Alaska Coffee Co., Inc. is a 9 year old company based in Anchorage, Alaska. The company, which began as an espresso shop, has grown to become a recognized brand in roasting exceptional coffee in terms of taste. It has diversified into the sale as well as provision of services for espresso. With several awards such as the Fair Trade and the Certified Organic awards in 2006, Alaska Coffee Co., Inc. has become a recognizable brand in Alaska and is having a say in the coffee roasting industry.
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The coffee roasting industry is quite lucrative, bearing in mind that coffee is among the leading beverages in terms of consumption. Considering that the coffee roasting process determines the taste of the coffee greatly, experience in coffee roasting determines the attractiveness of the coffee.
Using the five Porter’s forces model to analyze the coffee roasting industry, it is possible to formulate three strategies which Alaska Coffee Company can incorporate to ensure market leadership, profitability and survival. The coffee roasting industry is fairly competitive given the fact that coffee is a worldwide beverage.
However, the roasting process which depends on the skills of the taster helps in differentiating the tastes. For instance, while there are many coffee roasters, not many are able to produce excellent espresso. The ability to make the right espresso therefore acts as a competitive advantage that lowers rivalry.
Coffee has substitutes (usually available at lower prices) such as tea and cocoa and therefore this may act as a threat to the industry. However, not many buyers would choose to substitute coffee given the addictive nature of coffee.
On the same note, sensitivity of price of coffee influences buyers to either go for substitutes like tea or other coffee brands due to minimal differentiation. While entering into the coffee roasting industry may appear easy, it may not be so since it requires good experience in taste of coffee and the right roasting and brewing equipment.
For Alaska Coffee Company to remain competitive in the industry, it must focus on various strategies that would strengthen its position against its rivals. For instance, a cost leadership strategy would help Alaska Coffee Company remain a favorable source of supply of coffee in most coffee outlets. Currently, the company supplies its coffee to both retailers and wholesalers and this makes it appealing to almost all types of customers.
Taking a differentiation strategy would be very effective in this industry given that there is minimal differentiation in coffee, which may weaken a firm’s competitiveness. The Alaska Coffee Company has so far pursued this strategy as provided by its 10 different brands of coffee offered at different prices. Some of these brands are the Organic Ethiopian Blend and the Organic French Blend. These brands are based on type and source of coffee thus appealing to multicultural customers.
A third important strategy for Alaska Coffee Company is the idea of dealing in multiple products. Currently, the company has diversified into not only roasting different coffee tastes but also in equipment that are used in coffee brewing. This is very strategic in that the company is able to close in its buyers, who are more likely to prefer the coffee supplier as also a supplier of the accompanying brewing equipment.
This is the most attractive strategy for Alaska Coffee Company since once implemented would make the company a key influencer in the industry based on Porter’s five forces. For instance, this would weather competition from rivals by having the coffee buyers get all that is needed to brew coffee from one point.
It would also amass its supplier power as it would lower the costs incurred by buyers in getting the equipment and servicing, thus making Alaska Coffee Company a preferred supplier. The lower costs would also weaken the power of the coffee buyers supplied by the company. Moreover, the strategy would make it harder for new entrants as they would view it hard (in terms of cost and market leadership) to have an all round coffee roasting firm, thus making Alaska Coffee Company a market leader.