Competitive Analysis for a New Coffee Shop in Japan

Business Studies

Competitive Analysis for the Bean

Before opening a coffee shop, called The Bean, at the Yokosuka Naval Station, Japan, it is necessary to consider the competitive environment. A competitive analysis looks at the competition that exists within the proposed market, this requires the identification and consideration of the types of firms and products that 'The Bean' will need to effectively compete with if the venture is to be successful. The competition may be divided into different types of competition; the first category will direct competition, firms that are seeking to compete in the same market with the same, or a very similar product. Firms that are competing for the same market, with a differentiated product will also provide competition. It may also be argued that the firm will also compete with companies that provide a different product, but satisfies the same customer needs (substitute products) (Mintzberg et al., 2011).

As The Bean will provide an American coffee shop experience, the direct competition which provides similar experience includes firms such as Starbucks and Doutor Coffee. Starbucks is a well know iconic U.S. brand, which is well-known in Japan, having entered the market in 1995 (Schultz, 2011), with a cafe in Yokosuka since 2004 (Montgomery, 2004). Starbucks offers a range of different gourmet coffees which are all roasted and ground in-house. Products in the stores include coffees such as latte, cappuccino and espresso, with the ability to customize the coffee to personal tastes with the addition of different flavored syrups, such as caramel, vanilla, and hazelnut (Starbucks, 2014). The drink may be customized with different types of milk, including soya milk, with the drinks offered in three sizes, to drink in or take away (Starbucks, 2014). The range also includes teas, hot chocolate and a range of chilled blended drinks, trade markets as Frapachinos, and bottled drinks, in addition to complimentary goods including sandwiches, biscuits, and cakes (Starbucks, 2014). The firm is strongly differentiated with its well recognized brand name, supported by a high level of marketing. The premium brand competes not only with a premium product, but by seeking to provide a premium coffee drinking experience, in comfortable surroundings, offering additional services such as free wi-fi (Starbucks, 2014). This is a strong competitor, which is already established with a franchise in Yokosuka.

Doutor Coffee is another large coffee shops company in Japan, which has several outlets in Yokosuka. The company specialized in roasting coffee and has a large number of franchise coffee houses providing a European coffee house experience which the Excelsior Cafe chain and Doutor Gourmet Coffee Shops. Doutor Coffee is an important competitor, not only because there are several of the chains coffee shops in Yokosuka, but because it is a strong competitor in Japan; it has more than 900 branches in Japan and is listed on the stock exchange. The growth strategy has been similar to Starbucks, with the use of the franchise model (Doutor Coffee, 2014). The firm has a smaller range of drinks compared to Starbucks, but also seeks to provide a comfortable experience, with comfy chairs. Coffee and other drinks and complementary items can be eaten on the premises or taken away. The take away cups have a cheaper feel as they are made of polystyrene. If a customer decides to drink in the cafe, they will be sitting in an environment where smoking is allowed, a point of differentiation from Starbucks (Lewis, 2003). The Doutor Gourmet Coffee Shops are more upscale that the Excelsior Caffe chain, with the Excelsior Caffe chain offering a bright and vibrant interior design. The placement of the cafes, and pricing point, is to the middle market.

There are also independent coffee shops, these are known as kissaten locally, and tend to offer a more limited choice in terms of the coffee products, but also offer tea, including the popular green tea. The independent stores tend to have lower prices, and may include small shops with have limited seating, and patisserie style outlets where there are a wide range of cakes and snacks. Some of these outlets have been established for generations, others are newer, but most provide a more Japanese experience, the quality of these stores can vary greatly.

When looking at competing firms, it is also necessary to look at products which may compete, in a different way. The desire for high quality coffee has resulted in a thriving retail coffee sector, with ready to drink coffees and specialist gourmet coffees sold in supermarkets and convenience stores. Doutor Coffee has a range of coffees sold in cups in convenience stores, including Doutor Sweet Potato Coffee, Doutor Soft Latte, Doutor Cafe au Lait, and Doutor Banirarate, a vanilla latte (Doutor Coffee, 2014). These are sold in ready to drink cups, and are priced at approximately between 100 and 200 yen (Doutor Coffee, 2014).

Shop bought coffee for a home experience includes UCC Ueshima Coffee Co., Ltd. Based in Kobe; this firm became well-known when their coffee was featured in a 1997 anime film "The End of Evangelion." The firm created coffee cans featuring characters from the film. This alliance has continued, with the latest firm released in 2009 (Ornette, 2009). The coffee in a tin is less direct competition, but provides for a ground coffee taste in the home.