Costa Coffee

OBJECTIVES

As a person with knowledge of knowledge management, the author has always brought up to his superiors the viability of strategy formation regarding the analysis of this topic and at times fails to understand the reasons or logic behind certain strategic implementations imposed on it.

By delving into this project paper, the author intends to have better insights into how knowledge management is thought up, formulated and then imparted down into the subsidiaries of the company. The author hopes to have an in-depth understanding as to how the knowledge management enables companies and organizations to compete effectively and profitably in this era of internationalization where competition is extremely intense.

In order to reinforce the learning objectives, two key focal issues were focused upon i.e. innovation and diversity. Innovation was discussed with regard to knowledge management where it was renowned for its developmental capabilities to constantly innovate. Diversity came under strategic thinking and formation as the author considered the diverse culture, political climate, economic surroundings, social environment, technological settings, government policies and legal systems in order to better understand the issues being discussed.

 

 

INTRODUCTION

 

            In the last five years, the coffee brewing industry has seen so much activity in terms of massive changes in the landscape of coffee brewing companies. These changes range from mergers and acquisitions to changing consumer tastes and finally, to different branding strategies. These activities are expected to continue over the course of the next ten years.

 

Costa Coffee is one of the leading companies in UK’s coffee brewing industry in terms of the volume of sales and profitability. It has also one of the widest connections among other UK coffee brewers made possible through a network of distributors and breweries.

The Costa Coffee brand already has a premium status in all its markets. It is practically the main profit provider of the company in the broad markets of UK. Also, because of its market strength, the Costa Coffee brand has already obtained significant profitable segments on its own. Costa Coffee uses the name of both the company and its mainstream coffee label, and this strategy has allowed the company to pursue an integrated marketing approach directly related to the company name.

However, the main questions remain. Does this strategy produce more effective results than the others in terms of gaining company name recognition? Do the adopted strategies allow differentiation in the culture of the corporation to influence consumer choices?

 

PEST ANALYSIS (United Kingdom)

Political Trends

The United Kingdom has experienced electoral and political transitions and crises in the last 12 months.  There have been at least four political trends that have emanated from these political events. These are: (a) the cry for democracy and reforms; (b) increased popular and local-level assertiveness; (c) greater public accountability; (d) re-definition of the concepts of power and politics. Also, the forms of political economies have slowly shifted from a bipolar (big government-big business) to a tri-polar structure (authorities – private sector – civil society).

 

            The implementation of the Free Trade Area, or FTA, which laid out a comprehensive program of regional tariff reduction, will be continuously implemented in phases through the year 2008. Over the course of the next several years, the programs in tariff reductions were made broader. Efforts to eliminate non-tariff barriers and develop common product certification standards were initiated. In addition, the United Kingdom also was able to formulate framework agreements for the intra-regional liberalization of trade in services. Industrial complementation schemes meant to encourage intra-regional investment were also approved.

 

 

Economic Trends

Despite the adverse economic trends in the first half of the year, the United Kingdom as a whole experienced relatively robust economic growth. It is estimated that the United Kingdom, taken together, posted a better-than-expected GDP growth of 4.5% last year, slightly higher than the 4.1% growth that they achieved in 2002.

Many English provinces have also seen the risk-weighted capital adequacy ratios of their banking systems improve due to government-sponsored bank recapitalization programs, continued progress in financial restructuring, and improvements in financial risk management. The capital adequacy ratio of commercial banks in these countries is now far higher than the 8% Basle norm.

Social/Cultural Trends

With the rise in the middle to upper-middle class households in certain provinces within the United Kingdom, there exists a strategy mismatch for not considering the potential for consumer market.

There have also been social and cultural trends that have been evident over the last 12 months. These include: (a) the irreversible rise of civil society among English provinces; (b) the rise of civil society blends perfectly with a tri-polar structure of political economy; (c) the increase in the roles of intellectuals; and (d) the beginning of a period of introspection.

 

Technological Trends

It is a common knowledge that the coffee brewing industry in the Untied Kingdom is still a relatively new industry and is still in its early stages of development. However, it has shown signs of rapid growth and it is being estimated that there will be more than a million consumers that will be encouraged within the year. And it is further being expected that within the next years the tremendous growth and technological advancements will continue in the coffee brewing world. Mobile commerce and multimedia terminals are just some of the technological advancements already being expected. Therefore, the continued growth and development will also make it imperative for localization to occur in the coffee brewing industry in the years to come.

