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Illy Company’s Business Strategies Case Study

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Updated: Oct 29th, 2020

What are the current strategies of Illy (business, corporate, and global), and is their competitive position sustainable?

One of the business strategies applied by Illy is pricing. Since the company provides a unique blend of coffee drinks and positions them as a product of premium quality, the price is also premium. However, increasing sales prove the efficiency of the selected strategy. The company manages to target its particular niche in the market and satisfy the demand of the customers for a premium product.

Another specific strategy typical of Illy is to focus on quality. The company is known for its quality obsession and skillful use of innovative design. Innovation and quality are connected in the technological process of selecting the best coffee beans. For example, electronic photographs of beans are made to compare their color and detect those that do not suit the standards.

The company also applies a direct marketing strategy. It presupposes direct communication between the company and the target consumer. Illy provides direct sales through the official page of the company on the internet.

The corporate strategy of Illy is based on the value of quality and excellence. Being a family company, Illy preserved this value through generations. Also, the company values its employees, and they respect the corporate traditions and make efforts to provide customers with the product of high quality.

The global strategy is applied by the company in the market entry process. The application of diverse expansion approaches, such as direct franchising, master franchising, area franchising, multi-unit franchising, joint venture, and others, empowered the spread of the company over the world to more than 140 countries.

Judging by the increasing sales of the company, it can be stated that its competitive position is sustainable. According to the company data, sales volume increased even in countries with big competitors such as India and Brazil. Moreover, the increase was recorded during some subsequent years, which is another proof of the company’s position sustainability and the correctness of the selected strategies.

Illy operates coffee stores in Italy and has 200 coffee stores in 30 countries. But they also have contract-based relationships with 50,000 restaurants across the globe. Why is it important for Illy to vertically integrate forward into coffee stores in any of the markets that they have a presence?

The strategy of Illy to maintain relationships with restaurants worldwide and integrate into coffee stores can have the following explanation. Gross sales to coffee stores are the primary concern of the company. At the same time, they are interested in every consumer who can appreciate their product of exclusive quality. The company organized the provision of their coffee to restaurants worldwide to achieve the extended audience and attract new customers.

Moreover, these are high-end restaurants and coffee-houses in different countries. For example, in Italy, coffee provided by Illy company is considered to be the best one and “must-have” in the restaurants throughout the country. The restaurants and coffee-houses provide an opportunity to taste the product sold by Illy. In case a customer considers this coffee worthy, it can be the start of a new partnership for the company. At least, the customer can come again to the restaurant to have a cup of Illy’s coffee.

It will bring profit to the restaurant and, as a result, increase the company’s sales in case there are many loyal customers. In the case of the best scenario, customers who tasted excellent coffee can become partners buying Illy’s product for their companies or even extending the network of coffee stores that sell Illy’s production. Thus, presence in many high-end restaurants all over the world is a specific advertising campaign of Illy. Advertising on television, the internet, or in the press is efficient, but providing future customers with an opportunity to taste the world’s most exceptional coffee can have its benefits.

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IvyPanda. (2020) 'Illy Company's Business Strategies'. 29 October.

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