Situation Analysis: * Internal Analysis (Strengths):
Target Market - Gloria Jean’s Coffee is currently targeting small market segment, young adults segment, which comprises people age 18 to 25 years old, compared to Starbucks, 15 to 64 years old. Besides that, Gloria Jean’s mainly focuses on female customers, where half of the sales came from that particular gender.
* External Analysis (Weaknesses):
Threats Of New Entrants: The threat of new entrants for the coffee industry in Australia is considered high; the reason for this is because ‘Australia's strong coffee drinking culture has heavily influenced growth in specialist coffee shops, especially among the younger generation.’ (Hofman 2006) this shows an opportunity for people to venture into this business. Other things to be noticed is the barrier of entry to set up a coffee shop in Australia is low, noted by (Eselius et al. 1997), ‘it takes little more than four small walls or even a kiosk to deliver high quality coffee to the thirsty masses.’ ‘In accordance to this point of view Grant (1998) suggests that a company can erect barriers to entry by creating and exploiting economies of scale, by product differentiation, contrived deterrence or using government policy to deter entry.’(Martin 2005)
Bargaining Power of Buyers: Rather then going consumers going all the way to Gloria Jeans’s for a cup of drink especially coffee, they prefer to purchase different brands of coffee from the nearest stores or supermarket. ‘Buyers of coffee show a variety of price sensitivities. At the low price end, coffee is often considered a commodity and, accordingly, demonstrates price sensitivity.’(Eselius et al. 1997). Take for example Starbuck’s coffee case ‘in 1994 freeze in Latin America raised the prices of Arabica beans worldwide, which in turn puts pressure on the prices of Starbucks coffee beverages. Consumers did not balk at the higher prices. The Starbucks brand stands for quality, and consumers have shown great willingness to pay for that quality.’(Eselius et al. 1997). Other threats to Gloria Jeans are that the customers of Gloria Jean’s have low or no switching cost in switching to other competitors for example to Coffee Club and the ability of its customers to brew their own coffee. Therefore it is important for Gloria Jean’s to build its brand around quality and pricing to increase its customer base and customer loyalty. ‘The Australian coffee market is very competitive but consumers are brand-loyal, and becoming more sophisticated.’(Australian Coffee Stats 2006)
Bargaining Power of Suppliers: ‘Coffee is the world second largest traded product after petroleum’ (Kembell et al. 2002). The supply of coffee is determined by weather, demand and sometimes quality of the beans. It is said that the demand for coffee ‘in Australia has increased by 60% over the past 10 years, with the higher quality `Roast and Ground' market now comprising 20% of total imports. Demand for `Roast and Ground' coffee increased by 6.3% in 1996 compared to 1.4% for instant coffee.’(Drinman and Peasley 1997) and this has caused ‘the major players in the coffee industry have seen profits decline because of over-crowding of the market’ (Kembell et al. 2002) thus it will give the suppliers higher bargaining power. ‘Other factors that affect the bargaining power of suppliers are the condition of the weather and the health of coffee trees for example during winter seasons.’ (Kembell et al. 2002)
Threat of Substitute Products and Services: The threat of substitute products can be considered average for Gloria Jean’s in the coffee industry. ‘Other beverage industries can satisfy the customer’s need for a drink, and other food industries can satisfy the customer’s need to eat.’(Kembell et al. 2002).…