done on the product, pricing and services level in order to make
the company unique and attractive to the customers.

Analysis of the Business level strategies
Costa Coffee is known for being one of the best at implementation of business level
strategies. With quality in products and comfort through the ambience of the coffee shops Costa
Coffee is a good example of possessing business skills. It is through the understanding of the
market place and potential customers the coffee brand gained position in the market. Costa
coffee has developed product based on the demand of the customers in the new market place.
Along with the product management Costa Coffee has implemented pricing and place
distribution strategy on the basis of their market analysis. As the company targeted the upper
middle class and rich people the prices offered are just adequate for attracting both classes of the
society. Another important example of business strategy level is the preference of the location. In
order to promote the brand image and sustain the richness that the brand name reflected in any
new marker the location for the coffee shop is selected from the posh area such an efficient
implication of the strategy helped the company attract the target customers (Cunill, and et. al.,
2019).
Functional level strategy
Definition:- Functional level strategy implies the actions and goals assigned to different
departments of company that supports business level or corporate level strategy of the business. ‘
A functional strategy is the short term game plan for a special functional area within a company.
It is a approach which is used to achieve corporate and business level objectives, in which the
production maximized (Law, and et. al., 2019). The main objective of costa coffee company is
to pay attention on what is needed to be done to make this strategy work. It is a game plan to
subordinate the principal activities within the business.
Examples:-
 Strategies help the firms to anticipate changing condition. It was always an assumption
that the company will not change so fast according to need of conditions, strategies help
the companies to do accordingly, like costa coffee do all decisions for long term
forecasting. It takes actions on early stage of new trend and give their effective time to
managing these changes.

 Once the objective is clear, the direction for employees from becomes easier, once they
construct a plan of the management, the instructions that are given to employees are
easily understandable (Okumus, Koseoglu, and Ma, 2018).
 Costa coffee doesn’t stop their research on market they will continue doing it for
securing their position in the market, they research about their competitors and the
changing demand of the consumers and start preparing their strategy according to the
situation. This will help them in growing.
 It is an old saying that strategy leads a person to success, same as it implies to business
concerns. Doing business with strategies help a concern to grow. Costa coffee do their
every plan with strategy this results in their place in market and the success of their
business. It is a short term play through which ability of an organization to attain and achieve
standardized business objectives and strategic formulation is advanced with perfection. It
also assist to make profitable changes to advance and maximize overall productivity and
profitability for a longer period of instance.
Analysis and evaluation: -
The evaluation of strategic management lies in its capacity to coordinate the task done by
the employee, manager, groups and departments, by having control over it. Strategic evaluation
is needed because of various factors such as development of new strategies according to changes,
for working over the feedbacks of the clients. Costa coffee adapted different strategies as it faced
a tough competitive environment (Iyer, and Jarvis, 2019). It mainly received it raw material
from developing countries of south America. Being a huge and a well-known brand it has a huge
purchasing power, by which the bargain power of the buyer and suppliers become less. Which
results, the market share of costa coffee become less.
From the above information of the costa coffee we analysis that , though it is an
international brand with a powerful background of joint venture is the strength of this company.
After being an international brand, it has low market share and low reputation in market because
of lack of product localisation and shortage of professional (Kumar and et. al., 2020). Sometimes
being a big is not everything having an identity in market is necessary with respect is also

required. Costa coffee faced the competition with Starbucks and some local coffee chains, which
impacts its growth in the market.
Recommendations for Future Strategies
Market these days is an everyday changing market and in order to continue the growth
and achieve success Costa Coffee must have the understanding of this changing market. In the
strategic term the company must always accept the changes and adapt to them accordingly
(Porcu, and et. al., 2019). In a present world with the changing needs and demand of the
customer there are some changes that have the possibility to succeed in future these changes are.
Healthy Dishes: People these days live a hustling life and in their routine life the touch of
nutrition through food is lost, therefore the brand must include some of the healthy dishes into its
menu particularly targetting people living the corporate life with little time to care of their health
and would love to have a healthy snack or breakfast with the coffee (Strandberg, and et. al.,
2018).
Contribution towards environment: Costa Coffee has been actively taking part in the
contribution towards the rainforest but there has been a lack of relation with the brand name and
environmental connection through the market perception. With the growing concerns among
people towards the environment, the future is certain to have support for the companies inclined
towards the environment benefit. Therefore the company must involve itself in the direct
contribution towards the environment factors whether it is through the promotion of activities
that could help the world environment to heal or through making a percentage wise contribution
towards the environment (Konovalova, and et. al., 2019).
Immunity booster products : After the out burst of the Covid-19 pandemic people all
around the world have become more immunity conscious. Looking at this change in the concerns
and preference of the existing customers the brand is suggested to make a move towards
satisfying the need of the customers. Through the input of enough research and development,
Costa Coffee can very well use the brand image as the people could trust the brand with quality
and authenticity, that gives the company and edge over competitive advantage. The company is
suggested to introduce a drink with the primary objective to add to the immunity of the
customers. Every person was struck due to the after effects of the pandemic such as mental stress
and immunity issue, this unites everyone in the preference. The brand could add the promotional

