STRATEGIC MARKETING PLAN - JUST US COFFEE

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STRATEGIC MARKETING PLAN - JUST US COFFEE

  1. 1. MG 511 StrategicMarketingCase Study:Marketing Planning at‘Just Us! Cafes’Lecturer: Ms. xDate: 20th Dec. 2010Name: Seánpaul WalshStudent No: X
  2. 2. Contents:1.0 External Analysis 3 1.1 Competitor Analysis 3 1.2 Specific Competitor: Kicking Horse Strategy 4 1.3 PEST 4 1.4 Porter’s 5 Forces 42.0 Internal Analysis 5 2.1 Value Chain Analysis 5 2.2 BCG Matrix 5 2.3 Revenue Analysis 6 2.4 Geographic Concentration 63.0 SWOT Analysis 74.0 Key Issues 75.0 Strategic Alternative (A) 76.0 Strategic Alternative (B) 87.0 Strategic Alternative (C) 98.0 Bibliography -9.0 Appendices - 2|P a ge
  3. 3. 1.0 External Analysis In order to develop effective strategies Just Us Café’s are required to examine the external environment in which they operate. I have carried out the following analyses:  Competitor Analysis  Pest Analysis  Specific Competitor: Kicking  Porter’s 5 Forces Horse 1.1 Competitor AnalysisCompetitor Channels Locations No. ShopsKicking Horse Coffee Shops, Gourmet West Coast, Canada N/A Stores, Restaurants Quebec & OntarioKraft Foods Stores, Universities United States MainstreamP&G Millstone Mainstream Canada & United States MainstreamNestle Mainstream Canada & United States MainstreamLowblaws Private Label Loblaws Stores Canada MainstreamJust Us! Coffee Shops, Universities, Nova Scotia, Quebec & 4 Coffee Shops & On The Gourmet Stores, Ontario Shelf SupermarketsTrident Bookseller & Cafe Coffee Shop Halifax, Nova Scotia 1Java Factory Coffee Shop Nova Scotia-Halifax, 3 Coffee Shops Darthmouth, Upper TantallonTim Hortens Restaurant Nova Scotia General- 170 Wolfville(2), Halifax(21)Second Cup Coffee Shop & Retailer Canada General, Nova 360 Scotia(6)-Halifax(5) As we can see from the above table, JU have several competitors across the line in the local market, Nova Scotia, and the wider market, Canada and US. Bergen and Peteraf (2002) suggest a two step competitor analysis framework when comparing competitors. Within their framework they suggest that from the outset a company must recognize and classify all competitors. By doing this JU can actually identify both direct and future potential threats to their company. See Appendix A. This in turn will alert them to the most immediate threats short term and long term as well assist formulating a strategy. The second stage of the framework model is concerned with the evaluation of the competition’s resources and the prediction of rivalry. They discuss how by understanding your 3|P a ge
  4. 4. competitor’s resources you can predict the scale of future threats. Therefore forJU, they need to understand who they are competing with within the localmarket and big players entering that market, i.e. Trident only have one shop soJU could in turn be a threat to them whereas Java factory could be a threat to JU.Bergen and Peteraf (2002) also note that if two firms within the one market havesimilar resources, which would appear to be the case for JU’s local market ofNova Scotia, then this should in turn allow them to satisfy the same customerneeds, therefore making the need for strong branding and differentiationessential.1.2 Specific Competior: Kicking HorseAnother important form of analysis is to examine other company’s strategies tosee what has worked and what hasn’t and the risks/results involved. For JU, Ifeel looking at Kicking Horse is a very good way to test out future strategies.As stated within the case, Kicking Horse is a major competitor in the Canadianmarket. They are based however on the West coast of Canada, British Columbia.As a method of differentiation, the company leveraged the heritage and localaspect of the product in order to expand i.e. using the local names and culture todifferentiate their product. They also used endorsements with NGO’s and an e-commerce site to further promote their brand. Through these tactics, it providedKicking Horse an established platform within their local market and anopportunity to expand globally into the US and Europe. This strategy provedvery effective and JU should examine it carefully.1.3 PEST AnalysisSee Appendix B1.4 Porter’s 5 ForcesThe most powerful and widely used tool for systematically diagnosing theprincipal competitive pressures in a market, and assessing the strength andimportance of each, is the Five Forces Model (Porter 1979).See Appendix C 4|P a ge
