The Boston Consulting Group Matrix

Published Date: 02 Nov 2017

This report provides an analysis and evaluation of Just Us! Coffee Roaster Co-op (JU) current situation and present possible solutions for improvement.

The research draws attention to three key issues which affect the company currently and future prospect:

An increasing in level of competition in the local market caused by new entrants

Large organisation start to expand their market to Fairtrade industry where JU positioned

JU needs for expansion into larger market

Further analysis shows that there are opportunity for JU to expand the market such as a political promotion for FT products, people socially respond to ethical business and the advance of technology and social network. These claimed to offer JU the chance to penetrated to wider segment.

The report generate 3 possible solution as follow:

Using Integrated Marketing Communication to improve customer satisfaction

Developing new products based on opportunity of FT new range of products.

Using new structure strategy such as Joint-venture or Franchise to promote its brand

As the results of using SAF model to analyse three solutions, it is recommended that the 3rd choice of Joint-venture is most suitable at the moment to expand to the wider market. In implementation of this strategy, it can be combined with an introduction of social network marketing through internet.

2 Table of Contents

1 Executive Summary 1

3 Introduction 3

4 Current Situation Analysis 4

4.1 External Analysis: 4

4.1.1 PESTEL analysis 4

4.1.2 PORTER’S FIVE FORCES 6

4.1.3 Competitor Analysis 7

4.2 Internal Analysis 8

4.2.1 Core Competence 8

4.2.2 Value chain 8

4.3 Evaluation 9

4.4 Ethical issues 11

5 Memo to juliet 12

5.1 Boston Consulting Group Matrix 12

5.2 Product Life Cycle 14

5.3 Geography Concentrated 15

6 Retail & Customer loyalty strategy 15

INTEGRATED MARKETING COMMUNICATION 15

Consistency 15

Enhance performance 15

Improve customer awareness 15

Loyal customer base 16

7 STP analysis and the marketing mix 17

Market segmentation, targeting and positioning 17

Positioning 17

Strategic Marketing Options: Ansoff’s Matrix 17

Evaluation of Options: 19

8 Implementation 20

9 Conclusion 21

10 Bibliography 22

Appendix : Further Reading 24

Ethical in Food industry. 24

Marketing and Communication 24

Appendix: Financial Report 25

Appendix : Geography Focus 26

Appendix : Porters Generic Strategy 26

Appendix Strategic Brand 27

Appendix: Word counts 28

3 Introduction

Just Us! Cafe's is the company specialised in food and service industry consist of wholesaler and retailer in Nova Scotia, Canada, and United States. Just us! Cafe's mission statement states their aim to be a leader in Fair Trade business who focus on quality, social and environment responsibility and innovation for the benefit of all their stakeholders [1] . Their core product is certified Fair trade, organic products and local products which is high quality and social and environmental responsibility.

Just Us! Coffee's focus on niche market of promoting fair trade. Company has emphasis on maintaining the commitment of educating consumers as well as creating strong brand and building constant growth. The main distribution channel of Just Us are in grocery stores, four cafe's and university campuses.

In current situation, the prevailing economic climate and increasing competition has been issues to the founders. In addition, Just Us! Coffee goal to expand their business, consequently, the new challenges arise from having compete with several big brands for example Starbuck, Mcdonald, Kraft who also introduce the FairTrade certified coffees, Rainforest Alliances certified coffees. Besides, small coffee shops and new entrants make their brands recognition of its customers.

There are several possible answer to those problem such as:

Increase power of branding to make it difficult for new entrants and create the different with existing rivals.

Using Joint venture, franchising as an option to expand into new market

Using new media to increase marketing and customer service.

4 Current Situation Analysis

In order to understand and solve the problem, the situation analysis is needed since it reveal the current position of the company in the market.

4.1 External Analysis:

The external forces affected Just Us cafe's from macro to micro environment. It can be analysed by three tool as follow:

 Pest Analysis

 Porter’s 5 Forces

 Competitor Analysis

4.1.1 PESTEL analysis

Political

From the case, it can be seen that a political factor involved was the recognition of certified for fair trade and the whole process.

