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Marketing Strategy for Cafe Xaragua
Posted by Addison on Mar-29-2023
Introduction
The report primarily focuses on the marketing strategy of Cafe Xaragua to give a reader an overview of the growth dynamics of the company. Recently, several strategic issues and managerial problems have been identified in marketing strategy of Cafe Xaragua that have drawn the attention of the entire management to devise new marketing strategies that can help the company to resolve the problems to continue its expansion and future growth to achieve a competitive edge in the marketplace. This report is written to provide Cafe Xaragua marketing strategy with the required strategic solutions using multiple frameworks and tools.
External Environmental Analysis
PESTLE Analysis is the most popular strategic tool that is used by many organizations when conducting an external environmental analysis. This framework typically focuses on political, economic, social, technological, legal, and environmental factors that can impact the macro environment of the business (Zalengera, E.Blanchard, & C.Eames, 2014).
Political factors
Political Stability
Cafe Xaragua operates in a politically stable environment, which means that it provides the company with more friendly and stable business growth opportunities (Christodoulou & Cullinane, 2019). However, since Cafe Xaragua operates in multiple countries, there are high chances of various political tensions that can cause instability in market growth trends for Cafe Xaragua. This can limit the company's growth opportunities.
Pressure Groups
Moreover, it is important for Cafe Xaragua to analyze and monitor the activities of pressure groups. Cafe Xaragua can create a close collaboration with these groups to achieve long-term goals.
Corruption and Changing Policies
Cafe Xaragua must keep a close check on the changes in any government policies because they can directly impact the performance of the business. The operations of Cafe Xaragua are its different countries can become unpredictable if there is a high level of corruption and weak enforcement of the law (Achinas, Horjus, & Achinas, 2019).
Trade and Taxes
The profitability of a company is directly influenced if there are high taxes in a country. Cafe Xaragua should look into the taxation policies in each country before further expanding its operations (Eierle, Hartlieb, & C. Hay, 2022). Similarly, if there are high trade restrictions, it can get difficult for Cafe Xaragua to import and export its products, impacting the relationships with trade partners.
Economic factors
GDP, Employment, and Exchange Rates
The long-term growth strategies of Cafe Xaragua are majorly determined by the GDP growth of the economy. The purchasing power of consumers significantly increases with a high GDP. High unemployment in an economy shows that Cafe Xaragua can benefit from surplus labor with low-cost wages. Furthermore, Cafe Xaragua should monitor interest rates as it can affect the borrowing ability. With that being said, if there is a high fluctuation in currency, the profitability of Cafe Xaragua can also be influenced (Sadeghi, 2020).
Labor Market
It is important for Cafe Xaragua to make appropriate predictions regarding the labor market conditions in a specific economy (Sadeghi, 2020). This can help the company to hire a more talented workforce that can improve the performance of the company.
Industry lifecycle stage
Cafe Xaragua should consider expanding its operations in growing economies to benefit from growth opportunities. It can be challenging for Cafe Xaragua to enter a mature industry at a growing stage (Villamarín & Pinzon, 2017).
Social factors
Demographics
Cafe Xaragua should study the changing patterns of demographics, such as socio-economic variables, the aging population, and trends in migration (Barbara & Cortis, 2017). This can help the company to identify the right segment to target with a high potential for growth opportunities.
Cultural norms
Every country and society has a distinctive culture with different norms and values. It is important for Cafe Xaragua to study and identify social class stratification.
E-commerce
There has been a significant shift in online shopping. Cafe Xaragua needs to adopt necessary changes considering the growing use of social media networking sites and mobile phones to increase its revenue and overall profitability (Villamarín & Pinzon, 2017).
Technological factors
Technological innovations
On-going technological innovations should be considered carefully by Cafe Xaragua so that it can stay ahead of the competitive market. Cafe Xaragua should continue working on introducing major technological transformations to achieve a competitive advantage (Rastogi & TRIVEDI, 2016).
Social Media Marketing
The collaboration with consumers has been growing rapidly because of the development of communication technologies (Rastogi & TRIVEDI, 2016). Cafe Xaragua can take it as a great opportunity where can use innovative strategies to expand its customer base.
Environmental factors
Waste Management
Cafe Xaragua should implement the latest technological tools to minimize environmental pollution. Waste management is now getting popular and has been considered a major business norm (Igliński, Iglińska, & Cichosz, 2016).
Climatic Conditions and Eco-friendly products
Climatic conditions can influence the efficiency of Cafe Xaragua. The cost of a company's operations can be increased if there are extreme weather conditions. Similarly, there has been an increasing demand for eco-friendly products. Cafe Xaragua should work towards adopting more sustainable business practices to gain customer trust (Barkauskas, Barkauskienė, & Jasinskas, 2015).
