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Costa Coffee Company Analysis Research Paper

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Updated: Mar 27th, 2020

Introduction

History

The Costa Coffee is a UK based firm that has spread its wings worldwide. It is a fully owned subsidiary of a company known as Whitbread, which it fully controls. Costa Coffee is rated highly among other coffeehouses globally, where it follows Starbucks in size. However, it is the market leader in the UK. The coffeehouse was set up in 1971 by the Costa brothers, Sergio and Bruno. Initially, Costa Coffee started as a wholesale supplier of roasted coffee.

It used to supply to Italian coffee shops, as well as other caterers. The company was acquired by Whitbread in the year 1995. It has grown tremendously since its inception and today it owns over 2800 stores that are spread over 30 countries globally. In the United Kingdom, Costa Coffee owns about 1750 restaurants and approximately 3500 Costa Express. In addition, it owns about 1100 outlets in the overseas countries (Costa, 2013).

After starting as a distributor of roasted coffee, Costa Coffee started retailing coffee in the year 1978. Its first store was located in Vauxhall Bridge Road in London. Its 1000th store was opened in Cardiff in the year 2009. It also went on to acquire Coffee Heaven for a reported amount of £36 million and then added about 79 outlets around Europe. Generally, Costa Coffee is a big company and has been highly successful in its operation, a feat that can be attributed to its excellent management and leadership (Costa, 2013).

Industry

Costa Coffee operates in an industry that is highly competitive. The restaurant industry, despite being one of the busiest in the markets, is also one of the most competitive. The industry’s growth was fueled by the lifestyle changes that were created by the Italian living.

The food industry is a big industry in the United Kingdom, which is ranked 5th among the best and most profitable industries (Costa, 2013). The major factor why the food industry is big in the United Kingdom is because it is easy to enter. This also happens to be the major factor why Costa Coffee has been able to thrive in Europe.

Location

The location of a business is very essential for its success. For instance, a company that is allocated in a well-populated area is likely to do better than one that is located in a scarcely populated area because the former has access to more potential customers. The location of Costa Coffee has been a favorable factor towards its success. First, it operates over 1750 outlets in the United Kingdom. In the international market, the company is operating in over 30 countries and has about 1100 stores.

Most of its stores are found in the busy streets of the countries in which it is operating. The company has also set up shop in retail stores like Tesco, cinemas like the Odeon, as well as hotels like the Marriott Hotels, among other strategic locations that experience a high traffic of people. In addition, the company has stores in some hospitals (Costa, 2013). These locations have played a key role in the success of Costa Coffee because they enable it to be accessible to many people.

Competition

As mentioned earlier, Costa Coffee operates in an industry that is highly competitive. It is an industry whose entry is not very complicated, thus many companies with similar products can join. Among the competitors include Starbucks and Italian coffee outlets. McDonalds is also emerging as a competitor in the industry.

Most of the organizations that are operating in the industry are highly innovative, thereby increasing the magnitude of competition (Costa, 2013). Despite the level of competition in the industry, Costa Coffee has been able to establish itself as a force and it is ranked second globally in terms of performance and size.

Market position

Costa Coffee ranks well in the market, as it stands out compared to most of the other similar companies in the industry (Costa, 2013). The company leads the park in most of the countries in Europe where it operates. It is highly innovative, thus it continues to position itself for future competition. It is imperative to note that the level of competition continues to intensify as companies continue being innovative owing to the advancement in technology

Strategy of the company

Mission

Every business organization should have its goals and objectives, both for short term and for long term survival. The long term objectives of a business organization also happen to be the reason why the business exists (Stevenson, 2011). They define the strategy that the organization is to employ. The mission of Costa Coffee is to produce the best coffee in the world and become the best/ leading coffee business (Costa Coffee, 2014). Therefore, all its strategies are geared towards producing the best quality of coffee.

Strategy

Producing the best quality of coffee is the strategy that Costa Coffee employs. This has been the major factor in its success. It focuses on making a difference in the coffee industry through offering unique features in its products. Differentiation is the key aspect of the company’s strategy.

However, Costa Coffee also focuses on the affordability of its coffee. It, therefore, produces coffee that is affordable to virtually every class of people in its market niche. Costa Coffee produces coffee based on the needs of its customers. The company listens to what the customers need and responds to that. Its brand of coffee has an Italian origin, which is a differentiation strategy. It offers coffee that is unique from what is offered by most of its competitors.

