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Case study: apply your understanding – C operates several hundred…
Case study: apply your understanding
– C operates several hundred coffee shops across country U. Its stores offer a wide variety of coffee and teabased drinks that customers can either drink on the premises or take away. In addition to drinks, C also offers a range of sandwiches and cakes.
– C has a large number of rivals in the intensely competitive coffee shop market in country U, all of which offer a similar range of products to C and at a slightly lower price.
– C has built a reputation for high quality service and is currently the market leader, allowing it to achieve high margins on its products – even in the current economic downturn in country U.
This has allowed C to build a significant cash surplus and it is considering how to further grow its business. At the most recent meeting of the Board of Directors, three directors made suggestions for how to expand the business.
The Finance Director (FD) suggested that C should consider offering a range of other products in its shops. These would include wine and soft drinks as well as hot food. The cash surplus could be used to refit the kitchens of C’s shops and launch a large advertising campaign across the country. The FD suggested that the margins on these items were even higher than those currently achieved on coffee, leading to higher profits for C in the future.
The Marketing Director (MD) disagreed as she felt that C’s coffee shops were currently successful and should not be changed. She recommended investing the cash into opening up branches in neighbouring countries.
She stated that C’s current branding and product range would be suitable for neighbouring countries with few, if any changes. Many of C’s competitors have already entered the countries surrounding country U.
The Operations Director (OD), however, stated that he felt that the coffee and food market in the region was simply too saturated to make further investment worthwhile. Instead, he feels that C should look to invest in a totally new area.
A successful online music store has recently posted significant growth in profits in country U. The OD has identified this as a highgrowth market and feels the cash surplus should be used to purchase this business.
Your task:
1 Explain and justify where each of the director’s proposals would be placed on Ansoff’s matrix (Note: A diagram is NOT required)
2. Identify the strategy suggested by Ansoff that the directors have failed to consider and suggest how this could be applied to C.
3. Discuss the advantages and disadvantages of the CEO’s proposal to purchase the online music store.
