Companies in this industry sell coffee drinks and other food and beverages for consumption on the premises or for takeout. The US coffee shop industry includes about 22,000 stores with combined annual revenue of about $12 billion. Coffee shops are part of the specialty eatery industry, which also includes outlets specializing in products such as bagels, donuts, frozen yogurt, and ice cream. Consumer taste and personal income drive demand. The profitability of individual companies depends on the ability to secure prime locations, drive store traffic, and deliver high-quality products. Large companies have advantages in purchasing, finance, and marketing. Small companies can compete effectively by offering specialized products, serving a local market, or providing superior customer service. The US industry is concentrated: the top 50 companies generate more than 70 percent of sales. Customers are favor well-brewed gourmet coffee drinks and demand great service. CBTL (Coffee Bean & Tea Leaf) is to build a loyal customer base by offering a great tasting coffee in a relaxing environment of its coffee bar.
When doing the industry assessment, we are using two dimensions: GE “industry attractiveness” dimension and BCG “market growth” dimension.
BCG consulting group pioneered and used a growth-share matrix to do portfolio analysis of business units. The concept was to position each business within a firm on the two-dimensional matrix. As the illustration in the textbook, The BCG growth-share matrix is associated with a colorful cast of characters representing strategy recommendations. According to the BCG logic, the stars, important to the business and deserving of any needed investment, resided in the high-share, high-growth quadrant while the cash cows, the source of cash, occupied the high-share, low-growth quadrant. In addition, there are dogs, which are potential cash traps and candidates for liquidation-, in the low-growth, low-share quadrant and problem children with heavy cash needs but the potential to eventually convert into stars-, in the low-share, high-growth quadrant. (Aaker, 2014)
5.1 BCG growth-share matrix
However, GE and McKinsey’s business evaluation is on two dimensions—market attractiveness and the business position, which is richer and more robust than those used in the BCG model.
5.2 The Market Attractiveness/Business Position Matrix
When both market attractiveness and business position evaluations are unfavorable, the harvest or divest options should be raised. Of course, even in a hostile environment, routes to profitability can be found. Perhaps the business can turn to new markets, growth submarkets, super premium offerings, new products, new applications, new technologies, or revitalized…