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Sue Turner runs a chain of coffee shops and it has 15 outlets throughout North West of England .Sue was amazed by seeing the GPS technology in mobile phones and she wanted to know how the technology in the mobile phones helps to increase the sales of her business. PESTLE analysis of the current mobile market and porter’s five forces model for the current coffee market is developed so that she could be familiar with the potential issues that may arise in the industry. The ” radical and ongoing changes occurring in society create an uncertain environment and have an impact on the function of the whole organization ” (Tsiakkiros, 2002). Pestle analysis together with porter’s five forces analysis will allow accessing the main threat and opportunities in the market and to know the threats and to explore the opportunities. Thus providing sue with a clear picture of current mobile market and his competitive strength’s there by helping him with his decisions
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2. PESTLE ANALYSIS:
In analyzing the macro-environment, it is important to discover the factors that might affect a number of vital variables that are likely to influence the organization’s supply and demand levels and its costs (Kotter and Schlesinger, 1991). According to Johnson “PESTEL (PEST or PESTLE) framework can be used to identify how future trends on the following environments might impose on organisations”. (Gerry, J and Kevan, S. 2002) .PESTLE analysis is a tool that helps to categorize the influential factors as political, economical, social, technological, environmental and legal. These results can be used to spot opportunities and also to make contingence plans for threats when planning strategy for the business (Cooper, 2000).
The first element of the PESTLE analysis is the study of political factors. Political factors influence organisations in many ways. Political factors can create advantages and opportunities for organisations. On the other hand they can place requirements and duties on organisations.
The UK government has introduced new laws in accessing content of the internet by the young people through the mobile phone. The new law was introduced as self-regulatory instruments and was supported by all UK major mobile operators and the self regulatory act was successful (Ofcom, 2009).
The online market has been increased day by day and it has generated debate over the taxation of transactions on the internet. E-commerce growth will produce Sales- tax numbers that are simply too large to ignore. The potentially taxable events include access to the Internet and also substantial goods and services sold on the internet. According to the Digital Britain Interim Report, government looks to offset cost of illegal downloads with comprehensive charge on all internet users and this leads to less transactions over mobile web.
Data Protection Act
The UK Government has Data Protection Regulations in place there are many instances of violation. Therefore, mobile advertisers must ensure agreement with data protection and secure transaction issues.
Regarding mobile internet usage and mobile advertising government has authentic regulation policies. These are under the control of regulatory bodies like Ofcom and Mobile Market Association. Ofcom ensures consumer policy by checking mobile operator’s commitment to give their customers better information about mobile broadband services.
2.2 Economic Factors:
Economic factors affect the difficulty level in being successful and profitable at any time because they affect capital availability, cost and demand (Thompson, 2002).
Mobile web portals and Location targeting
There are many online portals which are helping in discovering discounts, special promotions and voucher codes. They also connect the online shopper with local stores providing the platform for local shops to market and promote their store to the online audience giving the shopper what they are willing to buy. Local and largely independent stores are well benefited because it is difficult to build their online presence to try and influence the online consumer to shop at their local store and strike into this valuable market. A person in a particular location can browses through mobile portal for a category of product and it will immediately target the local stores which is profitable for both the parties.
Location Based CRM targeting
Customer Relationship Management is often practiced by businesses today. Because of the wide range of usage of mobiles the company which has a promotional offer that would suit any customer profile by using mobile medium they are targeted. Because of this promotional offer it helps to push the customers to the store and thereby increasing the revenue.
Impact of Recession
Even though there is recession, mobile internet has increased a lot by 0.5% to 23.5% ( UK mobile user survey 2009, Enders Analysis). This raise in the usage of internet is because of customers are searching online for best value purchases.
The socio-cultural factors include demographics, disposable income, changes in buying pattern (Pearce and Robinson, 2005).
The communication in the world has seen lot of inventions. With the launch of new mobiles and technologies it has now become easier to stay connected to everyone and anyone from any place. One of the main advantage of mobile phones is “convenience ” but there are some other factors including security, fashion, social contact and work requirements.( International Telecommunication Union, 2007 )
It is well established at this point that mobile data usage shows a very strong tilt towards youth. Even the people from 25-34 years old men, are almost 150% more likely to use mobile internet and twice as likely to visit sports and news content as all adults. Very few percent are less likely to visit entertainment channels.
