Green Mountain Coffee Roasters was founded in 1980 and has grown to become a leading specialty coffee and coffee maker company. It aims to create the ultimate coffee experience through sustainability and ethical sourcing from tree to cup. The company faces various challenges in the competitive coffee industry including high threat of entry from new competitors, high threat of substitutes as consumers spend less on coffee, and high buyer power due to low switching costs. Technological developments also impact the industry, with new coffee makers emerging and social media being used for marketing.

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Green Mountain Coffee Roasters Inc.
Company Background
Green Mountain Coffee Roasters was founded in 1980, when owner Bob Stiller found a great
cup of coffee he enjoyed, and proceeded to buy the Vermont-located shop. The company was
incorporated in 1981, and started its first mail order business in 1986. The company has long
been associated with green and earth-friendly initiatives in its use of energy and product
packaging.
Mission Statement
To create the ultimate coffee experience in every life we touch from tree to cup –
transforming the way the world understands business.
Values and Principles
Ethics – Do the right thing. Integrity is the foundation of all the company’s decisions, actions
and relationships.
Passion for Coffee – From tree to cup. The company roast great coffees and is committed to
ensuring that everyone who encounters Green Mountain coffee has an outstanding coffee
experience.
Sustainability – Pathway to its future. The company uses resources wisely and make
decisions that take into account the well being of people, profit, and the planet.
Communication – Open dialogue. In company’s thriving, healthy organization, it shares
information, ideas, and successes.
Appreciating Differences – Finding opportunity in conflict. The company believes that
opportunity comes from welcoming different opinions and ideas with mutual respect.
Continuous Learning – For today and tomorrow. The company’s competitive strength comes
from the continuous improvement of all that it does. The company actively seek out and
apply best practices.

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Business Success – Financial Strength. The company delivers steady growth in market share,
sales and profit. Financial strength benefits employees, stockholders and communities
worldwide.
Planning & Measuring – To understand and improve. The company focuses on integrated
planning throughout the organization to align its strategies. The company gains insights into
its successes and challenges by measuring and evaluating the results of its actions.
Decision-Making – At the most effective level. The company makes timely, informed,
criteria-based decisions aligned with its business goals. The company’s decisions are made
with personal commitment, ownership and accountability.
Personal Excellence – Strong organizations rely on strong individuals. Therefore, the
company is responsible to do its personal best for its co-workers, and the company. Personal
excellence is built on a high level of skills, knowledge, self-awareness, self-motivation, and
respectful intentions toward all.
Leadership – At every level. The company develops leaders that demonstrate a high level of
competence, generate trust and bring out the best in themselves and those around them.
Partnerships – Success for all. The company collaborates with its partners for mutual benefit.
The company’s relationships are based on respect, honesty, openness, reliability and trust.
Vibrant Workplace – A place where you can make a difference in the world. The company
creates and maintains a culture that fosters teamwork, fun, personal growth, career paths,
financial rewards and a healthy work-life balance.
Shared Ownership – Thinking and acting like owners. The company meets its commitments
and appreciate the contributions of each employee. The company believes that its employees
are stewards of its collective resources. Everyone shares equitably in our successes.
World Benefit – Creating positive change. The company believes that it is a force for good in
the world. It celebrates and supports the power of businesses and individuals to bring about
positive changes, locally and globally.

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PEST Analysis
Political
Taxation policy - high taxation imposed on farmers in those countries producing the coffee
bean will usually mean the company pay a higher price for the coffee they purchase. Any
fluctuations in taxation levels in the industry are almost certainly ultimately passed on to the
consumer.
Deregulation - A decade ago, the USA pulled out of the ICA (international Coffee
Agreement) that set export quotas for producing nations and kept the price of coffee fairly
stable. Coffee quotas and price controls ended. Since the deregulation farmers have suffered
and their earnings have dropped. Many have struggled to make a living so have given up.
International trade regulations/tariffs - Trade issues will affect the company predominantly
when exporting and importing goods. When another country’s government imposes a tariff it
not only results in an efficiency loss for the company but large income transfers can become
Organisation
Political
-Taxation policy
-Deregulation
-International trade
regulations/tariffs
-Government stability
Social
-Decrease spending on non-
essential products
-Increase attention to
environmental friendly
products
-Increase in online sales
Economical
- Global economic crisis
- Exchange rates
Technological
-New technology
developments
-Internet
-Social media