Costa Coffee SWOT Analysis

Strengths:

• has products that boast of a very powerful retail. This includes a reputation for value of money, convenience and a wide variety of products


• has grown significantly over the years, and has experienced global expansion.


• main competence lies on the use of information technology (IT) to fully support its international logistics system. Therefore, Costa Coffee can see how their individual products perform within the United Kingdom, or even at stores at a glance. IT also supports the company’s efficient procurement.


• is able to deliver good customer care, as the limited amount of work would mean plenty of time to devote to customers.


• lead consultants have established a strong reputation within the market.


• can afford to change direction quickly if its management finds that the company’s marketing strategy is not effective.


• has little deficits and overheads. Therefore the company can offer good value to customers on a consistent basis.

Weaknesses:

• is one of UK’s largest company in coffee brewing and but has a weak control of its empire, despite its IT advantages. This could lead to a decrease in productivity in some areas where they have the least control of.


• Since Costa Coffee sells products across many sectors, the company may lack the flexibility that some of its more focused competitors possess.


• operates globally, but its presence is located in only relatively few countries worldwide.


• Some of the company’s weaker branches lack market presence or reputation


• Some of the company’s personnel still lack the essential skills base in many areas.


• The company is still vulnerable to the temporary losses of its vital staff (e.g. being sick, leaving).


• The company’s cash flow is unreliable especially in the early stages of a new product development.

Opportunities:

• Taking over, merging, or forming strategic alliances with other coffee companies while focusing on strong markets like Europe or the Greater China Region.


• The branches of Costa Coffee operate only on trade in a relatively small number of countries all over the world. Thus, this would open the opportunities for future businesses in expanding various consumer markets, such as those in China and India.


• The opening of new locations and branches offer Costa Coffee the opportunities to exploit market development. This could lead to the diversification of the company’s branches from large super centers to local-based sites.


• Opportunities exist for Costa Coffee to continue with its current strategy of establishing large branches worldwide.


• is continuously expanding, with plenty of future opportunities to exploit for success.


• The local councils of Palm, Inc. are in the process of encouraging local businesses with work whenever possible.


• The competitors of Costa Coffee may be slow to adapt to new technologies especially the ones that it releases.

Threats:

• Being number one means that Costa Coffee is the target of competition, the company to beat, both locally and globally.


• Being a global retailer means that Costa Coffee might be exposed to political problems in the countries where the company has operations.


• The production costs of most consumer products have the tendency to fall because of lower manufacturing costs. Manufacturing costs fall because of outsourcing to low-cost regions around the globe. This phenomenon could lead to competition in prices, which in turn would result in the deflation of prices in various ranges. Intense price competition must definitely be considered a threat.


• The latest developments in information technology which could possibly change the markets might challenge the company’s ability to adapt to these changes


• A slight shift in focus of a large competitor might wipe out any market position that Costa Coffee has achieved over the years. This could force the company to specialize in rapid response but good value services to local businesses. This would put so much pressure on the company’s consultancy staff to keep informed with the latest changes in technology where possible.

 

 

PROJECT: Implementation of Knowledge Management Programs for Holistic Improvement of Costa Coffee

In this project, Costa Coffee needs to implement these specific knowledge management programs in order to improve their business operations.  

A. Coffee Costa Transaction Processing System

This knowledge management program will be tasked to collect and organize operational data of the company’s activities ( 1992). For example, a typical banking operation by Costa Coffee involves transferring 0 from the account of their client to the company’s checking account. This would seem like a single operation to the company, but in reality this transaction consists of two steps: debiting the clients account by 0, and crediting the company’s checking account by 0. If the debit operation succeeded and the credit did not, then the 0 would disappear.

The Costa Coffee Transaction processing system will combine these two operations and group them into a single transaction. This will be done through the production of copies of the data in question, and these copies are then made to run the operations on the copied data. When both commands have successfully completed, the changed data is written back to the system in a single operation. If one of the operations fails, the copied data is simply discarded, and an error is reported.

For many years transaction processing was the domain of knowledge management programs, especially since they these information systems were able to guarantee that any changes to the database would be completed. This worked well for most companies, and they could all even run on top of a database with a single client-server.

However, in recent years this model has also become more difficult to maintain. As the number of transactions grew in response to various online services, a single database proved to be very inefficient. Also, most online systems consist of a whole suite of programs operating together, as opposed to a strict client-server model where the single server could handle the transaction processing. Nevertheless, this type of knowledge management program will significantly bolster the business operations of Costa Coffee when successfully implemented.

