Danes Coffee Market Entry Strategy: A PESTLE Analysis of the UK Market

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Central Queensland University, Australia
Term – 2019
MRKT 20057 ASSIGNMENT 2
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Executive summary
This report throws light on the global marketing concept of the business. For this report, Danes
Coffee selected for entering the market of the United Kingdom. The report mainly involved the
environmental analysis of the UK market. This report initiated with the introduction of the
selected product and the country as well. The report further follows the political and legal,
economic and financial, social and cultural, and technological environment analysis of Danes
Coffee in the UK market. The report concluded with vital recommendations for Danes Coffee.
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Table of Contents
Introduction......................................................................................................................................4
Economic and Financial environment analysis...............................................................................5
Retail pricing of coffee................................................................................................................5
Inflation rate.................................................................................................................................6
Labour costs.................................................................................................................................7
Employment rate..........................................................................................................................8
Interest rates.................................................................................................................................8
Political and Legal environment Analysis.......................................................................................9
Political relationships...................................................................................................................9
Political instability.......................................................................................................................9
Regional integration.....................................................................................................................9
Government standards................................................................................................................10
Fair trade laws............................................................................................................................10
Employment laws.......................................................................................................................10
Social and Cultural Environment analysis.....................................................................................11
Health and lifestyle issues..........................................................................................................11
Coffee culture.............................................................................................................................11
Consumer awareness..................................................................................................................12
Growth of middle class..............................................................................................................12
Other social and cultural factors................................................................................................12
Technological Environment Analysis............................................................................................13
Conclusion and Recommendation.................................................................................................15
References......................................................................................................................................16
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Introduction
Global marketing is a broad concept involving the marketing of a product or specific products in
the global markets. Danes Coffee considers as the Australian best specialty coffee. In Danes
Coffee, coffee manufacturing is treating as a mixture of science and art. The sourcing and
roasting of coffee beans undertake by the artisans who make the coffee with high standards. The
coffee market in the UK provides a significant contribution to the employment and Gross
Domestic Product (GDP). The UK coffee market offers direct and indirect contribution by
delivering billions of pounds to the GDP and more than 200,000 employment. Entering a new
market requires careful analysis of the environmental variables of the potential country. The UK
can consider as one of the critical markets for marketing coffee products since it's coffee market
is overgrowing in terms of production and finance.
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Economic and Financial environment analysis
The coffee market in the UK impacts in three different ways named direct contribution, induced
multiplier impacts and indirect multiplier impacts. Danes Coffee would affect by specific
economic and financial factors in the UK. The inflation rate, economic growth of the UK,
interest rates, and unemployment rates are the critical economic and financial factors for Danes
Coffee. The economic recession in 2008 affected the coffee industry as the customers have
become highly conscious and thoughtful before spending on products other than necessities (Ai,
2013). The unemployment rate during such a recession period goes up which confines the
customer spending. It becomes a negative sign for the coffee companies since even after
reducing the product prices; it becomes difficult for them to recover even the manufacturing cost.
Retail pricing of coffee
(Figure 1: Retail prices of roasted coffee in the United Kingdom)
(Source: By Jones, 2018)
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As per this analysis, it realised that the retailing prices of coffee in the UK market are more than
USD17 per pound in 2016. The country has the highest retail price of coffee which can view as
an opportunity for Danes Coffee where it can sell at higher prices. Not only has this, even after
the highest price, but UK people also spend a significant amount on coffee when the economic
growth rate of the UK is stable or functional.
Inflation rate
(Figure 2: Inflation rate 2019 of the United Kingdom)
(Source: By Moya, 2019)
This chart reflects the current inflation rate in the UK is 1.9. As compared from the last three
quarters of 2018, the inflation rate reduced to 1.9 which shows a positive sign for Danes Coffee.
It is because high inflation rate confines the production and sales of coffee products in the UK
market. Products related to foods and non-alcoholic beverages are enjoying a reasonable price
rate that would be beneficial for Danes Coffee.
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Labour costs
(Figure 3: Labour costs of the United Kingdom 2019)
(Source: By Tradingeconomics.com, 2019)
This analysis shows that the labour costs in the UK are higher than the quarters of the last year
2018. From the year 2016, it has realised that the labour costs are increasing rapidly and no
decrease in any quarter identified. It would be a threat to Danes Coffee as manufacturing and
selling of coffee in the UK would be a costly initiative in terms of labour.
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Employment rate
(Figure 4: Employment rate in the United Kingdom 2019)
(Source: By Tradingeconomics.com, 2019)
The employment rate in the UK is 76.1 per cent for January 2019. This rate considers as the
highest employment rate till now in UK history. This rate constitutes the number of people
having employment that can measure as the percentage of the entire working population in the
UK. It is an opportunity for Danes Coffee as it would help in attaining employees for the people
in the UK market.
Interest rates
On the other hand, the interest rates of the UK at present lies at 0.75 per cent as per the Bank of
England. It is a positive sign for Danes Coffee from the financial perspective in the UK. As per
the forecasts, this interest rate would rise to 1.75 per cent in the next year 2020. All these
economic factors require high consideration by Danes Coffee before entering the UK market.
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Political and Legal environment Analysis
Political relationships
Political relationships between the countries are significant for successfully entering the UK
market or other markets. Political relationships provide support to the company entering in
another market. Danes Coffee may have to deal with such situations; however, it can realise that
Australia and the UK share a sound political, business and economic relationship that would be
beneficial for the company. However, The company requires sourcing of raw materials and
manufacturing of coffee from the country having a healthy relationship with the UK (Tran,
2013). From an economic point of view, Danes Coffee can source the raw materials and
manufacturing of coffee within the UK only which would maintain the reasonable pricing of the
coffee products.
