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Cafe Coffee Day

Essay by   •  February 25, 2013  •  Case Study  •  575 Words (3 Pages)  •  1,120 Views

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Café Coffee Day (CCD) is a division of India's largest coffee conglomerate, Amalgamated Bean Coffee Trading Company Ltd. (ABCTCL). They have captured most of the market in India by focusing on Accessibility, Affordability and Acceptability.

Let us analyse how the five forces that shape the industry environment according to Porter are affecting the strategy for CCD.

1. Bargaining Power of Suppliers: The main suppliers for CCD would be the milk suppliers and the coffee suppliers. There are thousands of coffee farms in India cultivating lakhs of acres of coffee trees. India is also considered the largest producer of Milk in the world. Hence, the Bargaining power of suppliers would be very low in the industry as CCD has many alternative suppliers of milk and coffee.

2. Threat of New Entrants: The funds required for establishing a coffee shop are very low. The investment is required for leasing/ renting the place, Coffee machines, Interior decoration, furnishings, employee salaries and raw materials. Also, the return would be pretty high considering the high margins. It is very easy to establish and maintain as no special knowledge is required. Hence the threat of new entrants is very high in this industry. There are many local coffee shops in major cities which are local to those cities and create a little impact on the CCD customers. None the less, considering the ease of establishment and opportunity for growth, this is a very attractive industry.

3. Rivalry among Competitors: Though CCD has captured many of the major and minor Indian cities; India still has a huge market for this industry considering its vast size and population. There is a stiff competition from big players like Barista, Costa Coffee, and small local coffee shops. Starbucks is also looking to establish itself in India by partnering with TATA. Though Affordability of CCD attracts many customers, in the long run the competitors could pose serious threat to them with their attractiveness. Hence, there is high rivalry among the competitors.

4. Bargaining Power of Buyers: As I have mentioned, Affordability is one of the key strategies of CCD. It is what makes them attractive in the Indian market coupled with their accessibility and ambience. But however, there are other players in the industry with little differentiation that makes the switching costs very low. So the bargaining power of customers is high to medium.

5. Threat of Substitutes: As discussed in the class, it is not the coffee that makes a coffee shop attractive but the ambience that it provides to people so that they can spend time with their friends and relax. There are very few but strong alternatives to Coffee shops like pubs, restaurants, Sports Bars that are coming up slowly that run their business in this format. To state one of many such examples, "VAC's Pastries" in Hyderabad, poses

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