Get instant access to this case solution for only $15

Commonwealth Joe Coffee Roasters Case Solution

Solution Id Length Case Author Case Publisher
1734 3135 Words (11 Pages) Alexander J. MacKay, Ramon Casadesus-Masanell Harvard Business School : 719451
This solution includes: A Word File A Word File

Commonwealth Joe Coffee is a speciality coffee provider in Washington, D.C. Metropolitan area. The company was founded in 2012 and now has grown to consist of two retail stores, and extension into office and wholesale businesses. The company faces a dilemma in its expansion strategy. The company needs to decide whether it should expand in a coffee retail segment or focus on the office segment where it provides kegs of cold brewed coffee in business to a business setting. The company has to decide on one of these options as it does not have the financial resources to pursue both businesses simultaneously. Moreover, each business line requires attention and focusing on one will lead to a lack of attention to the other. This case solution recommends the decision that Commonwealth Joe Coffee should undertake, along with strategic advice on how the expansion plan for Commonwealth Joe Coffee should be. It first carries out a VRIO analysis, Porter's Five Forces analysis and Porter's activity map for Commonwealth Joe Coffee. It then lists the pros and cons of pursuing each strategy using findings from the previous analysis. Lastly, a strategy is recommended for Commonwealth Joe Coffee.

Following questions are answered in this case study solution

  1. Introduction

  2. VRIO Framework for Commonwealth Joe Coffee

  3. Porter’s Five Forces for the Coffee Industry

  4. Porter’s Activity Map for Commonwealth Joe Coffee

  5. Pros and Cons of Each Strategic Option

  6. Recommendation

Case Analysis for Commonwealth Joe Coffee Roasters Case Solution

2. VRIO Framework for Commonwealth Joe Coffee

The internal resources and capabilities of a company can be analysed using the VRIO framework to asses whether sustained competitive advantage is provided by these (Barney, 1991). This framework will help analyse Commonwealth Joe Coffee to understand which of the two options is more suitable for the company to pursue, given its capabilities and resources. 

Following are the resources and capabilities of Commonwealth Joe Coffee:  

  • The company had a certain level of brand awareness established that it could leverage onto. This was established through the quality of coffee, which its customers remembered. Kegerator on wheels was used to promote the brand at events and outside metro shops where they would hand out coupons.

  • The company has knowledge and experience in retail coffee shops. This was achieved through their ownership of The Java Shack. The Java Shack business allowed the team at Commonwealth Joe Coffee to understand the business extensively. It allowed them to experiment with product modifications and price variations. It allowed them to establish the standard operating procedures for the business. The founders visited Japan to understand speciality coffee retail better.   

  • The employees at Commonwealth Joe Coffee, who was passionate for coffee and were willing to commit to the company in its expansion plans. This was something that even the large competitor Starbucks did not have.

  • The quality of the coffee was a resource for Commonwealth Joe Coffee. This is because the company had developed a control on quality and customer experience. The coffee served by them was speciality coffee. This was roasted by a master roaster who had years of experience in bringing out the best flavours of coffee.

  • The Pentagon City retail location was also a resource for Commonwealth Joe Coffee. This was established using $950,000 worth of investment and was designed by a top architecture firm. The location played an important role in establishing a brand reputation amongst customers.

Each of this resource is analysed in terms of Value, Rareness, Imitability and Organization below:

1. Brand Awareness

Value

This has helped the brand expand in the office category. It has also helped attract customers when it set up its store in Pentagon City.

Rarity

This is a rare resource that is not possessed by all brands, especially new players.

Imitability

This resource is not costly to be imitated by competition through increased spend on marketing activities.

Organisation

This resource is not utilised by the company to its potential due to a lack of large-scale operations.

2. Experience and knowledge of coffee retail

Value

The knowledge and experience helps provide superior quality service.

Rarity

Knowledge and experience are rare. The experience and knowledge of specialty coffee retail is only with a few competitors.

Imitability

The cost of imitation is high. This is achieved over the years by training and experimentation.

Organisation

The new outlet that was opened in Pentagon City and the results that it delivered, shows that this resource is organized to be used by the company to its advantage. .

3. Employees

Value

These are passionate and have helped the company achieve various milestones since its creation.

Rarity

This is a rare resource as it is not even possessed by large corporations like Starbucks.

Imitability

This is not costly to imitate as companies with effective recruitment would be able to do so.

Organisation

This resource is organised to provide the organisation with a competitive advantage as seen through the way in which employees were passionate about solving issues in the office business.

4. Quality of Coffee

Value

This is the differentiating factor between the coffee provided by Commonwealth Joe Coffee and that of competition.

