Company overview of Indian coffee business

Company overview of Indian coffee business This case study analyses and discusses the Indian company Cafà © Coffee Day, its Marketing Mix and entry mode to the UK. My research aims to explore the cafà © coffee days background, marketing mix, and the success strategies in India in addition to various kinds of international environmental factors and market entry mode to enter in the UK market. The questions of why and how to enter in the UK market are illustrated with different market entry modes. It is found that the UK market is ease to enter for business. I compared the companys marketing mix and UKs marketing environment. I presented some recommendation to the successful Indian organization except minimum international experience for building its charisma in the UK. This case study is illustrates a trusted and well known coffee house brand Cafà © Coffee Day, and how it is possible for this to venture into one of the largest economy in the European zone , The United Kingdom. This case study describes the various marketing mix of this organization, the marketing environment of UK and the possible entry modes. Cafà © Coffee Day in India Cafà © Coffee Day (CCD) is one of the well established company and heart throb of youths in India. The headquarter is situated in Chikkamagaluru, Karnataka its a division of Amalgamated Bean Coffee Trading Company Ltd. CCD opened its first cafe in the year 1996 on the socially frequented area called Brigade Road which is located in the heart of Bangalore, now it has become the biggest retail chain of cafà ©s in India, having more than 1000 cafes in 141 cities. Cafà © Coffee Day stands out as a unique brand in India and has managed to achieve the tag of Most Trusted Brand ranking itself as second in a survey for food services conducted in 2008. Nowadays CCD plans to create big global chain by 2012-2013(Cafà © Coffee Day Official website 2010). While expanding the business in India, CCDs marketing strategy is to open a cafà © near to educational institution and corporate campuses. CCD already started to explore European market; they made their present to open coffee shops in Vienna. Cafà © coffee day is having various kinds of formats depending on the target audience. Cafà © Coffee Day Trivia C:Documents and SettingsRanjeetDesktopccd_table1.JPG (Source: website CCD Coffee Day website 2010) Cafà © Coffee Day Formats: C:Documents and SettingsRanjeetDesktopccd_table2.JPG (Source: website CCD Coffee Day website 2010) United Kingdom: United Kingdom has the sixth largest economy in the world and stands tall in list of developed countries in the European Union. UK is the home of world famous education institutes and corporate houses. Central Intelligence Agencys cites that the population of UK is 62,348,447 (July 2010), and the real GDP of the country is -5% (2009 est.). The annual report of World Bank declared that United Kingdom is ranked 4 out of 183 economies for ease of doing business. While choosing the UK market Cafà © Coffee Day needs to analysis the international marketing environments (CIA world factbook 2010). International Market Environment Brassington Pettit, (2006) argues while taking the decision to pursue international development, the company has to investigate following environmental factors. Socio cultural Environment Cultural factors Language Factors The UK population speaks various languages according to the region, Although English is the national language but CCD needs to consider Scot, Scot Gaelic, Welsh, Irish and Cornish languages as well. Religion CIA world factbook categorized religions in The UK (2001 census) (Source: CIA FactBook Website) Social factors Demographic factors and lifestyle plays very important role. According to MSI various sectors of the fast food market appeal to different age groups as a result the age profile of the UK population is significant factor affecting the demand. The urbanization of UK population is 0.5% the annual rate of change from 2005-10 and in year 2010 the population growth rate is 0.563 % (CIA World factbook). Legal Environment The UK legal system has early influences of roman and modern continental practices of law; has guidelines for the Acts of Parliament under the Human Rights Act of 1998 which have a non binding review of judicial nature; accepts compulsory ICJ jurisdiction with reservations (CIA World factbook) International Laws The United Kingdom comes under European countrys laws and regulations, and Indian and UK participation organization like IFC, ICC etc. Technological Environment The UK is technologically advanced than the India and having wide range of internet, telephone, and mobile network. Economic Environment The UK is a leading trading power and financial centre. In India CCD does not have any rules of minimum wages but while entering in United Kingdom, Company needs to give consideration to minimum wage rule, inflation rate, unemployment rate and household income . Political Environment Political and legal factors plays an imperative role in this industry, these factors sets the rule of competition, operational cost and wages. Following points should consider while entering in the UK. Operational restrictions Discriminatory restriction Physical actions Marketing Mix of Cafà © Coffee Day The age old marketing mix, consisting of the 4Ps i.e; 1.Product 2.Price 3. Place 4. Promotion However CCD offering infrastructure, facilities, staffs, and