STR 581 Week 1 External Environmental Scan Example

Higher Bean Prices, Fewer Commuters, More Competitors: Scanning the Environment of a Coffee Roaster and Cafe Chain

[Student Name]

University of Phoenix

STR/581: Strategic Planning & Implementation

Week 1 Assignment

[Instructor Name]

[Date]

Cascade Bean Roasters, its cafes, markets and figures are composites written for a model paper.

Cascade Bean Roasters, a composite company, roasts coffee in Portland, Oregon, and sells it through 48 company-owned cafes in Oregon and Washington and as packaged coffee in about 1,200 grocery stores across the Pacific Northwest and California. Revenue last year was about $142 million, 64 percent from cafes and 36 percent from wholesale. Profit margins have fallen from 9 percent to 4 percent in three years. The board wants a strategic plan covering the next three years, and the first step, presented here, is a scan of the world outside the company.

Why Scan the Environment

Grant (2019) explains that strategy must fit both the firm's internal resources and its external environment, and that analysis of the environment should focus on the forces that determine industry profitability and the success factors that customers and competition require. Hambrick and Fredrickson (2001) argued that real strategy links several choices, about which arenas to enter, how to beat rivals there and in what order to move, and that those choices must rest on an understanding of the environment. A scan that lists everything without judging what matters gives no guidance for choices.

Economic Forces

Green coffee prices, Cascade's largest input cost, roughly doubled over two years after weak harvests in Brazil and Vietnam. Coffee prices are volatile, and futures markets suggest prices may stay high for at least a year. Labor costs have risen as Oregon and Washington minimum wages increased, and cafes are labor-intensive. Consumers continue to pay premium prices for specialty coffee, though some trade down to grocery coffee brewed at home when budgets tighten.

Social Forces

Remote and hybrid work reduced weekday commuter traffic downtown; Cascade's eight downtown Portland and Seattle cafes have sales about 30 percent below their pre-2020 levels, while suburban cafes have grown. Younger customers favor cold drinks, which are now more than 60 percent of cafe beverage sales in summer, and plant-based milks. Interest in sustainably and ethically sourced coffee remains strong among Cascade's core customers.

Technological Forces

Mobile ordering now accounts for about a quarter of Cascade's cafe transactions; national chains have made app ordering and loyalty programs standard. Delivery platforms expand reach but charge commissions of 15 to 30 percent. In roasting, new equipment reduces energy use and improves consistency.

Political, Legal and Environmental Forces

Packaging laws in Oregon and California require recyclable or compostable packaging for many products, affecting both cups and retail bags. The European Union's deforestation regulation, which requires proof that imported coffee was not grown on recently deforested land, is pushing global traceability standards that are likely to reach U.S. buyers through suppliers. Climate change threatens coffee-growing regions over the long term, adding to price volatility. Tariff changes on imported goods could raise equipment and green coffee costs.

The Five Forces

Porter (2008) traced an industry's long-run profits to five pressures: competition among current firms, the chance that newcomers enter, products that can stand in for the industry's own, and the bargaining strength held by customers and by suppliers. Cascade competes in two segments where these forces differ.

In cafes, rivalry is intense. National chains, drive-through brands that have expanded rapidly in the region and many independent cafes compete for the same customers. Entry barriers are low for single cafes but higher at scale. Substitutes, including home brewing, office coffee and energy drinks, are significant. A single cafe customer has no sway over price, yet walking to a rival costs nothing. Supplier power is moderate: green coffee is a commodity with many sellers, but high-quality specialty lots are scarce.

In wholesale, buyer power dominates. Four grocery chains account for about 60 percent of Cascade's wholesale sales and demand promotional spending and slotting fees. Rivalry with national brands and private labels is intense on shelf price. Entry is harder because of retailer relationships and distribution.

In the cafes, customers can walk across the street; in the grocery aisle, four buyers decide whether Cascade is on the shelf at all.

Competitors in Detail

Three competitor groups matter most. National coffee chains have about 140 locations in Cascade's cafe markets, strong loyalty apps and the purchasing scale to absorb coffee cost increases. Drive-through brands have opened about 60 locations in the region in three years, targeting suburban commuters with speed and sweet cold drinks. Independent cafes compete on neighborhood character and craft. Cascade sits between the chains and independents: larger and more consistent than independents, more local and specialty-focused than chains. That middle position can be a strength if Cascade's brand stands for quality and sourcing, or a weakness if customers see it as neither cheap nor distinctive.

What the Wholesale Buyers Want

Interviews with category managers at two grocery chains reveal their priorities: steady supply, promotional support, packaging that meets state rules and products that differentiate their coffee aisle from national brands. One buyer said local roasters with credible sourcing stories help her compete with discount grocers. That suggests Cascade's sourcing and regional identity could strengthen its position with buyers who otherwise hold most of the power.

Key Opportunities and Threats

Ranking by likely effect on profit over three years:

Threat: sustained high green coffee costs, squeezing margins in both segments.

Threat: falling downtown traffic and rising wages, hurting cafe profitability.

Threat: grocery buyer power and private labels in wholesale.

Opportunity: suburban and drive-through formats aligned with changed commuting patterns.

Opportunity: cold drinks and plant-based options, where margins are higher.

Opportunity: traceable, sustainably sourced coffee as a differentiator as regulations spread.

Sources of Evidence

The scan drew on coffee futures prices, state wage schedules, Cascade's own sales by location and channel, foot traffic data for downtown Portland and Seattle, trade association reports on specialty coffee consumption and interviews with grocery buyers. Where sources disagreed, such as forecasts of future coffee prices, the scan reports a range rather than a single figure.

Uncertainty

Two trends are especially uncertain: how long coffee prices stay high and whether downtown traffic recovers. The strategy should be robust across plausible outcomes, for example by not betting heavily on either a downtown rebound or a quick fall in prices. Leases on downtown cafes come up for renewal over the next three years, which gives Cascade a natural point to decide location by location rather than all at once.

Implications for the Plan

The scan suggests that Cascade's strategy must address input cost volatility, shift its cafe footprint toward where customers now are and reduce dependence on a few grocery buyers. Week 2 will examine whether Cascade's internal resources and capabilities, from its roasting skill to its brand and its people, allow it to do so.

Conclusion

Cascade operates in an environment of high coffee costs, changed commuting habits, intense cafe rivalry and powerful grocery buyers, alongside opportunities in suburban formats, cold drinks and traceable sourcing. Ranking these forces and recognizing uncertainty give the strategic plan a clear set of external challenges to answer.

References

Grant, R. M. (2019). Contemporary strategy analysis (10th ed.). Wiley.

Hambrick, D. C., & Fredrickson, J. W. (2001). Are you sure you have a strategy? Academy of Management Executive, 15(4), 48-59. https://doi.org/10.5465/ame.2001.5897655

Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard Business Review, 86(1), 78-93.