Imperfect to retain its current customers as well

Imperfect
competition1
– Costa Coffee will experience high product prices in the future as some of the
factors are affecting all the key markets including the prices of coffee and
other supplies used by the business, technological advancement, and expansion
and development techniques. The impact of these issues in the communication is
important as it offers the Costa Coffee customers product as well as valuable
information regarding the products and promotional offers. The products of
Costa Coffee have been developed to maintain the traditional taste to retain
its current customers as well as attract more customers through good quality
coffee, as the current market comprises of both local and international
customers with a passion for the coffee and exceptional services offered by
Costa Coffee. Starbucks are the strongest competitor to Costa Coffee with a considerable
share of market. Costa Coffee has a large share of the market compared to
Starbucks the difference in this market share is marginal and therefore the
determination of the price of the products and consumer influence among the
competitors is not set by any of the them but set by market forces.

Number of Firms 2– Costa,
the UK’s largest coffee shop chain, has more than 1,500 stores, more than twice
as many as the 658 it had in 20103.
Furthermore, Costa has grown rapidly from under 2,500 stores to over 3,200
today and is firmly established as the UKs favourite coffee shop chain. On the
contrary, when a firm promise that is avoided becomes an asset or a liability
recognised on the balance sheet as the assets or liability is recognised, the
associated gains or losses that had previously been recognised in equity are
included in the initial measurement of the purchase cost or other carrying
amount of the asset or liability. When a gain or loss is recognised they are
transferred to the income statement, which the transaction that results from a
firm commitment that is hedged affects the income statement as gains or losses
are recognised immediately in the income statement. There is no future economic
benefit arising from these assets as charges for the closure and impairment of
loss making Costa Stores principally in China and Europe (£11.6million). This
offset by a tax credit of £13.0million due to the change in the tax rate from
20.0% to 18.0%. As the UKs favourite coffee shop, with a network of over 2,000
stores, Costa is well placed to capitalise no future market growth, but they
cannot be satisfied.

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Nature of the product4- Nature
of products means the classification of the product and services consider it
various attributes like: Tangible/Intangible, Separable/Inseparable,
Variable/Invariable and Perishable/Imperishable. On the other hand, Products
have different characteristics and involve a different consumer purchasing
behaviour. They are different type of nature of the product in the way
consumers buy them: Convince products – A convince product is a consumer
product or service that customers normally buy frequently e.g. articles such as
laundry detergents, fast food, sugar and magazines. In addition, these products
are usually low priced and planed in many to make them readily them readily
available when consumers need or want them. Convince products have mass promotion.  Shopping products – A shopping are a
consumer’s product that the customer usually compares on attributes such as
quality, price and style in the process of selecting and purchasing e.g.
furniture, clothing, used cares, airlines service etc. Shopping products have
advertising and personal selling promotion. In addition, these products are
high prices and are selective distribution and fewer outlets.  Speciality products – A speciality products
are consumer products and services with unique characteristics or brand
identification for which a significant group of consumers is willing to make a
special purchase effort e.g. specific car, professional and high-prices
photographic equipment, designer clothes or a Lamborghini etc. Speciality
products are more carefully targeted promotion. In addition, these products are
high price and are exclusive distribution in only one or a few outlets.
Unsought products – Unsought products are those consumer products that a
consumer either does not know about or knows about but does not consider buying
e.g. life insurance or pre-planned funeral services etc. Because of their
nature, unsought products require much more advertising, selling and marketing
efforts than other types of consumer products. Unsought products have aggressive
advertising and personal selling promotion. Costa’s product will come
underneath convince products as people buy coffee frequently before going to
work, after work or on a cold morning. Additionally, Costa Pronto is a new high
speed coffee on the go concept, which leads costa to give its customers coffee
on time, which will give Costa a competitive advantage. However, Costa’s
employees working too fast can lead them mixing up orders and giving wrong
orders to the wrong customers as customers will not pay and it will become a
loss for Costa. Costa coffee has more than 3000 outlets and 4200 Costa Express
outlets spread across 29 countries globally as it works with coffee growing
communities worldwide to source of high quality coffee beans

Freedom of entry 5–  Costa must face the entry and exit barriers as
infrastructure and branding costa that are involved in the setup of the company
and if the business is unable to attract customers then it’s a loss for the
franchise owners. Additionally, the coffee culture is still new to the
developing countries and in the developed countries there is a lot of
competitions between the local, national and international as the average
revenue per customer of Costa Coffee is much less than its competitors.

