Marvin and Smith's Coffee Expansion Plan

This assignment requires Hank and Patty to analyze the coffee market in Norway, identify potential opportunities and challenges, and recommend strategies for Marvin and Smith to expand their business. The report includes a detailed market analysis, financial projections, and recommendations for improving efficiency and competitiveness.

Business Essential

Contents
INTRODUCTION...........................................................................................................................1
1. Logistical and ethical considerations as well as structural challenge of expanding coffee
shop in Norway............................................................................................................................1
2. Tailored marketing mix for coffee shop expansion plan in abroad.........................................3
3. Implications of the need for Marvin and Smith's to cover a wider geographical area.............5
4. Evaluation of impact of profitability and liquidity on decision-making of a company...........6
5. Conclusion...............................................................................................................................8
REFERNCES...................................................................................................................................9
.........................................................................................................................................................9

INTRODUCTION
Business is stated to be an entity that is legal in nature and has a purpose behind existing.
There are certain things which are required to run a business in an appropriate manner to ensure
that each task is completed in a set time period. It aids managers in analysing the issues that are
existing within process (Hair, 2015). Present report is based on the case study of Smith and
Marvin who is looking for expansion opportunities in Norway. Various considerations like
ethical, structural and logical challenges have been put in report with justifying reasons. Also,
this project will be evaluating the way in which profitability and liquidity of Marvin and Smith
will be impacting decision making.
1. Logistical and ethical considerations as well as structural challenge of expanding coffee shop
in Norway
Marvin and Smith needs to take different decisions before they set up their coffee shop in
Norway. It needs a lot of research work to ensure that all aspects are properly analysed and
business can run successfully (Wilson, 2014). They aim to gain a competitive edge over others in
the chosen location.
Chosen Country: For expansion plan of Marvin and Smith’s coffee shop, Norway is
chosen as an ultimate destination. It is a part of EU and hence, has a major influence of its
neighbouring country on activities. The chosen country borders Russia, Sweden and Finland.
Justification behind choosing Norway for Coffee shop expansion:
 Norway is the second largest coffee consuming country in world. It has a per capita
consumption rate of 7.2 kg per person. It makes 1.98 cups per day for a year. It also
means that only 5 million people consumed more than 36,472,000 kg of coffee in 2015.
 The country’s rural areas too have same demand or even more than its urban area as they
like to consume coffee made drinks more often.
 They are interested in quality as well as variety of coffee.
 Due to increase in demand of organic product such as coffee and food items.
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Figure 1 How the World Gets Its Caffeine Fix.
(Source: Price Economics, 2017) https://priceonomics.com/how-the-world-gets-its-caffeine-fix/
Justification for Logistical Consideration: Norway is one of the countries which has a
green area that is suitable for brewing coffee. imported beans of caffeine could be stored safely
in the country. This Nation is a part of larger entity that is known as European Union (EU) and
hence, has to follow all the legal requirements that are enacted by EU for food safety and
serving. Country is also one of the largest importers and so it will be good for Marvin and Smith
as they will be getting more suppliers for their coffee (Anderson and et. al., 2014). This will
boost their margin of profits.
Justification of Ethical Considerations: Norway is known for its consumption of
products that are high in quality and offers the best quality content. The Nordic Roast coffee is a
quality that is produced as well as loved by country’s population. They are also fond of
Gumutindo beans which are brewed in Finland. The people of nation are ethically very strict
with the quality of products sold by business. Hence, Marvin and Smith needs to buy coffee
indigenously as this produce more job and assist in boosting economy as well.
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Justification for making structural challenges for expansion: There are different
issues and challenges that will be there due to expansion of company into Norway. They are
stated as below:
 Green coffee as well as organic items sales has improved in the last few years. Also, the
rise in UTZ certification has led to higher level of sustainability farming in the region. It
is needed for business to obtain this certificate to carry a mark that they support
sustainable farming and its methods.
 Friele is considered to be one of the oldest and biggest coffee producing companies in the
region. They are also a partner in UTZ program and so Marvin and Smith needs to utilise
this opportunity for getting high quality of raw material for their products from the cited
manufacturers for production of coffee.
 Marvin and Smith needs more investment to start their business in Norway. They will
have to form contracts with suppliers as well as set their shop in different venue.
Therefore, Hank and Patty will need to take loan for expanding their business in the
country.
Basically, it can be stated that Marvin and Smith needs to explore opportunity that exists
in Norway for expansion of their business. Country is one of the top coffee consuming places in
world. Also, they will be able to have access to cheap and high quality of green coffee. The
government of Norway is also assisting those business to boost local manufacturing of the nation
in setting up sound economy, which will reduce burden from company.
