MKTM033 Opportunity Analysis Report: Specialty Coffee Shop

This report presents an opportunity analysis for a specialty coffee restaurant, focusing on the UK market, specifically near Nottingham University. It begins with an executive summary outlining the business concept: offering high-quality coffee, pastries, and reading materials to attract students. The analysis includes a PESTLE analysis, examining political, economic, social, technological, legal, and environmental factors influencing the coffee business. Industry analysis incorporates Porter's Five Forces to assess competitive dynamics. The report also identifies key people and skills needed for success, emphasizing technical and marketing expertise. The business aims to capitalize on the growing demand for gourmet coffee and ambient spaces, with a focus on targeting the student market. The report highlights the importance of adapting to changing consumer preferences and managing potential challenges, such as competition from substitute beverages and home brewing.

Opportunity Analysis 1
AN OPPORTUNITY ANALSIS OF A SPECIALTY COFFEE RESTAURANT
By (Student name)
Course Title
Name of professor
Name of school
Date of submission

Opportunity Analysis 2
Contents
Executive Summary.........................................................................................................................3
External Environmental Analysis....................................................................................................4
The PESTLE Analysis.................................................................................................................4
Political....................................................................................................................................4
Economic:................................................................................................................................5
Social:......................................................................................................................................5
Technological:.........................................................................................................................6
Legal:.......................................................................................................................................6
Environmental:........................................................................................................................7
Industry Analysis.............................................................................................................................7
Porter’s Five Forces.....................................................................................................................8
Key People and Skills......................................................................................................................9
i.) The technical skills..........................................................................................................10
ii.) Marketing Skills..............................................................................................................10
iii.) Negotiating Skills............................................................................................................10
References......................................................................................................................................11
Appendix........................................................................................................................................14

Opportunity Analysis 3

Opportunity Analysis 4
Executive Summary
More people are on the search for ambient spaces to dream or reminisce as they attempt
to escape the unending stresses and bustle of life. Some people are also looking for comfy spaces
to have conversations with the loved ones as they down a cup of coffee. With the constantly
increasing demand for great quality gourmet coffee and desirable service, starting a coffee
business is irrefutably a promising idea.
By capitalizing on the growing craze of coffee consumption, this business idea explores
feasibility of starting a coffee business, particularly, specialty coffee. The business’ main
objective is to offer the customers with the best brewed coffee in the whole locality. The coffee
served in the establishment will be complimented by pastries and reading material such as
magazines and books, that the shop’s patrons can read during their visit.
The business shall be established in United Kingdom near Nottingham University. The
business location near a college campus is considerably essential, so as to maximize on the
patronage of college students (Entrepreneur, 2017). Statistically, the business’ target market-
college students- make for a substantial percentage of the coffee consumers. Additionally,
targeting patronage of college students is advantageous in that; it is much easier to market the
business around the campus by word of mouth marketing, use of posters or even creating a radio
advert campaign (Small Business Development Corporation, 2017).
The key players and stakeholders in the coffee business in the United Kingdom are huge
global companies such as Starbucks, who are yet to expand to the city where Nottingham
University is located. Besides, a few coffee shops in the locality, there is very little competition.

Opportunity Analysis 5
All the products shall be prepared within the business establishment (Hetzel, 2007). The shop
shall buy roasted coffee beans from local UK coffee factories. The compliments such as cakes
and cookies shall be baked within the coffee shop. All the products will be served instore.
(Shuttleworth, 2017).
External Environmental Analysis
A potentially viable idea only gets commercial value when it is accepted by the market
(Allen, 2012). It is, therefore, imperative to conduct a detailed study and research on a business
idea before investing in it. Adequate market research is also a certain way to ensure success in
the desired market of the business idea (Baines, Fill, & Page, 2008, pp. 356-378).
Success in the coffee business depends largely on the accuracy of the PESTLE analysis. In the
coffee industry, the issues in the PESTLE analysis are more complicated as the chain of
production of coffee stretches across multiple countries. Therefore, there are numerous political,
economic, and legal complications that come along with the whole process of acquiring quality
coffee. These issues vary based on the geographical location of the coffee business setting (Kasi,
2015).
The PESTLE Analysis for coffee business in the UK
Political
The coffee business can be considerably impacted by various political factors such as the
nature of the relationship of the trade between the country producing the coffee and the
importing country. Before going into the coffee business, it is crucial to examine and get a
complete understanding of the bilateral relationship between the United Kingdom and the coffee
exporting country. Due to the high standards required specifically in coffee production methods

