Student’s Name
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Coffee Shop Team Project
The coffee shop that I have started running has experienced consistent operations for more than sixty years, with consistency of customers. However, the sales are reducing in the recent past because of competition from the new entrants located in the region. While the coffee shop faces competition, it has the longest period of operation and customers as the potential to propel it to success compared to all other competitors in the region. To rebuild the coffee shop and maximize this potential, the strategy that I will adopt is differentiation strategy. The reason for selecting this strategy is because it is the one that best relates to the unique nature and history of the coffee shop. Out of the three generic strategies, differentiation focus is the best suited strategy for the coffee shop to focus.
Taking the Porters Five Model, the coffee shop is performing below par and is set for future business deterioration for lack of strategy and sustenance of customers. The Porters Five Model has two types of strategies, the low cost and the differentiation (Porter 80). Taking the lower cost, competitive strategy, the coffee shop has achieved minimal with its prices being the same as the normal pricing strategies as the competitors. On the side of differentiation, the coffee shop only enjoys the sixty year operational period as the unique feature that differentiates it from competitors. However, the coffee shop has no leadership in terms of cost.
The coffee shop market in the region faces a number of challenges that I will have to overcome in the rebuilding of the coffee shop. The entry barriers exist in the form of limiting the new entrants through competition. Therefore, the re-establishing of the coffee shop as a competitive unit of the 21st century will require an insightful competition analysis. The competition is from the new coffee shops and restaurants in the region such as Biggby Coffee and Espresso Royale among other shops and restaurants in downtown. The bargaining power of my grandfather’s coffee shop is the loyalty of the customers who have shared coffee over time. The substitute products such as tea and chocolate drinks offered by other shops and cafés pose a competitive challenge.
To make the coffee shop competitive, the differentiation strategy will be applied to create a unique hotspot for coffee, more than it was in the past. This will be done through the creation of online marketing, social media presence, dynamic and functional website, offering customers free Wi-Fi and promotional programs around East Lansing. At the same time, more coffee brands will be served and new coffee tastes prepared for international students in Michigan State University. By capitalizing the past history, and applying technology, the coffee shop will be unique in two main ways. First, it will retain the customers who have stuck with the shop for many years, due to loyalty. Secondly, the new coffee shop will attract new customers through the new services offered and changes that will be implemented.
By including international coffee tastes for foreigners and serving more coffee brands, the coffee shop will be fulfilling a dream that was dear to my grandfather. This will be a globalization of the services offered at the coffee shop, with a view of capturing new customers. The achievement of the global dream of my grandfather will further be implemented as a strategy of differentiating the coffee shop from others. According to Hitt, Ireland and Hoskisson (39), this can be done by creating a unique combination of services and modern technology. By blending the 60 year old operational history with new business practices, I will rebuild the coffee shop with a view of making it a different unit whose uniqueness will drive its competitive advantage.
Works Cited
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management: Concepts and cases: Competiveness and globalization (10th ed.). Mason, OH: South-Western Cengage
Porter, Michael. ‘The five competitive forces that shape strategy’, Harvard Business Review, Vol. 86 Issue 1, p78-93