  5. 5. 2.0 Internal AnalysisJU must not only understand the industry and market they are operating in but alsotheir own internal capabilities and strengths/weaknesses. Therefore we must conductan internal analysis of JU. I have carried out the following analyses:  Value Chain Analysis  Revenue Analysis  BCG Matrix  Concentration Examination 2.1 Value Chain Analysis See Appendix D 2.2 BCG Matrix As JU provide various organic products it is important to examine the more profitable ones and not so profitable in order to either focus marketing effort on weaker products or discontinue them. After careful examination of JU’s product offering and Appendix 1 of the case study I believe that they have: Stars: Coffee & Tea Dogs: Sugar Cash Cows: Cocoa Coffee and Tea appear to be the largest growers in the trade figures with significant growth rates in volume averaging approximately 15% across both categories over a four year period. Perhaps JU should look at the profitability of the sugar market and consider placing less emphasis on it. 5|P a ge
  6. 6. 2.3 Revenue AnalysisQuarter Grand Pre Wolfville Barrington Spring gardenQ1 $134,625 $123,912 $90,562 $123,709Q2 $175,217 $138,898 $104,877 $148,356Q3 $215,909 $142,984 $112,504 $152,758Q4 $213,673 $134,205 $111,142 $180,625 By examining the revenue streams we can identify the weakest and strongest times of year and target our marketing activity directly at these in order to strengthen sales. It is clear from the table that Q1 is the weakest time of year and perhaps some new innovative strategies could help increase sales here. Q3 is the strongest period of the year and I believe that this is accountable to the summer tourists. 2.4 Geographical examination Another analysis I conducted was to look at the concentration of the JU coffee shops and the potential markets available to them. The illustrations below show the concentration of the shop locations. It is obvious to locate in the more densely populated areas; however the company could be missing out on further opportunities. Both shops in Wolfville are within a mile radius of each other and in Halifax they are within 10 minutes walking distance of each other. JU must consider this when planning growth or expansion as they are reaching a limited audience when so clumped together. 6|P a ge
  7. 7. 3.0 SWOT Analysis See Appendix E4.0 Key Issues  Increase Marketing Spend  Targeting new markets or new buyers?  How can JU build on the assets they have in place already  Product Line and profitability  Need for clear MARCOMS  Increase volumes purchased in existing channels  Maintain/defend market share or attempt to grow  Assess Retail Channels and feasibility of Long term5.0 Strategic Alternative (A) “Joint Venture/Strategic Alliance”The first strategic alternative I propose is to attempt a joint venture/ strategic alliancewith a fellow competitor with similar values. This strategy could help JU with resourcesand in increasing market share in the local market as well as providing a platform forexpansion outside the maritime states.Sherman (2003) states that one of the possible reasons for a joint venture or strategicalliance is to widen or integrate product lines. As we have seen from the SWOT analysis,new product lines would provide JU with new opportunities for revenue. However animportant factor to consider when considering a joint venture or strategic alliance is togive careful thought to the type of partner you are looking for and what resources youand the partner will be contributing to the newly formed entity (Sherman 2003). Fromcareful examination of competitors in the local market I believe that a joint venture withKicking Horse would be most effective. The reasoning behind this is because they arelocated on the opposite coast of Canada and have the same core values as JU. There aremutual benefits for both parties by entering this agreement. 7|P a ge
  8. 8. Just Us! Kicking Horse+Access to Distribution +Online & Marketing +Greater access to -Con’s outweigh Pro’sChannels Expertise Eastern Market+Expansion Nationally -Loss Of Control +Huge Publicity Opps e.g. -Upset Customers JUDES+Positive Awareness of -May discontinue some +Innovative Products -Reduces Exclusivity ofFair Trade to Nation lines upscale food retailersIn terms of feasibility of this strategy, I believe that it would be very beneficial for bothparties however I question the reality of it. In order for this strategy to be implementedI believe that there would have to be more in the agreement for Kicking Horse to get onboard. I also acknowledge that this strategy may have knock on effects on JU. With ajoint venture, customers could perceive the company as ‘selling out’ e.g. similar toInnocent smoothie Coca Cola purchase. This in turn could affect the loyal customer baseas many customers may be attracted to the idea of the company being a small companyfrom a local town. Another knock on effect could be from the employees also. As statedin the article the employees