In Canada, the cooperative between member of Fairtrade attract encouragement from NGO, government and international stakeholders. [2] 

Economic

The economics is changing rapidly and the market become more and more competitive [3] 

The financial crisis affect people decision to buy [4] . The price of JU is higher due to Fairtrade cost.

Social

From the case, the Canadian fairtrade market is gaining support from customers who concern about being ethical consumer.

From the study of The Body shop [5] , it shows that 34% of people decision based on ethical behaviour of companies.

Technology

Technology development has fast movement creates a significant change in the way business was doing.

The introduction of e-commerce and social network (KCLaudon, CGTraver 2007)

Environment

The issues of carbon footprint means there are more incentives to buy from local supply rather than international import.

Legislation

There is no specific legal requirement for fairtrade or coffee in general.

To sum up from the PESTEL analysis shows that there are opportunities as well as threat to JU. Focusing on the Social and Technology factor, JU can explore the opportunities of upcoming trend of ethical supporting behaviour and technology advanced in marketing.

4.1.2 PORTER’S FIVE FORCES

Threat of New Entrants: is high in the market since there is low barriers to enter coffee market. Moreover, distribution of fair trade products are popular trend and attractive industry.

Buyer Power: Buyer has the power to force company to reduce the prices, improve quality while competing with each others (Dess 2004). Because there are a lot of competitors therefore, the buyer power is high.

Besides, the economics factor suggests customer’s income plays an important role in buying decision. The crisis force customer to choose lower prices coffee leads to an increase in price wars.

Threat of Substitutes: In the market there are multiple substitutes for coffee such as tea, beverages, juice, water etc. Consequently, the threat of substitutes is high.

Supplier Power: is low because there are more and more suppliers enter this industry.

Competitive Rivalry: Competitive rivalry is relatively is specified in the competition analysis. It shows that the competitive threat is high since there are a lot of big firm interest in this market.

Although, the 5 Forces analysis shows that the market is attractive, it suggest for JU that the market is highly competitive, the product is substitutable and the buyer has high power of purchase. These forces are the threat to JU business especially competitors.

4.1.3 Competitor Analysis

To understand further the issues of competitors as states above, the major competitors can be shown as below:

4.2 Internal Analysis

The position of the business cannot be understand by external environment analysis only but also be influenced by internal elements.

4.2.1 Core Competence

JU's core competencies are goal congruence on quality, outstanding customer service, continuous product advancement. From the start, the Moores focused on providing high quality coffee as well as information on ethical to interest group customers. Since then the company has focused on maintaining this core competence in all of its stores.

Over the years, Just us cafe's has been well known in the niche market of fairtrade coffee, the brand image of being ethical business has strong affect on customer who are interested in and supporting fairtrade business.

4.2.2 Value chain

The Value Chain (Porter 1980) is a tool to analyze internal environment which including activities that could be found in most firms. These activities are categorised as primary and support activities for the aim of adding value to the service for customers.

The primary activities consist of inbound logistics, operation, outbound logistics, marketing & sales and services. On the diagram shows the activities of JU in each individual task. All Just Us cafe's primary activities are linked together and supported by the firm infrastructure.

The support activities are accountable for developing and enhancing the primary activities. The strength to competitive advantage of JU based on the link between primary and support activities. The value chain analysis can identify and enhancing competencies. As the results of the VCA, it can help JU to reduce cost and improve quality of products and services.

4.3 Evaluation

Strength

Just Us! Coffee Roasters’ aim is to drive business with high quality and services. Customers' decision to buy from JU was driven by a symbol of their own personal beliefs on ethical business and high quality of product and service.

Besides, they encourage customer relationship to attract consumer using the ethical image and multiple channel.

Weakness

From the start, JU operate in niche market which related their brand name to Fairtrade, therefore, it will limit their supplier and make it is harder to compete in term of prices.

As time pass, JU enter the maturity stage of the company’s life cycle, The Moores should increase marketing as well as maintain operations with strict control of company image as well as profitabilities.

Opportunity

New Fair trade products: every year Fairtrade organisation in Canada increase number of certified products into stores. It creates an opportunity for JU to expand the market under the Fair trade principle. [6] 

Social Media: The social network is developing along with the advancing of the technology creates the opportunity for marketing using e-commerce and social media.

