Costa Coffee: Business Organizations in a Global Economy Report

This report examines Costa Coffee's potential for business expansion in New Zealand, focusing on the company's global strategy and its adaptation to a new market. The introduction highlights Costa Coffee's position as a leading coffee house chain and its interest in foreign direct investment (FDI) in New Zealand. The report provides background information on Costa Coffee, including its history, operational activities, and financial performance. A PESTLE analysis is conducted to assess the political, economic, social, technological, legal, and environmental factors influencing the business environment in New Zealand. The analysis suggests that New Zealand offers a favorable environment for business expansion. Furthermore, Porter's Five Forces analysis is applied to evaluate the competitive landscape, including competitive rivalry, bargaining power of suppliers and buyers, the threat of new entrants, and the threat of substitute products. The report concludes that Costa Coffee has strong potential for success in the New Zealand market, given the country's stable economy, favorable social factors, and manageable competitive forces.

Business
Organisations in a
Global Economy

Table of Contents
INTRODUCTION...........................................................................................................................1
BACKGROUND INFORMATION ON ORGANISATION..........................................................1
Overview of company..................................................................................................................1
BACKGROUND INFORMATION ON BUSINESS ENVIRONMENT.......................................2
PESTLE analysis.........................................................................................................................2
ANALYSIS OF THE BUSINESS SCENARIO..............................................................................5
Application of Porter's Five Forces Analysis..............................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Costa Coffee is one of the leading coffee house chains which are executing business all
around the world. It is mainly established in Dunstable, Bedfordshire. The founder of it was
Costa family and established it in year 1971 (Montero and et.al., 2018). The company is looking
for FDI opportunity of business expansion in New Zealand. With the help of it the organisation
will be able to attract large number of customers and increase profits. By expanding business in
the country the company will also able to increase its market share. For this purpose different
topics are discussed in this report. These are background information of the enterprise and its
business environment. Additionally, porter's five force model is also used for the purpose of
analysing business scenario in this report.
BACKGROUND INFORMATION ON ORGANISATION
Overview of company
Costa Coffee is the largest organisation which is a coffee house chain of Coca Cola. It
was founded by Costa Family in year 1971. Earlier roasted coffee is suppliers by it to the coffee
shops and caterers. Afterwards, it started its own shops and sold varieties of coffee's to the
customers. The size of the company is very large as it is operating business at global level.
Revenues of it for year 2016 were around 1.168 billion pounds and net income for the same
period was around 153 million pound (Nguyen and et.al., 2017). It is owned by Coca Cola which
is a private company and the legal structure which is followed by it is limited company. There
are various international operations of it which are as follows:
Sales: It is one of the main operation of Costa Coffee because it is selling range of
Coffees to the customer in international market. For this purpose, quality of all the items is
focused by it so that it can meet the expectation level of consumers.
Marketing: It is also a major operation of Costa Coffee which executed by marketing
department of the company at international level. For large as well as small companies it is very
important to market all the items sold by them so that large number of customers could be
attracted towards it. This operation is highly focused by the business entity as it helps it to spread
awareness about all the varieties of coffees which are sold by it to the customers. Different
advertising campaigns are conducted by the organisation at global level to increase its sales. If
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the enterprise fails to market its products and services then it will result in bad market image and
decreased profits.
Human resource: It is also an international operation of Costa Coffee. As it is operating
business at global level so it recruit staff members from different countries to execute the
operational activities properly. All the employees for effective performance are hired from the
country where business is operated as it can help to analyse buying behaviour of customers and
identify their demand.
All the above described international operations are performed by Costa Coffee at global
level for the purpose of executing all the operational activities in systematic manner. With the
help of all of them company try to reach all its long as well as short term business goals such as
profit maximisation, customer satisfaction and attracting FDI for future.
BACKGROUND INFORMATION ON BUSINESS ENVIRONMENT
PESTLE analysis
Business environment can be defined as framework which guides companies to analyse
all the external forces which are leaving impact upon business operations. In order to execute all
the business activities appropriately it is very important for organisations to analyse it so that
effective strategies for future could be formulated. As Costa Coffee is willing to expand its
business in New Zealand so it is very important for the management to make sure that it gather
detailed information of business environment of specific country. It will help to form
organisational policies according to the external factors. For this purpose, appropriate analytical
approach such as PESTLE analysis is required to be applied on the company.
PESTLE analysis: It is a strategic management technique which is used by organisations
to analyse the impact of external business environment. There are six different elements of it
which are required to be assessed by all the companies (Arrieta Castro and et.al., 2016). These
are political, economic, social, technological, legal and environmental. In order to determine the
business environment of New Zealand all these components are required to be analysed by Costa
Coffee. Description of all of them is as follows:
 Political: Trader restrictions, corruption, political conditions, governmental policies etc.
are considered as these factors. As Costa is planning to open new coffee shops in New
Zealand so it is very important for it to make sure that all these forces are analysed by it
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in detail. This nation is considered as one of the stable economies of world therefore it
will not be difficult for Costa Coffee to expand its business there (Stability in democracy
of New Zealand, 2019). Due to this, the restrictions for trade in the country are also very
low which will be beneficial for the organisation to reach its objective of expanding
business.
