Marvin and Smith Cafe Expansion Plan

This assignment analyzes the expansion plans of Marvin and Smith, a cafe venture looking to open a new shop in Milan, Italy. The analysis delves into various aspects, including market research on the Italian cafe industry, interpretation of financial data such as gross profit and return on capital employed, identification of competitive advantages like their unique interior design and barista-led service, and an overall assessment of their expansion strategy.

BUSINESS
ESSENTIAL

Table of Contents
INTRODUCTION...........................................................................................................................1
Question 1Justification behind the selection of country, logistics used, ethical consideration
and structural challenge..........................................................................................................1
Question 2 Marvin and Smith Marketing mix........................................................................5
Question 3: Smith’s to cover a wider geographical area in terms of a different country on the
basis of organisational culture and Information system.........................................................8
Question 4 Interpretation of financial data.............................................................................9
Question 5: CONCLUSION.................................................................................................10

INTRODUCTION
Business essential are the different elements and resources that are required by the
venture in order to complete all the task and activities. There are different opportunity and
threats that exist in the venture. Opportunities helps the organisation to uplifts their current
business conditions, and threats motivates them to reduce problems by implementing different
strategies. In order to support this project report, Marvin and Smith have been selected. They are
currently running their business in UK and now they want to expand their business in Italy. This
is because they find that the country is the best suitable to open coffee shop. After analysing the
culture of Italy, they grasp this opportunity and make the interior of the coffee shop according to
the culture and tradition of the Italy. Other than that after analysing the culture of Italy they have
given additional services to the customers such as customer care system, complementary drink
etc.
Question 1Justification behind the selection of country, logistics used, ethical consideration and
structural challenge.
Reason behind why the Marvin and Smith have selected Italy
The key reason behind the selection of Italy in order to expand their coffee shop is the
people who live in Italy love coffee. Once the manager of the Marvin and Smith have visited
Milan coffee shop in 1994 and his desire was to duplicate the coffee shop interior in relation to a
sense of community, delightful coffee and friendly baristas in Italy. After watching that
environment, he was influences to open a good coffee shop at Italy (Claycomb and Martin,
2013). Most of the people are sitting in the coffee shop after doing their work. Evening of the
people was spent in coffee shop. It states that stress of the people reduces after having coffee.
Thus, this is the key reason, he has thought to open coffee shop in Italy. Reason that influenced
him to open coffee shop in Italy are as follows:
 Italian people love coffee as they are sure enough passionate about the coffee, they were
consuming 4.6% of the total world supply.
 Numerous customer in Italy having $10 billion cafe market that is the biggest in the
world.
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Illustration 1: Fact about cafe market in the country
(Source: Biggest cafe market of the country, 2016)
As per this graph, it is being analysed that Italy has the biggest cafe market in the country
that is around 7,611 million$. Thus, after analysing this data, they have thought to give
competition to Italy coffee shop hence, they are going to open coffee shop in Italy in order to
expand their business (Eriksson and Hansson, 2013).
 Other than that competition and price also influence Marvin and Smith to open their shop
in Italy. In Italy there are huge number of competitors so they can produce quality coffee
in order to gain competitive advantage. 0.90 euro is the average price of the coffee in
Italy which is affordable by the people in Italy.
Logistics utilized by the venture
There are two types of logistics that are requires by the organisation in order to expand
their business that are inbound logistics and outbound logistics
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Outbound Logistics: It includes the procurement of logistics, distribution logistic, after sales
logistics and disposal logistics. This includes buying of raw material that is coffee beans. The
venture is buying coffee beans from Uganda, so they will be requiring proper transportation
facilities (Hui and Suher et.al., 2013). While transportation good from Uganda, the will be
requiring proper documents such as bill of insurance, letter of credit and bill of lading. Other
than that, when coffee beans are imported they will require warehouse in order to store that
beans, warehouse environment should be favourable for the beans so that it helps them to reduce
risk of spoilage. With that outbound logistics includes after sakes services such as creating a
separate sector fo customer care where customers can give their positive and negative feedback.
If there is any negative feedback than it should be solved immediately. With that proper disposal
system should be there, the mugs which is used by the customers should be disposed properly or
if they are non-disposable then reused properly (Lindsay and Norman, 2013).
Inbound logistics: It is the process by which raw material, finished goods, parts from the
supplier from the producer. The inventory that are the finest coffee beans of Gumutindo coffee
are being brought from the Uganda with the fair trade agreement with their supplier (Mintz and
Currim, 2013). This ensures about the fair trade practices are being adopted by the organisation
that includes tariff and non-tariff barriers. They are following all the rules and regulation which
are related to the transportation of beans.
