Introduction
Environmental scanning is a control mechanism operated by companies in order to ensure growth and stability in the market. It may be internal or external. An internal environmental scan focuses on the companies’ internal control system. It checks on the effectiveness of its present and future objectives.
This procedure assists the company to review the effectiveness of their policies and their capability in terms of facing future risks. The external environment encompasses the factors that may affect the companies’ performance with regard to issues that the management has no control over. These factors may include the market forces of demand and supply, political issues facing the country, environmental and social issues in the community.
Discussion
The coffee industry has shown tremendous increase in its market over the years that have passed. These trends fluctuate over time due to the market forces of demand and supply. They may be influenced by government policies over the export and import of the commodity.
Climate change adversely affects the coffee industry where the temperatures in coffee producing areas have risen by half a degree within the past 25 years. This limits land capacity to productivity as well as reduced water availability. This has caused, and will continue causing, increased prices on coffee due to the demand being higher than the supply (Rogers, 2008).
The coffee industry has grown by about 190% since the 20th century. This is due to the wide variety of roasted coffee in the current market. Raw coffee beans have had a decline in prices, making the farmer resistant to cropping the crop. Political influences on coffee production occur from time to time, depending on the country of produce or purchase.
In the 1980’s, the coffee producers had “war taxes”, which made trade, of coffee impossible in El Salvador. The farmers refrained from replanting coffee trees so as to avoid huge loses of their property. In recent years since the year 2000, many competitors have come up the industry thus causing a decrease in the coffee market. (Morrison, 1987)
Developing countries have shown a great percentage of dependency on agriculture as a means of livelihood. Most farmers have shifted to production of cash crops in their farms, with a hope of increasing their income. Coffee and tea are the most widely produced cash crops in the developing nations. This is due to the favourable climate of coffee growing areas.
The increase in the number of competitors has seen the income to these farmers decrease consistently to a level where the poor farmers have minimal benefit as compared to the retailers. The World Bank records that about 60.5 billion dollars arise from the trade of coffee. Out of this, the coffee producers get less than 3% of the final trade revenue.
The producers acquire the roasted coffee at an incredibly higher price than that of the raw beans. About half of all developing countries depend on exports in order to earn about 50% of the countries’ foreign exchange income.
In Africa, more than 75% of Burundi’s’ exports are coffee and in Uganda 50%. In the past, there was a body regulating the coffee prices in the market, the buffer stock system. The International coffee agreement implemented it but collapsed in the late 1980’s. Since then there has been no standard unit price for the coffee market (Weick & Sutcliffe, 2007).
The countries with the highest production of coffee worldwide are Brazil, Vietnam, Colombia, Indonesia and India. In the year 2007, Brazil took the lead of 2.2 million tonnes, followed by Vietnam, Colombia and Indonesia with a production of 0.96, 0.69 and 0.67 respectively. Brazil over the years has remained to be the largest producer of coffee, followed by Vietnam and Indonesia. In Africa, Ethiopia is the largest coffee producer followed by Uganda and Cameroon. The coffee industry is second to oil in the world market (Fidel, 1989).
The best consumers of coffee worldwide are Luxembourg, Finland, Switzerland, Norway and Sweden. The per capita consumption scores at 25.55, 12.62, 9.15, 8.99 and 8.28 kilograms per capita respectively. Italy utilizes 5.98 kg/capita, Canada 5.80 kg/capita and the United States of America 4.17 kg/capita. Coffee’s price elasticity of demand is very low.
This could be due to the increased production of substitute drinks in a warming up climate. Coffee consumption increases at a low rate annually of about 1 %. This may be because most people may view it as a luxurious good, compared to food.
Coffee producers and consumers come together through the International Coffee Organization. This body assists the coffee sector to stabilize through governmental co-operation amongst the member countries. It involves more than 70 member nations. It assists the poor developing countries in improving the quality of their coffee also in empowering their communities. It uses marketing strategies to increase world consumption of coffee, thus improving the market for producers in the developing countries.
Most of the farmers in the developing nations practice small scale coffee production. In large producer countries such as Brazil, farmers practice large-scale production of coffee. This is an employment avenue to most of its citizens. Millions of people in Brazil work in the coffee sector, thus contributing to increasing the countries’ revenue (Fahey, 1981).
Coffee as a luxury in many countries brings prestige and self-satisfaction to people. The choice of a coffee berry in use brings about luxury. When compared to alcohol or other luxurious commodities, coffee consumption still stands out. This can be attributed to the fact that coffee rates in second in the world market consumption.
The internal environment of any firm is very crucial since it governs the running of events. For any business or firm to run smoothly, there has to be an effective plan to follow. It is necessary for a business to lay down its strategies towards achieving success. It will also require management to lay out ways in which the plan can be implemented and evaluated. An environmental scan is also necessary to ensure control over the firm. The firm has to lay down its mission and objectives for a given duration.
In order to implement the strategy, the company needs policies laid out clearly, as to how decisions should be made in the Company. This avoids inequality and biasness, while promoting order in the business (Blewits, 2008).
Porter, in the essentials of strategic management, says that strategies are of five forms. Corporate, directional, growth, concentration and stability strategies are considered when instituting a business firm. Corporate strategies govern the running of the business as a whole. It deals with the financial bit of the companies’ resources. The directional strategy focuses on how the business may expand in future, incorporation of a new product, the source of capital to enable expansion and personnel to be relied.
The firm should consider the methods for the firm’s growth such as sales and profits. Growth can be either vertical or horizontal. This means that there has to be a plan to ensure growth within the firm or in other geographical regions. The stability strategy includes having policies about the use of profits, whether to incorporate change or not.
Conclusion
The Great Cups Coffee shop uses the growth strategy. The management uses its profits to acquire other stores and open up new coffee shops in them. It also expands the current coffee shops by acquiring adjacent stores. They use their profits to buy land and build new permanent coffee shops. The Great Cups expand both internally and geographically.
References
Blewits, J. (2008). Understanding Sustainable Development. London, U.K. Earth Scan.
Fahey, R. (1981). Environmental Scanning and Forecasting in Strategic Planning. New York: Routledge.
Fidel, J. (1989). 2020 Perfect Vision for the next Century: An Environmental Scan. Document Reproduction Service, 319 (451), 2-39.
Morrison, J. L. (1987). Planning for Higher Education, Establishing an Environmental Scanning System to Augment College and University Planning, Environmental Journal, 15(1), 7- 22.
Rogers, P. P. (2008). An Introduction to Sustainable Development. London, U.K. Earth Scan.
Weick, K. E., & Sutcliffe, K. M. (2007). Managing the unexpected: resilient performance in an age of uncertainty (2nd ed.). San Francisco: Jossey-Bass.