 Economic: Exchange rates, inflation, deflation, rate of unemployment, disposable
income, economic growth etc. are such factors which should be focused by the
companies such as Costa Coffee which are planning to expand business in new country.
It can help to analyse that the business will be able to grow there or not. The rate of
unemployment in New Zealand is decreased in first quarter of 2019 as compare to last
year which is leaving positive impact upon the economy (Unemployment rate in New
Zealand, 2019).
Illustration 1: Unemployment rate in New Zealand, 2019
(Source: Unemployment rate in New Zealand, 2019)
From the above chart it can be analysed that the unemployment rate in New Zealand is
decreasing continuously which is growing the economy and creating opportunities for companies
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such as Costa Coffee to expand their business. Continuous reduction in such rates are resulting in
economic growth which benefits the organisations which are operating business in the country.
 Social: The combination of demographics, culture, lifestyle attitudes, age distribution etc.
is known as social factor. In order to be the first choice of customers it is very important
for companies to take all of them in to consideration so that their satisfaction level could
be increased and they could be retained for long run. The culture which is followed in
New Zealand is Western and it is influences by geographic isolation of islands. Due to
this people prefer to have coffee as compare to other beverage items. As Costa Coffee has
planned to expand its business there so it will be beneficial for it to generate higher
profits as range of coffee is offered by it to clients. It will also help the company to reach
the objective of expanding business successfully (Social factors of New Zealand, 2019).
 Technological: It takes level of innovation, automation, technological awareness and
incentives etc. in to consideration. For organisations such as Costa Coffee it is very
important to use innovate ways to market all the products and services so that
technological needs of customers could be fulfilled. Technological awareness in New
Zealand is very high and this sector is booming continuously so it is a great opportunity
for Costa Coffee to expand business there by using latest techniques (Technological
awareness of New Zealand, 2019). If the management is not able to comply with
innovative modes of business and marketing then it will be very difficult for it to expand
business as it may affect the customer engagement and attraction.
 Legal: Different types of laws such as discrimination, employment, consumer protection,
health and safety, patent and copyright etc. are legal factors. As Costa Coffee is planning
to expand its business in New Zealand so it is essential for it to make sure that it collects
detailed information of all of them in context of the country. The law of the nation is
based upon English Law so it will not be very difficult for Costa Coffee to comply with
all the rules and regulations of it regarding expansion (Legal system of new Zealand,
2019). It is a great opportunity for the organisation as the efforts which were required to
be made for analysing laws for expansion will be reduced and monetary resources will be
saved by company.
 Environmental: Climate change, weather, corporate social responsibility, environmental
policies etc. are such factors which are required to be focused by business entities such as
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Costa Coffee while expanding business. Currently the organisation is willing to open
more cafes in New Zealand so that its market share could be increased. For this purpose,
the enterprise is required to pay attention towards environment related policies. The
government of country has taken various steps to conserve the indigenous biodiversity
which shows that environment protection laws in the country are very strict. In order to
open more coffee shops in New Zealand it is very important for Costa Coffee to comply
with all of them (Kinoshita and et.al., 2016). It will be beneficial to establish a good
image in the mind of authorities and local public of nation.
By assessing all the above described aspects of business environment of New Zealand it
has been determined that the decision of business expansion in the country will be favourable for
Costa Coffee because all of them are creating opportunities for business.
ANALYSIS OF THE BUSINESS SCENARIO
Application of Porter's Five Forces Analysis
Business scenario is the analysis of competitive environment in the industry so that
effective strategies to deal with issues which may leave negative impact upon business could be
formulated. If an organisation is not able to analyse the scenario of its business then it will be
very difficult for it to sustain in the market for a long period in future. As Costa Coffee has
planned to expand business in New Zealand so it is vital for it to determine the competitive
environment. For this purpose effective analytical approach is required to be used that can guide
to analyse the actual situation of market (Auld, 2014). Porter's five forces model is the best
suitable model which could be used for this purpose.
Porter's five forces model: It is a technique which is a combination of five different
elements which are focused by companies for the purpose of determining the level of
competition in the industry. For Costa Coffee it if vital to analyse all the elements of it so that it
can help the company to take strategic decisions for betterment of business (Blechová, 2018).
Description of all its elements in the context of Costa is as follows:
 Competitive rivalry: It is the first element of analysis in which existing level of
competition is analysed to form strategies to attain competitive advantage for business.
Costa Coffee is currently operating business at global level and planning to open new
cafes in New Zealand so it should determine the existing rivals in the industry. The major
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competitors for it in the country are Starbucks, Cafe Coffee Day, Lavazza, Nestlé
Nespresso etc. It shows that level of competition for the company is very high so the
management is required to make sure that it introduces unique coffee with new cafes so
that it can help to deal with competition (Costa and Torkomian, 2015).