Legal factors
Employee protection laws
It is important for Cafe Xaragua to follow the health and safety laws for its employees that are issued by the authorities to ensure the safety of its labor.
Consumer laws
Cafe Xaragua should protect its customer data to ensure their security and privacy concerns. Moreover, it should set the right price with the right product quality (Igliński, Iglińska, & Cichosz, 2016).
Porter's Five Forces
Cafe Xaragua can use Porter's Five Forces to analyze the competitive landscape of the industry. The strategic planners of Cafe Xaragua can use this framework to make effective decisions.
Threat of New Entrants
Cafe Xaragua operates in an industry where it is difficult to achieve economies of scale, making it difficult for new entrants to enter the industry (Yunna & Yisheng, 2014). There is a strong product differentiation with high capital requirements. Moreover, it is difficult to establish a distribution network easily in this industry. Thus, Cafe Xaragua has a weak threat of new entrants.
Bargaining Power of Suppliers
There are more suppliers in the industry of Cafe Xaragua. This shows that there is less control over prices. Organizations like Cafe Xaragua can easily switch to other suppliers because of less differentiation in products. This makes the bargaining power of suppliers a weak force in Cafe Xaragua's industry (H. Th. Bruijl, 2018).
Bargaining Power of Buyers
The industry in which Cafe Xaragua operates has many suppliers as companies to buyers. This means that buyers have fewer options and do not have control over prices (H. Th. Bruijl, 2018). The high product differentiation shows that there are few alternative products for buyers, and there is a high switching cost. This makes the bargaining power of buyers a weak force in the industry.
Threat of Substitute Products and Services
Cafe Xaragua operates in an industry that offers very few substitutes to its customers. The substitutes that are available are expensive because of their high quality (Zhao, Zuo, & Wu, 2016). However, companies like Cafe Xaragua sell their products at a lower prices. This clearly shows that buyers may feel reluctant when switching to other substitutes.
Rivalry Among Existing Firms
Cafe Xaragua operates in a less competitive industry. The already established companies have a large market share, meaning that any move by the existing companies will be noticed. Moreover, Cafe Xaragua has to take several competitive actions to become a market leader, as the industry is likely to grow rapidly in the coming years (Aithal, 2020).
SWOT Analysis
Cafe Xaragua can make use of SWOT analysis to effectively analyze the company's internal strengths, weaknesses, external opportunities, and threats.
Strengths
Strong distribution network
Cafe Xaragua operates in various countries and has multiple outlets that help the company to deliver its products quickly to its customers. This shows that Cafe Xaragua has a strong distribution network (Benzaghta, Elwalda, & Mousa, 2021).
Financial position
Cafe Xaragua has established itself as a strong financial company over the past few years. It has generated enough profits that can be used to finance any future expenditure (Basset & Mohamed, 2018).
Automation
Cafe Xaragua has adopted the latest and innovative technology in its business operations, which has allowed the company to reduce its production costs (Benzaghta, Elwalda, & Mousa, 2021).
Social media presence
Cafe Xaragua has been successful in establishing itself as a strong brand on social media platforms that, includes Facebook, Twitter, and Instagram. This increases customer engagement (Basset & Mohamed, 2018).
Weaknesses
High rent costs
Cafe Xaragua has its manufacturing plants on rented properties. This increases the company's overall costs, and a significant portion of Cafe Xaragua's profits go into paying the rent (Comino & Ferretti, 2016).
Research and Development
Cafe Xaragua has not been able to conduct effective and in-depth market research regarding new markets and products (Comino & Ferretti, 2016). Customer trends are always evolving, and it is important for Cafe Xaragua to take immediate action in conducting its research.
Centralized Power
There has been a centralized decision-making process in Cafe Xaragua. This means that employees have to consult their managers before taking any decision themselves. This slow down the decision-making process. and employees feel demotivated. Thus, impacting the operations of Cafe Xaragua (Comino & Ferretti, 2016).
Opportunities
Presence of Internet
Cafe Xaragua has a great opportunity of expanding its business by using the internet. Since there has been a growing trend in online shopping Cafe Xaragua can boost its sales by expanding its online stores (Yan, Xia, & X.H.Bao, 2015). Additionally, social media platforms can be updated constantly to engage customers with all the new products introduced by Cafe Xaragua.
Technological Innovations
Technology is constantly evolving, and Cafe Xaragua can benefit from it by implementing the technology in its various departments. Manufacturing process can be completed automated, which can eventually help Cafe Xaragua to reduce its costs (Taghavifard, Mahdiraji, & Alibakhshi, 2018).
