Understanding the External Environment

Topics: Coffee, Espresso, Starbucks Pages: 26 (7331 words) Published: April 22, 2012
Module 2 Understanding the external environment
Task 1: Summarise the attractiveness of the industry.

1a) Identify the industry, product segments and value chain.

The industry is the coffee industry. Coffee is one of the most valuable traded commodities in the world. In the volume of coffee trade there is 90% trading in green bean from producer countries and 10% trading in manufactured coffee. Consumption of coffee grow low in the world. Since the early 1980s, only ther growth only 1.2% annually. This is mostly contributed by the countries where per capita income levels are rising(e.g. India and China) while growth in high income counties is static. And new coffee lifestyle and behaviors also cause the growth. Product segment

| | |
Green bean | Arabica | Robusta|
Manufactured coffee | Roasted Coffee| Instant Coffee|

Market segment
Supermarket(in house market) Foodservices( out house market)

1b) What is the current life cycle position of the industry? And Lavazza strategy to operate in industry in current life cycle.

The coffee industry is at the mature stage of its life cycle. Since the early 1980s, the growth is only 1.2% annually. This is evidence of a low growth environment, where the industry is at the mature stage of its life cycle. The organizational focus is on efficiency, cost control and market segmentation. Value chain

1. Purchase green bean : 230 million bags per annum from 50 countries- large portion purchase give Lavazza strong negotiation power to get better deal 2. Process bean and package: using high-tech procedures to produce efficiently( grinding 4,409-6,613 pounds of roasted coffee per hour). processing is completed at one of four Lavazza factories in Italy. each factory produce different products aim different market. The Turin factory is the largest coffee factory using up-to-date methods and equipment. The Verres factory produce and package main blended produces for the domestic market and special products for export. The Gattinara factory make ground coffee cartridges and capsules for Lavazza's coffee system for which demand grow strongly. The Pozzili factory specializes in the production of decaffeinated products. 3. Distribution finished products: Lavazza keeps control over distribution through warehouse and logistics centres, using a large network that services over 90 countries through distributors and foreign subsidiaries. Lavazza keeps improving connectedness and efficiencies and by using specialist suppliers improve packaging, distribution services, demand-planning and warehousing activities.

1c) What are the key issues that will affect future industry growth? What is their likely impact and the overall assessment of the industry’s future growth?

Future growth for the overall industry is assessed as negative. A number of factors influence the growth of industries. They can be briefly called TEMPLES model and broadly grouped under the following areas: •technological;

•environment; and

We will use the TEPLES model to identify future industry growth.

Key issues influencing future industry growth

Factor Issue Nature of impact Assessment of ( + / = / – ) impact on future industry growth (Low/Medium/High)

Technology § New technology will be developed which make – Positive High green beans are roasted and grinded more efficiently. § New packing...
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