Role of Smart phones
According to recent study “mmetric”, the usage of smart phones has increased lot of web users on mobile phone because of its extraordinary feature like “local search activity”. This is a huge opportunity for mobile marketers. ( Ref-Appendix-1)
2.4 Technological Factors:
Technology must be considered as a prime factor in the analysis because it is a part of the organization as it is used for the creation of competitive advantage with in the mobile market. (Capron and Glazer, 1987).
GPS and Internet Control
The provider of digital map databases and location-based solutions around the world supplying digital maps to every GPS makers (NAVTEQ ) Already 3GS & 3G users are bigger consumers of mobile data than consumers on slower mobile data connection (Appendix-3) There will be a great deal of technological change in the mobile phone industry with respect to time. Organisations that ignore technology face decline. The recent new 3GS technology helped the companies to increase their sales revenues with low labour cost by providing a high speed medium for faster connectivity, faster internet access, and music entertainment with improved quality which could involve multimedia.
Technology improvements in mobiles:
In terms of technology changes, new approaches such as location around zone detection and higher resolution phones instead of small screens, and battery life is improved a lot. Faster process will improve the performance and also user interfaces will continue to become more flexible. Because of the high competition in the mobile market Handset makers are also including better software embedded in devices that will make the mobile more users friendly. Extensive availability of HTML browsers on mobile devices enable consumers to access a much more web content. Adobe offers a new version of flash called Flash Mobile that could be used to develop rich applicants on handsets.
2.5 Legal Factors:
Legislation is certainly the basis for privacy protection; however Social norms, business practices, and technical means can also contribute to this goal (Camponovo & Cerutti, 2004).
As m-advertising is extremely sensitive practice and is personnel to every individual so as to limit m-advertising EU legislation has passed on the law (Directive 2002/58/EC) saying that “direct marketing may only be allowed in respect of subscribers who have given their prior consent”
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Location based application create significant privacy risks. Increasingly consumers are becoming aware that the location of their mobile phone and therefore knowing about the market availability and navigation services. M-advertising campaigns must address a number of public policy concerns, such as privacy and confidentiality (Kalakota & Robinson, 2001).
2.6 Environmental Factors:
Most mobile phones are made of plastics, ceramics and metals such as copper, zinc silver etc. Recycling of such materials reduces the green house effects (Wray, 2009).Recycling of the dumped mobile phones is an important issue, mainly in United Kingdom, where no of handsets exceed the total number of population .Radio waves emitted above a certain level can cause heating effects in the body. Radio frequencies from cell phones cause brain damage (CNET News, 2009). Heavy usage of cell phones increase risk of cancer. Improper disposal of mobiles release toxins into environment. Immense power usage because of increasing in the use of internet. A wireless connection to the internet uses more power than any other activity on the phone.
A Harvard University physicist says a typical search on a desktop computer generate about 7 grams of carbon dioxide for each Google search but whereas through mobile phones this can be reduced (The Times of London Mobiles).
3. Porter’s Five Forces Model
According to Porter (2008), Businesses have to understand the dynamics of its industries and markets in order to compete effectively in the marketplace and is conducted on coffee cafe so as to know the Bargaining power of the supplier, bargaining power of Customers, Threat of New Entrants, Threat of substitute products, Competitive Rivalry with in an Industry. In addition to rivalry among existing firms and the threat of new entrants into the market, there are also the forces of supplier power, the power of the buyers, and the threat of substitutes. Appropriate strategies can be structured by understanding these forces (Thurlby, 1998).
3.1 Threat of New Entrants
Since it requires a very less capital to start a coffee shop it’s quite easy to establish a new shop. In that sense the threats from new entrants is high but since the large and successful brands like” coffee for the people” have the advantage of economies of scale. The new entrants will find it difficult to compete and extend themselves into a chain. Since the coffee shop market is already saturated it’s difficult to achieve product differentiation just based on the taste. So product differentiation can be achieved by means of better service and by adopting by newer technologies like GPS. Especially during the time of recession the new entrants may find difficult to invest in this newer technologies and at the same time to achieve profits, but if the new entrance have enough capital if they are ready to forego some profits for the sake of initial customer attention it might be a significant threat to already established coffee shops. Overall, taking into account the amount of capital in technologies like GPS it might not be a good proposition for the new entrants. So the threat of new entrants is low.