Ethical consideration by Marvin and Smith with the help of Berista.
The venture is hiring barista, it is an Italian words which states that person (male and
female) that mainly work in the coffee shops. The work behind the counter and serve different
products of the shop which includes hot drinks, coffee and cold drink. The venture is organising
different training and development programs which helps barista to mould their behaviour in
such a way that it represent the culture and tradition of Italy traditions and culture. With the help
of this training programs, the venture can promote the culture of Italy to the customers in the
workplace (Singh, 2013). This will help to maintain ethical environment in the premises of
coffee shop as implement all ethical rules and regulation.
Structural challenge faced by the Marvin and Smith in Italy and ways by which they have
overcome this challenge.
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Italy culture was the biggest reason behind the challenge faced by the venture related to
their interior and structure of coffee shop. Their culture state that Italy people like to have coffee
at their home, this is because they fell comfortable at their home and while having coffee they
reduce their stress. The research conduct by Italy investigator state that 76% of the people drink
coffee at home and rest 24 drink at coffee. Their have coffee at shops when they are large in
group (Zhong and Huang, 2013). Thus, they have adopted the strategy to make their structure
and interior in such as way their people find the environment of shop is like their home. This
will help the venture to make feel customers that they can relax and have coffee. People of Italy
used to consume coffee after their working hours to reduce their work stress and laziness. Thus,
they keep lighting in such away that it does not hurt the people and colour that are used should
be of very light shades.
Illustration 2: Interior of the Cafe
(Source : interior of Cafe, 2017)
Marvin and Smith have made their interior in such a way that people fell comfortable
when they are having coffee in cafe, this will help them to reduce stress.
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Question 2 Marvin and Smith Marketing mix
 Product: there ate several products the venture is serving, the product mix of the
organisation, that are as follows:
 Herbal tea: It consists of lemon, green, black, ginger, peppermint, lavender, lemon balm,
black beery leaves, dandelion and hawthorn tea.
Illustration 3: Hot coffee served by venture
 Hot coffee: It consists of espresso, latte, macchiato, Long black, doppio, flat white,
mocha, and cappuccino.
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Illustration 4: Cold coffee serve by venture
 Cold coffee: It consists of appuccino, dry-cappuccino, americano, affogato, dreve,
mocha breve, mocha, cafe con hield, cafe bombom, con panna, flat white and black eye.
 Snacks: The organisation serve different snacks which is according to taste and
preferences of the Italian people that includes ortolane, ortelloni, armonica, casatiello, hot
dog, margherita and parigina.
 Pastries: They serve different pastries with different flavour such as angel wings, baxin,
bruttiboni, barbajada, cassata, budino, biscuit tortoni, crostata, cavalluci, gelato, cucidati,
cannoli, italian ice andmarron glance
Pricing: It is the way by which organisation decide the price of their products. They keep their
prices attractive so that they can attract large number of customers. There are three elements that
effect setting of price that are cost, competitive prices and quality of product. Venture have
selected odd pricing and price penetration. Price penetration is the one of attractive pricing
strategy which is being selected when the organisation is opening new shop or launching new
product (Kuperman, Gardner and Pryor, 2013). This is the strategy where the firm keep their
prices low so that they can attract large target market. Marvin and Smith is going to open their
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shop in Italy, so they have considered price penetration. With that they have also kept their
prices on odd basis such as $99 for cappuccino.
Place: They have selected very posh place that is Milan in Italy, this is because there are several
factors that have influenced Marvin and Smith to select this place, that are as follows:
 Human resources: This is the primary factor that have influence Marvin and Smith to
select Milan (Claycomb and Martin, 2013). In Milan have availability of the quality
human resource will help the company to produce the quality goods.
 Transportation: Customer can easily come to the coffee shop and easily can go back to
their home.
 Warehouse: As they import fine coffee beans from the Uganda, they need to keep that
beans in warehouse, So Milan has the facility of store.
Promotion: In order to promote the functions and operations of Marvin and Smith, organisation
has main motive to enhance their customer base. Therefore, they are using different tools to
promote their products and services in international market (Claycomb and Martin, 2013). In this
context, following elements can be implemented at workplace for developing effective
functioning in business:
 In this way, sales of the enterprise is the first important tool of promotion of the products
and services within the business unit. Advertising is the important aspect that covers
communication method that are paid for the television advertisement, radio, print media,
etc. In the contemporary times, it assists to seem and shifting from offline to online in the
world (Singh, 2013).