are all happy to be part of something good and although thevalues will remain the same, management may change through the deployment of thisstrategy as well as the direction of the company which could upset employees and inturn reduce the workforce or productivity levels.Therefore I would not recommend this strategy.6.0 Strategic Alternative (B)The second strategy is to remain in the Nova Scotia market and defend what JU alreadyhas, no expansion.The objective of this strategy is to continue maintain the 4 coffee shops and maintainingthe relationships with retailers. The benefits of this are that the company can focus onits service offering and finding new product lines. However because of the competitiveenvironment it is not recommended and therefore is not the selected strategy. Howeverone solution to combating the intense competition in the market is to use a counter-offensive defense as suggested in Wilson and Gilligan, 2005. This strategy of defense is usedin industry when a competitor launches an attack on the market. JU for example could 8|P a ge
  9. 9. either meet the attack head on or look for a gap or a weakness in its competitor’s strategy through promoting their own strengths and highlighting the competitor’s weaknesses. 7.0 Strategic Alternative (C) “Improve Brand Performance & Expand Long Term” The chosen strategy that I have selected is a five year strategy. The concept behind the strategy is to improve and build on the existing brand within the local market with expansion plans 1) in Nova Scotia and 2) to mainland Canada. Expand Nova Expand•12-18 Months Scotia •52-60 Months Mainland•Online •Continue To build •New Units •After 60 Months•MARCOMS Mix Awareness •Increase Reach •Closer Proximity First •Become NS Market •The Brand From Nova Leader Scotia Improve Brand •48-52 Months Maintain Performance As you can see from the above figure my strategy follows a four step process. Improve Brand Performance: At present as mentioned Improving Brand earlier, JU are a relatively Performance recognizable brand in the Improve Raise Volume Nova Scotia market, Wolfville Productivity & Halifax. I suggest that they Brand Brand Raise Prices Cut Costs Revitalisation Repostioning 9|P a ge
  10. 10. aim to improve the brands performance. Doyle & Stern (2006) suggest the followingframework for improving brand performance.For JU I suggest that they look to reposition the brand and leverage the story behindthe brand as their pull. As mentioned earlier I would also recommend that they aimto cut costs through examining their value chain.When repositioning it is crucial for JU to tell the story of the coffee fair-trade processfrom start to finish and emphasize the fairness in the whole process thus leveragingthe brands personality. Brand personality can be defined as the “embodiment ofpersonality traits of the consumer in the brand itself” (West, Ford & Ibrahim, 2006;P259). By leveraging this more as part of the offering JU will more be instantlyrecognized by customers which is crucial. This story telling will also differentiate JUfrom other fair trade competitors as well as educate the public, one of themanagement team’s goals. By using Aeker’s 1996 model for brand identity JU canunderstand how the customer perceives them and position themselves adequately.See Appendix F.According to Ries and Trout (2001), the biggest challenge to win customers over iswithin the mind of the customer before they even decide they want coffee. JU shouldagain as mentioned play on telling the story to be instantly in the customer’s mind.They should also adopt a catchy memorable slogan, again reflecting their brandpersonality.As mentioned above, JU need to develop a clearer MARCOMS model. Marketingcommunications (MARCOMS) refer to four different types of communicationchannels – advertising, public relations, personal selling and sales promotion.MARCOMS give organizations the opportunity to establish, in this case strengthen, astrong position in the market and assert their distinctiveness and also ties into whatthe client wants to say as opposed to execution, which relates to how the message isreceived. (West, Ford and Ibrahim 2006). There are many advantages of a successfulmarketing communications strategy such as cost savings, which is crucial to JU’sneeds.I recommend the following: 10 | P a g e