Relationship
between demand, supply and price6:

Demand – The coffee shop market has seen
unprecedented growth in the past and the coffee shop has fast become the place
of choice for people to meet and work. There is a growing demand for great
quality coffee than before. However, this trend has room to continue as coffee
consumption per capita in the UK is still relatively low in comparison to many
other countries. Costa over the past years is logical that they need to upgrade
their systems and infrastructure to cope with the greater demand the business
will impose them. Costa Fresco is designed to meet their customers demand for
an enhance food offer while food capture represents around 40% of transactions
across the estate, their Costa Fresco store has a higher food capture rate of
60%, highlighting consumers demand for fresher food and providing customers
with an opportunity to offer a wider product offering across the estate.

Supply7 – Costa
recognisee’s that their responsibility is to ensure sound social, ethical and
environmental practices within their operations, supply chain and in every
market in which they operate. Costa coffee supply chain management is affected
due to provision of coffee and to substantial flow of data in among the various
stakeholders as the coffee supply chain involved:

 The
farmers provide raw materials that include the coffee beans that meets costa’s
quality expectations. The private traders are the ground agents that activities
to acquire coffee form the individual farmers and prepare if for manufacturing
as the private traders select their coffee purchase based on the desirable
coffee quality. Processing plants are the manufacturing centres that transform
the coffee beans into ready products meeting the roast quality. The primary
suppliers are the major suppliers with a strong relationship with Costa Coffee
outlets and ensure that all replacement orders and other material are readily
available for Costa Coffee. Distribution are the movement of processed coffee
from the suppliers to the warehouses. The warehouses are the storage facilities
used by Costa that serve all local outlets and the thousands of express coffee
points. Costa Coffee seeks to build strong relationship with their suppliers
with an aim of maintaining high standards for all their supplies needs.

Prices – The
Cross elasticity of demand (XED)8 measures
the percentage change in quantity demand for a good after a change in the price
of another e.g. an increase in the price of tea 
by 10% and the quantity demanded for coffee increase by 2%, then the
cross elasticity of demand: Substitute goods will have a positive
cross-elasticity of demand:

 Weak
substitutes like tea and coffee have a low cross elasticity of demand as shown
in the graphs. If the price of tea increases, it will encourage some people to
switch to coffee. However, people can favourite for a particular drink is more
important than a small different in price. For example, Starbucks Coffee and
Costa Coffee, these goods are closer substitutes as the difference is much
smaller. The price of Costa increases, more customers will switch to another
brand such as Starbucks and with close alternatives, the Cross elasticity
Demand will be higher. Additionally, Costa aims to increase brand loyalty and
make consumers less willing to switch to another brand as prices rise

1 http://cassmba3.weebly.com/

2 https://www.whitbread.co.uk/content/dam/whitbread/pdfs/investors/reports-and-presentations/annual-reports/2015-16/Annual_Report_and_Accounts_2015_16.pdf 

3 http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/12033580/Mapped-the-spread-of-coffee-shops-across-the-UK.html

4 http://smallbusiness.chron.com/classification-products-marketing-65394.html

5 https://www.ukessays.com/essays/marketing/strategy-for-coffee-house-in-the-united-kingdom-marketing-essay.php

6 https://www.whitbread.co.uk/content/dam/whitbread/pdfs/investors/reports-and-presentations/annual-reports/2015-16/Annual_Report_and_Accounts_2015_16.pdf
(Page 136)

7 https://www.coursehero.com/file/14735942/Management-Supply-Chain-Management-in-Costa-Coffee/

8 https://www.s-cool.co.uk/a-level/economics/elasticities/revise-it/cross-price-elasticity-of-demand

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