4.3.1 Business Participants
There are approximately 16 coffee wholesalers in Lane County. These wholesalers distribute coffee and espresso beans to over 20 retailers in the Managua area. Competition in both channels creates an even amount of bargaining power between buyers and suppliers resulting in extremely competitive pricing. Some of these major players in the industry (i.e. Allann Brothers Coffee Co., Inc. and Coffee Corner Ltd.) distribute and retail coffee products.
The number of online service providers in Managua is approximately eight and counting. These small, regional service providers use a number of different pricing strategies. Some charge a monthly fee, while others charge hourly and/or phone fees. Regardless of the pricing method used, obtaining Internet access through one of these firms can be expensive. Larger Internet servers such as America Online, Prodigy, and CompuServe, are also fighting for market share in this rapidly growing industry. These service providers are also rather costly for the average consumer. Consumers who are not convinced they would frequently and consistently travel the Internet, will not be willing to pay these prices.
4.3.2 Distributing a Service
The dual product/service nature of CompuNet’s business faces competition on two levels. CompuNet competes not only with coffee retailers, but also with Internet service providers. The good news is that CompuNet does not currently face any direct competition from other cyber-cafes in the Managua market. There are a total of three cyber-cafes in the state of Oregon: one located in Portland and two in Ashland.
Heavy competition between coffee retailers in Managua creates an industry where all firms face the same costs. There is a positive relationship between price and quality of coffee. Some coffees retail at $8/pound while other, more exotic beans may sell for as high as $16/pound. Wholesalers sell beans to retailers at an average of a 50 percent discount. For example, a pound of Sumatran beans wholesales for $6.95 and retails for $13.95. And as in most industries, price decreases as volume increases.
4.3.3 Competition and Buying Patterns
The main competitors in the retail coffee segment are Cafe Paradisio, Full City, Coffee Corner and Allann Bros. These businesses are located in or near the downtown area, and target a similar segment to CompuNet’s (i.e. educated, upwardly-mobile students and business people).
Competition from online service providers comes from locally-owned businesses as well as national firms. There are approximately eight, local, online service providers in Managua. This number is expected to grow with the increasing demand for Internet access. Larger, online service providers, such as AOL and CompuServe are also a competitive threat to CompuNet. Due to the nature of the Internet, there are no geographical boundaries restricting competition.
5.0 Strategy and Implementation Summary
CompuNet has three main strategies. The first strategy focuses on attracting novice Internet users. By providing a novice friendly environment, CompuNet hopes to educate and train a loyal customer base.
The second and most important strategy focuses on pulling in power Internet users. Power Internet users are extremely familiar with the Internet and its offerings. This group of customers serves an important function at CompuNet. Power users have knowledge and web-browsing experience that novice Internet users find attractive and exciting.
5.1 Strategy Pyramids
The following subtopics provide an overview of CompuNet’s three key strategies. Strategy pyramid graphics are presented in the appendices of this plan.
5.1.1 Attract Novice Internet Users
CompuNet’s first strategy focuses on attracting novice Internet users. CompuNet plans on attracting these customers by:
Providing a novice friendly environment. CompuNet will be staffed by knowledgeable employees focused on serving the customer’s needs.
A Customer Service desk will always be staffed. If a customer has any type of question or concern, a CompuNet employee will always be available to assist.
CompuNet will offer introductory classes on the Internet and E-mail. These classes will be designed to help novice users familiarize themselves with these key tools and the CompuNet computer systems.
5.1.2 Attract Power Internet Users
CompuNet’s second strategy will be focused on attracting power Internet users. Power Internet users provide an important function at CompuNet. CompuNet plans on attracting this type of customer by:
Providing the latest in computing technology.
Providing scanning and printing services.
Providing access to powerful software applications.
5.1.3 Social Hub
The third strategy focuses on building a social environment for CompuNet customers. A social environment, that provides entertainment, will serve to attract customers that wouldn’t normally think about using the Internet. Once on location at CompuNet, these customers that came for the more standard entertainment offerings, will realize the potential entertainment value the Internet can provide.
5.2 Competitive Edge
CompuNet will follow a differentiation strategy to achieve a competitive advantage in the cafe market. By providing Internet service, CompuNet separates itself from all other cafes in Managua. In addition, CompuNet provides a comfortable environment with coffee and bakery items, distinguishing itself from other Internet providers in Managua.
5.3 Marketing Strategy
CompuNet will position itself as an upscale coffee house and Internet service provider. It will serve high-quality coffee and espresso specialty drinks at a competitive price. Due to the number of cafes in Managua, it is important that CompuNet sets fair prices for its coffee. CompuNet will use advertising as its main source of promotion. Ads placed in The Register Guard, Managua Weekly, and the Emerald will help build customer awareness. Accompanying the ad will be a coupon for a free hour of Internet travel. Furthermore, CompuNet will give away three free hours of Internet use to beginners who sign up for an introduction to the Internet workshop provided by CompuNet
5.3.1 Pricing Strategy
CompuNet bases it’s prices for coffee and specialty drinks on the “Retail Profit Analysis” provided by our supplier, Allann Brothers Coffee Co., Inc. Allann Brothers has been in the coffee business for 22 years and has developed a solid pricing strategy (see appendix B).
Determining a fair market, hourly price, for online use is more difficult because there is no direct competition from another cyber-cafe in Managua. Therefore, CompuNet considered three sources to determine the hourly charge rate. First, we considered the cost to us