Opportunity Analysis 6
has led to the process of producing coffee to gain more political prominence (Smithson, 2017).
There has been a huge surge in the pressure for coffee businesses to operate in more socially,
ethically, economically and environmentally conscious ways.
Economic:
The most impactful factor affecting the coffee business and coffee industry is the purchasing
power of the inhabitants of the particular coffee business setting. Generally, more purchasing
power of the locals implies that there would be a huge demand of coffee in the area and thus
more sales.
Social:
For any business to be successful, it is important to consider the social concerns of the
particular commodity (Svala, 2018). For instance, having a coffee business requires the business
to be completely adaptable to any emergent shifts in the attitudes and preferences of the society.
Typically, the coffee market is threatened by the concerns of the society of the negative impacts
of coffee to the lifestyle and health of the consumers. Beverage consumers in the UK and around
the world, particularly the young generation, are increasingly becoming conscious of their health,
leading to less consumption of coffee.
Additionally, the increase in the popularity of other more healthy energy drinks has led
to competition against coffee consumption. According to research carried out by Mintel,
currently there is more diversification of tea beverage in the United Kingdom. The Brits,
especially, have a craze for herbal and other premium teas. To adapt to these changes and
intensified competition, the coffee industry introduced soy milk coffee and other de-caffeinated
drinks (Bryant, 2017, par. 1).

Opportunity Analysis 7
On the other hand, coffee is believed to boost the consumers’ metabolism. A boost in the
metabolism leads to loss of weight in return. Consequently, it is reasonable to theorize that the
consumers with weight issues will resolve to more coffee consumption and thus boosting the
sales and revenue.
Technological:
More advanced brewing techniques make coffee production easier and more efficient.
Subsequently, coffee manufacturers and other coffee selling business establishments enjoy more
profitability. Besides, coffee businesses are enabled to develop much better and novel varieties
of coffee and thus boosting the sales. Advancement in the machinery used in coffee production
also implies that the manufacturing of coffee is not restricted to huge companies only.
Advancement of the technology in coffee production allows small organizations and factories to
take up on the role of coffee production. This in turn leads to an increase in the competition in
the coffee production industry. Moreover, from the increased competition, customers get a wider
range of varieties to choose from. The increase in competition also implies that the small coffee
businesses will get to cut into the profitability enjoyed only by huge corporations.
Nevertheless, technology advancement implies that coffee production machinery is becoming
cheaper and more affordable. Therefore, more people are resulting to brewing their own coffee at
home and thus reducing the potential sales of the coffee businesses.
Legal:
In the coffee industry, there are numerous factors at play. The first legislation that affects
the coffee industry is the policies around the importing and exporting of coffee. When a coffee
manufacturer imports coffee production raw materials, or exports processed coffee to another

Opportunity Analysis 8
country, it is imperative for them to consider the laws and policies around the exports and
imports. Stringent laws around exportation and importation imply that the process of importing
raw materials or exporting processed coffee becomes more complicated and harder to deal with
(Fabling & Sanderson, 2013, pp. 422-431).
Environmental:
The coffee production industry relies heavily on the conditions surrounding the harvest of
the coffee beans (Bajagai, 2012). Similar to other crops, the harvest of the coffee crop is subject
to all the conditions of nature. The vagaries of nature that affect coffee harvesting include:
i.) Earthquakes;
ii.) Drought;
iii.) Rain.
All the aforementioned factors directly affect the process of harvesting coffee beans and
subsequently the supply of coffee.
Furthermore, coffee consumption is influenced by the weather. Some consumers prefer to
take coffee only in cold weather while others take coffee all year long regardless of the weather.
Depending on the preference of the coffee consumers in the given locality, there is a huge effect
on the coffee sales based on the consumption trends of consumers.
Industry Analysis
Generally, global coffee consumption has shown a constant increase. Gourmet coffee is
by far the most consumed coffee. Coffee consumers are arguably the most demanding customers.
It is, therefore, essential to have varieties of coffee to choose from with numerous variations in
the way they are produced. Coffee consumers favor freshly brewed gourmet coffee and

