ANALYSIS OF MARKETING ENVIRONMENT

SWOT Analysis

Strengths

• Financial strength is very high with tremendous success since the hotel chain is operation in Sri Lanka for over 50 years.
• Professionally managed.
• Well trained and treated employees.
• Famous brand associated with high quality.
• World class recognition.
• Product loyalty.

Weaknesses

• High price
• Absence of locations in rapidly developing cities such Jaffna, Trinco and Baticolo.
• Awareness of branded coffee shop concept among the local customers is comparatively low. 

Opportunities

• Emerging new markets like Jaffna, Baticolo and Trinco.
• Booming of tourism industry.
• Political stability.
• Economic growth.
• Social developments towards westernize culture.

Threats

• Growing brand competition within the coffee shop industry and generic competition from fast food restaurants such as KFC, McDonald and Pizza Hut.
• “Happy hours” from hotels and restaurants.
• Economic crisis in Europe.
• Inflation.

Micro Environment

Competitors

There are currently four branded coffee shops in Sri Lanka namely;

• Barista Lavazza
• Pascushi
• Coffee Beans & Tea Leaves
• Java Lounge.

Porter’s five forces analysis:

• Competitive Environment - The competition in the coffee market is not high due to the awareness for branded coffee is low in Sri Lanka. Entry of Star Coffee Shop will increase awareness about coffee and enhance the community of cafe goers. There is enough room for every one to grow. Coffee shops in star class business hotels also to be considered as competitors.
• Threat of new entry - As government expecting more foreign investment as the tourism industry boom, there is a threat of more new coffee shops will be open in the near future. According to “Sunday Leader” newspaper published on 01/01/2012, the Starbucks coffee shop is also looking to enter the Sri Lankan market simultaneously with the Indian market.
• Suppliers - There are only two coffee varieties in the world namely Arabica and Robasta. India is the nearest supplier for these varieties and there is a small bargaining power in these suppliers.
• Buyer Power: - Buying power of a single person is medium to low. One person seems to be consuming one coffee cup most of the time and in addition he/she will purchase an addition such as piece of cake or cookie.
• Threat of substitution - McDonald’s coffee and KFC’s crushers are the treat of substitution for a coffee shop. Because these two places have a large existing customer base, and people have already experienced the convenience, it will be a threat to attract customers to a new coffee shop.
• Customer behavior - According to surveys, currently there are approximately 50,000 consumers in Sri Lanka mainly form urban and suburban areas, aware about branded coffee shop concept. These consumers belong to upper class, middle class and emerging new middle class. This 50,000 include top business executives, students who are preparing professional exams like CIMA, CIM and other foreign professional bodies.
• Students of foreign affiliated universities and international schools, lovers representing upper and upper-middle class and also foreigners reside in Sri Lanka on diplomatic missions and NGOs. These sectors want to spend quality time leisurely in coffee shops. MBA students want to discuss their educational matters. Top business executives would like to have business meetings while having a coffee sip. These people are having high or moderate disposable income comparing to lower and lower-middle class.

Macro Environment

Political

Current economical system is mix economic method; it seems to be more liberalizing now. As a result of that, some international brands have already entered in to Sri Lankan market and still some of the famous international brands are waiting to enter to Sri Lankan market.

Current government is the most stable government ever since independence from British in 1948. This government under the leadership of his Excellency President Mahinda Rajapaksha ended a thirty years long standing war.

According to government new policies and future forecasts of country is heading towards the development along with the more weight on tourism industry. Therefore there will be a big opportunity to cater with foreign segment.

So the people preference for this government is high and it seem to be will not change for another 10-15 years.

Economic

GDP growth rate gradually increased up to 8% during last five years. Per Capital income increased US$1402 in 2011 to US$2399 in 2012. Therefore disposable income of consumers increased drastically. According to 2012/13 budget presentation, government expect per capital income to become US$4400 in year 2015.

According to budget forecast 2012/13, the tourism industry is expected to grow by three folds from US$600 millions to US$2 billions by end of 2013. This will be a huge positive sign for branded coffee market as well.

Socio Cultural

Different social classes in Sri Lanka are as below.

• Upper class
• Upper-Middle class
• Lower-Middle class
• Lower class
• Our target is upper-middle class and upper class.

Technological

Future driving force is the role of technology. Line management is a significant issue for coffee shop as often the demand is concentrated in the early morning. To serve customers quickly need to introduce automatic espresso machines to serve less than 2 minutes. As a whole advanced of technology is need to retain customer satisfaction in high levels state of the art technology in the shop helps to server high quality and differentiated products.

Legal

Minimum of US$150,000 investment need to start a foreign franchise operation in Sri Lankan according to government rules and regulations. Board of Investment (BOI) approval also needed to start this type of project.