ANALYSING THE FACTORS, A FIRM SHOULD CONSIDER TO
MINIMISE RISK BEFORE ENTERING U.K MARKET
AIM: To evaluate the risks taken by the Indian café coffee day [CCD] before entering
the U.K market.
Objectives:
To know what are the hindrances a firm might face while entering the U.K market.
To study the response towards the advent of the firm in the new market.
To focus on the customer taste and needs of the U.K market.
Understanding the market strategies adopted by the top competitors
Countering future competition.
Analyzing the U.K market potential and market players
- International market
- National market
Context:
The mission statement of the café coffee day is "To be the best café chain in the
world by offering a world class coffee experience at affordable prices"
The above statement tells us their intention to grow beyond the Indian sub
continent. Various coffee brands (local and international) have created a market for
themselves in U.K. Looking at this positively coffee day can as well create a market
space for itself.
The author wishes to contribute effectively to the mission of the café coffee day. The
main rationale of the study is due to Global coffee chains landing in U.K and
imperative to study the consumer motives, perceptions and amidst all this the
venture of coffee day into U.K market
Literature review:
An insight into the
Café Coffee Day is a division of India's largest coffee conglomerate, Amalgamated
Bean Coffee Trading Company Ltd. (ABCTCL), popularly known as Coffee Day, A Rs.
750 crore ISO 9002 certified company. Coffee Day sources coffee from 5000 acres of
coffee estates, the 2nd largest in Asia, that is owned by a sister concern and from
11,000 small growers. It is one of India's leading coffee exporters with clients across
USA, Europe & Japan.
With its roots in the golden soil of Chickmaglur, the home of some of the best Indian
Coffees and with the vision of a true entrepreneur nurturing it, Coffee Day has its
business spanning the entire value chain of coffee consumption in India. Its different
divisions include: Coffee Day Fresh n Ground (which owns 400 Coffee bean and
powder retail outlets), Coffee Day Xpress (which owns 895 Coffee Day Kiosk), Coffee
Day Take away (which owns 12000 Vending Machines), Coffee Day Exports and
Coffee Day Perfect (FMCG Packaged Coffee) division.
Café Coffee Day (CCD) pioneered the café concept in India in 1996 by opening its
first café at Brigade Road in Bangalore. Till about the late 1990's coffee drinking in
India was restricted to the intellectual, the South Indian traditionalist and the five
star coffee shop visitor. As the pure (as opposed to instant coffee) coffee café
culture in neighboring international markets grew, the need for a relaxed and fun
"hangout" for the emerging urban youth in the country was clearly seen.
Recognizing the potential that lay ahead on the horizon, Café Coffee Day embarked
on a dynamic journey to become a large organized retail café chain with a distinct
brand identity of its own. From a handful of cafés in six cities in the first 5 years,
CCD has become India's largest and premier retail chain of cafes with 833 cafes in
118 cities around the country.
"Enthused by the success of offering a world-class coffee experience, CCD has
opened a Café in Vienna, Austria and is planning to open other Cafes in the Middle
East, Eastern Europe, Eurasia, Egypt and South East Asia in the coming months."
Risk management-
Barriers to entry : To enter into a international market considering porters five
forces we can see make the following assumptions
1. The main thing will be the investment
2. The government regulations and policies like licenses and permits will be
more difficult and sometimes it may be impossible also
3. Due to heavy competition firm selling the product at low prices may incur
heavy losses which would be difficult to survive for new firms in the tough
market
4. Patents play a major role in the expansion or entering into new market
5. The presence of well established brands in the market will be a abstract for
the newly entered firm
6. It is difficult for the new competitors to spend more money on advertising of
the company
Like we discussed above there are many more aspects which one should
consider before entering the new market
Focus on the customers changing tastes: As the customers tastes differ and change
frequently The most important thing to be considered is the quality of the product.
