Business Essentials Advanced: Case Study of a Coffee Shop Expansion in Italy

This report analyzes the viability of a coffee shop expansion into Italy, considering factors such as market research, marketing mix, competitive advantage, and financial ratios. The case study focuses on Hank Marvin and Patty Smith, who are planning to expand their coffee shop business from their home country to Italy. The report examines the potential benefits and challenges of operating in the Italian market, including cultural sensitivities, competitive landscape, and financial implications. It provides recommendations for a successful expansion strategy, emphasizing the importance of a strong marketing mix, a clear understanding of the Italian market, and a sound financial plan.

Business Essentials Advanced
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Contents
Introduction................................................................................................................................3
Question 1: Research (country to start-up with)........................................................................4
Question 2: Marketing mix in relation to the coffee shop expansion plan abroad....................5
Question 3: Implications of the need for Marvin and Smith have to cover a wider
geographical area in terms of a different country......................................................................8
Question 4: Using the financial information provided, evaluate two profitability and two
liquidity ratios and discuss how this may influence the decisions available to them..............10
Concluding summary about the overall viability of overseas expansion.................................13
References................................................................................................................................14
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Introduction
The study aims at research writing regard a coffee shop planning to function and operate in
one of the European Union countries. The suggestion and recommendations in the report are
highly based on previous performances and financial value. The case study in the report is
like with two cafe owners Hank Marvin and Patty Smith; for they are aiming up to open and
expand their business in one of the European Union countries. The norms, morals, and
business ethics have been complied with the management and operating of the cafe. The
exception made to the selected country Italy is that Brexit would not have any impact on the
functioning and trading relation of the cafe in of the ways.
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Question 1: Research (country to start-up with)
On the basis of survey conducted by Business Insider, one of the finest countries to begin a
business in Europe Union is Italy. There are few things that are to be kept in mind whilst
starting a business in Italy. The fame of the city regard its business culture related to food and
drinks is renowned worldwide. The culture is also defined as La Dolce Vita i.e. the sweet life.
Introduction of a coffee business in country would only add charm and diversity in the country.
It can be understood that people are of loving nature following the ways of romance to lead
respective life, and business as well. Businesses that fall in the emotional connection rack are
highly thriving and most likely to remain. The sole purpose although of coffee that is to bring
two individuals or in general people closure can be highly used as a strategy in Italy.
Italy today has turned its traditional bureaucratic nature of working and business into an art
expanding and gaining popularity across the globe. For the reason as such, businesses
regardless how similar they appear always can make out the best from the country. The country
takes use of Euro as its currency, which is highly beneficial on its part for its permits foreign
traders, deals, investors to generate and turn business in the country. The reason this country
has a high economic background and rising level of entrepreneurship is that it falls from a
group of eight industrial nations of European Union. Businesses and ideas willing to turn raise
the sails in high working of Italy are most likely to be successful and too expanding. The coffee
shop has two aspects making it highly potential to optimise maximum profit from the business;
the entrepreneurial aspect and the manufacturing (Kuratko, 2016).
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Question 2: Marketing mix in relation to the coffee shop expansion plan abroad
Marketing mix is an alliance of varied market elements that are managed by business in order
to persuade customers to buy/purchase the respective product, such as fruit drinks, beverages,
snacks etc.
Price
The price of the product is one of the most vital aspects of business. For on the basis of its
accessibility and availability the entire growth and development of the business stands (Jones,
et. al., 2013). There are few reasons that aid in setting the right price of the product, such as;
1. How much did it cost to make the product?
2. How much the product costs to the customer?
3. How do the customers perceive and welcome the cost of the product?
Price is entirely based on production and its positioning. For it sends a reflection of business
value perception. Price should include the overall cost of the product but each product should
not be centre used for optimising profit. Like, there can be variation in the cost of each
roduct, some can depict the actual cost of the product whilst some can enjoy a little higher
cost margin. It can be understood with mentioned priced methods:
A. Competitive pricing: Price that suggests cost derived from market status and competitions.
B. Value Pricing: Price suggested by customer (fair charge regard organic, or fairly sourced
coffee)
C. Cost-plus Pricing: Price obtained by covering costs with addition to market price.
Widely the cost has to match customer need and requirement. Analysis of market is necessary
too to set the price of the product. High price may retract customers, and low price may lead
the competitive product surpass the value of product (Jindal, et. al., 2018).
Product
Product includes the appearance of menu, reflection of market demand, and quality standards.