Globalization
The continuous increase in globalization has allowed Cafe Xaragua to expand its business operations across borders. It has the opportunity of entering new markets (Yan, Xia, & X.H.Bao, 2015).
Threats
New Entrants
Recently, many companies are entering the industry in which Cafe Xaragua operates. This means that there are chances of increased competition. This poses a threat to Cafe Xaragua as it has to put more effort into gaining market share (Taghavifard, Mahdiraji, & Alibakhshi, 2018).
Fluctuations in exchange rates
The exchange rates are highly subjected to fluctuations that negatively impact the sales of Cafe Xaragua. Cafe Xaragua needs to study the changing fluctuations to keep up with its profitability (Vlados & Chatzinikolaou, 2019).
Consumer trends
The consumer trends are constantly changing, that causes changes in their demands. This puts pressure on companies like Cafe Xaragua, who have to continuously meet their consumer demands. Moreover, there is a significant threat from substitute products because consumers tend to switch to these companies (Vlados & Chatzinikolaou, 2019).
Marketing Mix
Product
Cafe Xaragua operates in a wider range of products. Each of the products has its further product lines that are sold under the Cafe Xaragua. This means that customers can benefit from a large variety of products. Cafe Xaragua sells highly differentiated products with higher quality that, gives it a competitive edge (Khan, 2014).
Price
Cafe Xaragua follows a competitive pricing strategy. The company also takes into account all its costs before setting its prices (Londhe, 2014). Currently, Cafe Xaragua is using a product bundle pricing strategy where customers get bundled products at lower prices.
Place
Cafe Xaragua has adopted various distribution channels to reach its customers. The company sells its products through its website directly (Thabit & Raewf, 2018). Apart from this, it also distributes its products to wholesalers, who then further sell it to small retailers. Cafe Xaragua has its own retail stores where it sells its products directly to consumers.
Promotion
Cafe Xaragua uses traditional and modern promotional techniques. TV ads are used to reach a larger audience. Cafe Xaragua also advertises on social media sites such as Facebook, Instagram, and Twitter. Events are sponsored by the company. Moreover, Cafe Xaragua participates in several exhibitions (Londhe, 2014).
VRIO Analysis
Valuable
Cafe Xaragua engages in corporate social responsibility activities. This has allowed the company to establish a strong brand image. Since, Cafe Xaragua has a well-established distribution network, the products are reached to consumers in a timely manner. Cafe Xaragua has been able to introduce innovation in its various departments, which has lowered its costs (Ariyani & Daryanto, 2018).
Rare
Cafe Xaragua operates in multiple countries. This means that its global presence is a rare factor. It works towards an organizational culture that encourages teamwork, and creativity among employees (Ariyani & Daryanto, 2018). Cafe Xaragua is also able to adapt to different societies, and cultures due to its exposure to various locations.
Inimitable
The products produced by Cafe Xaragua are of a high quality. Customers make repetitive purchases, and thus it is an inimitable source. (Miethlich & G. Oldenburg, 2019). Cafe Xaragua has a significant placement of its stores that gives an easy access to its customers. Additionally, the company has been using a competitive pricing strategy because it has been able to achieve economies of scale, thus lower production costs.
Organization
Cafe Xaragua, over the years, has successfully gained a financial strength. Cafe Xaragua can make use of these finances to invest in major acquisitions that give it more growth opportunities. The advancements in technology have allowed Cafe Xaragua to manage its operations more effectively. Distribution channels are another resource for Cafe Xaragua. The supply chain is very efficient, resulting in more revenue (Miethlich & G. Oldenburg, 2019).
Value Chain Analysis
Primary Activities
Cafe Xaragua is involved in primary activities such as the production of goods and then selling them to the target audience.
Inbound Logistics
Cafe Xaragua should ensure to have a strong relationship with its suppliers to avoid any inconvenience in receiving, storing, and distributing the product. This will help Cafe Xaragua to have a more effective transformation of a product (Ariwibowo & Saputro, 2021).
Operations
Operations involves manufacturing as well as services. Cafe Xaragua should conduct an in-depth analysis of its operational activities to remain ahead of its competitors (M.El-Sayed, W.Dickson, & O.El-Naggar, 2015). This will increase the productivity of the company, and more profits can be generated.
Outbound Logistics
It is important for Cafe Xaragua to analyze, and optimize its outbound logistics so that it is able to achieve the long-term corporate goals. Managing outbound activities properly reduces the chance of late deliveries (M.El-Sayed, W.Dickson, & O.El-Naggar, 2015).
