Café Nero
CAFFE NERO TARGET 100 STORES IN TURKEY!
Caffé Nero is an Italian brand and the largest independent coffee retailer in
the United Kingdom. It provides a European style coffee house experience to
its consumers offering espresso coffee, Italian food products and a relaxing
atmosphere.
Caffé Nero group was established in 1997 by Dr. Gerry Ford and today us
has more than 400 stores in UK. It is expanding its business internationally
including Middle East and other European countries.
Caffé Nero was expanded to Turkey in 2007; this paper explains the
marketing tools used by Caffé Nero to find out the marketing strategy for
expanding its business in the Turkish market.
Opening stores in Turkey is Caffé Nero’s implementation of the International expansion strategy in
which it is also targeting Gulf, China and many European countries. It is operating in Turkey trough a
joint venture of Isik Asur, who is a Harvard Business School graduate and previously was working for
Starbucks operation in Turkey.
Dr. Ford made an extensive expansion strategy of opening 100 stores in Turkey. He decided this by
looking at the success of Starbucks, who has been very successful there. More than 60 percent of
population in Turkey are under 30 and are moving towards the western brands. He decided to target
these by opening stores in main shopping streets and shopping malls, including the new malls. Dr. Ford
was of the view that Turkish coffee bar market is like UK ten years ago and urban consumers are
increasingly switching towards the espresso from tea and strong Turkish coffee.
SWOT Analysis
Strengths
Caffé Nero is a multinational company with more than 400 stores only in Europe.
Caffe Nero serves high quality coffee along with Italian style tasty food.
It provides an environment of European coffee house which is a different concept from the
market leader coffee shop Starbucks.
Caffé Nero has improved and maintained the trust of customers and therefore has strong
relationship with customers
Caffe Nero always pays special attention when selecting sites in order to create a disciplined
environment.
It has ability to capture and increase its market share day by day.
It has ability to open a new store every week.
The company’s debt is not excessive and leaders are driven for success.
Caffe Nero always focuses on the brand values and core product. Management does not scarify
the core brand values despite getting opportunities.
Caffe Nero has high quality management and well check and balance system which is also used
for the analysis of employees as well as outlets.
It takes care of its employee and considers them as the dearest possession.
Weaknesses
Caffé Nero is famous for their new product development and creativity but there is a possibility
that their innovation may weaken over time.
Caffé Nero is dependent only on its main product, the retail of coffee, which is not enough for it
to diversify and compete in other sectors.
Aggressive expansion could lead to managerial / financial problems
Opportunities
It can expand its business widely in Turkey due to the increasing demand of coffee in the people
of Turkey. They can directly compete with Starbucks by opening stores near their stores. More
over they can also open stores in the areas that are not focused by the Starbucks and other local
coffee stores.
In order to create brand awareness, Caffé Nero can do co-branding with other manufactures of
food and drink in Turkey.
Starbucks stores in Turkey easily capture market where ever they are located. This information
provides great opportunities for Caffé Nero in globalization as well as product expansion.
Threats
Starbucks is the biggest threat of Caffé Nero not in Turkey but in all parts of the world since it as
15000 outlets in shopping malls, streets and airports of 35 countries.
Other threats are from Costa and Subway which are also its major competitors and cause loss of
market share for Caffé Nero.
Small private coffee and sandwich shops are also a threat to the expansion.
Currency exchange and regulations of Turkey are also the threats for Caffé Nero expanding
business in Turkish market.
Economic conditions of Turkey will also have affect on the consumer’s spending behavior on
coffee and snacks. However, according to the recent surveys, people manage to get a cup of
coffee and a snack even in tough financial situations.
Lack of ownership of coffee farms can lead to price fluctuations
These can be tax changes, currency changes, new laws and rules, as well as the government
policy changes
PESTEL Analysis
There are several factors in the macro environment which will affect Caffé Nero while expanding
business in Turkey.. These all are discussed below with the help of PESTEL model.
Political Factors
Turkey government policy changes
Economic Factors
Economic crises in Turkey; changes in the disposable income will influence the purchase level of
consumers
Quick expansion of coffee shops in Turkey
Demand for Turkish coffee by the older Turkish consumers
Social Factors
More than 60 percent of population in Turkey is under 30 and moving towards the western
brands
Increasing trend of coffee among Turkish people
Due to financial crises, Turkish people prefer to have coffee and snack at the coffee shop instead
of spending money on lunch or dinner in a restaurant
Technological Factors
new technologies create new products and new processes. MP3 players, computer games, online
gambling and high definition TVs are all new markets created by technological advances. Online
shopping, bar coding and computer aided design are all improvements to the way we do
business as a result of better technology. Technology can reduce costs, improve quality and lead
to innovation. These developments can benefit consumers as well as the organisations providing
the products.
– Use of technology can improve operational efficiencies
Environmental Factors
environmental factors include the weather and climate change. Changes in temperature can
impact on many industries including farming, tourism and insurance. With major climate changes
occurring due to global warming and with greater environmental awareness this external factor is
becoming a significant issue for firms to consider. The growing desire to protect the environment
is having an impact on many industries such as the travel and transportation industries (for
example, more taxes being placed on air travel and the success of hybrid cars) and the general
move towards more environmentally friendly products and processes is affecting demand
patterns and creating business opportunities.
Legal Factors
Turkey government controls laws, rules and regulations; consumer laws, competition laws,
employment laws, health and safety lesgislation
Culture
Understanding the culture is the most important issue in the development of cross-cultural relationships
and one of the major issues faced by the multi-national organizations. They face it internally within the
human resource development as well as externally with in relations with the buyers, suppliers and also
customers(Tse, Lee, Vertinsky and Wehrung 1988)
Culture has also been described as how people think and behave as a society
(Hofstede 1980) and how group problem solving and what basic assumptions those groups
use during their problem solving
Hofstede (1980) defined culture as how people think and behave in a society. It can also be
defined by what basic assumptions people use to solve their problem(Trompenaars 1994)..
Hofstede (1980, 1984),
Hofstede and Bond (1988) and Trompenaars (1994) all developed cultural dimensions by
which different national cultural patterns can be compared. Cultural dimensions simplify
the comparison process by highlighting the main elements on which national culture can be
compared. These ‘elements’ are common across all national cultures. National culture
pertains to the culture of a sovereign country not to the different sub-cultures that exist
within each sovereign country. The next section of the paper will discuss the different
cultural dimensions developed by both researchers.
Hofstede (1980) highlighted four cultural dimensions: power distance; masculinity/
femininity; individualism/collectivism; and uncertainty avoidance.
Hofstede and Bond (1988) did note that all societies are unequal and
therefore there will always be some power distance values in society, but that in some
societies the equality gap is greater than in other societies