3.2 Bargaining Power of Suppliers
Generally supplier input is very important to ensure quality of the product, but in the case of coffee since it is a standard product it cannot be differentiated. Since there are lot of good quality suppliers there is not a high dependence on any particular supplier. Since there is a lot of competition their negotiating power is less. The threat of vertical integration is moderate since it involves significant factors like brand-building and supply chain management. More over government fair trade policies would be an obstacle for vertical integration.
3.3 Bargaining Power of Buyers
There are more number of customers/buyers of the coffee in the UK. Britain consumes 500g of coffee per person, per year, with annual amount spent being 730 million this is reason the Buyers have There is a very low switching cost for the buyers so customer retention is of paramount importance. There is also a very great need of brand recognition. Customer retention is only possible by means of extraordinary service and a good quality of the coffee sold. There is also a very high dependency on customer income and their tastes. Especially in the case of coffee it depends on the customer purchase frequency. With the GPS technology we can influence the customers into buying our coffee by placing in-place ads and discounts. If the coffee price increases the customer has other choices to have a coffee like they can prepare it in their home or then can easily change to another beverage like tea.
3.4 Threat of Substitute
Technology plays a major role in the coffee market so as to have competitive advantage and is widely recognised by various literatures on strategic management (Capron and Glazer, 1987; Johnson and Scholes, 1993; Jan, 2002).Technological substitutes like E-vending machines, pose a threat to current market leaders because the technology helps in avoiding the cost of the staff and maintenance there is a great threat by these for the already established players. Price competition is also a reason for the substitution of the coffee, if the price increases the customers have tendency to shift to the other product like tea. More over people now have become more health conscious and are opting for low calorie drinks. Also because of the recession people are going for cost effecting alternatives like home brewed drinks.
3.5 Intensity of new rivalry
The market is saturated, that is about 79% of the market share is occupied by three market leaders (Mintel, 2008) and there is a potential growth for the new comers to have a slice of market and because of the market leaders using latest technologies like The Starbucks Card Mobile App gives users instant access to their Starbucks accounts, and they can use it to pay for their latte (Appendix-4).So as to get product differentiation and have competitive advantage over its rivals. Sue can achieve product differentiation by using the GPS technology to push in place ads and location based discounts to attract existing customers and potentially new customers. By adopting newer technologies sue can compete with larger brands and at the same time be a notch higher than the moderate and the small players in terms of service. Sue could go ahead with GPS proposal as a first step in mobile market and eventually provide a mobile commerce application to compete with large players like Starbucks. There is a very high competition for new customers and locations so GPS could help attract the customers while there are in transit.
4. The Opportunities that Mobile Market may offer coffee for the people
Sue Turner being running a successful chain of coffee shops with its fragment of market share it must consider new strategies to expand its market share. Taking mobile services like mobile coupons, mobile web ads, mobile search and Sms marketing to her existing business will increase her sales (Appendix-5). Customers can receive mobile messages regarding timely offers like same-day promotions, limited timely discount and special offers. To create excellent brand awareness mobile coupons can be attached to a message and forward it to all the regular customers and new customers to attract them towards the business Young people can be targeted best by mobile than any other medium.
Context sensitive mobile search can be used to target customers. For example if a person near by the coffee shop uses mobile to search for a coffee shop then if he is within the particular radius he surely would not mind receiving a discount coupon. So in this way the consumer can get discount and sue can get a new customer.
CRM can be used to identify the regular customers if it has become long time since they had a coffee in our shop and they can be targeted to remind that they are the important customers for the shop and their revisit will be a worth to us and by this way we can reconnect our old customers.
With increase in the mode of transport intended to be used when accessing maps by LBS (location Based Services) (Ref-Appendix-2) can be used to create an application so that it can automatically find the nearest coffee shop to the user’s location and provide directions with the help of GPS (global positioning system).
Sue can create her own website so as to provide customers with all the information regarding the latest offers and discounts and keeping them updated. It can also provide online facilities like Advance booking of tables.
The Sue could use mobile marketing to increase her revenue and also to attract the new customers.
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