Marketing and Sales
Cafe Xaragua should use various marketing and sales techniques to differentiate its products from its competitors. Cafe Xaragua can adopt marketing and sales activities such as promotional activities, advertising, and building strong relationships with suppliers and customers (Ariwibowo & Saputro, 2021).
Services
In terms of services, Cafe Xaragua must ensure that it provides its customers with the pre-sale and post-sale services (Jaligot, C.Wilson, & R.Cheeseman, 2016). The post-sale service typically falls into the promotional activities of a company. Cafe Xaragua can thus develop its customer loyalty.
Secondary Activities
Firm infrastructure
A strong infrastructure of a firm can enable Cafe Xaragua to optimize the entire value chain of the company. Moreover, by controlling the infrastructure activities, Cafe Xaragua can be in a better position to get a strong foothold in the competitive marketplace (Darmawan & Wiguna, 2014).
Human Resource Management
Cafe Xaragua should place its major focus on analyzing the different aspects of HR, such as recruitment, selection, training, and performance evaluation of employees (Darmawan & Wiguna, 2014). Cafe Xaragua can reduce its costs by identifying and analyzing the costs associated with hiring and training.
Procurement
Procurement is an important element in the Cafe Xaragua's value chain. It is important for the company to assess its overall procurement activities so that the inbound, outbound, and operational activities can be optimized (Kumar & P. V., 2016).
Ansoff's Matrix
Cafe Xaragua can implement Ansoff's Matrix to make decisions regarding its business growth. This framework includes four different strategic choices that can be selected by Cafe Xaragua.
Market Penetration
Production capacity
Cafe Xaragua can increase its overall production capacity. This will allow the company to reach more wider audience in an existing market. Cafe Xaragua can also benefit from the reduced costs by expanding its production capacity. Thus, Cafe Xaragua can attract more customers using competitive pricing (Madsen, 2017).
Marketing Investment
Cafe Xaragua can penetrate the market by investing more in marketing and sales activities. This will help the company to engage with its customer more effectively, leading to more potential customers (Dawes, 2020).
Distribution Channels
Innovative and unique distribution channels can be explored by Cafe Xaragua. This will enable the company to reach new segments and groups of customers (Dawes, 2020). In addition to this, Cafe Xaragua can penetrate the market by improving its supply chain, giving more accessibility to customers.
Joint Ventures/Acquisitions
Cafe Xaragua can enter into joint ventures or can take over other leading companies of the market. This will give Cafe Xaragua more market share.
Market Development
Research & Development
Cafe Xaragua should keep on investing in its R&D department, so it is able to identify the changing trends of the market. This will help Cafe Xaragua to target the right market at the right time (Mukangai & Murigi, 2021).
Expanding Regionally
Cafe Xaragua can enter in a new market by expanding its operations regionally. This includes considering different cities of the country. Cafe Xaragua must consider any cultural differences when entering a new market (Mukangai & Murigi, 2021).
New Segments
New segments of the current market can be explored (Mukangai & Murigi, 2021). Cafe Xaragua can add new features and product uses to its existing products that satisfies the needs of a different customer segment.
Product Development
Modifications
Cafe Xaragua can modify the existing product by improving its features to enhance the product offerings.
Launching additional products
Cafe Xaragua should invest in its R&D department so it can come up with new and innovative products that attracts and fulfill the needs of the target audience. This will boost the sales of Cafe Xaragua and will increase profitability (Khajezadeh, Niasar, & Asli, 2019).
Diversification
Vertical Integration
Cafe Xaragua can consider vertical integration. This will allow Cafe Xaragua to develop and launch new products that are similar to its existing product category (Khajezadeh, Niasar, & Asli, 2019).
Horizontal Integration
Cafe Xaragua can diversify its business operation using horizontal integration. This means that the new products and services of Cafe Xaragua will not be related to its current products (Dhir & Dhir, 2015).
A new business diversification
Entering into a completely new business can be considered by Cafe Xaragua. The organization can work towards starting a new business that can give a company more growth prospects in the future (Dhir & Dhir, 2015). Cafe Xaragua can conglomerate with the help of mergers and acquisitions.
Conclusion
To conclude, it could be said that Cafe Xaragua can resolve its current managerial and strategic problems by focusing on its existing products. The company can adopt more attractive marketing strategies that can help Cafe Xaragua to boost its revenue and profitability. It is recommended to focus on maintaining strong supplier relationships. Moreover, it is also advised to focus on more innovative products so Cafe Xaragua can remain competitive in the market.
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