Green Mountain Coffee Roasters free essay sample

Roasters reveals the following : 1. 1 Strengths i. Product Consistency By utilizing state-of-the-art roasting software, GMCR is therefore able to maintain their level of product consistency, ii. Unique Products Its key success is in differentiating its coffees. The coffee beans have been carefully selected and then roasting them in small batches to ensure consistency and to maximize their taste and flavor differences. This one of the reason why are the Green Mountain coffees is different from those of other specialty coffee companies. On the other hand, Keurig also gives Green Mountain access to the office and one-cup segment. iii. High Distribution GMCR flushes nitrogen into its packaged coffee and employ one-way value bag packaging technology that provides a minimum shelf life of six months for the company coffee as customer is able to retain the freshness of the coffee in the package. This in turn, allows GMCR to expand it’s distribution, without any worries about compromised quality. We will write a custom essay sample on Green Mountain Coffee Roasters or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page v. Socially Responsible Business Practices GMCR is a supporter of social and environmental causes, and being listed in the â€Å"100 Best Corporate Citizens† and â€Å"The World’s Most Socially Responsible Companies† lists. This acts as a bonus to the company’s outlook and reputation. v. Widely Available GMCR’s products are widely available in the market. By targeting various distribution channels and customer categories, GMCR is confident that consumer trial at one point of the distribution level will lead to a subsequent purchase at another. vi. Flagships Flagship customers such as Amtrack, Exxon-Mobile, JetBlue Airways and American Skiing Company are key to the company’s geographic expansion strategy as they provide visibility and sampling opportunities 1. 2 Weaknesses i. Single Product Line GMCR deals with specialty coffee solely, putting it at a serious disadvantage in bargaining with supermarket chains for favorable shelf space. ii. Own Distribution and Sales Force GMCR relied on its own distribution and sales forces to expand the Green Mountain brand in the grocery channel. 1. 3 Opportunities i. Increased consumption Increased coffee consumption in Europe, Asia and Brazil has just expanded GMCR’s distribution opportunities. By targeting and influencing more of the above mentioned countries’ coffee drinkers, GMCR can hope to influence most of the consumers before its rivals do so. ii. Specialty Coffee Market Gourmet, specialty coffee is the bread-and-butter of GMCR’s establishment. A growing increase in consumers seeking specialty coffee will mean brighter prospects for GMCR. iii. Keurig Acquisition Green Mountain acquired 42 percent ownership in Keurig Inc. The appeal of the Keurig K-cup perfectly brewing just one cup of coffee from a variety of coffee selections has contributed to GMCR success in the office coffee services. 1. 4 Threats i. Decrease in coffee consumption The U. S coffee market now only accounts for 20% of world coffee consumption, compared to the 80% during World War II. The coffee market is now moving on to Europe, Asia (particularly Japan). ii. Commercial coffee roasters There is higher competition as major companies seek to enter the specialty coffee industry. Such names include but are not limited to : Phillip Morris’ Gevalia, Procter Gamble’s Millstone and Nescafe. The major coffee marketers make a big push to make their premium coffee brands dominant in the wholesale channel. iii. Starbucks Partnerships Starbucks, seen as a long time competitor to GMCR, upon entering into a long-term licensing with Kraft, will expect to generate extra sales 20-40 pounds of coffee per store per week. This is seen as a threat to GMCR, which has an average sales of 100 pounds of coffee per store per week. Starbucks, which has distribution agreement with Kraft foods Inc. plans to place their coffee in supermarkets along with Kraft Maxwell House brands. Kraft manages all distribution, marketing, advertising and promotion for Starbuck coffee in grocery, warehouse club and mass merchandise store. It featured distinctive, elegant packaging, prominent positions in grocery aisles and the same premium quality as that sold in its stores. Starbucks is also partnering with Dreyer’s for branded ice cream, and Pepsi to distribute bottled Frappuccino. Starbucks become the coffee supplier to 20 million passengers who fly United Airlines each year and mail-order sales division accounted for roughly 2 percent of total revenue. iv. Seattle Coffee Company Acquisition Starbucks acquisition of Seattle Coffee Company in the forth quarter of fiscal 2003 and increased warehouse club revenue due to growth in existing account. The increase was primarily attributable to the growth of the food service business as a results of the acquisition of Seattle Coffee Company and the growth in new and existing Starbucks food service accounts. To conclude Green Mountain’s SWOT analysis, its resource strengths are limited, and the company is a so much smaller compared to the rest of the major coffee marketers, like Starbucks. However, it is carving out a market niche for itself and has done a commendable job of securing wholesale accounts. 