Opportunity Analysis for a Coffee Shop in Northampton, UK

This report presents a comprehensive opportunity analysis for establishing a coffee shop in Northampton, UK. It begins with a business idea and explores the market opportunities, emphasizing the potential for a hygiene-focused establishment offering diverse products. The report delves into market analysis using PESTLE and Porter's Five Forces frameworks to assess political, economic, social, technological, legal, and environmental factors, along with competitive dynamics. It identifies the target market as students and shoppers, analyzes market potential, and recommends a location strategy. Furthermore, it includes an analysis of current and projected demand, supported by questionnaire results. The report concludes with financial modeling and references to support its findings, providing a detailed roadmap for a successful coffee shop venture.

Opportunity analysis

Table of Contents
INTRODUCTION...........................................................................................................................1
Business idea....................................................................................................................................1
Opportunities....................................................................................................................................1
Market analysis................................................................................................................................2
Competitors analysis........................................................................................................................3
Target market ..................................................................................................................................3
Market potential...............................................................................................................................4
Location and site..............................................................................................................................4
Current and Projected Demand Analysis for Coffee Shop .............................................................5
Results based on Questionnaire.......................................................................................................5
Technology......................................................................................................................................5
Financial model................................................................................................................................6
REFERENCES................................................................................................................................8
Appendix........................................................................................................................................10

INTRODUCTION
There are different type of issues that being faced by customers. Those firms which are
able to understand the requirements and develop innovations are able to develop strong
customers base. It is important to make sure that proper analysis is conducted so that they will be
able to understand the taste and preference of customers and deliver their products and services
accordingly (Alsos, Carter and Ljunggren, 2014). Present report is on establishing a business and
that is coffee shop at Northampton. This report covers analysis made for this particular market so
that problems can be identified that will act as barrier to business to be established. Lastly, it also
includes strategies that should be implemented with the help of which business can be developed.
Business idea
To open coffee shop in Northampton
The new business idea is based on opening coffee shop in Northampton which would
provide variety of services or products in accordance with requirement of the public. It will be
more focused on hygiene as currently people are more conscious about their health and they
prefer to have healthy food to stay fit. Owing to this, drinks and snacks will be offered
accordingly. The major uniqueness of the project is hygiene and variety of products whereby
more number of customers will be attracted. Furthermore, reasonable prices will be set for the
drinks and snacks in order to keep them satisfied and retained. In this report proper evaluation
will be made with the help of which effectiveness of this market will be determined.
Opportunities
There are many organizations that deliver their customers with similar products and
services. They make use of different set of strategies that enable them to attract more and more
customers. In order to develop coffee shop at Northampton, it will be an effective idea as this
will help to achieve the desired goals and objectives (Gustafsson, Herrmann and Huber, 2013).
With this respect, one of the opportunities that prevail in this market is related with preference of
customers. In accordance with the culture that are followed at this particular place, people prefer
to spend their time also or with friends in coffee shops. Further, there are different type of dishes
that are preferred by them and they love to try new type of dishes. In this context, the type of
idea for establishing coffee shop at Northampton will be effective.
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Market analysis
In order to establish business in a market, it is essential to make sure that there is proper
analysis made so that the areas in which it lacks and preference that can be identified. With his
respect, one of the effective tool that is helpful to make analysis of market is with the help of
PESTLE analysis. Below given are the PEST analysis done for Northampton:
Political factor: This can be determined as the extent to which government involves in
order to make changes in the interest rates, monitory and fiscal policies (Wyatt, Kiers and West,
2014). When there are changes in these policies, then the firm also need to make changes ion the
prices strategies. In case there are frequent change, then it has negative impact over the business.
Economic factor: There are conditions in which there are recession or inflation. In such
type of condition the rate of money spend by customers is affected negatively. In this context, it
is important to make sure that firm understand the situations and take appropriate steps with the
help of which the issues that are faced can be solved.
Social factors: Changes in taste and preference of customers take place frequently. It is
important that firm understand these changes and take appropriate steps so that they will be able
to develop products and services as per requirements of customers (Warnick, Bojanic and Xu,
2015). This way the rate of profitability and sales can be raised.
Technological factor: With time there are changes that take place in technology. It is
important to make sure that firm update or make use of new technology so that they will be able
to make sure that they deliver customers with high quality services. Ultimate aim of any firm is
to gain maximum profit. This is only possible when they will be able to understand the customers
requirements. In order to satisfy them use of updated or new technology is an effective aspect
that need to be considered.
Legal factors: There are different type of laws that are fallowed at this particular country.
It is essential that all the laws should be considered by the firm. When these are not followed,
then people develop negative perception over the services that are delivered to them.
Environmental factors: All the services and products that are delivered should not any
type if negative impact over the society or environment (Li, Wang and Ragland, 2013). For this
purpose all type of consideration should be made by the organization before the business is
established.
