Organizations revolve around both its internal and external environments. Situation analysis focuses on both the internal and the external factors that may affect a business (Rosalba). Starbucks and Costa operate in the coffee business. Therefore, there are controllable and uncontrollable variables that influence both companies. The market shares and segmentation strategies also affect the companies’ operations.
Controllable and Uncontrollable variables
Starbucks and Costa are the leading coffee shops in the world. Starbucks offers a large selection of experimental flavours besides coffee. These flavours include Pumpkin spice latte, Vanilla Bean Latte, and signature Frappuccino, among others (Ichwatus, et al.). On the other hand, Costa offers an assortment of coffees, tea, and hot chocolate (Ayu, et al.). Both companies have a number of strengths and weaknesses.
- Starbuck’s Strengths. The first strength is that the company has a strong brand image. Starbucks is worth over 11.7 billion dollars, with customer loyalty in most parts of the world (Ichwatus, et al.). As a result, the company has become more popular and stronger.
- The second strength is that the company has an extensive supply chain. Starbucks has managed to dominate Latin America, Africa, and Asia- Pacific. These regions are its main coffee beans suppliers.
- The company also knows how to manage its employees. It is known for how they treat employees with dignity and respect (Ichwatus, et al). As a result, the employees have developed a positive attitude towards working for Starbucks.
- Starbucks’ Weaknesses. Despite the numerous strengths, the company also has its dark side. The weakness includes high prices, lack of uniqueness, generalized standards, unethical procurement practices, and recall of products (Ichwatus, et al.). This fact creates an advantage for competitors over Starbucks.
- Opportunities. The company has an opportunity to diversify its product line by including more goods and services. In addition, Starbuck can open more branches in different countries. This strategy will help in global expansion.
- Threats. There is the threat of existing companies in the industry. There is also the threat of new entrants. More people also prefer e-commerce.
- Costa Coffee’s Strengths. The company is the second largest coffee chain in the world after Starbucks. Additionally, it has widespread operations in over 31 countries with 3,401 stores and over 6,000 express vending machines (Ayu, et al.). Lastly, the company has managed to achieve a premium image all over the world (Ayu, et al.). Despite the numerous strengths, the company has not managed to overtake Starbucks.
- Costa Coffee’s Weaknesses. Weaknesses provide an opportunity for improvement. The major weaknesses of Costa Coffee include the large gap between Costa and Starbucks in the first position (Ayu, et al). Secondly, the company requires more aggression since it has been in existence since 1971 (Ayu, et al). Lastly, Costa lacks marketing and advertising (Ayu, et al). As a result, the company may be easily overtaken by smaller companies.
Market Shares and Segmentation Strategies
Understanding the market will lead to the ultimate success of the company. Starbucks holds almost 40 percent of the United States of America coffee shop market (Sharmeen). Costa, on the other hand, holds about 39 percent of the entire European market (Ahmed). This fact means that Starbucks still hold higher market shares as compared to Costa.
Joining companies may widen a market. The segmentation practice adopted by Costa is merging with Coca-Cola. Coca-Cola is the world leading soft drink and beverage manufactures (Ahmed). The merger means that Costa’s market segmentation will be wider as compared to that of Starbucks.
Starbucks, on the other hand, holds a different strategy. It mainly targets high income earners between 25-40 years and those ranging from18-24 years belonging to richer families (Sharmeen). These target groups have a higher spending capacity.
Starbucks and Costa are leading coffee companies in the world. Both have strengths and weaknesses that need improving on in order to expand their businesses. They have to develop different strategies and segmentation methods in order to thrive in the competitive market.
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