Macmillan International Higher Education docx

Running head: BUSINESS ESSENTIALS ADVANCED
Business Essentials Advanced
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Introduction:..................................................................................................................2
Answer to question 1:...................................................................................................2
Answer to question 2:...................................................................................................4
Answer to question 3:...................................................................................................7
Answer to question 4:...................................................................................................9
Conclusion:.................................................................................................................12
References:................................................................................................................13

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Introduction:
The present report will be assessing the expansion strategy in Germany for
opening a new coffee outlet. In order to find the most right market for Marvin and
Smith a PESTLE framework has been applied which help in planning for the future
events concerning the macro-economic environment in which Marvin and Smith
operates. Germany has been acknowledge as the potential market, nonetheless it
was important to further assess the market to arrive to an appropriate decision.
Answer to question 1:
Europe almost contributes 44% of the global hot drinks in the market. Out of
which Germany alone accounts 24.3% of the Europeans hot drinks. These results
strength Marvin and Smith initial bias of selecting Germany as the potential overseas
market for overseas expansion (Kirzner 2015). As there is a high percentage of
customers that demand hot drinks in Germany the threat relating to substitute
product is not very much disturbing.
Key findings Germany:
Germany is regarded as the federal republic with fair and transparent
elections. It has competitive economies in the world. Germany has world’s one of the
best and highly developed transportation and infrastructure for communication.
There is not much cultural difference between Germany and UK, hence it is most
favourable opportunity for Smith and Marvin to establish their premises in Germany
(Drucker 2014). Germany accounts for around 24.3% of the European hot drink
market and coffee is regarded as highly lucrative market with overall market value of
58.4%. To further support the key findings a PESTLE is conducted to justify the
overseas expansion.

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Political Factors:
Germany is a democratic country and its constitution lay down the
fundamental structure of government. Germany dictates the value which the system
should abide by as the main source of authority (Parker 2018). The judiciary and
executive are three wings which makes up the government of Germany.
Economic factors:
The service sector of Germany contributes around 70% of the GDP. Industry
accounts 29.1% whereas agriculture stands 0.9%. Majority of the products are
involved in engineering (Kuratko 2016). Metals, automobiles, chemical goods and
machinery are viewed as some of the items for which they are proud of.
Socio-cultural factors:
The German society is shaped by wide variety of lifestyle. There are also hints
of certain completely different ethno culture diversity. Local architecture, literature,
art provide the socio-culture scene in Germany.
Technological factors:
Germany supports the national science and technology in several ways. It has
the house independent laboratory. The industry lends support to numerous research
and development. In European Union Germany has the noteworthy position in
science and technology components. The people of Germany are educated and the
standard of living is very high. One should realize the country has the potential to
grow.
Ecological/Environmental Factors:

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The business sustainability trend in Germany is sustainable which can serve
as an opportunity for new market entrant. Germany has a growing popular support
for accountable sourcing which serves as a perfect opportunity for establishing a
business (Frese and Gielnik 2014). The business sustainability trend emphasizes on
the business procedure in Germany which assures that minimal environmental
impact is made. Marvin and Smith has the opportunity of improving its performance
in these areas.
Legal factors:
Germany follows strict business regulations. These includes;
a. Safety of the product
b. GMO regulations outside Germany.
Smith and Marvin clearly has the opportunity of setting up their new coffee shop
by meeting the regulations of product safety.
On the basis of above explanation, it can be stated that Germany is the most
suitable market for Smith and Marvin. The degree of need for tea and coffee is
reasonable but the CAGR of 2.9% is thought to accelerate. The important
distributional channel comprises of supermarkets which means that Smith and
Marvin can find the niche market by setting up Coffee outlets in Germany.
Answer to question 2:
Smith and Marvin business expansion strategy is based on communicating
the value of business to the targeted segments. This will be done with the help of
variety of methods (Baum, Frese and Baron 2014). A tailored marketing mix for in