 Bargaining power of suppliers: All the external parties which are delivering material to
organisations to execute their operational activities are known as suppliers. The food and
beverage industry of New Zealand is very large and the number of such parties who can
supply items for coffee is very high. If one of them is selling the material on high price
then Costa Coffee can switch to another one. It shows that the power of bargaining of
suppliers for the organisation is low due to high number of them (Fiorani, Cavicchi and
Angelini, 2016).
 Bargaining power of customers: In order to operate business activities properly it is
very important for organisations to meet expectation level of clients. There are end
number of seller in the coffee industry of New Zealand so the bargaining power of
customers is very high. For Costa Coffee it will be very difficult to deal with this issue
while opening new cafes in the country. The organisation cannot afford to loose its
customers as it may affect the market share of it (Gunawan, 2014).
 Threat of new entry: If a new company is willing to be the part of coffee industry then it
is very important for it to arrange funds and make efforts to perform operational activities
in systematic manner. It shows that there are various barriers to enter in this sector so the
threat of new entrant for Costa Coffee in New Zealand is low and it will not affect its
expansion in the same country.
 Threat of substitutes: The products which provides same benefits to the customers are
known as substitutes. Costa Coffee is a big brand in the coffee industry and the price of
all its items is very high so the customers prefer to go to local shops and have substitutes
of it so that they can get it for lower price. In New Zealand and other locations all around
the world people have same mentality and on the other hand there are various brand loyal
customers which are retained by the organisation. Therefore, the threat of substitutes for
the organisation in New Zealand is moderate (Porter and Magretta, 2014).
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CONCLUSION
From the above project report it has been concluded that if an organisation is willing to
expand its business in a country then it is very important for it to make sure that it is able to
adopt the opportunity of foreign direct investment. With the help of it the goals regarding
expansion could be achieved. While formulating strategies for the successful attainment of all the
objectives it is very important for companies to determine the business environment for which
PESTLE analysis could be conducted. In order to analyse the business scenario Porter's five
forces model can be used by companies. Both the tools can guide the managers to form effective
strategies for business. There are various issues which could be faced by companies while
expansion. These are higher competition, bargaining of customers and substitutes. In order to
deal with them business entities are recommended to launch unique items according to the
buying behaviour of customers to be their first choice.
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REFERENCES
Books and Journals:
Arrieta Castro, G. and et.al., 2016. Diversity of Bacillus thuringiensis strains isolated from
coffee plantations infested with the coffee berry borer Hypothenemus hampei.
Auld, G., 2014. Constructing private governance: The rise and evolution of forest, coffee, and
fisheries certification. Yale University Press.
Blechová, J., 2018. Konkurenceschopnost vybraného podniku služeb v oblasti cestovního ruchu.
Costa, H. L. and Torkomian, A. L. V., 2015. The valley of electronics: Relations between the
creation of a school and the building of a successful industrial cluster in
Brazil. International Journal of Technology Management & Sustainable Development.
14(2). pp.125-139.
Fiorani, G., Cavicchi, A. and Angelini, E. C., 2016. Prospettive strategiche per il Made in Italy
agroalimentare: un’analisi esplorativa del mercato delle macchine professionali da caffè
espresso secondo le 5 forze competitive di Porter. Economia agro-alimentare.
Gunawan, I. H., 2014. BUSINESS PLAN CAFE LUDOS. CALYPTRA, 3(1), pp.1-21.
Kinoshita, R. and et.al., 2016. Large topsoil organic carbon variability is controlled by Andisol
properties and effectively assessed by VNIR spectroscopy in a coffee agroforestry
system of Costa Rica. Geoderma. 262. pp.254-265.
Montero, M. and et.al., 2018. Identification of supply chain performance indicators: case study
of costa rican coffee production. Universal Journal of Industrial and Business
Management. 6(1). pp.1-10.
Nguyen, D. and et.al., 2017. Overview of imageclef lifelog 2017: lifelog retrieval and
summarization.
Porter, M. and Magretta, J., 2014. Strategy and Competition: The Porter Collection (3 Items).
Harvard Business Review Press.
Online
Stability in democracy of New Zealand. 2019. [Online]. Available through:
<https://www.newzealandnow.govt.nz/investing-in-nz/stability-security>
Unemployment rate in New Zealand. 2019. [Online]. Available through:
<https://www.stats.govt.nz/news/unemployment-rate-edges-down-to-4-2-percent>
Social factors of New Zealand. 2019. [Online]. Available through:
<https://www.msd.govt.nz/about-msd-and-our-work/publications-resources/journals-
and-magazines/social-policy-journal/spj37/37-social-indicators-and-social-reporting-in-
new-zealand.html>
Technological awareness of New Zealand. 2019. [Online]. Available through:
<https://idealog.co.nz/tech/2017/07/new-zealands-technology-sector-booming-
education-needs-catch>
Legal system of New Zealand. 2019. [Online]. Available through:
<https://www.newzealandnow.govt.nz/living-in-nz/history-government/legal-system>
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