2. QUESTION TWO In your analysis of the organization’s strengths, be sure to identify the firm’s Core Competencies using the Value Chain. M. Porter’s value chain is as follows : Source : UK Education, Accounting For Strategic Management According to M. Porter’s value chain, we have analyzed and indentified the firm’s core competencies as follows : 2. 1 Technology Development Nitrogen-based one-way valve packaging allows GMCR to increase the shelf life of it’s coffee, thus leading to a higher Convection air roasters combined with specific roasting programmes for each bean type allows GMCR to create â€Å"signature† coffees, distinguishing itself from other coffee companies. 2. 2 Inbound Logistics GMCR obtain their coffee beans from Mexico, Guatemala, Peru, Indonesia and other coffee-growing countries. This allows for a wide variety of coffees to be made. By obtaining its resources for multiple locations, GMCR is at lower risk of being affected by shortages. 2. 3 Marketing and Sales GMCR has over 100 varieties of finished coffee products, which caters to consumer taste and preference, in the specialty coffee sector, the market niche which it has identified. Partnership with Wild Oats and Costco allows for greater penetration into the wholesale and supermarket channels. The Keurig K-cup ownership by GMCR has tremendously increased business prospects for GMCR. With the precedence of online shopping, similarly, coffee is set to follow, as more and more consumers are starting to brew their own coffee from the comfort of their own home or office. 2. 4 Services According to Wikipedia (16 JUL 2007), GMCR has also launched delivery services to cater to consumers. Cafe EXPRESS is Green Mountain’s automatic delivery coffee club that rewards their end consumers with discounts, free gifts, and special perks and privileges that only Cafe EXPRESS membership brings. Besides coffee beans, Green Mountain also sells brewer and accessories to the end consumers out there. Therefore consumers are able to get all the necessary equipment within one stop. 3. QUESTION THREE Identify and evaluate the strategies that the organization has pursued to maintain its growth and leadership position. GMCR has adopted a differentiation strategy, therefore creating prestige and brand image. Ever since GMCR entered the specialty coffee market back in 1981, it has created over 100 varities of finished coffee products, and with the use of technology to enhance consistency and quality, edged over its competitors. Green Mountain’s strategy has several key elements: A key component of management’s growth strategy was to make Green Mountain coffees readily convenient and available for consumer trial by the cup at convenience stores, office coffee services, and food service establishments, thereby spurring sales of green Mountain coffees in supermarkets and specialty food stores. Green Mountain has a wide selection of high-quality coffees. There are about 90 varieties. Green Mountain’s coffee products included single origin, estate, certified organic, Fair Trade, flavored, and proprietary blends of coffee sold under the Green Mountain Coffee Roasters and Newman’s Own Organics brands. Green Mountain also emphasis on 2 distribution channels which are; i. Catalog sales To promote catalog sales, Green Mountain focused solicitations on catalog customers who bought regularly, especially members of the company’s â€Å"Coffee Club† who had customized standing orders for automatic re-shipment. Recently, the company had begun pursuing ways to increase traffic on its website both to build brand awareness nationwide and boost direct sales to consumers where the company had a limited presence in supermarkets and specialty food stores. ii. Wholesale accounts Supermarkets, specialty food stores, convenience stores, hotels, restaurants, universities, travel and office coffee service customers, and food service companies. Major wholesale customers included the American Skiing Company alpine resorts, Amtrak, ARAMARK, ExxonMobil Convenience stores (almost 2,000 locations), Fred Meyer Stores, Hannaford Bros. Supermarkets, Kash N’ Karry Food Stores, Kings Super Markets, Nestle Waters of North America, Price Chopper, Shaws Supermarkets, Sodexho and Wild Oats—see Exhibit 6. Acquiring additional â€Å"flagship† customers was viewed as key to the company’s geographic expansion strategy because they provided great visibility and sampling opportunities On the other hand, Green Mountain is also providing high levels of sales and equipment service support to its supermarket accounts which helps them to win over supermarket chains to stocking and supporting the Green Mountain brand in their stores. Every Green Mountain’s coffee bean has been carefully selected and then roasting them in small batches to ensure consistency and to maximize their taste and flavor differences. This is why the Green Mountain coffees is different from those of other specialty coffee companies. The company’s strict quality control and distinctive aroma has resulted in the strong customer loyalty to the brand. The Green Mountain coffee was sold in a variety of packages including whole bean, fractional packages, and one-cup Keurig  ® portions. The packaging equipment for Keurig K-Cup portion packs was also owned by Green Mountain Coffee and Green Mountain paid a royalty to Keurig for each K-Cup sold. Green Mountain’s strategy will be classified as focused differentiation (where the focus has been on the New England and mid-Atlantic regions as well as on specialty coffees). However, the company is transitioning to a broad differentiation strategy in the sense that it is expanding geographically. 