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... d to reorder low levels of coffee beans and organise for their delivery would keep costs low and help ensure adequate levels of stock at all times, which adds value to the company. Operations, also known as operations and production, is the actual transformation from raw materials to finished product. Obviously the companies infrastructure will play a part in the way in which the procedures are accounted for, however infrastructure is said to be an essential part of every action.
The support activity, technology, is also of vital importance at this stage. In order for Gosh to set prices, management will have allocated a certain amount of the cost to raw materials. Technology such as, coffee regulators, which dispense a predetermined amount of coffee ensure that budgeted amounts are maintained, wastage is low and value per cup is high. 3. 3 Marketing/Sales and Human Resource Management In order for Gosh to become a household name, effective advertising and enticing promotions are essential. However, for these to be considered a possibility, those in the Human Resource department must fulfil their roles. With the right staff, unlimited value to the company is attainable, however, if the department recruit the wrong people for the job, costs will soar and market share will be lost, possibly forever. Porter suggests that in order for a firm to achieve a sustainable competitive advantage, they can follow one of three generic strategies.
As seen in the diagram below, the strategies include; cost leadership, differentiation, cost focus and differentiation focus. The difference between the two levels is, the focus strategy aims at a particular market segment, where as the overall cost leadership and differentiation strategies are directed industry wide. (Kreitner, 1989) Fig 4. 1 Porters Generic Strategies Model To establish which strategy is being used it must firstly be established whether Gosh is targeting a broad or narrow market. According to Simon Lloyds article Big Beans, Gosh expects to have 300 store in a range of differing locations, operational within four years. Clearly, they are trying to target the entire industry. Furthermore, the article explains that Gosh hopes to revolutionise coffee retailing in Australia and they further believe they will be able to offer something that the others, particularly Starbucks, cannot. Whilst they recognise that they both rent shops and sell coffee (Treadgold, 2000) Gosh believe the factor that will distinguish them, is they will be able to Australianise the concept.
This approach is in line with the differentiation strategy which involves an attempt to distinguish [oneself] from others in the industry (Daft, 2000) as opposed to the cost leadership strategy, whereby the company tries to win business through being the cheapest in the industry. Firms must remember that strategies that change industry structure can be a double-edged sword, because a firm can destroy profitability as readily as it can improve it. (Porter, 1985). With this in mind, the following are recommendations based on minimal research and therefore should be considered further before any implementation is considered. As seen in section 2, the threat of new entrants to this market is considerably high because of the relatively low set-up costs involved. Therefore, Gosh needs to make the coffee shop industry a harder market to access. One way to achieve this is by building brand loyalty.
According to Bradmore (1996) Strong brands add value to the firm Strong brands add value to customers. There are a number of ways to build Gosh's brand name and eventually increase brand loyalty. As a relatively unheard of player in the market, Gosh needs to promote their name. They have a unique opportunity to use their Australian image to edge out competitors like Starbucks. Advertising, sponsorship and free tastings are just some of the options available to Gosh in order to capture the publics attention. Once it has caught their eye, they needs to ensure that they are able to retain customers.
An easy way to entice customers into becoming regulars at their local Gosh store is to provide an incentive to buy their product. The incentive could be personal, such a VIP Coffee Card, which entitles the drinker to redeem his or her points for free coffees. Or, the incentive may be community based, whereby a donation is made to a charity in the area, like Riches Supermarkets is currently operating. It is obvious however, that customers will not return, not matter what incentives are offered, if they do not like the product and the service. 5. 1. 2 Provide the service the public expect Since Gosh has accepted that they will not be cost leaders in the industry, their customers will expect a certain level of quality and service to be maintained throughout all their stores. To achieve this level of service, strict recruiting policies should be developed and adhered to, to ensure that the staff can competently make coffees and provide good customer service.
Furthermore, the customer will expect the same high quality of coffee in every Gosh store they enter. To achieve this a strong relationship with a supplier is necessary. 5. 1. 3 Build a relationship with a supplier A strong relationship with their supplier will ensure that they will always have a sufficient level of high quality stock. As mentioned earlier the supply of coffee beans is a highly competitive industry and no supplier is likely to jeopardise a lucrative, long-term contract by providing lower quality beans. In order for switching costs to appear higher to the customer they will need to desire Gosh's product over any other. The switching costs are likely to increase with an increased loyalty to the product. Again, incentives such as a VIP program would help make the cost of switching coffee shops higher.
Additionally, it has been established that the availability of substitutes is high and therefore a concern to Gosh. However, loyalty to their product will increase switching costs in this force, which will leave a coffee at Gosh looking more attractive than a milkshake from a competitor. 5. 3 Lack of experience in the industry 5. 3. 1 Seek the advice of professionals in this area It may also be of long-term value to speak to consultants in the industry as Brain seem to be relatively inexperienced in the coffee industry. All 4 Code offer consulting and management services based on the coffee industry. Their website contains some useful information and it may prove worthwhile to actually appoint a consultant.
Their website address is web In an article by Tim Treadgold (2000 b) he mentions that Starbucks believes they will not be taking market share from local competitors, but suggests that there is potential to build the total category. It may therefore prove beneficial to make short-term strategic alliances that will assist such an plan. Bibliography: Bibliography &# 61623; Bradmore, D. , (1996), Competitive Advantage: Concepts and Cases, Prentice Hall: Sydney. &# 61623; Daft, R. L. , (2000), Management, 5 th Ed, Dryden Press: Sydney. &# 61623; Kreitner, R. , (1989), Management, Houghton Mifflin: USA &# 61623; Lloyd, S. , (2000), Big Beans, Business Review Weekly, vol. 22, no. 34. &# 61623; McColl-Kennedy, J. R. , Kiel, G. F. , Lusch, R.
F. and Lusch, V. N. , (1994), Marketing: Concepts and Strategies, 2 nd Ed, Thomas Nelson: Australia. &# 61623; Porter, M. E. , (1980), Competitive Strategy: Techniques for Analysing Industries and Competitors, New York: Free Press. &# 61623; Porter, M.
E. , (1985), Competitive Advantage: Creating and Sustaining Superior Performance, New York: Free Press. &# 61623; Treadgold, T. , (2000 a), Rivals brew up a battle of the bean, Business Review Weekly, vol. 22, no. 15. &# 61623; Treadgold, T. , (2000 b), Coffee chain blends home style with awareness, Business Review Weekly, vol. 22, no. 17.
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Research essay sample on Competitive Advantage Coffee Beans