Opportunity Analysis 9
incredible service. When starting a gourmet coffee business, it is, therefore, imperative to target a
market with a liberal and adventurers populace looking to try new things. A great example of this
populace is college students.
As mentioned before, coffee consumption has grown steadily over the past few decades. The
industry of selling retail coffee is flourishing even more. Rainy, cold weathers have contributed
to more hot beverages. Also, hot dry summers drive more people into coffee shops for cold iced
drinks.
Porter’s Five Forces
Threat of competition from new entrants in the market: Moderate
 Even though not high, there still exists the threat of competition from the new
entrants into the market. This is due to the fact that, there are very few barriers to
entry in the UK market and thus more entrants can easily start their operations (Zekiri
& Angelova, 2011).
 Also, the initial investment capital for starting a coffee business in the UK is
relatively low and thus, new investors do not need much to lease stores or purchase
the necessary requisite equipment (Elsner, 2013).
Threat of substitute in the market: High
 In the retail coffee selling business, there are numerous beverages that can be
consumed as substitutes for coffee. These beverages include: tea, soft drinks,
water or alcoholic drinks. Also, the experience in coffee shops could be easily
substituted by experience in bars or pubs.

Opportunity Analysis 10
 Also, consumers are now consuming more home-brewed coffee. At a fraction of
the price, consumers are electing to make their own coffee at home.
 Since the switching costs among substitute beverages are very low or even non-
existent, consumers are having a breeze in switching options between different
substitutes.
The Bargaining Power of Buyers: Low to Moderate
 The coffee business has numerous buyers. Therefore, it is difficult for a single buyer to
ask for price concession when purchasing coffee.
The Bargaining Power of Suppliers: Low to Moderate
The most critical input in the coffee industry value chain is coffee beans. The coffee beans are
produced by very few producers thus making the likelihood of switching between suppliers
increasingly difficult.
Intensity of rivalry and competition: Moderate
 Coffee consumers have virtually nonexistent costs of switching among the different
available substitutes. This makes switching between the substitutes much easier and thus
intensifying the competition.
 Over the past few decades, the coffee industry has seen much development to a point
where the industry’s growth rate is now moderate. This has led to increase in competition
and intensification in rivalry among the industry’s key players.
Key People and Skills

Opportunity Analysis 11
When starting any business, it is often important to have a clear business description
outlined before starting the business (Halpern, 2016). However, most prospective entrepreneurs
make the mistake of starting a business without clearly outlining the “little things” which often
turn out to cost them in the long run (Gregory, 2017). These “little things” include the essential
requisite skills and the financials of the coffee business. The essential skills required in running a
retail coffee business are:
i.) The technical skills
The baristas are required to have essential technical skills in preparing and serving coffee.
To ensure that the personnel have the requisite skills, it is important to carefully select the job
applicants and evaluate their skills before hiring them. Alternatively, the prospective workers can
be trained in-house how to prepare and serve coffee professionally.
ii.) Marketing Skills
The business location shall be set near Nottingham University campus. Considering the
ease of marketing through word of mouth in a student populace is not a difficult task, the
business hopes to maximize on this marketing strategy. This, therefore, does not require special
marketing skills. However, possession of these skills could be very essential in using other
marketing strategies such as radio advert campaigns or advertising through print media.
iii.) Negotiating Skills
The retail coffee business does not require a lot of negotiation. When acquiring the coffee
from the manufacturers, however, it is imperative for the business to deploy an individual with
great negotiation skills. This can be done by the business manager. When selling coffee, though,
there is absolutely no need for negotiation since prices can be pre-set and fixed.

Opportunity Analysis 12
Since the business will be a small enterprise, some tasks such as money management, planning,
quality assurance and health standards upholding can be shared among the business’ employees.