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inconsistent with equity. This extra charge can turn a bargain into a rip-off. Also, since 9/11,
trade relations have been adversely affected between the USA and some other countries.
Government stability – the company should thoroughly investigate the political stability of
any country they plan to export coffee from. Changes in government can lead to changes in
taxation and legislation.
Economical
Global economic crisis – global economic crisis significantly effects businesses all around the
world which may also effect the company’s business in the future. Sluggish recovery in the
economy has been negatively affecting consumer demand for specialist coffee chains and
therefore slowed down their growth.
Exchange rates – exchange rates differences between countries where Green Mountain
Coffee Roasters exports its raw materials and sells its products can affect the company’s
profit level.
Social
Decrease spending on non-essential products - consumers were seen to be curbing their
spending on what was considered non-essential and extravagant by them. Coffee may be seen
as a non-essential product to purchase by some people which may decrease the market value.
Increase attention to environmental friendly products – consumers have significant attention
to environmental friendly products as well as having attention to products that are sourced
ethically.
It has been noticed that coffee drinkers prefer local coffee shops over international chains for
their daily dose of coffee because of the more close and friendly environment in these
boutique coffee shops. Recent times have seen the emergence of superior kinds of artisan
coffees being offered by niche independent companies; this has resulted in more knowledge
about coffee leading to more quality-aware consumers. This has led to even companies who
do not have a strong base in coffees to offer better quality of the brew at competitive rates.
Online sales – online sales are on the rise among the consumers in the world.
Technological

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Technology is one of the most important factors that affect companies operations. In fact, it
plays a role in all aspects of the businesses from supply chain management to controlling and
monitoring and production. For example, new RFID technologies increase efficiency of
supply chain players. Similarly, robots are started to be used in production units and they
increased the speed of manufacturing process as well as increasing the quality of the
products. Therefore, it can be said that investing in those technologies are very important for
gaining competitive advantage. In fact, number of companies is attempting to produce
product like Keurig. This means that company should be focusing on to produce better
product in order to compete with the new technology.
Internet – internet can be used as a channel to sell products internationally.
With the new social media becoming an important part of life, coffee shops can utilise media
networking sites to market themselves. As well as this, they can connect people who interact
over the virtual platform.
Social network sites such as Facebook allow customers “check-in” in coffee shops and
therefore encouraging people to psychically socialise with others with the help of social
media. It is expected that technological advancements will increase appeal of coffee shops for
customers as long as they adapt these developments into their services.

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Industry Analysis
Threat of Entry – High
There are strong barriers to entry created by the strong brand portfolios of major international
corporations in the market. However, low switching costs and low levels of product
differentiation render the hot drinks market and coffee shops sector more attractive to an
increasing number of new entrants (especially the local ones). This reduces the entry barriers
to the coffee shop sector.
Threat of Substitutes –High
Prior analysis showed that consumers started to spend less money in average in coffee shops
in relation to previous years. This could be related to decline in income level or their
confidence to the future. This has adverse effect on specialist coffee shops; customers may
prefer affordable alternatives such as McDonalds. On top of this, there are growing concerns
about the adverse effects of caffeine consumption among consumers as caffeine containing
Degree of Rivalry
-High
-Existence of large players like
Starbucks
-Low-priced products
-Increase in the number of artisan
or boutique coffee houses
Threat of Entry
-High
-Low switching costs
-Low levels of product
differentiation
-Increasing number of new
entrants
Threat of Substitutes
-High
-Decline in income levels of
customers
-Less money spending in coffee
shops
-Concerns about adverse effects of
caffeine consumption
Buyer Power
-High
-Low switching cost
-Low product differentiation
-Entry of large food-specialists
such as McDonald’s
Supplier Power
-Low
-Suppliers are small and have
limited power against industry
giants

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drinks including coffee cause nervousness, restlessness and over-excitement. These given
facts increase the threat of substitutes for coffee and specialist coffee chains.
Buyer Power – High
Buyer for the offerings of coffee shops consists of individual consumers. Irrespective of the
fragmented nature of the coffee shops sector, existence of international brands mainly
determines purchasing decision of consumers. However, low switching cost and low product
differentiation increase buyer power against the players operating in this sector. In fact, entry
of large food-specialists such as McDonald’s, into this sector increases the bargaining power
of buyers.
Supplier Power – Low
Primary suppliers of coffee shops are coffee growers who are generally small and have
limited power against industry giants as these firms dictate price determination of raw
materials.
Degree of Rivalry – High
Rivalry in the coffee shop sector is high due to the existence of large players like Starbucks.
Entry of non-specialist such as McDonald’s which offer low-priced products intensify the
competition in the industry along with the rapid increase in the number of artisan or boutique
coffee houses.