Political instability
On the other hand, the political condition of the UK seems unstable that would develop a barrier
for Danes Coffee. It is because the uncertainty of political situations leads to the changes in trade
law and other laws. Adherence to these laws would be mandatory for Danes Coffee, and it would
be difficult for the company due to the unstable condition of the UK political environment.
Mainly the local government would bring changes in the trade laws, tariffs and taxes. Adherence
of laws and fulfilment of taxes on time would assist the company in eliminating negative
publicity.
Political instability such as riots, wars, or cease-fire and all can lead to the destruction of the
company in the UK market. Therefore, it becomes necessary for Danes Coffee to enter in the
region which is least prone to such political instability (Reinecke, Manning, & Von Hagen,
2012). The company requires consideration to the sentiments of the UK people to eliminate the
ban of the company or its products within the UK.
Regional integration
With regional integration, Danes Coffee can view this as an opportunity for business expansion
on the global level. The UK market possesses a qualified infrastructure and attempting for
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infrastructure improvement. It would be a great opportunity to Danes Coffee in exploring and
reaching new markets and customers.
Government standards
In the UK, the government developed high standards for the coffee manufacturing process and
products. Following these standards would assist the company in attaining an adequate
prominence from the political perspective. Such political prominence compels the coffee
companies to operate their business ethically and responsibly.
Fair trade laws
The trend of coffee in the UK has been rising rapidly, but Danes Coffee can attain market
dominance by manufacturing sustainable coffee including fair trade of coffee or certified coffee.
It would ensure a fair price to producers and customers guaranteed which would assist Danes
Coffee in operating a sustainable business in the UK (Baregheh, Rowley, Sambrook, & Davies,
2012). Fairtrade has been encouraging in the UK to the fullest and using this opportunity, Danes
Coffee can even develop differentiated coffee products along with a reputation of socially
responsible. If Danes Coffee imports or exports the coffee or raw materials, then the new laws of
import-export laws would have to be adhering by the company.
Employment laws
Apart from this, the labour or employment laws such as equality, discrimination, fair pay, and
minimum wages and others require compliance by Danes Coffee. It should note by Danes Coffee
that the labour or employment laws comply strictly in the UK. These laws give high attention
and consideration by the companies for protecting themselves with the harsh penalties or
punishments.
Therefore, it can consider that the crucial factors affecting the companies under the political
environment imply employment laws, trade policy, political situation and tax policy. Compliance
of laws, rules and regulations have become necessary after the increased awareness as well as
activism towards the political and legal environment (Mangena, Tauringana, & Chamisa, 2012).
The country has become highly conscious of sensitive issues such as child labour and
standardised working conditions for the employees.
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Social and Cultural Environment analysis
Health and lifestyle issues
The attitudes and preferences of customers change with time, and this fact requires to be
understood by Danes Cook. According to some part of the UK population, coffee can face
threats from the perspective of lifestyle or health issues. UK people have become highly
conscious towards their health due to which, the attractiveness of coffee declined in the UK
market (Hawkins, Holden, & McCambridge, 2012). Mainly young people seek to access
substitutes or alternatives such as health drinks or green tea and so on. From the health
perspectives, coffee consumption reduced since it contains a high level of caffeine due to which
specific mental and health issues including sleep disorders, migraines, and high blood pressure or
irregular heartbeats can develop (Tucker, 2017). It may compel the UK people to ignore
beverages such as coffee or tea, and this would place a negative effect on the sales of Danes
Coffee in the UK market.
However, it considers that coffee helps in boosting metabolism due to which people can reduce
their weight. The consumption of coffee increases on this fact that coffee helps in weight loss.
Such a situation would assist Danes Coffee in enhancing sales. Contrary to this, some popular
coffee brand companies such as Starbucks have to deal with negative publicity due to the
marketing and promotion of sugar, full-fat milk and rich cream flavours (Moodie et al., 2013). It
identified that these coffee chains promote obesity. Danes Coffee can transform such situation
into an ample opportunity by manufacturing coffee for health conscious people.
Coffee culture
It identified in the UK market that different cultures view coffee from different perspectives and
such difference can influence coffee sales. In some culture, people prefer coffee over the other
beverages such as tea whereas, in other cultures such as the East, people consume tea more
instead of coffee. In such a culture, coffee includes in one of the premium beverages.
Consumption of coffee in such culture enhances mainly either on special occasions or social
events. Therefore, considering this difference as an opportunity, Danes Coffee can label high
prices on coffee in such areas (Malik, Willett, & Hu, 2013).
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Consumer awareness
The UK people have become highly aware of the society and the environment. It is necessary for
companies to work ethically and sustainably concerning the environment and society. Every
company requires being socially and environmentally responsible for gaining a competitive
advantage and ensuring long-term survival. Danes Coffee requires operations, marketing and
production of coffee products in the UK market in a way that harms less to the environment and
concerns for society (Yoo et al., 2013).
Growth of the middle class
In the UK, the employment rates have enhanced from the last few years which helped in the
improvement of the standard of living. The middle class of society has been overgrowing with
the economic growth of the country (Elder, Lister, & Dauvergne, 2014). Such economic growth
of the people, as well as the UK, provides an opportunity to Danes Coffee for targeting middle
and high-class people in the UK market.
Other social and cultural factors
Availability of many diversified substitutes may affect the sales of Danes Coffee. These
substitutes may include different types of teas such as herbal tea, black tea or premium tea. The
values of the UK population affect primarily from the dynamic global environment. These
changing values can affect the sales of Danes Coffee as some values can go against the coffee
culture. Professionals or employees prefer having coffee while they are working and such
lifestyle or culture may enhance the sales of Danes Coffee.
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