Product quality is backed by an external focus. "Having a great product is no good if
it's not what consumer wants to buy" as consumer base is very huge consumer base
is wide and will keep on changing, knowing the customers desires and attitude is a
difficult task. As it differs from one country to another according to local and
regional traditions and cultures, "In today's world, product format and the occasion
are important factors in purchase decisions,"
Changing customer tastes means coffee drinkers are increasingly ademanding
healthier options and greater convenience. The ability to understand and respond
quickly to diversity and change gives competitive advantage. Tetley puts a lot of
effort into gaining consumer insights, so it can anticipate and meet the needs of tea
drinkers globally.
At Tetley, tea now has new avatars, including green, red, and white tea. Then there's
chai, decaffeinated tea, ready-to-drink or RTD, specialty flavoured teas and fruit and
herbal infusions with exotic names like Summer Merry Berry, Mango Passion, Tangy
Pomegranate and Ginger Mint. The decline in the black tea market is being balanced
by growth sectors such as these specialty and herbal teas.
As Tetley enters new markets, it offers customised products based on market
studies of customer tastes and preferences. In India, for instance, Tetley has
launched variants that are relevant to Indian taste buds - flavours like elaichi,
masala and ginger.
Tetley also continually innovates: with new packaging like the 'stay-fresh' flip-top
carton, new blends like 'Tetley Extra Strong', and new products like 'Tetley T of Life'
(launched in 2005, it became UK's fastest growing brand of iced tea and is now
called 'Tetley Ice T').
According to the Mills.A (2001) 'Risk management' is expecting the unexpected - it is
a task which helps to control the risks in a business. The main objectives of risk
management are, identifying, assessing, monitoring and managing risk in a
systematic way. This gives guidelines to introduce a risk management strategy that
is suitable for any business at all levels.
According to Alexander.K (1992) Risk management is a course of action
planned to reduce the risk of an event occurring and/or to minimize or contain the
consequential effects should that event occur.
According to Tchankova.L (2002) Risk management is an important task in
most of the organizations, every business decision involves a range of risks- to the
workers, to the "workflow", to the environment, to the property and, ultimately, to
the financial performance. In recent days more importance is given for identifying
the risk in the business.
According to Mills.A (2001) "risk" is defined as the chance of ann adverse
event depending on the circumstances (Macquarie dictionary). The impact of a risk
can be measured as the likelihood of a specific unwanted event and its unwanted
consequences or loss.
The best example would be the recent credit crunch which affected many companies
in different ways among those companies some of the companies survived during the
credit crunch due to proper risk management and many didn't survived due to
improper planning of finance so it is mandatory for every business to have a good
financial planning.
The process involved in risk management:
According to Keith Alexander (1992),There are four stages of risk
management process
1) Identifying the risk: utilizing various techniques to find out different threats to
the enterprise;
2) Analyzing the risk: examine the probable risk and divide the possible threats to
the business;
3) Manage the risk: By giving appropriate instructions and tune up the staff to
reduce the risk and its financial affects to the company which may cause huge risk
to the business
4) Monitoring of risk: As risk is unpredictable, any business can never get rid of it,
plans should be made for financing as a form of savings or funds, which may be
helpful for the business in the future risk.
Risk management includes a large analysis of all present and future risks in
the business operation, asset management and support services. These risks will
include organizational and managerial risks and a better understanding of
"management risk". This includes knowledge of the law and legal relationships,
human factors and communications. Other "uncertainty" factors should be included,
such as criminal action, security risks and trade union action. Once the risks within
the organization are known a proper evaluation can be made. Such an evaluation
then leads to a risk assessment based on quantitative and qualitative factors.
Economic consideration will require a cost-benefit analysis, along with option
appraisal and the priorities of alternative expenditure.
Risk Control: Every organization will look forward to reduce its risk. As risk is
uncertain it is hard to wipe out or eject the risks permanently.
Risk control depends on the involvement of the business in reducing its risk with a
proper identification of strengths and weaknesses of the business and the capacity
of the business to overcome the risk
Different organizations differ in their approach towards reducing the risk according
to the nature of their business. The important task is how quickly and well prepared
is the business to face the risk. It depends on the way how and what procedures
they will go through to overcome the risk, it may be as concerned to some of the
policies to prevent or overcome the risk, or they may transfer or insure the risk.
