An environmental scan tracks trends and occurrences in an organization’s internal and external environment that bear on its success, currently and in the future. The identification of key trends and the analysis of them within context gives much-needed insight to plan the way forward for your business. The results are extremely useful in shaping goals and strategies. In this article, we will discuss the need for an environmental scan and possible factors that may affect the average, contemporary coffee-producing nation.
Trade Relations
Global Recession
Consistent Consumption through Pandemic
Canned/Bottled Coffee Beverages
Selectively-bred Coffee Varieties
Politics has been a major driving force of all developments, positive and negative, in human history. The political landscape can and will shape all business and economic conditions through varied factors like tax policies, bureaucracy, corruption, foreign trade policy, etc. An example of a possible political factor affecting the coffee industries is:
Trade Relations: With coffee being most consumed in the developed world mainly in Europe, The Middle East and North America (European countries comprising most of the top ten coffee consumers per capita) – as per Statista Consumer Market Outlook, 2021, it is of high importance to pay attention to international trade relationships to ensure smooth and efficient deliveries of product, raw or processed, through trans-shipment points and to their end-user consumer.This dependence can be seen as a liability. A strong local or regional market needs to be created to dampen the negative effects of any possible fallout or disruption to international trade to Europe and North America.
Economic factors have a significant impact on how an organization does business and how profitable they are. Factors include - economic growth, interest rates, exchange rates, inflation, disposable income of consumers and businesses, etc. These factors can be further broken down into macroeconomic and microeconomic factors.
Macroeconomic factors deal with the management of demand in any given economy. Governments use interest rate control, taxation policy and government expenditure as their main mechanisms for managing macro-economic factors. Microeconomic factors are all about the way people spend their incomes. An example of a prominent economic factor affecting coffee industries worldwide:
The global crisis around the COVID-19 pandemic created an unprecedented global shutdown of business and trade for months to years. The world is yet to fully recover. This shutdown created economic impacts that are still not fully understood. However, it is safe to say the global economy was forced into a recession.
The pandemic affected everything from production capacities due to mandated work-from-home orders, shipping costs and lead times, energy prices, to consumer behaviours. The disrupted international trade systems and supply chains proved a need for a strong local market if an industry is to find resilience and growth. For instance, According to Ethiopian Monitor, In April 2020, coffee trade on the Ethiopian Coffee Exchange (ECX) declined by 30% as compared to previous year as a result of disruptions in the cultivation, processing, and shipping of coffee beans.
Sociocultural factors are the areas that involve the shared belief and attitudes of the population. These factors include - population growth, age distribution, health consciousness, career attitudes and so on. These factors are of particular interest as they have a direct effect on how business leaders and managers will understand customers and what drives them. An example of a relevant sociocultural factor:
The focus here is on the social environment and identifying emerging cultural trends. This helps us to further understand consumer needs and wants in a social setting. This is focused on current consumer behaviors that shape purchasing habits.
Whilst all restaurants, and dining out overall, took a hit during the pandemic, so did cafes in all our countries and the world over. Throughout this however, it is reported that coffee consumption remained consistent despite the closing of cafes as people turned to at-home coffee consumption. The resilience of the coffee market has been chalked up to consumers’ willingness to move their place of consumption from their favourite café to their home. As such, there were noted increases in the consumption of soluble, or “instant”, coffees and canned/bottled coffee-based mixed beverages – as well as the use of different home-brewing solutions.
The technological analysis considers new technological advancements and opportunities that can expand the market, increase production efficiency, or offer new ways to consume the product. The adaptation of technological developments along the value chain, from producer to consumer, can shift and redefine the entire industry. It is supremely important to keep abreast of all opportunities. An example of technological opportunities arising in the industry:
Typically, there has been two main types of coffee bean available: Robusta and Arabica. Robusta has been the hardier plant that grows more easily but produces a bean with a more bitter flavour. Arabica is the traditional bean which dominates the market – its varieties make up the premium of the industry. Arabica is known for its high-quality flavour and aroma, but lacks genetic diversity, commonly leaving it susceptible to coffee leaf rust.
This low genetic diversity makes disease very easily spread across farms. Climate change has also been a source of difficulty for cultivators as factors such as inconsistent temperatures (global warming) and rainfall has become commonplace. The Centroamericano coffee bean was created as an F1 hybrid between the Ethiopian landrace variety Rume Sudan and another coffee bean called T5296, which is known for its coffee leaf rust resistance. It is an Arabica variety and retains the desired flavour and aroma.
On its own, the Centroamericano has proven to be twenty percent more productive than other coffee beans and is tolerant to coffee leaf rust. However, it soon became clear that it fares better against the effects of climate change as well, as it can survive temperatures below freezing.
Environmental scanning will put you in a good stead to have a full understanding of the situation at hand. This understanding will inform your decisions and strategies ensuring greater chances at success. Higher efficiencies ultimately pave the path to higher sales and return on investment on your business efforts. Take a look at our Market Development templates to start defining your market today.