Clouded Focus: The channel of selling JU is using does not have clear focus since there are too diversified in services provided while comparing amongst JU channel. Operating and managing different strategies creates contradict within the organisation therefore, a uniform focus should to be made prioritize.

Threat

Competitor enter Fair Trade market: It can be seen that the fairtrade concept has been used by competitors reduces the effect of one of JU’s key USPs. [7] 

New entrants: The coffee market as well as FT branding is easy to operate, therefore, new entrants can easily enter the market and increase the competition.

To conclude the analysis, it shows the strength of branding and ethical customer loyalty along with the opportunity to explore the need of consumer based on an increase in range of FT product. However, there are several weakness which can be improve such as high cost, low marketing spend and vague focus. Besides, the threat of JU come from increasing competition, it can be reduced by creates barrier to entry.

4.4 Ethical issues

"Ethics are the moral principles or values that govern the actions and decisions of an individual or group" (Gresham 1985) [8] . Ethical principle has been used as guidelines of business activities and justification of action. The table below

9

The part JU focus on in this diagram is ethical and legal which make them more expensive than others. The reason for that is they promoting Fairtrade to pay more for suppliers, therefore, the cost of it will be higher than competitors who are currently not in fairtrade segment.

Secondly, as the case study mention, they couldn't use licensing method since they don't trust the agency who selling JU product would comply with JU ethical principle. It may damage their reputation as well as losing customers.

5 Memo to juliet

5.1 Boston Consulting Group Matrix

As JU offer multiple organic products through out their channel. It is important to analyse profitable and prioritise in order to increase competitive advantage products and remove least profitable ones.

The revenue from coffee and drink has the highest percentage in the trade figures of Just Us! Cafe while in the Fairtrade market there is significant growth rates in volume in both coffee and tea during 4-year-period.

JU should pay attention to profitability of the market for 'others'(vouchers) and consider placing less emphasis on it. Since it contributed lowest proportion to the total revenue and even loss in one store. However, the gift cards, gift basket and event tickets in this category may promote all Just Us products.

Benefits of BCG Matrix

The BCG matrix help managers in resource allocation among various units. The managers can compare several business units which company offer. This method simplified the analysis of the product and market by using the market share and growth rate of products.

BCG has been well known world wide and used for quick respond to the industry. The BCG can help in comparison of growth and development rate between a company products and the average growth rate in specific industry.

In addition, BCG encourage company to make better decision. Organizations looking for a effective decision making can benefit from using BCG matrix, especially in resource management.

Limitations of BCG Matrix

High level of market share is not equal to high profits. The cost of producing products and providing services is ignore from BCG matrix.

Growth rate and market share are important but not the only elements of profitability. BCG model overlooks other indicators of profitability such as profit margin, ROCE or growth in profit.

Dogs products can promote other products to gain competitive advantage.

The Dogs products although may have lowest growth rate and market share, it can gain abnormal profits.

To sum up, it can be seen that even though BCG matrix has many benefits, it may not applied to JU since they offer Fairtrade products, therefore, the cost is relatively high as well. In other words, high market share and high growth rate may not give them high profit. Moreover, the dog products seem to have lower revenue may due to high profit margin and has been used to promote others products.

5.2 Product Life Cycle

Using product life cycle to find the stage of products could help to understand the profit of the products offered. Rather than compare the market share and growth rate, JU can use product life cycle to understand their products.

Coffee and drinks still on the growing trend, it shows that these products is on the growth stage which need to increase differentiation, improve the products and services while gaining the market shares. [10] 

The JU products and Bodum, Lunches, Bakery has been put in maturity stage since the revenue of those are expected to increase slighty compare with Coffee and Drinks.

The other products of JU complied of gift card, event tickets has low profit and even loss due to introduction stage. Therefore, it should not be removed from the products range.

