I. Trading Position
The company is well known for providing customers with quality grinded coffee in retail grocery format. Customers of the company are stores and coffee shops. The company should maintain this position because it is the most profitable for the company. However, there are also risks in the format. Selling in large packages will generate sales discount that will reduce corporate profit.
II. Brand Decisions
I believe that the company should maintain the presence of the Royal Kona brand because it means less pressure for the Lion Coffee brand. In other words, the two brands can help each other (financially or strategically) from time to time.
III. Discount Selling
I do not think it is possible to reduce the amount of discount selling for Lions Coffee Brand because the company sells in retail format where consumers will most likely want to get discounts from large amount of purchase. However, if conditions generate the necessity for such reduction, the price of coffee should be enhanced to cover the discounts given to special customers. This can be performed by using the numbers from previous period. Thus, the increase in price can be matched to the amount of discount given in the last period. There are also variations in the way we eliminate the looses from discount selling. For instance, the price increase could be based on average discount given in the last three years, etc.
IV. Expanding to the Mainland
Expansion to the mainland could generate enhanced market share if performed diligently. On the other hand, the wrong entry method could generate losses due to poorly calculated investments. First, manager of the expansion project must have thorough understanding on the coffee market in the mainland. A part of this is elaborated in the case study. The market is somewhat different with the Hawaiian market because in the mainland, people prefer to buy coffee beans and grind them in their houses and stores. In Hawaii on the other hand, there are significantly larger portion of the grinded coffee sales.
Another difference of the coffee market in Hawaii and in the mainland is the nature of the competition. In Hawaii, the largest competition comes from drug stores and convenience stores. In the mainland on the other hand, competition comes from other coffee-selling companies like Starbucks, etc. In a sense, competition in the mainland exists in wider variation compare to the Hawaiian market.
One of the upsides of such an expansion is the generation of additional markets that will relief the pressure from existing markets. Furthermore, the establishment of a presence in the mainland will generate knowledge sharing between the Hawaiian market and its subsidiary in the mainland. On the other hand, the downside of such an expansion is the unprepared system to face a considerably different business environment. The company might have to face considerable challenges from competitors and the increasingly demanding customers in the mainland.
Starbucks as the trendsetter in the coffee industry still have considerable influence for the company. In a sense, all products produced within the industry will be compared to Starbucks coffee. In the light of this condition, it is quite unwise to compete directly with the company. However, recent articles regarding the retail coffee market indicated that there are still plenty of rooms for development. Furthermore, analysts also stated that the retail coffee market has quite a unique appeal for investors. Despite the effects of popularity on sales, consumers of coffee are not ‘fanatics’ like in other industries. In a sense, there are still wide opportunities for development and winning the competition against others if one has the appropriate quality to please visitors (Duffy, 2007).
VI. Opportunities and Threats
Opportunities for the Hawaii Coffee Company are generated mainly from the nature of the industry which is always on the look for new tastes and new coffee experience. Threats on the other hand, come from the lack of knowledge on how to manage the retail coffee business. Some of the important points that deserve attention in order to avoid threats and generate opportunities include:
· Designing the business plan
One of the most frequent mistakes in managing the retail coffee business that could lead to failure is the lack of flexibility regarding corporate business plan. In a sense, managers should realize that they could never be done with the business plan. There are always little details that require attention and business change. Inability to understand this need is a threat toward corporate long-term survival.
Studies indicated that 50% of new startups failed in the first three to five years. The reason of this failure is the lack of business expertise and insufficient funding. Therefore, the lack of a sufficient funding is categorized as a considerable threat for the coffee business.
· Choosing the Location
Most business understands that location is a crucial aspect of business endeavor. However, managers in the coffee business should understand that location is a critical determinant for business success or failure. The lack of ability in choosing the right location for business is a notable threat.
· Understanding the Products
Customers in the present day are much more critical than those of the old days. Tastes, cleanliness, quality of services are all under critical observation of visitors. Therefore, present day managers of coffee retailers must understand various aspects that would influence how customers perceived the products and services provided by the company. For instance, health issues are gaining increasing attention, therefore health considerations in designing coffee mixtures is important for business survival. The lack of comprehension toward the products and services offered and their implication to customers is a threat for the retail coffee business (‘Coffee Industry Goes Green’, 2007).
· Knowing Customers
A good product for a single segment could be horrible for other segments. Companies should never generalized their product and hope for a piece of all markets. There is always the need for targeting a certain segment of the market and focuses on developing products and services to meet the preferences of the segment. The lack of knowledge over the targeted segment could be a significant threat for corporate growth and survival.
· Investing in Barista
Barista and waiters are the ones who interact directly with customers. These are the people where managers put their faith upon. If a manager realized this, then he/she should realize the importance of investing into baristas and waiters. Training, bonuses and other types of compensation are important for the business. Ignoring Baristas is a significant threat for success in the retail coffee business.