Rarity

This is a rare resource, and this level of quality is not provided by competition except Blue Bottle.

Imitability

This resource is difficult to imitate as it requires forming direct relationships with good quality coffee bean suppliers. 

Organisation

This resource is organised to provide the company with a competitive advantage.

5. Pentagon City Location

Value

This retail outlet provides value to the business as it helps to establish brand reputation and awareness for the brand.

Rarity

This can be copied by competitors that have enough financial resources, which makes the resource not rare.

Imitability

Setting up a new store is not costly to imitate especially for large corporations like Blue Bottle.

Organisation

This is not used by Commonwealth Joe Coffee to its advantage.

The VRIO analysis shows that sustained competitive advantage is provided by the two resources and capabilities; knowledge and experience in speciality coffee retailing and the quality of coffee. On the other hand, a temporary competitive advantage is provided by brand awareness and the company's employees.

3. Porter’s Five Forces for the Coffee Industry

This section carries out Porter's Five Forces Analysis for the retail coffee and office business simultaneously to assess which of these segments is more attractive in terms of competitive forces. These competitive forces help determine the ability of a company to achieve a competitive advantage within the industry (Porter, 1985).

i. The threat of New Entrants

Setting up new coffee businesses is a costly process that requires investment especially in speciality coffee. This requires even more investment if a company wants to set up the supply chain from roasting to retail. Comparatively, setting up regular coffee retail is cheaper. Threat of new entrants is slightly stronger force due to venture capitalists, which can and have provided various coffee businesses with funds in the past as seen from exhibit 3 (Mackay, & Casdesus-Masanell, 2018). 

The threat of new entrants is a weaker force in the office business as new entrants would need a significant level of brand awareness to survive. In business to a business setting, brand awareness helps drive sales through word of mouth. It also requires high amounts of investment in distribution, which is not easy to establish by small new entrants.

ii. Threat of Substitute Products

The threat of substitute products is not high within the speciality coffee retail segment. This is because the quality is important in their purchase for speciality coffee. The customers in this segment are less likely to substitute for cheaper coffee or cheaper alternatives.

The threat of substitute products is higher within the office segment as office workers are likely to go to other substitute products that meet their daily caffeine needs. These could include tea, drinks and other beverages.

iii. Bargaining Power of Suppliers

This is a strong force within the coffee retail segment. This is because direct relationships are established with coffee roasters who are less in number (Melanie, 2017). This makes switching costs high for suppliers. 

The bargaining power of suppliers within the office business is also high as the coffee roasters are the same as those for the retail business. This additionally requires a supply of Kegs and branding on these, whose suppliers are also less in number.

iv. Bargaining Power of Buyers

The strength of this force is medium within the speciality coffee retail segment. This is because there are a large number of coffee shops among consumer choices. This makes switching costs low for buyers. However, it is to be noted that the consumers in the market are brand loyal and do not switch brands frequently.

This force, however, is lower in the office segment as the number of companies that provide cold brew coffee are low. This makes the switching costs high for buyers. Cold brew coffee is only provided by the competitor Compass. Stumptown tried delivering to offices but failed to satisfy customers.   

v. Competitive Rivalry

The competitive rivalry within the speciality retail segment is a strong force. The direct competition in the market involves competitor Compass Coffee, Bowtruss, La Columbe, Philz Coffee, Stumptown and Blue Bottle Coffee. The latter three are not currently in the D.C. area. However, Blue Bottle is expected to enter the D.C. area, which is a threat as it has quality comparable to Commonwealth Joe Coffee. The indirect competition exists from Starbucks that sells regular coffee but has decided to enter the speciality coffee market as well.

The completive rivalry is low within the office segment. This is because only a few competitors can provide cold brewed coffee, which includes Compass and Stumptown. These have failed to satisfy customers. However, there exists the threat of Blue Bottle entering the market. This threat is moderate as a result of strong brand loyalty in the segment.

4. Porter’s Activity Map for Commonwealth Joe Coffee

This tool helps show the connection between the challenges and opportunities at hand with the capabilities and resources possessed by Commonwealth Joe Coffee. The diagram below shows this connection:

Get instant access to this case solution for only $15

Get Instant Access to This Case Solution for Only $15

Standard Price

$25

Save $10 on your purchase

-$10

Amount to Pay

$15

Different Requirements? Order a Custom Solution

Calculate the Price

Approximately ~ 1 page(s)

Total Price

$0

Get More Out of This

Our essay writing services are the best in the world. If you are in search of a professional essay writer, place your order on our website.

Essay Writing Service
whatsapp chat icon

Hi there !

We are here to help. Chat with us on WhatsApp for any queries.

close icon