  11. 11. Advertising - This marketing channel aims to inform or influence one or morepersons about the product or service sold. Advertising is a long-term marketing toolthat can increase the brand awareness through television, radio, internet and press.Advertising used in these mediums can encourage peoples’ interests and also sales. Ibelieve JU currently relies on the PR channel too much and should realign theirefforts with more emphasis on advertising, with online particularly. Online isparticularly effective at strengthening brand equity which again assists thestrengthening strategy (Wakolbinger et al., 2009). I feel the opportunity that socialmedia provides cannot be underestimated and can tie into using their loyalcustomer base as brand ambassadors on facebook and hopefully in turn creating abrand community. I also recommend that JU examine the online community life-cycle suggested by Iriberri and Leroy (2009). There are 4 stages in the life cycle ofan online community, inception, creation, growth and maturity. By understandingthe phases of this life-cycle JU can guarantee that the rate of growth of their onlinecommunity.I believe that increase in advertising will generate more traffic to the website andtherefore they should make the site more interesting. An interesting feature I wouldfeel would be online videos of the product process on the website from start tofinish. Another simple low cost form of advertising and using technology could be amembers club. By establishing this in the online environment they could then useElectronic newsletters to keep in touch with existing customers. The benefits ofelectronic newsletters to customers are simply that they can be issued in largequantities on a low-cost basis and can reach a large portion of their target market.They could also provide JU with important feedback regarding innovating theirproduct i.e. new flavours or lines. Once they have built their online base up enough Ithink that e-retail could become an option for JU.Public Relations (PR) – This marketing communication channel can establish amutual understanding and reciprocal good will between itself and its stakeholders.JU already as stated earlier have a huge emphasis on PR through cultural events intheir coffee shops and talks as well as receiving awards. I believe it is a successfulroute to take but that for the current economic climate it is very expensive in terms 11 | P a g e
  12. 12. of effectiveness on sales, ROI. Perhaps as above, money would be better spent inadvertising and more low cost events in –house e.g. book clubs.Sales Promotion – Sales promotion can be used as a strategy to encourage customersto make a quick purchase. Using this marketing channel only has short-term effectson sales. Perhaps rewarding loyal customers could be a method of boosting sales inQ1 the most difficult period for JU. I believe that by offering samples or coupons inQ4 people may come to redeem them in Q1. Bawa and Shoemaker (2004) highlightthat ‘free samples’ also aid brand recognition and have a measureable long-termeffect on sales up to 12 months after the initial after the promotion.This brand improvement phase I estimate will take approximately 18 months toimplement considering the scale.The next step is to expand within Nova Scotia and dominate the market. Asmentioned earlier there is a highly concentrated location of shops. I suggest openingnew coffee shops but in more dispersed locations, thus increasing reach and aidingdomination of market. See below.I suggest opening simplestores that serve coffee andnot acquiring old cinema etcas that is too costly. Thepurple boxes indicate newpotential locations and thegreen indicates a touristhotspot. I estimate that thesenew stores will take thestrategy up to its 48th 52ndmonths to be up and runningand profitable. It is alsoimportant to note that this expansion method allows close relationship managementas they are relatively located to each other as opposed to in Toronto. By then thebrand should be the strongest in the Nova Scotia Market. Fan (2005), suggests thatstrong widespread branding represents and promotes lifestyles and that brandsthemselves become part of the customers’ culture, therefore I believe that by then 12 | P a g e
  13. 13. people of Nova Scotia will associate JU as the coffee of Nova Scotia. This can also tieinto the retail branding as people will then be buying an experience of Nova Scotia.The third part of my strategy is to maintain once these units are open and monitorperformances whilst building awareness. At this stage I believe that JU should beequipped to enter the Canadian mainland market as the brand will be strong enoughto compete outside of Nova Scotia and awareness will be high enough to open storesin larger cities thus the fourth step.I feel that this strategy will be effective as it is long term and cost conscious in theshort term. As suggested in the article, there is a 20,000 budget however it couldpotentially be 7%of the overall revenues thus being $161,276. The latter would besufficient to carry out this strategy with resulting increased revues funding the newshops. Product Promotion Maintain and Expand Loyalty Scheme Focus on coffee/Tea For Expansion Just Us! Place Price Continue Retail Channels Maintain Price More Coffee Shops. 13 | P a g e