Measuring Productivity

One of the challenges facing Costa Coffee is determining the level of productivity of the staff, because the firm relies on the productivity of different units. Each unit has its own employees (Costa, 2013). The failure of the company may not necessarily reflect the failure of all employees.

In other words, there is a possibility of the company recording dismal performance, even when some employees have excelled in their units. Therefore, measuring the specific productivity of the employees becomes a challenge. In general, it is not easy to measure the productivity of specific employees in the food industry.

Forecasting

Forecasting is important because it helps the organization in predicting its future performance, as well as its future financial needs. This helps the management to be proactive in its decisions, thereby giving the organization an advantage (Stevenson, 2011). Forecasting can either be qualitative or qualitative. The former refers to non-quantifiable aspects, while the latter is quantifiable.

Forecasting approaches

Costa Coffee has its long term projections and the goals that it needs to achieve in the long run. Therefore, it has to possess some specific resources, both quantifiable and non-quantifiable. This is why it uses both qualitative and quantitative approaches in its forecasting. The basis of forecasting is on time series.

This will be enabled by the fact that the company keeps data for its operations. It is, therefore, able to predict the trends in sales and profitability. The trend has been on the increase over the years. This means that the company continues to get more customers. Its implication is that the productivity needs to be increased over time (Hill & Jones, 2012). Therefore, the company will need more human resource, more assets, and more equipment in the future. The amount of resources will be dictated by the time frame.

Time horizon

It has been mentioned that time series is the basis on which the company predicts its future performance, input, and output. The data is collected and fed into a computer program that is able to project the quality of resources needed at a given time and the quantity needed at a specific time, all other factors remaining constant over the time. The program helps the company to be precise in its predictions and reduce wastage of time and resources.

Product and Design

Costa Coffee is a coffee house that has operations globally, which means that it is known worldwide. It also means that the company has a wide variety of products that vary based on the cultures and the needs of the different countries in which it operates. Costa has various designs of products, which have helped it secure the large market in which it operates. The differentiation strategy helps the company to design products that are suited for the various customers.

The main brand that the company serves in its stores is known as Mocha Italia. The Mocha Italia brand is constituted of the Arabica and Robusta coffee blends. Costa Coffee ensures the best taste for its coffee. In fact, it has employed a coffee taster by the name of Gennaro Pelliccia (Costa, 2013). The high product quality and design make the coffeehouse receive a number of awards.

The products are sold under various names, such as honeycomb crunch, snowman, Santa, Elf, and Rudolf, among others. The various products are designed based on the occasions and the time of the year, as well as customer needs. Other products include tea, Costa ice, specialty drinks, and food.

The company also engages in product development, which is a very significant factor for the future performance of Costa. The level of competition is expected to increase in the future. The needs of customers also keep changing. Therefore, organizations need to keep up with the changes to remain in the competition.

They need to provide customers with what they need. They also need to offer products beyond the expectations of customers. Costa Coffee has been a leader in product development (Costa, 2013). It has banked on innovation to help it develop its products accordingly.

Capacity Planning

Business organizations should be dynamic. They need to keep expanding to broaden their consumer base and profitability. The management should plan on such expansion. It should ensure that the organization has the capacity to hold the future growth. It should have the equipment that is sufficient to sustain the future increase in productivity.

In addition, the company should have equipment that is up to speed with the current technology, as this will help in product development and innovation (Ginter, Duncan & Swayne, 2013). The capacity planning of Costa Coffee is unprecedented. The company has expanded since its inception and has been able to handle the growth sufficiently.

It has the right equipment to handle the level of productivity it needs at any given time. In addition, Costa Coffee has employees who are skilled and able to produce at the highest level possible. The employees undergo training on a needs’ basis to put them into terms with the development (Wheelen & Hunger, 2012). The size of Costa Coffee restaurants, on the other hand, is big enough to hold their customers comfortably.

As the company continues to predict and anticipate more growth, it also plans for its capacity expansion. This involves an increase in employees, the size and number of restaurants, as well as an increase in equipment to sustain high level production.

With the advancements in technology, the company also updates its equipment accordingly. This helps it to maintain quality production. The company has been fair enough on constraint management. Although this is not in perfection, its constraint management is at an acceptable level.