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respect of the coffee shop expansion plan for Marvin and Smith has been given
below;
Product:
The products of Marvin and Smith would comprises of wide variety of products
which will appeal mainly to the German hot drink lovers. Products will have the blend
of German taste. Majority of the complimentary eatables are adopted to meet the
German taste buds, thus the owners here Marvin and Smith are trying to capture
German taste which involves both hot coffee and cold ice-cream blend (Barringer
2015). The younger population of Germany favours it while in winter it is cappuccino.
A unique selling proposition of Marvin and Smith coffee products will be positioning
itself as the reasonably priced coffee house which has the effective and innovative
system in place for social gathering. Marvin and Smith will also position the leverage
on the basis of their competitive edge. This includes the following;
a. A unique approach of getting the singles together which is known as
structured conversation system. This system is considered competitive edge
since majority of the coffee bars or taverns in Germany does not have the
niche that they are concentrating at (Kerr, Nanda and Rhodes-Kropf 2014).
Despite the fact, there are certain bar and coffee shop has specific flavour
and this is the main reason someone will choose one bar or another since the
flavour is only surface deep. Marvin and Smith business model is based on
selling the coffee and offering the customers with social setting.

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b. Marvin and Smith will implement a diverse price offering in the marketing mix,
even though it is influenced by the competition and it is slightly premium. The
products that would be offered by Marvin and Smith will be priced at premium
range due to higher quality product offering. Marvin and Smith regularly
believes that pricing is secondary for any customers and emphasizes on
delivering better quality products (Storey 2016). The company will be
providing its customers with two variants namely small and large. The price is
considered directly proportional to the quantity ordered. The prices of coffee
will vary on the basis of supplement that will be added to coffee such as extra,
chocolate, crème etc.
Place:
The location in Germany is a favourable choice of expanding its customer
base. The strategy that Marvin and Smith looks forward to adopt is to place its coffee
possibly in Germany can result in revenue boost. Marvin and Smith looks forward to
cater their targeted market through a strategically located outlets in Germany (Burns
and Dewhurst 2016). The outlet of Marvin and Smith will be located in the high street
or family entertainment centres, gas stations and near colleges etc. Marvin and
Smith outlets in Germany are mainly targeting the middle class, upper middle class
and the rich people. Marvin and Smith will also modify the menu to the country in
which it would be operating in order to gain a wider customer market share.
Promotion:
This constituent of marketing mix for Marvin and Smith comprises of
communication strategies that is used in disseminating the information to the
consumers regarding the company and its product so as to encourage the customers

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in buying these products (Chatterji, Glaeser and Kerr 2014). Marvin and Smith will be
promoting its product in Germany through the interpersonal relations and
communications, even though advertisement is viewed as the part of promotional
approach. In case of Marvin and Smith the promotional mix comprises of the
following;
1: Advertisement
2: Sales Promotion
3: Word-of-mouth marketing
4: Public relations
Marvin and Smith aims to be popular among the customers through word-of-
mouth marketing. Under the marketing mix, the use of word-of-mouth is mainly
focused on offering customers with best experience so that they are encouraged to
spread the positive word regarding the business (Ansoff et al., 2018). The company
will also be advertising its products through local newspaper, television and internet
sales. Sales promotions will be used by Marvin and Smith as a program involving
freebies where customers will be able to avail following the purchase of certain
coffee products of the company.
Marvin and Smith will be infrequently using the public relations as this has not
always been successful for business. The marketing mix of Marvin and Smith shows
that the core significance of word-of-moth marketing, advertisement and supporting
the roles of public relations and sales promotion for its chain of coffee business.

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Answer to question 3:
The key factors which Marvin and Smith should take into the account in
expanding their business in the unfamiliar business territory are the supply chain
management and human resource management (Rothaermel 2016). An inter-link
between the two can be created by Marvin and Smith to manage the potential
business challenges that might arise.
Supply Chain management:
The supply chain of an organization should be such that the company
successfully delivers the products which their customers want (Hill 2017). The basis
through which Marvin and Smith can design their supply chain is by thinking of their
supply chain and the related metrics in terms of cost savings, accuracy of order and
on-time delivery.
Design considerations:
The design consideration of the business should comprise of the company’s
supply chain including the geography where the product of the business is moving.
Marvin and Smith should consider the lead time involved in the logistics and costs as
well as the taxes involved in moving the products (David and David2016). In relation
to these considerations is that Marvin and Smith supply chain should be measured
by the flow of goods, the cost involved in the flow of goods and the time taken for the
flow of goods.
Logistics: As the goal of Marvin and Smith is to ship the customers with the coffee
products that they want, then the owners should avoid the trap of remaining
dependent on the expedited and overnight shipping fees to make up for the delay in
purchase and production (Hill, Jones and Schilling 2014). It is recommended to