  14. 14. 7.0 BibliographyBooks:Dess G.; Lumkin G. & Taylor L. 2004. Strategic Management, Text and Cases, McGraw-Hill.Doyle & Stern, (2006), ‘Marketing Management and Strategy’, 4th Ed., Prentice Hall.Keller, (2008), ‘Strategic Brand Management’, 3rd Ed., Pearson Education.Murray & O’Driscoll, (1996), ‘Strategy and Process in Marketing’, Prentice Hall.Ries,A. and Trout, J., (2001), The marketing classic positioning: the battle for your mind, McGrawHill.West, Ford & Ibrahim, (2006). ‘Strategic Marketing’, Oxford Publishing.Wilson, R. And Gilligan,C., (2005), Strategic Marketing Management (3rd Edition), England: ElsevierButterworth-Heinemann.Journals:Bawa, K., Shoemaker R., (2004) The Effects of Free Sample Promotions on Incremental BrandSales, Marketing Science, Vol. 23, No. 3, pp. 345-363.Bergen, M., and Peteraf, M., (2002), Competitor Identification and Competitor Analysis: A Broad-Based Managerial Approach, Managerial and Decision Economics, Vol. 23, No. 4/5,Fan, Y. (2005) Ethical branding and corporate reputation, Corporate Communications: AnInternational Journal, Vol. 10.Hanas, J., (2008) Going Green, Marketing News, 2/1/2008, Vol. 42 Issue 2Hughes, G. and Fill, C., (2007), Redefining the nature and format of the marketingcommunications mix, Marketing Review, Vol. 7, Issue 1, pp45-57.Iriberri, A. and Leroy, G. (2009) ‘A life-cycle perspective on online community success.ACM Computer Survev.41, 2, Art. 11.Sherman, A. (2003), ‘Growth through Joint Ventures and Strategic Alliances’, Fast track BusinessGrowth, Chapter 21.Wakolbinger,L., Denk, M. and Oberecker,K., (2009), The effectiveness of combining online andprint advertisements, Journal of Advertising Research, Vol. 49, Issue 3, pp360-372. 14 | P a g e
  15. 15. 8.0 AppendicesAppendix A: Bergen and Peteraf (2002) Mapping Competitors 15 | P a g e
  16. 16. Appendix B: Pest Analysis Political - Fair Trade Technology- Evolving Pest Economic Manufacturin -Climate g Technology Analysis Social- ExperiencePolitical: As highlighted throughout the case, a huge political factor involved in the industry was the certified recognition of actual fair trade and the whole process.Economic: The economic environment is constantly changing and as we can see from the case, some competitors are providing partially organic ranges as well as mainstream organic coffees. JU pricing is at a slight premium and in the current environment; disposable income of consumers can play a large role in choosing a product. JU must be aware that a consumers feeling toward one product may be influenced by their income, regardless of how strong they feel about fair trade.Social: As mentioned in the case, the overall coffee experience seems to be a large part of the attractiveness of JU and competitor’s. Any future strategy must be designed with this ‘experience’ in mind rather than expanding rapidly and diminishing the experience factor.Technology: Technology is constantly evolving and JU can seize a significant advantage by utilizing technology more. JU needs to examine the improvements technology can make in the manufacturing process and in their advertising. 16 | P a g e
  17. 17. Appendix C: Porter’s 5 Forces Threat Of New Entrants HIGH Substitutes Competitive Buyer Power HIGH Rivalry HIGH HIGH Supplier Power LOWThreat of New Entrants: Threat of New Entrants is high within the market as there are very few barriers to entry and fair trade coffee trends are extremely popular so it is an attractive industry.Buyer Power: “Buyers threaten an industry by forcing down prices, bargaining for higher quality or more services, and playing competitors against each other” (Dess et al 2004:53). As mentioned in Appendix B-PEST, the customer’s income plays a huge role in selecting a product therefore if they decide to bypass fair trade products because of the premium price they can hold allot of buyer power, thus making buyer power in the industry high. 17 | P a g e
  18. 18. Threat of Substitutes: There are various substitutes for fair trade coffee in the industry such as regular coffee, tea etc but not only coffees but in the general beverages market e.g. Coca Cola, Water etc. As a result of this there is a very high threat of substitutes.Supplier Power: Supplier power is relatively low as the industry is fair trade coffee. From previous knowledge, coffee suppliers were being exploited and continued to produce. It is simply because of the willingness to partake in fair trade that they have gained power. However I still believe that due to the underdevelopment of the producing countries allot of the power still lies with the buyers.Competitive Rivalry: Competitive rivalry is relatively high as seen in previous competitor analysis. There are many competitors in the local market and on the shelf within the mainstream markets. 18 | P a g e