2. Tailored marketing mix for coffee shop expansion plan in abroad
Marketing mix is stated to be a method that allows managers in managing elements that
are very important for attaining higher level of profitability and productivity. For Marvin and
Smith, 7P’s will be used for making sure that they are able to understand the requirement of
market as well as manage issues in an effective manner (Peteraf, Gambl and Thompson Jr,
2014). Marvin and Smith needs to examine current market tendencies and opponent’s positions
before making marketing mix plans. It will require a marketing strategy that can be used for
boosting its capabilities in Norway: Product: It states about the company prime offering to the market area. Marvin and
Smith are selling coffee there are certain questions that are required to be answered by
Marvin and Smith.
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o What items need to be in Menu?
o Do all the items mentioned in menu are able to present solutions to issues?
o What are the preference of customers?
The company has to make its strategy after conducting proper analysis of above questions. It
is important as to serve market with best capabilities and quality.
 Price: This is a strategy which will make first impression on consumer. It will also assist
them in competing with other organisations in market. Currently there are many cafes and
restaurants that is serving the stated items at a lower cost (Huang and Sarigöllü, 2014).
So, Marvin and Smith will be adopting the strategy of differentiation and competitive
pricing as to attract consumers in an easy manner. price basically act as a perception
maker for customer, so it is very important to ensure that they are served with better
quality and lower prices. As this will attract more consumers.
 Place: It is very important factor that has to be decided for making sure, the shops are
open in places which offers better reach and is a centre for people. Café should not be in
a separated region. For example, having a café near to the metro station or bus stop will
aid in attracting people to have a coffee till their vehicle arrives.
 Promotion: It is one of the most factor that has to be managed by the marketing
department. There is requirement of promotion in market so that Marvin and Smith
popularity can be increased (Liu and et. al., 2017). Till the time consumers are not
informed regarding company existence in area, firm won’t be able to attract them. for
Marvin and Smith, internet marketing as well as televised advertisement will do the
work. They need to go for aggressive marketing in beginning so that they are able to
attain a better level of effectiveness.
 People: Marvin and Smith need to hire people as per the store requirement. Managers
need to be careful as who they hire and how many they are hiring. If they get more
people than it will be extra burden on company (Bowie and et. al., 2016). As well as
organisation has to serve consumers as per the ethics and laws so that their satisfaction
level can be maintained.
 Process: Marvin and Smith are following their core process as there is very little space to
change the core methods of making coffee. There are separate things in management as
well as in other aspects that can be changed easily.
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 Physical evidence: The physical evidence of company is stated to be its products as well
as stores that it will be opening in the region.
A solid and active promotional plan would define as how to solve consumers’ matters and
how to fulfil their requirements for products.
3. Implications of the need for Marvin and Smith's to cover a wider geographical area
Marvin and Smith is stated to have a vision and that is to serve people around the world with
a better quality of coffee. They aim to cover massive geographical area as to sell more and earn
more. There are various implications to their needs and wants which are stated below:
 Information system: These are developed as to act in a way that all relevant data is
gathered from all the sources (primary and secondary) in an appropriate manner.
information system allows managers in making decisions which boost overall approval
rate for projects and programs (Oino and Ukaegbu, 2015). The requirements of Marvin
and Smith can have an impact on the information system as maintaining it requires huge
amount of resources. Basically, for preparing an information system, manager collects
data as well as keep everything as per the people, population, customer preference,
political regulations, etc. This issue is going to increase cost for company as it is required
to be reduced by keeping process efficient. Also, diversity of people will cause issue as
there are separate system that are needed to be made for better management.
 Personnel and managing staff issues: Marvin and Smith is a small company compared
to international brands like Starbucks. It is very important for them to manage employee
issues, otherwise there are higher cost that is engaged in the process (Lindegaard, 2010).
Also, people efficiency is reduced if their problems are not solved in set time period.
The above mentioned tools are linked as both can cause higher cost as well as impact
upon decision making of organisation.
4. Evaluation of impact of profitability and liquidity on decision-making of a company
Marvin and Smith as a company will have to take various decisions for expansion of their
expansion in market. That is why a financial analysis is important to be conducted. Below is a
list of analysis that has been conducted: Ratio analysis, return on capital employed and
Liquidity.: Profitability: It assist by providing data regarding earnings done by company in a year
time period (Anderson, Sweeney and Williams, 2011). Profitability ratio displays the
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weight-age of firms’ net incomes in contrast with net sales revenue. Below is gross profit
as well as Net profit stated:
◦ Gross profit:
Gross profit ratio
Gross profit(A) 208000
Net Sales(B) 360000
Gross Margin(A/B) 57.78%
Interpretation: the company will be able to generate good amount of profits as it is
doing now. They have a gross profit of 208000 while net sales of 360000. The gross margin is
stated to be 57.78%.