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Marvin and Smith that robust planning and lead time management can help in
reducing the sum of money the business may spend on logistics and rush fees. This
will help in lowering the total number of air shipments required from the lower cost
suppliers. Marvin and Smith should understand the lead time and should have the
access to long-term demand are the two ways of helping the cost of supply.
Human resource management:
Following the positive application from the initial information seminars, both
Marvin and Smith should expand the HR service to their German franchisees as
well. Marvin and Smith should develop a formal HR strategy in order to guide the
development of new system of support (Ginter, Duncan and Swayne 2018). The HR
factors which should be considered by Marvin and Smith are as follows;
a. Recruitment and training of the store employees: Marvin and Smith must
offer a complete recruitment and selection service to their new German store.
Marvin and Smith should develop a comprehensive staff manual which must
cover all the aspects of the working for an organization (Lasserre 2017).
Marvin and Smith should work on developing a training platform where the
employees would be able to finish the induction module before commencing
their shifts.
b. Workplace relations: The owners here Marvin and Smith should provide its
German outlet with the overview regarding the basic work conditions during
their induction and should run the workshops by teaching employees
regarding their responsibilities (Frynas and Mellahi 2015). Even though this
area is difficult and it open to risks the supporting relations relating to
interpersonal relations must be developed.

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Answer to question 4:
Liquidity Ratios:
Liquidity Ratios 2017
Current Ratios 5.71
Cash Ratio 4.42
Current Ratios Cash Ratio
5.71
4.42
Liquidity Ratios
Figure 1: Figure representing Liquidity Ratios
(Source: As created by Author)
Profitability Ratios 2017
Gross Profit Ratio 58%
Return on Assets 24%
Current ratio is regarded as the liquidity ratio which measures the ability of the
company to pay its short-term liabilities with its current assets (Harrison et al. 2014).
As evident the business has reported a current ratio of 5.71. The ratio implies that
the business has larger amount of current assets which is more likely to pay its
current liabilities when they become due without selling the long-term revenue
producing assets.

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On the other hand the cash ratio is regarded as the ratio which measures a
company’s ability to pay the current liabilities only with the cash and cash
equivalents. The cash ratio for the company stood 4.42 for the year 2017. The ratio
is above the normal benchmark of 1 which implies that all the current liabilities can
be paid by cash and cash equivalents. The higher cash coverage signifies that the
company has high liquid to easily fund the debt.
1
58%
24%
Profitability Ratios
Gross Profit Ratio Return on Assets
Figure 2: Figure representing Profitability Ratios
(Source: As Created by Author)
Profitability Ratios:
The gross profit ratio is regarded as the profitability ratio which compares the
gross margin of the business against the net sales (Weetman 2019). The ratio
measures the profitability of the business in selling its inventory or merchandise. The
gross profit ratio for the company here stands 58%. The gross profit ratio reported is
very high which means the business has more money to pay its operating
expenditure.

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On the other hand, return on assets has been computed for Smith and Marvin
business. The return on assets for the business stands 24%. This suggest that the
ratio is on higher side which implies that the company is managing it assets to
generate higher amount of sales. The ratio is on the positive side and shows an
upward trend as well.
The financial ratios have indicated that Mark and Marvin have sufficient amount of
fund for expansion purpose. The ratios makes sense that the company is very
favourable to investors and it can effectively manage its assets to generate greater
amount of net income in future.
Conclusion:
On a conclusive note, it can be stated that Germany is highly suitable market
for Marvin and Smith. The coffee industry in Germany has portrayed a CAGR of
2.9% and it is further anticipated to accelerate as well. The business faces lesser
threat to enter in the German market and there is no such risk of subsidiary product
taking into account the higher proportion of population consuming hot drinks. In
addition to this, the culture in Germany is not very different from that of UK regarding
the cup of tea or coffee in the afternoon and particularly during Sundays. This implies
that the transport does not takes very long. The mission of Marvin and Smith should
be to emphasize the desire of staying closer with their customers instead of growing
too fast.
Once Marvin and Smith has selected the most appropriate overseas market, it
is essential for them to establish the entry mode so that they can optimize their
operations. Entering in the new market is generally viewed as critical and
fundamental decision because of the advantage and disadvantage of every entry

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strategy which would further create an influence on the company’s performance. The
ratios computed have further portrayed that the business of Marvin and Smith has
the potential of expanding their operations in overseas because the company has
favourable return on assets and current ratio. The positive liquidity position indicates
an upward profit trend as well.

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