the process from ordering the product to delivering it. This is the reason makes us to consider People, Physical evidence and Process (Brassington Pettit, 2006, P. 1063). Products Food (Source: official website of CCD) Beverages (Source: official website of CCD) Cafà © Coffee Day is offering various ranges of products, some of them already exist in UK market. The Cafà © Coffee Day adopts a product managing hindsight to distinguish each of its unique cafe which are exhibited under an umbrella of products and those can be different as per the location. For example we can introduce Masala Chai and Kashmiri Qahwah to Indian populated area. Price While considering the price mix for UK market, CCD needs to consider various factors which can play the vital role to influence the pricing strategy. Factors: Affects on the Pricing Strategy Company and Product factors Corporate and Marketing objectives The short term tactical use of pricing such as discounts, product offers, ex. McDonalds use Big Mac with fries and Coke Firm and Product positioning Available resources Marketing and Product development Market Factors Consumers perception of the product, associated expectations and the average spending ability Identifying the objectives of the existing, their upcomingstrategies and unqiue selling point Environmental Factors Government influences and constraints Level of inflation Cafà © coffee day can apply a variety of strategies, combination of affordable prices and understand consumers need in addition to estimate the competition from the major companies like Starbucks and Costa Coffee and their strength and weakness as well. Business in the UK is governed by Government regulations and inflation plays an important role running them. It is important for CCD to analyze all the important factors which i have mentioned above to integrate and coordinate pricing policies to grow in the UK (Doole Lowe, 2008, P. 383-4). Place Strategic locations of the outlets help to attract the target market by means of which Cafà © Coffee day is sustaining its business, for ex. in India their outlets are commonly situated near to family entertainment centers, educational institutes and high street. CCD can apply the same strategy in addition to it can open the outlets in city center and near to corporate offices. Promotion Cafà © Coffee Day use promotion mix in India like ties up with youth brand Levies and association in movies except as a new company in the UK; it needs to go with more options of promotions. The customer is most likely to build his/her expectations by grasping the communication messages marketing the service a business service is likely to deliver (Brassington Pettit, 2006, P. 1069). The Promotion criteria use a variety of communication and motivation techniques with adequate emphasis on the need to generate curiosity which ultimately helps the customer purchase the new product with trust (Lilly Walters1997). Following possible channels of advertising can aid CCD to realize its existence in the market. T.V. Radio Print Advertising Internet Advertising Sales Promotion (Student Concession) People The nature of Services provided depends on the various interactions between people, including Cafà © Coffee Days staff and the regular customer. The staff plays vital role to deliver the quality service, people in CCD knows People are hired for what they know but fired for how they behave. Cafà © Coffee Day believes that staff is the real face of any company so they can stress on intensive staff training to cope with customers. Physical evidence Brassington Pettit have mentioned Physical evidence comprises the tangible elements that support the service delivery, and offer clues about the positioning of the service product or give the customer something solid to take away with them to symbolized the intangible benefit they have received(2006, P.1070). Cafà © Coffee Day is well aware about the physical evidences it can be categorized by: Brand Image, Logo: Cafà © Coffee Day logo has bright red and green color which gives it a distinct appeal. Red color represents leadership, vitality and the zest for drinking coffee, whereas the strokes in green instantiates the heritage of producing coffee Architecture and Dà ©cor: Cafà © Coffee Day is using lots of young color of today like limegreen, yellow, orange and purple and lots of steel instead of wood. Literature: A youth representative image is indicated by the literature provided by Cafà © Coffee Day. The  colorful hardbound menus, placards, leaflets are all designed o appeal the younger generation who are able to emphasize with it. Processes In India earlier Cafà © Coffee Day opted on self serving system but nowadays in most of the outlets the waiter comes and takes away the order and delivers it to the particular table. While considering the UK market it can be vary according to the location for an example CCD can choose to go with self service with an outlet on Sauchihall street in Glasgow to alleviate the service provision in heavy rush and to avoid the appointment of an additional staff for servicing, thereby saving cost in process execution. Entry Mode to United Kingdom Once the company decided to enter in the UK market, it must evaluate various options on how to create an entry into the market. Different factors influence the choice of entry into the market. Brassington Pettit (2006, P.1131-2) state six main factors are as below: Speed: How quickly a company