◦ Net profit:
Net profit Margin
Amount £
Net profit (A) 26800
Sales Revenue (B) 360000
Net profit Margin(A/B)*100 7.44%
Interpretation: As stated in the table, organisation is currently consuming a lot more
resources and funds in cost of sales. the figure stands at 7.44%. at this rate, it is difficult for
Marvin Smith to survive.
 Return on Capital Employed: It is a financial ratio that assist in measuring organisation
efficiency as well as profitability on the amount which has been employed by managers.
Return on Capital Employed
EBITA (A) 45200
Total Assets 113000
Less: Current Liabilities 6200
Capital employed(B) 106800
ROCE (A/B) 42.32%
Interpretation: As stated in the table, ROCE is stated to be 42.32% which means that they
need to boost their sales. the earnings before income and tax is stated to be:
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Net Profit 26800
Add: Depreciation 18400
EBITA 45200
 Liquidity: Marvin and Smith are required to maintain their liquidity levels, so that they
can engage in more activities in a short time period. The right ratio for the company is
stated to be 2:1, which every business has to maintain.
o Current ratio: Below is the calculation of Current Ratio of Marvin and Smith:
Current Ratio
Amount £
Current Assets (A) 35400
Current Liabilities (B) 6200
Current Ratio (A/B) 5.7096774194
Interpretation: The company has lower level of liabilities and it can pay off any debt as
the assets and their quality is good enough. Current ratio is stated to be 5.709.
o Acid test ratio:
Acid Test Ratio
Current Assets 35400
less: Inventories 8000
Quick Assets(A) 27400
Current Liabilities (B) 6200
Acid Test Ratio (A/B) 4.4193548387
Interpretation: The company is in good position to pay off any liability that comes in its
way. As its Acid test ratio is stated to be 4.419.
5. Conclusion
Marvin and Smith, will need to expand into Norway as it is a country where Coffee
demand is very high while providers are still less. Hank and Patty will need to take decisions
regarding choice of places where they want to open their own office. As well as there will be fair
trade practices that will be followed to gain competitive advantage over other in Norway. They
will be able to lower down the cost of production and increase margin of profits. The biggest
manufacturer and seller of coffee in Norway is stated to be Friele. It is an organic and higher
quality of coffee products provider. It is also stated to be UTZ certified which means Marvin and
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Smith will be able to get items at lower cost. Hank and Patty need to form tie up with firm as to
get better raw material.
The company will have to take loans for boosting its ability to cover large geographical
area. Currently they do not have a funds to run all the operations as per requirements.
Corporation is also consuming more current assets than its short-term liabilities which proof that
Cited company is not managing its funds efficiently.
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REFERNCES
Books and Journals
Hair, J.F., 2015. Essentials of business research methods. ME Sharpe.
Wilson, J., 2014. Essentials of business research: A guide to doing your research project. Sage.
Anderson, D.R. and et. al., 2014. Essentials of statistics for business and economics. Cengage
Learning.
Peteraf, M., Gamble, J. and Thompson Jr, A., 2014. Essentials of strategic management: The
quest for competitive advantage. McGraw-Hill Education.
Huang, R. and Sarigöllü, E., 2014. How brand awareness relates to market outcome, brand
equity, and the marketing mix. In Fashion Branding and Consumer Behaviors (pp.
113-132). Springer New York.
Liu, Y. and et. al., 2017. The Effects of Products’ Aesthetic Design on Demand and Marketing-
Mix Effectiveness: The Role of Segment Prototypicality and Brand
Consistency. Journal of Marketing. 81(1). pp.83-102.
Bowie, D. and et. al., 2016. Hospitality marketing. Taylor & Francis.
Oino, I. and Ukaegbu, B., 2015. The impact of profitability on capital structure and speed of
adjustment: An empirical examination of selected firms in Nigerian Stock
Exchange. Research in International Business and Finance. 35. pp.111-121.
Lindegaard, S., 2010. The open innovation revolution: essentials, roadblocks, and leadership
skills. John Wiley & Sons.
Anderson, D. R., Sweeney, D. J. and Williams, T. A., 2011. Essentials of modern business
statistics with Microsoft Excel. Cengage Learning.
Online
Price Economics. 2017. How the World Gets Its Caffeine Fix. [Online]. Available through: <
https://priceonomics.com/how-the-world-gets-its-caffeine-fix/>.
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