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Competitors analysis
There are many coffee shops that they deliver their customers with similar products and
services. It is important that to understand the strategies that are used by these firms so that
appropriate steps can be considered that will help to attain competitive advantages. With this
respect, below given are the Porter's five forces done:
This is an effective tool that enables to shape industry and to know the strengths and
weaknesses. There are five forces that are involved and they are :
Competition in the industry: There coffee shops like Dreams Coffee Lounge, Academy
Coffee Haus and Magee Street Bakery which can be considered to be the main competitors.
There are different type of strategies that are used through which they get to attract more and
more customers.
Potential to new entrants: The type of cost and the policies that are followed in
Northampton is favourable in order to establish the business (Brida, Pulina and Aguirre, 2013).
Further, the time consumed to develop the market will also be less than the business will be able
to have enough financial support and the raw materials to develop it will enable to establish the
business.
Power of suppliers: This is the availability of raw materials that will be make available
by suppliers. In this context, the rate of supplier are high. Business will be able to make sure that
they get proper materials so that they will be able to make it finished goods. This way they will
be able to meet up the demand of customers.
Power of customers: This shows the capability of customers to make purchases. As per
the analysis made, it can be stated that the rate of capability that customers have is high. More
specifically, firm will be able to get in return for the products and services that are delivered by
them.
Threat of substitute products: There are condition in which individuals get to develop
prefer other type of services that are provided by other firm. In this context, the rate of threat of
substitute product is low. This shows, when the coffee show will be established, then they will be
able to achieved the desired goals and objectives.
Target market
The target market will be the university students and the people visiting the mall for
shopping purpose because there is substantial demand of coffee shop identified in the
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Northampton market. But if the demand is increasing gradually in the market then the decision of
starting new coffee shop venture is beneficial as it would help in gaining high profitability and
sales (Bulut, Demirbas and Ferhatosmanoglu, 2015).
Market potential
Through carrying out the analysis, opportunity for opening Coffee shop is attractive
because of following-
Strengths- Idea of opening coffee shop in Northampton is very attractive because in the neary by
area there is no such coffee shop who is offering unique blends of coffee and snacks to its
customers (Leschke, 2013). Thus, main strength of starting such coffee shop is to offer variety of
drinks and snacks and retain satisfied customers within business. It also helps in improving the
profitability of firm in market.
Opportunities- Opening such coffee shop business in Northampton obtains varied opportunity as
it helps in expanding the business in other parts of country. Thus, due to such rise in market
share it helps in enhancing the capabilities and thus offer variety of coffee and snacks so that
large number of consumers could be attracted (Alsos, Carter and Ljunggren, 2014).
Threats- Coffee shop might face threat from other restaurants running nearby therefore they need
to speed up and make brand loyalty through offering quality products or services. Another threat
might be faced in the form of implementing low level of automation and thus it impacts the
preparation of coffee as well as its taste. Entry of new players within the market also impacts
upon the operations of firm (Coles, 2014).
Location and site
Location of Coffee Shop needs to be selected in crowded place i.e. near by corporate
offices, colleges etc. Main reason behind starting the venture at such place is that it is the best
place where target customers could be found who prefer to spend time within coffee shop. Large
area would not be required by entrepreneur as in small area also coffee shop could be opened.
Therefore, selection of location and site is the most appropriate part and thus starting the venture
so that it could attract more number of target consumers towards firm (Green, 2014). However,
the chosen area is crowded place i.e. nearby corporate offices and college so that youth could be
attracted towards business.
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Current and Projected Demand Analysis for Coffee Shop
It has been assessed that there is a developing business sector for coffee shop in the
current era as it is being preferred by every age group and thus it is being considered of high
demand product in market. There are different coffee products being offered by venture and thus
it helps in meeting the projected demand in the Northampton market. It has been identified that
demand of coffee and snacks is highest in that particular location so that it would help in
maximizing the profits (Beuchelt and Zeller, 2013).
Thus, it has been identified that potential of opening new coffee shop in Northampton
that helps in evaluating the region to be the most demanded place to have coffee consumption.
Therefore, it is essential for entrepreneur to provide quality products or services and thus become
the significant player in coffee shop market. It has been identified that average consumers spend
approximately 5.2% of their annual household expenditure upon food and beverages when they
are away from home (Koester, 2016). However, when the disposable income increases,
consumers are more willing to spend money at coffee shops. Thus, combining all such figures,
industry is well positioned for growth till 2021 it is expected to reach Pound 46.2 billion.
Results based on Questionnaire
Questionnaire results showcases that there are varied factors such as ambience, pricing
and varied of products offered in regard to attract people towards the coffee shop. Thus, it helps
in identifying the buyer's choice whether they prefer to consume the coffee provided by your
venture or not. However, price sensitivity is considered as the most important factor that helps in
influencing their choices in regard to which coffee is being consumed by most of the people
(Bulut, Demirbas and Ferhatosmanoglu, 2015). Also, it could be evaluated from the
questionnaire that near university or in the shopping mall are the most happening places which is
being preferred by consumers. Producers are required to offer variety of products or services in
the form of various snacks and beverages are being provided to target consumers. Respondents
are also in favour of employing skilled staff so that it could be beneficial for coffee shop and thus
they could operate in an effective way.