5.3 Geography Concentrated

Appendix

6 Retail & Customer loyalty strategy

INTEGRATED MARKETING COMMUNICATION

The idea of marketing communication suggest that product, services, image and customer belief should be considered simultaneously focuses on the integration of communications principle. (Nowak 1994)

Consistency

There are two types of consistency, uniform image and strategic consistency (Fill 2001)

Firstly, uniform image such as creates a campaign in which all advertising, promotion, sponsorship, publicity, services and package of different products give customer the same feeling (Duncan, 2002). Renovation of coffee shops into uniformed unit could show customer the consistency of the business.

In order to create strategic consistency the company need to design the message to different target audiences and maintain a brand image. (Kotler 2003). JU create a clear focus objective throughout advertising, marketing, public relationsship and employee communications in order to enhance the communication. All of communication method should reinforce each other.

Enhance performance

JU cafe can improve the customer service such as the expert suggestion or customer related services. The good customer service could improve the performance and increase turnover.

Improve customer awareness

In order to improve customer awareness, effective communications is important. Therefore, promotional tools such as advertising, public relationship, direct marketing, promotion and value added services like events, sponsorship, merchandising are used.

Events and exhibitions to keep the customer aware and informed about fair trade and Just Us products. By provide the chance for customer to understand JU nature as well as fairtrade, customer can feel more comfortable to come to the coffee shop.

Moreover, besides traditional media such as newspaper, leaflet, radio or TV, online advertising become more and more popular. The marketing can be used in combination of all media in order to communicate with audience and stakeholders.(Fill 2002)

The method and approach of JU can be change depend on the market position and customer perception.

Merchandise and point of purchase (Duncan 2002) can be used as the method of promoting brand at retail level. It suggest that the material display in-store attract attention of customers which can benefits both retailers and JU.

Loyal customer base

Customer base enhance credibility, strengthen image, develop goodwill or influence public opinion. There are many tactics such as speeches, special events, promotions, newsletters, and update release, are targeted to stakeholder can be used. (Cuclis Communication, 2004)

Just Us can offer the following tactics:

Promotions such as giving free cup of coffee for return customers.

Loyalty cards for existing customer to collect points to exchange for gifts or products.

Customer relationships such as email of new products or service or simply the news on Fairtrade.

The network of retail can offer wide range of service for customer as well as communication expert to promote customer loyalty. By strategic planning the relationship between the JU and retailers, it can help company to distribute the brand and outsource the non-core competence of business. (Reuters 1997). JU can operate through joint-venture, franchise or licensing.

7 STP analysis and the marketing mix

Market segmentation, targeting and positioning

Segmentation and targeting determine the main target segment and customer to build effective relationship with. In order to increase efficiency and effectiveness, marketing strategy focused on smaller but more profitable segments. (Duncan, 2002)

Just us cafe' currently focus on the young people 18-30 who concern about the ethical issues and interested in Fairtrade. However, that is only the niche market where the number of customer is small compare to JU competitors.

In order to increase sales, JU need to expand it own segmentation. In other words, JU need to enter new segment in order to get more customers. For example, JU offer to fashion industry such as giving coffee for catwalk show or JU coffee could offer delivery to office for white collar people.

JU coffee would increase the range of target since more and more people outside their age focus interested in drink coffee and ethical issues.

Positioning

Positioning is the strategy of providing and create image to obtain important place in the perception of the target market. (Kotler, 2003).

The positioning of the JU coffee need to be uniformed. At the moment, there are 4 different location which offer different products and service which make JU too diversified. If new customer come to the coffee bar they may expected the same service, therefore, JU coffee should be made as uniform service.

Strategic Marketing Options: Ansoff’s Matrix

In the market JU has their existing menu as the existing products which other competitor also provide the same kind of products and services. The market is existing. Therefore, JU cafe' have 3 option they could adopted.

Market penetration: JU can improve their customer service, renovate the current location and training employees to increase and improve the customer experience. Moreover, they can use new media to promote the brand.

Product development: JU can come up with new products which may benefits their current customers such as new formular for coffee, additional art on coffee cream or the new food in their menu.

Market development: JU can use Joint Venture to expand their market and sharing the risk of investment.

Evaluation of Options:

Option 1: Market penetration:

Increase marketing spend in order to creates customer awareness. Using social and online network to promote the brand and enhance to customer relationship.