wants to penetrate into a market? Cost: How much is the initial investment required to enter into the UK market? Flexibility: How flexible is the company to adapt to the requirements of the changing market? Risk factors: Competitive and Political risk Payback period: The pressure from within the organization to produce a quick return on any foreign market investment How fast the organization operates to achieve break even on investments from foreign shores and also generate profits on the long run. Long-term profit objectives: long term strategic plan and opportunities While entering in the United Kingdom, Cafà © Coffee Day can use different entry modes for its all business divisions. Direct Export Direct exporting means that the Cafà © Coffee Day would produce FMCG products in India and then foray into a foreign venture thereby exporting it to the new found market i.e. (UK) customer without involving intermediary parties. The parent company Amalgamated Bean Coffee Trading Company Ltd is one of the biggest exporters of green coffee from India since 1999. The company having expertise in export, it will help Cafà © Coffee Day to send overseas its FMCG products like Coffee day, Cafà © Beat. Advantages Its sellers responsibility to find customers, negotiate with them and process their orders. Seller maintains complete control by selling through his own export department and sales force It helps to build up clear presence in the market Disadvantages Transportation cost will be high Dependency on Buyer (Porters 5 forces Bargaining power of Buyer ) It might creates lack of control over marketing and sales by delegating to agents Franchising Cafà © Coffee Day can consider Franchising for its Cafà © Coffee Day express and lounge which would mean that CCD is ready to grant the rights to use the multitude of marketing avenues like brand usage, trademarks and usage of products, and a franchisee mode of operation is put in place to make the local entities run the operations under the banner of CCD. Advantages It can generate franchise fee It creates Opportunities to build a broadermarket operation Disadvantages It may create quality control and protecting brand equity problem Wholly-owned Subsidiaries Cafà © Coffee Day can also be concerned about wholly-owned Subsidiaries for express and lounge division. One of the most expensive methods of market entry is using wholly owned subsidiary. It requires long term commitment from the management and resources (Doole and Lowe, 2008, P. 250). This entry method can facilitate Cafà © Coffee Day plans to create the big global chain by 2012-13, at the time of entering in the UK will send clear message about the companys agenda. Advantages Wholly own subsidiary will serve control of core competency and manufacturing method to a competitor The entry mode will assist to realize learning curve and location economies Disadvantages The entry mode will make CCD to bear full cost of establishing its own subsidiary Cafà © Coffee Day needs to study British culture, consumers and competitions Cafà © Coffee Day will have to face UK politics and laws Sales Subsidiaries Cafà © Coffee Day can think about sales subsidiaries while selling its coffee vending machines in the United Kingdom. Sales subsidiaries play no role in manufacturing the products apart from taking accountability for marketing, selling and distributing it (Brassington Pettit, 2006, P. 1138). Advantages CCD can recruit local as well as transfer staff from India It can build up closeness to the customer Transferred staff can have good expertise in the product and management knowledge Recruiting local staff will help CCD to acquire local contacts and knowledge Disadvantages CCD needs to give product and management training to local staff Transportation cost of vending machine can be high Transferred staff needs local knowledge and contacts, and expatriates cost can be high Manufacturing Subsidiaries CCD can also deliberate to establish manufacturing subsidiaries to reduce the import tariff. They can accumulate existing products in the local market or developing better products as per requirements (Brassington Pettit, 2006, P. 1139). Advantages UK government is keen to attract inward investment, it can offer incentives and grants to set up in key region This entry mode for CCD helps to reduce transportation cost in addition to CCD can export the machines to other European countries. Disadvantages This kind of operation needs to start from scratch or acquire manufacturing unit CCD needs to calculate long-term plan before investing resources Recommendations While considering Cafà © Coffee Day, its Business divisions and the United Kingdom as a potential European market I would like to present some recommendations. While studying marketing i come to know that there is no immediate or best solution for entering into a foreign market. Cafà © Coffee Day should calculate all the facts and figures regarding United Kingdom. Cafà © Coffee Day needs to consider franchising, direct export, wholly-owned subsidiaries, sales and manufacturing subsidiaries with their pros and cons. World Banks reports for doing business in the United Kingdom is positive but as a new foreign company in the market, Cafà © Coffee Day should consider to go with low investment and long term strategic goals. Cafà © Coffee Day must consider all the regulations, international laws, and culture and target customers in addition to existing competitors as well.