Technology
Technology plays a crucial role and thus it helps in fulfilling the demand of coffee among
buyers. Thus, entrepreneur need to introduce automatic espresso machine that would provide
good quality coffee to consumers. Also, they need to own different machines tht would make
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cappuccinos in less than a minute and that too at lower price than other competitors (Leschke,
2013).
Financial model
Cost of the project
Factors Amount (GBP)
Rent of the building 90000
Furniture and fittings Sofa, counter, table & chairs 4000
Equipments
Coffee vending machine, Air condition, Stereo,
water filter etc. 2000
Kitchen supplies
Napkin, cups and plates for coffee and snacks,
forks, knives etc. 1500
Marketing and promotion 800
Legal cost Registration and consultation 700
Insurance 1000
100000
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Means of finance
Particulars Amount (IN GBP)
Owner's capital contribution 40000
External borrowing from bank @ 4% p.a. 60000
100000
Estimation of annual profit
Particulars Estimation (In GBP)
Sales 466287.5
Less: Cost of sales (60%) 279773
Gross profit 186515
Operating cost
Utility (fuel, electricity, water etc.) 12000
Building rent/year 90000
Salary (see working note 1) 49944
Supply cost (coffee, napkin, snacks, cups etc.) 800
Advertisement & marketing 500
Insurance 1000
Total operating expenditures 154244
Earnings before interest and tax 32271
Less: Interest 2400
Earnings before taxes 29871
Less: Taxes @ 20% 5974
Net profitability 23897
Working note: 1.
Employee pay Amount
Waiter and waitress 6 GBP/hour 14976
Manager 8 GBP/hour 19968
Accountant 15000
49944
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REFERENCES
Books and Journals
Alsos, G.A., Carter, S. and Ljunggren, E., 2014. Kinship and business: how entrepreneurial
households facilitate business growth. Entrepreneurship & Regional Development. 26(1-
2). pp.97-122.
Beuchelt, T.D. and Zeller, M., 2013. The role of cooperative business models for the success of
smallholder coffee certification in Nicaragua: A comparison of conventional, organic and
Organic-Fairtrade certified cooperatives.Renewable Agriculture and Food Systems. 28(03).
pp.195-211.
Brida, J. G., Pulina, M. and Aguirre, S. Z., 2013. Cruise passengers in a homeport: A market
analysis. Tourism Geographies. 15(1). pp.68-87.
Bulut, M.F., Demirbas, M. and Ferhatosmanoglu, H., 2015. Lineking: Coffee shop wait-time
monitoring using smartphones. IEEE Transactions on Mobile Computing. 14(10). pp.2045-
2058.
Coles, L., 2014. Marketing with social media: 10 easy steps to success for business. John Wiley
& Sons.
Green, R., 2014. Collaborate or compete: how do landlords respond to the rise in
coworking?. Cornell Real Estate Review. 12(1). pp.9.
Gustafsson, A., Herrmann, A. and Huber, F. eds., 2013. Conjoint measurement: Methods and
applications. Springer Science & Business Media.
Koester, E., 2016. Green entrepreneur handbook: the guide to building and growing a green and
clean business. CRC Press.
Leschke, J., 2013. Business model mapping: A new tool to encourage entrepreneurial activity
and accelerate new venture creation. Journal of Marketing Development and
Competitiveness. 7(1). pp.18-26.
Li, Z., Wang, W. and Ragland, D. R., 2013. Bicycle commuting market analysis using attitudinal
market segmentation approach. Transportation Research Part A: Policy and Practice. 47.
pp.56-68.
Warnick, R. B., Bojanic, D. C. and Xu, F., 2015. Using a trade market analysis technique to
refine measurements for economic impact analysis of special events. Journal of Travel
Research. 54(1). pp.52-65.
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Wyatt, G. A., Kiers, E. T. and West, S. A., 2014. A BIOLOGICAL MARKET ANALYSIS OF
THE PLANT‐MYCORRHIZAL SYMBIOSIS. Evolution. 68(9). pp.2603-2618.
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Appendix
Questionnaire
Name______________________________________________
Age
 18-25 Years
 26-30 Years
 31-35 Years
 36 and above
1. How frequently you go for coffee shop?
 Never
 Some times
 Frequently
2. With whom you like to go for coffee shop?
 Friends
 Partners
 Family
 Alone
3. What attracts you most to prefer particular coffee shop?
 Variety of products and services
 Effective prices
 Good ambiance
 Staff services
4. Do you think that staff service is important for getting higher level of satisfaction?
 Yes
 No
 Can't say
5. Are you satisfied with the present service level of other coffee cafe?
 Highly satisfied
 Satisfied
 Neutral
 Dissatisfied
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