Process Design

Product design is significant because it helps the organization in differentiating its products. There are a number of process designs that a company can adopt. In the case of Costa Coffee, the process design that is applied is the batch process design. The products of the company are standardized, but not to perfection, as they can be altered based on customer needs (Barney & Hesterly, 2010). In other words, the products are semi- standardized.

On the other hand, the equipment used to manufacture the products is not specific, as it can be used for general purposes. Costa Coffee produces a wide variety of coffee products. It produces in high volumes. Therefore, the batches are high because the company has many customers. In terms of standard, Costa Coffee is highly flexible and able to adjust according to customer needs.

Process design strategy

The process design of Costa Coffee is designed based on its strategy, which is differentiation. Therefore, the process designs help the company to produce products that are unique and specific to various customer needs. High quality production is the main objective of Costa Coffee. However, the company also tries not to leave out any class of customers, thus its goods fit various customer prices. This is done without compromising quality.

Quality and quantity control

Quality production is crucial for the competitive advantage of an organization. Costa Coffee is an organization that values quality production, as this is what will contribute to customer satisfaction. Customers will always be willing to get a quality product and realize as much value for their money as they can. Quality control refers to measures that are taken to reduce or to eradicate errors in production completely.

They are measures that ensure products are produced to the highest level of perfection to ensure high quality. Costa Coffee is keen on taking these measures to maintain its competitiveness and retain its brand image. A company needs quality assurance to be able to continuously produce high quality goods. This is provided my hiring highly skilled employees and offering regular training to the existing ones.

This has been observed at Costa Coffee. The employees in the organization are trained well. They are able to produce high quality products. The employees are also motivated enough, which is essential in maintaining their high level performance (Bamford & West, 2010).

The employees are trained on how to handle customers and how they should conduct themselves when in the organization. This is important as it helps in creating a good image for the company, a move that gives it a competitive advantage. The management of Costa Coffee is also composed of highly skilled personnel, which further increases the level of quality assurance.

The business world today is highly dynamic, and so should the organizations and employees be. They should focus on continuous improvement on their products and performance. They also need to keep up with the changes that occur in the business world, which means that they have to keep up with the change (Stevenson, 2011).

Recommendations

Costa Coffee is a business that operates in a highly competitive environment. It faces competitors who strive to acquire a large share of the market. Therefore, quality becomes a very significant factor. Costa Coffee needs to keep on improving its quality of production. It should embrace innovation and encourage the development of new products that meet the needs of the customers.

The company needs to keep a close relationship with the customers to get first hand feedback from them. That way, it will be able to know what customers think should be added or should be excluded in the products in real time. The other factor that Costa Coffee should look at is innovation, as this will help in product development. Therefore, it should embrace technology in its production (Stevenson, 2011). Employee satisfaction is also important to Costa’s continued success.

Conclusion

Strategic management is important because it helps an organization to achieve its goals. It also contributes to operations management. The operations that an organization engages in are all geared towards achieving its goals. On the other hand, the goals of the organization are an integral part of its strategic management.

Operations should be aimed at maintaining high quality of production, as this will give them a competitive advantage. Costa Coffee is an organization that is highly ranked in its industry globally. This means that it has been able to observe quality production and able to satisfy its customers in the long run. It should maintain and improve on this trend for it to be well positioned for future competition.

References

Bamford, C. E., & West, G. P. (2010). Strategic management: Value creation, sustainability, and performance. Adelaide, Australia: South-Western Cengage Learning.

Barney, J. B., & Hesterly W. S. (2010). Concepts strategic management and competitive advantage, international edition. London, UK: Pearson Education.

Costa (2013). .

Costa Coffee (2014). . Costa.

Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2013). Strategic management of health care organizations (7th ed.). San Francisco, CA: Jossey-Bass.

Hill, C. W. L., & Jones, G. R. (2012). Strategic management. Mason, OH: Cengage Learning.

Stevenson, W. J. (2011). Operations management: theory and practice (11th ed.). New York, NY: McGraw-Hill Higher Education.

Wheelen, T. L., & Hunger, J. D. (2012). Strategic management and business policy: Toward global sustainability. Upper Saddle River, NJ: Pearson Prentice Hall.

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