Suitable

In the current situation, Just Us cafe can use this to improve their market share.

This strategy can take advantage of the opportunity of technology advanced can increase the respond of the customer with JU.

Yes

Acceptable

It may increase revenue through customer awareness

The cost of implement the strategy is lower than other methods

The risk is low

The return in investment is low

Yes

Feasible

The fund for marketing is available

The technology is available to use at low cost

Yes

Option 2: Product development

Widening the range of products increase the customers

Suitable

In the current situation, Just Us cafe can use this to improve their customers' experience.

Take advantage of Fairtrade organisation increase range of their products.

Yes

Acceptable

The new products cannot be launched immediately since they need to research and development.

The fund required is for research and development is high

Therefore, the risk may be high

The return in investment is medium

No

Feasible

The fund required is high considering the available fund at JU

There is need for expertise involvement to analyse and improve the range of products such as new recipes.

May be

Option 3: Market development

Using joint-venture to increase the number of outlets and reducing the risk of return

Suitable

In the current situation, Just Us cafe can use this to improve their market share.

Take advantage of venture local specialist.

Yes

Acceptable

This method make JU lose part of their control in new shops.

Reducing risk of investment by sharing with other ventures

If the venture doing bad job, it may damage the image of JU (Agency Problem)

May be

Feasible

The fund required is medium since it can be share with other venture and the risk is shared as well

The likelihood of success is high.

Share of expertise from other ventures.

Yes

8 Implementation

In order to implement strategy effectively, it is necessary to communicate in all aspect to achieve synergy. Accordingly, the business principles and objectives in mission and vision statements, should synchronises and co-ordinated with company's marketing activities. (Fill, 2001)

The Marketing Strategy should be planned carefully in all direction in order to amplified the effectiveness and efficiency. These following are the list of marketing tactics:

Advertising

Point of purchase

Licensing marketing

Direct Marketing

Website ads

Personal Selling

Exhibitions

Appearance

Sales Promotion

Customer Loyalty Scheme

Email

Trade Promotion

Product Placement

Sponsorship

Field Marketing

Besides, Marketing Mix suggest that JU can improve their products and services in order to expand the market.

Product

Just Us cafe' can expand the range of products such as introducing smoothies, healthy drinks or foods.

Price

Reducing the price to attract customers such as promotion or events. In order to do so the cost need to be reduced. There are many methods to do so such as find sponsor for events, reducing cost of waste.

JU operate under FT principle therefore, they cannot follow cost leadership but to pursue differentiation. They should offer premium quality for customers.

Promotion

Just Us can offer IMC in large scale as mentioned above. It can help Just us to be recognised and increase revenues. However, the initial cost may need to be considered.

Place

The new channel of online selling would be potentially promote the business. It can creates huge advantage over new entrants.

Besides, JU can offer Joint-venture or licensing to retail their products. That way, the number of outlets providing JU products can be increase as well as an improvement of marketing channel.

In order to implement the marketing mix strategy the verification of responsibilities is important. As the case study mention, JU has the historical issue with trusting agency, therefore, it would be important to define the accountabilities within the contract as well as JU majority of control level in retailers. (Doyle, Stern 2006)

In additional, the timing need to be consider, the plan need to implement as soon as possible to outbid the competitors and create sufficient barrier to entry. Moreover, the cost need to be budgeted and monitored carefully. The risk of underbudgeted may leads to an increase in cost and slow down the process.

Last but not least, the return on Investment is important issue stakeholders interested in. The ROI need to be sufficient to give investors interest. For example, it is expected to increase the market share by 10% and 5% profit margin.

9 Conclusion

Just us cafe' can offer the option 3 or option 1 since all of the option require sufficient fund to launched. Although, option 1 can increase customer awareness then improve business revenue, the effect may not be high. The option 3 seem to be more suitable since JU want to expand the market. Using Joint Venture, they can create the alliance with other rival to protect themselves as well as increase the power over new entrant and stronger competitors. Moreover, they can increase their channel for supply and B2B market as well as B2C.

Besides, JU can also combine option 3 with advertising through new media such as online business or online network to promote their brand with low cost of maintainance since internet become more and more common.