strategies as it has come with a product that is helpful for the customer along with the quality and
authenticity of Costa Coffee (Murphy, and et. al., 2018).
The major aim and target of the business is to attain and achieve profitable advancement
over a linter period of instance through which market sustainability and its suitability both get
enhanced over a regular period of instance. In this company make supportive usage of cost
leadership as it is the most successful and impactful business in competitive marketplace. Thus
tendency of the business to attain market attentiveness and its attractiveness both get developed
in systematic manner. In addition to this costa coffee make ensure to target larger marketplace
and through this reattach with customer as by offering various benefits such as offer and
hampers. For this ability of the company is advance and improvise in modest manner that aid the
business to attain better outcome over a regular period of time.
CONCLUSION
It is concluded from the report that hospitality consist of numerous areas in which
organisational strategies play a vital role. There are strategies for various purposes that help a
company reach the target and achieve it mission and vision. Through the implementation of
Corporate level strategies a company can set the base of its objective and all the target area and
market it wants to deal in Business level strategies help the company better its per venture
performance as the strategies implemented here based on the analysis of the local market.
Functional level strategies help the company in competing in the market and on the basis of this
strategy a company can make changes and plans that helps beat the competition for the customer
satisfaction.

REFERENCES
Books and Journal
Ali, F., and et. al., 2018. An assessment of the use of partial least squares structural equation
modeling (PLS-SEM) in hospitality research. International Journal of Contemporary
Hospitality Management.
Cunill, and et. al., 2019. Thirty-fifth anniversary of the International Journal of Hospitality
Management: A bibliometric overview. International Journal of Hospitality
Management. 78. pp.89-101.
Elfimova, Y. and Radishauskas, T., 2018. Management of innovative activity in the field of
hospitality. In Sustainable development of tourism market: international practices and
Russian experience (pp. 57-59).
Franco, S., and et. al., 2020. Are you good enough? CSR, quality management and corporate
financial performance in the hospitality industry. International Journal of Hospitality
Management, 88, p.102395.
Horng, J.S., and et. al., 2018. Developing a sustainable service innovation framework for the
hospitality industry. International journal of contemporary hospitality management.
Iyer, G.R. and Jarvis, L., 2019. CSR adoption in the multinational hospitality context: A review
of representative research and avenues for future research. International Journal of
Contemporary Hospitality Management.
Konovalova, and et. al., 2018. Forming approaches to strategic management and development of
tourism and hospitality industry in the regions. Journal of Environmental Management
& Tourism. 9(2 (26)). pp.241-247.
Konovalova, and et. al., 2019. The conceptual basis of the tourism and hospitality industry's
development. Journal of Environmental Management & Tourism. 10(4 (36). pp.865-
869.
Kumar, M., Tsolakis, N., Agarwal, A. and Srai, J.S., 2020. Developing distributed manufacturing
strategies from the perspective of a product-process matrix. International Journal of
Production Economics, 219, pp.1-17.
Law, R., and et. al., 2018. Systematic review of hospitality CRM research. International Journal
of Contemporary Hospitality Management.
Law, R., and et. al., 2019. Progression and development of information and communication
technology research in hospitality and tourism. International Journal of Contemporary
Hospitality Management.
Li, Y. and Singal, M., 2019. Capital structure in the hospitality industry: The role of the asset-
light and fee-oriented strategy. Tourism Management, 70, pp.124-133.
Martínez-Martínez, A., and et. al., 2019. Environmental knowledge strategy: driving success of
the hospitality industry. Management Research Review.
Moutinho, L. and Vargas-Sanchez, A. eds., 2018. Strategic Management in Tourism, CABI
Tourism Texts. Cabi.
Murphy, K., and et. al., 2018. A review of high performance work practices (HPWPs) literature
and recommendations for future research in the hospitality industry. International
Journal of Contemporary Hospitality Management.
Okumus, B., Koseoglu, M.A. and Ma, F., 2018. Food and gastronomy research in tourism and
hospitality: A bibliometric analysis. International Journal of Hospitality
Management. 73. pp.64-74.

Okumus, F., and et. al., 2019. Strategic management for hospitality and tourism. Routledge.
Poddubnaya, N.V., 2019. Corporate culture as an effective instrument of strategic development
of tourism and hospitality enterprises. In Актуальные проблемы развития сервиса и
туризма (pp. 133-135).
Porcu, L., and et. al., 2019. Analyzing the influence of firm-wide integrated marketing
communication on market performance in the hospitality industry. International Journal
of Hospitality Management. 80. pp.13-24.
Strandberg, C., and et. al., 2018. Tourism research in the new millennium: A bibliometric review
of literature in Tourism and Hospitality Research. Tourism and Hospitality
Research. 18(3). pp.269-285.