4. QUESTION FOUR What factors should the organization consider in the development of its future strategy? 4. 1 Publicity Since GMCR has established it’s distribution lines, which it claims that â€Å"at one point of a distribution line, a customer will make a subsequent purchase†, it is the right time for GMCR to go on a publicity campaign. This will raise awareness amongst the coffee drinkers who have been loyal to GMCR’s competitors. With GMCR having such a wide distribution channel, consumers are bound to encounter the distribution lines at some point or another. Therefore we suggest that GMCR consider increasing its advertising budget, exploring all methods to increase public awareness of its coffee. Green Mountain should continue with its present strategy. The company must continue its strong efforts to obtain new wholesale accounts; preferably large regional or even national accounts. Sales growth at Green Mountain is largely dependent on gaining additional retail exposure for the company’s coffees; both in states where it is already fairly strong (New England and the mid-Atlantic) and in states where its market penetration is low. . 2 Franchising and location By reducing the number of outlets which are company-operated, GMCR will save a lot of costs and instead look forward to thriving on franchising revenues. As cities are continuously developing, buildings after buildings are being replaced, a good location may not last forever. Therefore it is wise for GMCR to leave the strategic positioning decisions to the franchise owners, wh o may have lived there for a longer period of time or are locals who have more experience and knowledge. Currently Green Mountain target audience has always been in the United States and it is only available to the niche market. As a result, other coffee drinkers in the United States might not know about Green Mountain Coffee Roasters, Other coffee drinker will not be purchasing any coffee from GMCR. The company should look into expanding the target audience in the United States and the other part of the world. In order to reach out to the other coffee drinkers, GMCR should consider in re-opened the company-owned and operated retail stores. GMCR made a strategic decision previously to close down the company-owned and operated retail stores. By closing the company-owned and operated retails stores, it will reduced the presence of the company in the market and other coffee drinkers might not know of the GMCR. 4. 3 Marketing Green Mountain should focus its marketing efforts on securing new accounts where it will not encounter the competitive wrath of Kraft (Maxwell House), PG (Folger’s), or Nestle; all of which have more financial and marketing muscle than Green Mountain. The Management of Green Mountain must get performance of the newly-acquired Keurig subsidiary on track; there is not enough information in the case to offer specific recommendations about Keurig. Green Mountain management seems confident that the problems are temporary and that the acquisition will work out. GMCR offer samplers to new consumer however they would need to complete an online form and to qualify for the free trial and you would need to have at least 12 employees in the office. It is time consuming from the customer point of view and prevent them from completely filling up the information. GMCR are concentrating most of their sales online. Although there are supermarkets or convenience stores that are selling their products, customer like to know where to purchase them however the website does not provide them the information. 4. 4. Product Line Expansion Issues Based on the website http://www. greenmountaincoffee. com, GCMR sells other products beside coffee powders. They have brewers and other coffee-related accessories that are being sold online however customer would like to have the physical touch and feel of the product that is being sold. There are products which cost hundreds of dollars which customer would not purchase the coffee machines online unless they are a regular coffee drinkers of GMCR. By taking their expanded product lines offline and to supermarkets, they will therefore be able to ensure the survival of their accessories. 5. QUESTION FIVE Discuss the importance of changes in the external environment to the organization. We have analyzed the following six environmental factors and its effect on GMCR: Political, Economical, Sociocultural , Technology, Demographics and Global factors. . 