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SWOT Analysis
Strengths
 Strong brand equity in the North American coffee industry: GMCR is one of the
leading companies in the North American specialty coffee industry. The company
sells more than 200 high quality coffee selections and organic coffees in the North
America region under the Green Mountain Coffee Roasters and Newman's Own
Organics brands. The wide range of coffees made by the company caters to varied
customer preferences and makes GMCR the 'one-stop-shop' for customers.
 Corporate image built on sustainability initiatives: The company’s sustainability
practices have enhanced its corporate image and consumer perception over the years.
The company has introduced several sustainability measures as part of its corporate
social responsibility program. GMCR allocates 5% of pre-tax profits to support social
and environmental projects every year. Besides, the company is also a participant in
fair trade coffee (fair trade coffees are purchased directly from the growers at a higher
price than standard coffee) and sells fair trade certified coffees under the Newman’s
Own Organics label. Fair trade certified coffee represented approximately 27% of
overall coffee purchased by the company in 2010. In addition to this, the company has
-Strong brand equity
in the North
American coffee
industry
-Corporate image
built on
sustainability
initiatives
-Robust financial
performance
imparts business
sustenance
-Reliance on single
clients for both
supply as well as
distribution
-Acquisitions to
expand the brand
portfolio
-Strategic
agreements to
bolster revenues
-New product
development
realigns product
portfolio with
customer trend and
preferences
-Highly competitive
specialty coffee
market
-SEC probe and
class action
lawsuits could
affect brand image
-Political instability
in coffee growing
regions
Strengths Weaknesses Opportunities Threats

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launched several environment-friendly coffee cups and accessories in association with
International Paper Company.
 Robust financial performance imparts business sustenance: GMCR recorded a very
robust financial performance in its key financial metrics (revenue and profitability) in
recent years.
Weaknesses
 Reliance on single clients for both supply as well as distribution: GMCR relies on
single players for its supply as well as distribution operations. The company sources
its single-cup brewers from its supplier located in China. The dependence on the
single supplier for the product, which garners largest revenue for the company,
exposes it to supply disruption risks.
Opportunities
 Acquisitions to expand the brand portfolio: GMCR has made several significant
acquisitions recently.
 Strategic agreements to bolster revenues: The company has entered into a number of
strategic agreements in recent years.
 New product development realigns product portfolio with customer trend and
preferences: The company has launched several new products recently.
Threats
 Highly competitive specialty coffee market: The company faces intense competition
in its specialty coffee market.
 SEC probe and class action lawsuits could affect brand image: In 2010, the company
was under investigation by Securities and Exchange Commission (SEC) for some of
its revenue recognition practices and its relationship with a vendor. Subsequent to the
SEC probe, several class action lawsuits were filed against the company alleging
revenue mismanagement and fraudulent accounting practices. Although, the enquiries
are in the initial phase, however, the probe has reflected negatively on the company’s

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image. Further allegations or adverse judgment of SEC could have material adverse
impact on the company’s business and market share.
 Political instability in coffee growing regions: GMCR roasts Arabica coffee beans
from many different regions. Many of these regions, including Africa, Indonesia, and
Central and South America, are prone to political instability, and such instability
could affect the company's ability to purchase coffee from those regions.
Strategy Choice
Porter (1985) argues that a business needs to make two fundamental decisions in establishing
its competitive advantage: (a) whether to compete primarily on price (he says "cost," which
is necessary to sustain competitive prices, but price is what the customer responds to) or to
compete through providing some distinctive points of differentiation that justify higher
prices, and (b) how broad a market target it will aim at (its competitive scope). These two
choices define the following four generic competitive strategies which he argues cover the
fundamental range of choices.
1. Overall Price (Cost) Leadership: appealing to a broad cross-section of the market by
providing products or services at the lowest price.
2. Differentiation: appealing to a broad cross-section of the market through offering
differentiating features that make customers willing to pay premium prices, e.g., superior
technology, quality, prestige, special features, service, convenience.
3. Price (Cost) Focus: a market niche strategy, concentrating on a narrow customer segment
and competing with lowest prices, which, again, requires having lower cost structure than
competitors.
4. Differentiation Focus: a second market niche strategy, concentrating on a narrow customer
segment and competing through differentiating features.
GMCR applies differentiation strategy in the market where it operates. One of the major
determinants of achieving this strategy is mergers and acquisitions.

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Evaluation and Strategic Direction
Green Mountain Coffee Roasters enjoyed a period of rapid growth. This growth was
primarily due to the successful transition of the Keurig single-serve coffee brewing system to
consumers’ homes. Previously, Keurig single-serve coffee brewing system was only targeting
workplace and institutional areas.
The company is using this success to solidify its national presence by acquiring regional
brands. In addition it is focused on leveraging the popularity of its system to build
manufacturing and distribution partnerships with other major national brands, such as
Starbucks and Dunkin’ Donuts. Green Mountain is adapting to seek growth beyond coffee.