  19. 19. Appendix D: Value Chain AnalysisThe Value Chain is a method that can be used to analyze JU’s internal environment. Porter(1980) created a generic value chain model which listed activities that could be found in mostfirms. These activities can be divided into primary and support activities, which aim to createvalue for customers, whilst exceeding the cost of such activities.The primary activities create value for customers. These activities consist of inboundlogistics, operations, outbound logistics, marketing and sales, and service. At JU, someprimary activities include importing the coffee beans, manufacturing process,packaging, coffee shop service itself, customer service etc.. These primary activities aresupported by JU’s infrastructure e.g. Coffee Shop Manager Etc. Appendix 2 of Case Study.The support activities are responsible for facilitating and enhancing the primaryactivities. The profitability of JU depends on the relationship between these primary andsupport activities. The value chain can help JU define their core competencies. It canalso be reconfigured in order to gain a competitive advantage. This reconfigurationinvolves analysing the operating costs and assets that are required for each individualactivity in the value chain. By reviewing the costs associated with each activity, JU can 19 | P a g e
  20. 20. determine which activities are sources of cost advantage or disadvantage whencompared to competitors. An example for JU could be to outsource the packagingelement of their process to save on costs.Appendix E: SWOT Strengths Weaknesses •Loyal Base •Shops Too •Customer Concentrated Engagement •Low Marketing •Multiple Channels Spend •Reasonably Strong Brand Opportunities Threats •Potential for Nova •High Competition Scotia dominance •Starbucks •New Fair Trade •Lack of clarity on Products FairTrade •Social Media/Online •Clouded FocusStrengths:Loyal Customer Base; JU have built up a loyal satisfied customer base and this is a very important asset to the companyCustomer Engagement: As their stores are quite quirky JU also partakes in a lot of social initiatives and therefore that is one of the core strengths of the brand 20 | P a g e
  21. 21. Multiple Channels; as the company is a wholesaler also they are using multiple channels which increases revenue streams. However this can be a threat also.Strong Brand: JU has reasonably strong brand recognition within the maritime states and this again is a crucial asset to the company’s future strategies.Weaknesses:Shops Concentrated: As mentioned in analysis, shops are very concentrated and thus limits audience and reach.Low Marketing Spend: At present there is a very low marketing budget spend and this attitude will prove a weakness if it continues for JU.Opportunities:Nova Scotia Dominance: There is an opportunity for JU within the local market for increased market share as they re one of the leading recognizable brands and have a foothold already.New Fair trade products: With more and more fair trade products becoming readily available a huge opportunity to increase the product portfolio is on the horizon for JUSocial Media/Online: The online environment presents JU with a huge opportunity to increase brand awareness, engagement and utilize its loyal customer’s feedback at a very low cost.Threats:High Competition: As mentioned in earlier analysis, there is high competition in the industry and also a high threat of substitutes. Without significant value proposition and differentiation JU could become a victim to substitutes or competitors. 21 | P a g e
  22. 22. Starbucks: Starbucks introduction to Nova Scotia and their new organic line poses a huge threat for JU as their resources are far more than JU’s and so Starbucks could soon dominate local market.Clarity on Fair Trade: An issue highlighted in the case was that of clarity and regulation on fair trade. It is to be seen that the fair trade term is been thrown around too commonly and applied to every product, thus potentially reducing effect of one of JU’s key USPs.Clouded Focus: At the moment JU are using multiple channels of distribution however with various challenges on the horizon a decision needs to be made on a strategy. Operating and managing two separate strategies can create a clouded vision within the company and a decision needs to be made on prioritization.Appendix F: Aeker’s Model 22 | P a g e
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