1 Political A political campaign to push for greater presence of socially-responsible companies would have an impact on the coffee industry. Socially-responsible business practices come into the limelight now, as consumers are not only concerned about product quality, but the processes which the business goes through to obtain their end-products. Therefore, businesses would have to increase their contributions to charitable/ non-profit organizations to enhance their reputation as a â€Å"company which gives back to the society†. 5. 2 Economical During an economic downturn, GMCR’s sales would decline. People would cut back on unnecessary spending, and specialty coffee is on the list of those items, which people can easily replace by buying coffee powder from home-grown brands, which tend to be cheaper. On the other hand, when the economy booms, people have less qualms about spending more on luxury items like GMCR’s coffee. 5. 3 Sociocultural As society becomes more and more fast-paced everyday, people would eventually have lesser time on their hands during office hours. With more deadlines approaching, people spend more time in the office, sometimes even having their lunch in the office. Activities such as having an hour-long lunch break would eventually become a luxury for working adults. As such, they would hesitate to even spend their time queuing up for coffee. GMCR’s stores would suffer a decrease in revenue because of a dip in customers during working hours, however, their Keurig K-Cup and coffee bean sales would increase, as more people would prefer brewing their own cup of coffee within the comfort of their own office. The workforce continues to get larger and larger everyday. More and more people are entering the workforce, and coffee consumption would increase since coffee consumption in the office is considered a norm, and more people would therefore be consuming coffee. Health concerns over caffeine would constantly harass the coffee industry. As more health reports are released everyday regarding the side effects of caffeine, companies should strive to provide more varieties of de-caffeinated coffee, so as to cater to the group of consumers which are more health conscious. . 4 Technology Better technologies are developed everyday. The construction of highways and roads allows for less transportation time for goods, so that they can be delivered earlier. This in turn reduces transport costs, as more transport alternatives become available. Focusing on the coffee industry, technology is crucial to the production of coffee beans. The preservation of coffee beans, as demonstrated by GMCR’s nitrogen valve bag packing technology, allows for coffee beans to have an increased shelf life. This is extremely crucial as it allows a business to expand its distribution. Moreover, a longer shelf life would appeal to the consumer as they are able to buy in bulk for future use, and not have to return to the supermarket on a frequent basis. Improvement in technology allows for faster processing times and better quality control. Therefore this would have a serious impact on the coffee industry, not only to gain the edge over their competitors, but also to increase customer confidence that the product they are buying is indeed value-for-money. . 5 Demographics An aging population would mean more adults (18 and above), therefore naturally contributing to an increase in coffee consumption. The National Coffee Drinking Trends survey of adults 18 years and above concluded that 79% of adults consume coffee in 2000, 78% in 1999, and 75% in 1997, which is a total increase of 4%. 5. 6 Global i. Bargaining Power of Suppliers Coffee bean prices seem to be driven by supply and demand for i nstance, a bad crop can drive prices up and a good growing season with high yields can drive prices down. Or even adverse weather and growing conditions could produce sharp upward spikes in prices of coffee beans, especially premium and relatively scarce varieties. In recent years, green coffee prices had been under considerable downward pressures due to oversupply. The low coffee price ranges generally experienced in recent years were not considered high enough to support proper farming and processing practices for top grade coffees, potentially endangering supplies of premium grade beans. But getting high quality beans was definitely a factor for the sellers of premium coffees. To protect their access to supplies of top grade beans, many specialty coffee companies, including Green Mountain, had entered into long-term contracts to purchase needed supplies from the growers of high quality beans. In addition, companies from time to time purchased coffee futures contracts and coffee options to provide additional protection when they were unable to enter into coffee purchase commitments or when the price of a significant portion of their committed contracts were not fixed. ii. Bargaining Power of Customers Most whole bean specialty coffees for home consumption were purchased in supermarkets or neighborhood grocery stores. Supermarket retailers are in a very strong position to drive a hard bargain in granting shelf space to the many premium coffee brands wanting retail exposure—many of these brands are relatively unknown and the companies marketing them are small (like Green Mountain). Supermarket chains have considerable leeway to switch out low-selling brands and replace them with more popular brands. Individual consumers have no bargaining power beyond that of switching brands henever they are dissatisfied with the brand they are currently using. 