The Coffee Shop Industry: Internal and External Perspectives
The coffee shop industry has become a target for investors due to the increasing consumption and thus demands for coffee. The UK has seen a 7.5% growth rate in 2012 despite being a tea-oriented society (Hospital & Catering News, 2013). Although there is a low barrier of entry into the café and coffee industry, there a myriad of factors that needs to be taken into consideration in order for a new entrant to survive in the already crowded market, including large coffeehouse chains such as Starbucks and Costa. To increase survivability, a new entrant must take into account, the perspective of internal and external environments towards starting a coffee shop/café business. Using PESTEL analysis and Porter’s 5 Forces to evaluate the external environment, considerations for the achievement of competitive advantage with regards to the internal environment, and SWOT analysis to “evaluate the nature of the business environment and its strategic capability”, this essay will discuss the importance of these factors for new entrants.
External Environment
A firm’s proficiency depends on the factors that govern the external environment (micro-environment and macro-environment), which is not within its control but has to be adapted to. Macro-environment can be analyzed using PESTEL analysis, comprised of political, economic, socio-cultural, technological, environmental, and legal factors (Armstrong and Kotler, 2013).
The coffee shop industry is not heavily affected by the political environment because it does not rely on imports and exports that could be hindered by import restrictions and other types of control enforced by the government due to the relatively common and lax product/service like coffee which is abundant on the market (Lee and Carter, 2012). Since coffee products are not a restricted good, there are no legal issues which would affect coffee shops, albeit some permits may be required to operate a coffee shop in some countries. Technology can be a great
External Environment
A firm’s proficiency depends on the factors that govern the external environment (micro-environment and macro-environment), which is not within its control but has to be adapted to. Macro-environment can be analyzed using PESTEL analysis, comprised of political, economic, socio-cultural, technological, environmental, and legal factors (Armstrong and Kotler, 2013).
The coffee shop industry is not heavily affected by the political environment because it does not rely on imports and exports that could be hindered by import restrictions and other types of control enforced by the government due to the relatively common and lax product/service like coffee which is abundant on the market (Lee and Carter, 2012). Since coffee products are not a restricted good, there are no legal issues which would affect coffee shops, albeit some permits may be required to operate a coffee shop in some countries. Technology can be a great