CoffeeShop Team Project
Thecoffee shop that I have started running has experienced consistentoperations for more than sixty years, with consistency of customers.However, the sales are reducing in the recent past because ofcompetition from the new entrants located in the region. While thecoffee shop faces competition, it has the longest period of operationand customers as the potential to propel it to success compared toall other competitors in the region. To rebuild the coffee shop andmaximize this potential, the strategy that I will adopt isdifferentiation strategy. The reason for selecting this strategy isbecause it is the one that best relates to the unique nature andhistory of the coffee shop. Out of the three generic strategies,differentiation focus is the best suited strategy for the coffee shopto focus.
Takingthe Porters Five Model, the coffee shop is performing below par andis set for future business deterioration for lack of strategy andsustenance of customers. The Porters Five Model has two types ofstrategies, the low cost and the differentiation (Porter80). Taking the lower cost, competitive strategy, the coffee shop hasachieved minimal with its prices being the same as the normal pricingstrategies as the competitors. On the side of differentiation, thecoffee shop only enjoys the sixty year operational period as theunique feature that differentiates it from competitors. However, thecoffee shop has no leadership in terms of cost.
Thecoffee shop market in the region faces a number of challenges that Iwill have to overcome in the rebuilding of the coffee shop. The entrybarriers exist in the form of limiting the new entrants throughcompetition. Therefore, the re-establishing of the coffee shop as acompetitive unit of the 21stcentury will require an insightful competition analysis. Thecompetition is from the new coffee shops and restaurants in theregion such as Biggby Coffee and Espresso Royale among other shopsand restaurants in downtown. The bargaining power of my grandfather’scoffee shop is the loyalty of the customers who have shared coffeeover time. The substitute products such as tea and chocolate drinksoffered by other shops and cafés pose a competitive challenge.
Tomake the coffee shop competitive, the differentiation strategy willbe applied to create a unique hotspot for coffee, more than it was inthe past. This will be done through the creation of online marketing,social media presence, dynamic and functional website, offeringcustomers free Wi-Fi and promotional programs around East Lansing. Atthe same time, more coffee brands will be served and new coffeetastes prepared for international students in Michigan StateUniversity. By capitalizing the past history, and applyingtechnology, the coffee shop will be unique in two main ways. First,it will retain the customers who have stuck with the shop for manyyears, due to loyalty. Secondly, the new coffee shop will attract newcustomers through the new services offered and changes that will beimplemented.
Byincluding international coffee tastes for foreigners and serving morecoffee brands, the coffee shop will be fulfilling a dream that wasdear to my grandfather. This will be a globalization of the servicesoffered at the coffee shop, with a view of capturing new customers.The achievement of the global dream of my grandfather will further beimplemented as a strategy of differentiating the coffee shop fromothers. According to Hitt,Ireland and Hoskisson (39), thiscan be done by creating a unique combination of services and moderntechnology. By blending the 60 year old operational history with newbusiness practices, I will rebuild the coffee shop with a view ofmaking it a different unit whose uniqueness will drive itscompetitive advantage.
Hitt,M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategicmanagement: Concepts and cases:Competiveness and globalization (10th ed.).Mason, OH: South-Western Cengage
Porter,Michael. ‘The five competitive forces that shape strategy’,HarvardBusiness Review, Vol.86 Issue 1, p78-93