 Further, public relation is the another important parameter that assists to create
communication towards the business products and services in the business unit. With this
regard, press released, exhibitions, seminars, etc. implemented that assists to promote
effective functioning in business unit. Therefore, it assists to accomplish targets and
outcomes in the positive context (Mintz and Currim, 2013).
 Word of mouth is the another important perspective which develops for product
promotion. In this way, Marvin and Smith need to concentrate on the informal
communication that create several benefits to satisfied customers and ordinary people as
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well. Therefore, staff members of the organisation play very important role in success of
the business objectives and goals (Lindsay and Norman, 2013).
 In addition to this, the organisation need to understand about the customer demand and
requirement so that they can easily enhance their outcomes. This is because, valuable
information can be made at workplace that assists to enhance online social media and
managing of media presence at workplace. Hence, it caters to make effective promotional
strategy that assists to develop message of the organisation (Hui and Suher, 2013).
 Hence, Marvin and Smith can easily develop their targets and goals to perform functions
and targets in systematic aspect. With this regard, promotional strategy will be develops
in systematic aspect that assists to enhance target market in the different areas (Eriksson
and Hansson, 2013). With the help of defined strategies, promotion could be undertaken
in systematic aspect.
 Social media is the important tool that assists to identify competitors position that assists
to make effective results within the organisation. Therefore, it cater effective functioning
at workplace to enhance target market (Claycomb and Martin, 2013).
 In this aspect, the chosen organisation also need to provide discount on products and
services so that goals and objectives will be accomplish in systematic aspect. With this
regard, development can be made for ascertain effective functioning in Marvin and Smith
coffee shop. Therefore, targets and goals will be accomplish through ascertain several
elements in the business unit (Lindsay and Norman, 2013).
Question 3: Smith’s to cover a wider geographical area in terms of a different country on the
basis of organisational culture and Information system
 Information system: They have adopted integrated computer system where all the
systems are connected with each other (Eriksson and Hansson, 2013). Other than that
have automated their inventory management, where different software indicate them that
how much inventory is left with them and how mush they need to purchase in order to
cater needs and wants of customers.
 Organisational culture: In Italy, people like to have coffee at their home because they
consume coffee after completion of their working hours so that they can feel stress free,
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relax and reduce their tiredness. The organisation have created their interior and structure
in a way that people fell comfortable while sitting there as well as fell that they are sitting
at home and having coffee (Hui and Suher, 2013). This strategies help them to
differentiate from their competitor and gain competitive advantage.
Question 4 Interpretation of financial data
Particulars Formula Amount
Sales 360000
GP 208000
GP ratio GP/Sales*100 57.777777778
NP 26800
NP ratio NP/Sales*100 7.4444444444
Total assets 113000
Current liabilities 6200
Capital employedTotal assets-current liabilities106800
ROCE Sales/Capital employed3.3707865169
Liquidity ratio
Current assets 35400
Current liabilities 6200
Current ratio Current asset/current liabilities5.7096774194
2016
Current ratio 5.7096774194
Current ratio
0
1
2
3
4
5
6 5.71
Liquidity ratio
2016
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GP ratio NP ratio
0
10
20
30
40
50
60
70
80
5.76
74.44
Profitability ratios
2016
Interpretation: Gross profit presents the relationship between the total profit earned by the
venture and Total sales revenue generated by the organisation. The formula to calculate gross
profit is profit earned by total sales (Lindsay and Norman, 2013). The company has earned
57.77 percent of GP in current year that is very good sign for stability in market and Marvin and
Smith is able to recover the fixed costs incurred along with profitably selling the inventory.
Return on capital employed is the ratio represents the return earned on the capital employed. In
simple words, it can be said that Return on capital employed ratio state that mow much return
can company earned on their capital investment. It is being measures after dividing sales by
capital employed which is 3.37 times during current year, it can be developed after making
secured investments in government funds or mutual funds. Liquidity ratio represent the cash or
cash equivalent of the venture. Current ratio is being calculated by dividing current asset by
current liabilities (Mintz and Currim, 2013). For this year the company has ratio of 5.71 which
state that company is above the minimum or standard current ratio that 2:1. From this analysis, it
can be stated that Marvin and Smith are having huge fund which helps them to invest in opening
new shop in Italy.
Question 5: CONCLUSION
It can be concluded from the project report that Marvin and Smith is going to expand
their business by opening their new shop in Milan that is in the Italy. There are several reasons
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which helps them to select Italy that are competition, their culture, prices etc. Venture is going to
deal in several goods and services that are cold and hot coffee, herbal tea, Pastries etc. they have
made their interior in such a way that customers feel that they are sitting at home and having
coffee. The company gains the competition advantage through their information technology and
organisation culture where the barista are appointed which create the ethical environment.
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