In Cutbacks comfortable environment, customers can sit down and relax with special Jazz and blue CDC while enjoying a wide choice of coffees such as fresh brewed coffees, different Italian-style espresso drinks, cold blended beverages (Production), packaged roasted whole bean coffees, or Via Ready Brew and Viviane Smoothies instant coffee with fresh pastries and other food items. Also, the company mainly relies on word of mouth, so that more and more people have been coming into their stores.
Product prices will not always be very high, and this is en of the reasons that Cutbacks has been attracting so many customers for decades.
1 . Strengths
To begin with Strengths, Cutbacks’ reputation with high brand equity cannot be denied. Cutbacks is one of the most well recognizable brand names with high brand loyalty, perceived quality for fine products and services, and strong brand associations. With almost 9000 cafes and 16000 coffee shops in almost 40 countries worldwide, Cutbacks Corporation is a very profitable organization, earning in excess of $600 million 2004.
The company also cares about the concept of environment, which is mentioned in the session statement as well. The internal environment that Cutbacks tries to create in its stores is a comfortable place where a customer “can sit for five hours with a single cup of coffee’. Relationship with employees is also important asset for the success of Cutbacks. Howard Schultz, the Chairman of Cutbacks wrote that to gain profit and be competitive, famous brand and respect employees, both are necessary (Barbara Farman).
Cutbacks not only has excellent training program, but through effective encouragement policies, it also creates open communication between employees and managers. As all employees have options, they were also called “partners”. The headquarters of the company is even named “Cutbacks support center” whereas management center of information and support functions are provided to the grassroots shops instead. Cutbacks SWOT By loincloths Although widely known to be successful, the company does have some weaknesses.
The first one is its extremely high in pricing. Because it is too expensive, it is easy for customers to switch from drinking Cutbacks coffee to cheaper alternatives. And if imitative pressures increase, the company could be undercut by lower price rivals such as McDonald’s or Costa Coffee.
The second one is the store over-exposure. Around every corner, in every shopping complex, there is always a Cutbacks coffee, if not two. Sometimes, Cutbacks stores are Just inside and outside the same complex. To many stores in the same small areas can lead to the competition among each other (stealing business and customers away from other Cutbacks locations).
Additionally, Cutbacks is trying to add more foods such as sandwiches and salads UT can’t maintain the same level of profit margin as its coffee does. This changes doesn’t go with its mission to serve coffee, which causes confusion. Many customers started to complain that Cutbacks now is more like a fast-food restaurant rather than a coffee house. The introduction of breakfast foods and pastries has caused confusion about their core values and thus damaged their brand image.
Being a famous brand, Cutbacks has lots of opportunities available for further growth and investment.
First is to continue expansion in the global market. Some ewe markets for coffee such as India and the Pacific Rim nations are beginning to emerge. Significant opportunities exist, especially outside domestic US market for joint ventures. Cutbacks could overcome planning restrictions; reduce costs through co-locating at supermarket chains, pubs and restaurants. Licensing its name could provide new streams of revenue. For new distribution channels, co-branding with other manufactures of food and drink, and brand franchising to manufacturers of other goods and services both have potential.
Their technology advancement can also increases the company’s efficiency and effectiveness. Cutbacks has used software developed by a stuffing management technology system called Tales. With this technology, Cutbacks can maintain a database of hundreds of thousands of candidates applying for Jobs. This technology helped increase its efficiency in screening out the potential employees to fill up the positions with the correct candidate.
The efficiency of their automatic espresso machines helps Cutbacks to retain their customers. The machines cut 24 seconds of the time needed to make an espresso.
This helped the company to be able to make heir espresso in less than 3 seconds.
Despite opportunities as above, the external environment still hold potential threats, which can probably put a negative impact on Cutbacks’ development. Among those, reason why Cutbacks dismissed 6,700 employees and closed 300 stores in addition to 600 US store closures announced in 2008 (the Business Journal 2009). What is worse, besides a fall of 6 percent in revenue as reported, its profit, excluding one- time charges, decreased considerably from $208. Million to $113 million last year (the Business Journal 2009). Another main threat of the Cutbacks Corporation is that it is hard to predict whether the coffee market will grow or stay stable in the future because it is likely that some other types of beverage may replace coffee. Also, realizing its negative health effect, many customers have recently made their way to the alternatives such as green tea or black tea, which are more health-friendly. Furthermore, Cutbacks has been facing tough competition for coffee drinkers and other fast-food companies as well. Costa Coffee, The Coffee Been for example, and
McDonald’s which obviously can be seen as one of Cutbacks leading competitors. Positioning itself as a lower-cost substitute to expensive coffee, McDonald’s offered its premium coffee for about 50 cents cheaper than similar Cutbacks offerings (The Associated Press 2008). Accordingly, as a result of McDonald’s success with its Mecca© coffee brand sold about $1. 5 billion last year, Sean Gregory claimed in his article “Cutbacks could no longer sit on the sidelines” (Gregory, S. 2010) All in all, Cutbacks’ weaknesses may probably be outweighed by its significant threatens.
However, this corporation could not be unconcerned with constant threats from its fierce competitors as well as other economic factors. It can be recommended that Cutbacks should carry out possible strategies to diversify the main products, and the most important is to lower its price in order to enhance its competitiveness over other coffee brands. In general, from a far-sighted view, if it can make use of available opportunities and strengths to minimize its shortcomings, Cutbacks can still be the world best and largest coffeehouse.