-B. Costa Coffee Knowledge Management Support Systems

1) Decision Support System

This information system goes beyond one-way presentations and sharing of applications to enable a focused exchange of ideas over the Internet or an Intranet. Researches have proved that electronic brainstorming is able to generate more and better ideas (1994). This is brought about by the combination of parallel idea generation and the utilization of focus group discussions and tools for the organization of ideas. Therefore, decision-making is done with a higher degree of consensus and a higher likelihood of implementation success. Meetings within Costa Coffee would only take less than a fraction of time as expected. But more importantly, the employees walk away with the minutes of the meeting in hand, regardless of where they are.

Also, because the tools are web-based, the Costa Coffee management can choose the proper setting for the meetings, whether to place the clients in a conference room, set up a distributed meeting or a mixture of both. The management can decide whether the meeting should be done in real-time or whether the clients can participate and contribute their ideas only when their schedule allows them to. Either way, the Costa Coffee company can be assured of getting the same focus and productivity while at the same time having a significantly greater flexibility in terms of scheduling.

2) Costa Coffee Executive Information System (EIS)

The Costa Coffee Executive Information System begins with the identification of problems. These include the gaps between the desired and actual states that cannot be easily closed easily because of the new knowledge that needs to be produced to support the decisions and actions needed to close them (1994). There are generally three (3) classes of such problems:

·         problems occurring in Costa Coffee business processes;

·         problems occurring in Costa Coffee knowledge processes; and

·         problems occurring in Costa Coffee Knowledge management processes.

Problems occurring in the Costa Coffee business processes cannot be resolved through the use of Knowledge management solutions, but through knowledge processing solutions. The other two classes of problems, however, can be solved through the use of Costa Coffee Executive Information System services. This Information System will identify, formulate, and evaluate the knowledge processing and knowledge management problems

This is the most important service that the Costa Coffee EIS could provide.  Failure to solve a business process problem within Costa Coffee Company, for instance, may not be caused by a problem in the organization and structure of its organizational knowledge processes. Instead, it may be possibly caused by a failure in solving an extremely difficult business process problem, even though available knowledge processes are working just fine.

There are certain instances, however, that it is not always very clear what the nature of the problem is, even if a knowledge processing problem exists. For example, the fact that the knowledge needed to support a particular decision is not there may be possibly caused by the fact that the knowledge exists, but is currently unavailable because of a poorly operating knowledge sharing process. Another possible explanation is that it could be caused by the fact that the process of the development of new knowledge claims is not open to most organizational participants.

The bottom line is the process on how the problem is formulated and diagnosed. Because of its experience in the development of the underlying conceptual foundations of Knowledge Management, the Costa Coffee Executive Information System will be able to identify, formulate and evaluate knowledge processing and knowledge management problems within the company.

C. Costa Coffee Office Automation System

The Costa Coffee Office Automation System would provide the incorporation of important company documents of all types through the integration of images into the Automation System (1995). The Costa Coffee Office System would include applications such as word processing, database, and mail, all of which are able to access image documents. The storage of document images is made possible through the utilization of a variety of storage media such as microfilms and optical disks. An image access subsystem, on the other hand, provides to each of the Costa Coffee Office Automation applications the uniform access to images stored on all of the media. The image access subsystem can then be used as a hardware controller to handle some of the complex events in the retrieval of images from the image storage devices. A relational database system must be used in order to organize the stored images so as to provide flexible access to the images and to isolate any effects of reconfiguration of the image storage system.

 

 

 

CONCLUSION

Costa Coffee has been able to remain one of UK’s leading coffee brewing companies for more than a century now primarily because of the execution of the company’s branding and positioning strategies to perfection. Add to the mix the company’s dedication to high quality of service and the formula for success is at hand.

Moreover, the utilization of the appropriate knowledge management tools is necessary for their products to reach out to people even in different cultures.

However, certain points have to be taken into consideration by Costa Coffee regarding knowledge management tools. Since their income is relatively higher than most coffee brewing companies, the time for implementation of their chosen knowledge management tools would take longer than usual, aside from being expensive. But since the goal of Costa Coffee is towards a long-term dominance and stability in the brewing industry, then the pursuit of these promotional campaigns will be beneficial for the company in the long run.

 

 

 

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