5. 7 Conclusion The biggest source of competitive pressure is rivalry among competing brands like Starbucks Coffee while the other two big sources of competitive pressure are the bargaining power of retail chains and the continuing entry of additional brands. The industry is probably ripe for consolidation—500 specialty and pre mium brands probably cannot survive (unless most remain niche brands for a limited clientele). Strong regional brands with an attractive product and a good brand image—like Green Mountain—may well be able to grow at the expense of weaker brands. . REFERENCES 1. UK Education : Accounting for Strategic Management, [Online] Available at : http://www. ukeducation. org. uk/Documentation. asp? key=1340 2. University of Cyprus : Green Mountain Handout, [Online] Available at: http://www. pba. ucy. ac. cy/staff/Green%20Mountain-Handout. pdf 3. Wikipedia : Green Mountain Coffee Roasters, [Online] Available at: http://en. wikipedia. org/wiki/Green_Mountain_Coffee_Roasters 4. Green Mountain Coffee : Green Mountain Coffee, [Online] Available at: http://www. greenmountaincoffee. com INDIVIDUAL REPORTS – WONG JUN WEI Question 1 : Undertake a SWOT analysis of the organization in the case. The SWOT analysis on Green Mountain Coffee Roasters (GMCR) are as follows : Strengths i. Product Consistency By utilizing state-of-the-art roasting software, GMCR is therefore able to maintain their level of product consistency, ii. Unique Products GMCR uses specific roasting programmes for various types of coffee, thus creating their â€Å"signature† roasts. By offering products which are unique in the market, this allows GMCR to stand out from their competitors. iii. High Distribution Packaging technology allows GMCR’s coffee to have a long shelf life. This in turn, allows GMCR to expand it’s distribution. iv. Socially Responsible Business Practices GMCR is a supporter of social and environmental causes, and being listed in the â€Å"100 Best Corporate Citizens† and â€Å"The World’s Most Socially Responsible Companies† lists. This acts as a bonus to the company’s outlook and reputation. v. Widely Available GMCR’s products are widely available in the market. By targeting various distribution channels and customer categories, GMCR is confident that consumer trial at one point of the distribution level will lead to a subsequent purchase at another. Weaknesses i. Brand Awareness Consumers are less aware of GMCR, as compared to Starbucks, which has a higher advertising budget to create consumer awareness. Opportunities i. Increased consumption Increased coffee consumption in Europe, Asia and Brazil has just expanded GMCR’s distribution opportunities. By targeting and influencing more of the above mentioned countries’ coffee drinkers, GMCR can hope to influence most of the consumers before its rivals do so. ii. Specialty Coffee Market Gourmet, specialty coffee is the bread-and-butter of GMCR’s establishment. An increase in consumers seeking specialty coffee will mean brighter prospects for GMCR. Threats i. Decrease in coffee consumption The U. S coffee market now only accounts for 20% of world coffee consumption, compared to the 80% during World War II. The coffee market is now moving on to Europe, Asia (particularly Japan). ii. Commercial coffee roasters There is higher competition as major companies seek to enter the specialty coffee industry. Such names include but are not limited to : Phillip Morris’ Gevalia, Procter Gamble’s Millstone and Nescafe. iii. Starbucks Partnerships Starbucks, seen as a long time competitor to GMCR, upon entering into a long-term licensing with Kraft, will expect to generate extra sales 20-40 pounds of coffee per store per week. This is seen as a threat to GMCR, which has an average sales of 100 pounds of coffee per store per week. Starbucks is also partnering with Dreyer’s for branded ice cream, and Pepsi to distribute bottled Frappuccino. Question 2 : In your analysis of the organization’s strengths, be sure to identify the firm’s Core Competencies using the Value Chain. They have brewers and other coffee-related accessories that are being sold online however customer would like to have the physical touch and feel of the product that is being sold. There are products which cost hundreds of dollars which customer would not purchase the coffee machines online unless they are a regular coffee drinkers of GMCR. †¢GMCR are concentrating most of their sales online. Although there are supermarkets or convenience stores that are selling their products, customer like to know where to purchase them however the website does not provide them the information. GMCR offer samplers to new consumer however they would need to complete an online form and to qualify for the free trial and you would need to have at least 12 employees in the office. It is time consuming from the customer point of view and prevent them from completely filling up the information. Question 5 Discuss the importance of changes in the external environment to the organization †¢Custome r taste and preference will change and Green Mountain Coffee Roasters would need come up with new flavours of coffee to retain existing customer.