The services of the product should fulfil the requirement of the customer against the cost pays
for the product. The value of product means less when the quality of the product surpasses
other aspects.
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Promotion
The cost, value, quality of the product stands for nothing if people are not aware of the
existence of the product. Marvin and Smith’s coffee shop has to have the charm that entices
customers across the entire Italy. The communication with the customer is the sole of
promotions. Marvin and Smith’s have to gain basic knowledge regard advertising their plan
and business on varied social media’s suggesting the game nights, chats with Nanna, and
other curious activities they are planning to employ in their coffee shop.
Place
The geographical location of the coffee shop is also one of the basic aspects that affects the
selling and purchasing of the product. The place neither should be at a remote location and
nor it should be in extremely populated regions. For extremities in any case are highly
inappropriate, Marvin and Smith should find a place moderately populated with soothing and
simple surrounding to create ambience people carry with themselves wherever they go.
Marvin and Smith need to consider things like, stand alone building. Strip mall, etc (Jones, et.
al., 2013).
Packaging
The appearance of the product affects it selling cent percent against the cost of the product.
Marvin and Smith need to employ some visual elements of coffee inside their product to
1. Polish its appearance
2. Depict the ingredients
3. Customer satisfaction
Coffee shops and the products feasibility depends on its longevity and lastiness. The to-go is
an option trending and appearing to stay in market, to surf the wave of market Marvin and
Smith should employ coffee-to-go option for the customers, it should include visual
representation of coffee shops logo, store decor and design, promptus packaging and design
of coffee. The appearance of the employee appearance is also extremely vital to services.
Positioning
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Market value against competitors states positioning of the product. Marvin and Smith
customers have to value the product to like and purchase it consistently. The value is created
and maintained by consistent taste, and fine quality. Marvin and Smith need to maintain their
services, quality, and the air around their coffee shop i.e. atmosphere (Jindal, et. al., 2018).
People
Customers are of varied kind and it is impossible to fulfil the need and demand of each
individual. Marvin and Smith can pick the general kind; follow key roles and responsibilities
to make the most of their business.
It is important to enquire about WHAT and HOW’s during execution of any business. For
higher the grasp on surrounding aspects, wider and larger the expansion of business.
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Question 3: Implications of the need for Marvin and Smith have to cover a wider
geographical area in terms of a different country.
Management Structure of Italy
The transaction of money overseas is more than just about the procedures and the cost. It’s
highly about merging culture and kind, with varied diversity. It is also about considering the
product or business services appropriate and applicable in a different nation; for it is quite a
significant change to move from domestic business to international expansion. The expansion
can be done with a simple step, marketing and that too effective one at that whilst expanding
a business to Italy. Business on indigenous kind of soil is an art in its own self, whereas
attempting to actually follow it across international lanes is miraculous. Countries are
although turning more heterogeneous day by day but the soul, the foundation of culture rarely
interrupts anything, such as traditions, cultural sensitivities, traditional discourses, kind,
general nature, local resources, and fine protocols are highly unchanging whereas they are
stubbornly unaccommodating. Hence, the identity of the product, business has to project
itself worthy and fashionable to the nation, and not exactly the other way, whilst hoping that
things turn out to be best (Hair, et. al., 2015).
Internationally renowned advertisement brands are born and set up in Italy. High functioning,
large local firms to numerous small scale industries and Italian agencies are availing the
services provided by the field of advertising. Italians are widely engaged by the newspapers
and periodicals making it an effective means of advertising various business projects,
expansions, customer products etc. The promotion might appear costly but for Marvin and
Smith it would be widely affective. Although social media is not highly wide spread in Italy
yet, however it is vital for an effective brand to have a website.
Gaining Competitive Advantage
Italy currently is one of the most industrialized nations of the world. People in Italy enjoy a
high standard living, which according to surveys and research reports makes it rank 8th on the
list of quality and standard life offers to its citizens. It is notable that Italy has finest and
largest gold reserves in the contemporary to lowest unemployment rate across the entire
Europe.
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Marvin and Smith’s coffee shop can turn into an rapidly growing business for the country is
highly affected by lack of market reforms, and infrastructure development. On the basis of
latest survey conducted by the government of the country, the country has spending of 1.1%
on R&D of its entire GDP. This is significantly and highly lower than European Union
expense of 1.7%. Marvin and Smith’s have a beneficial implication regard their coffee shop
that they use the finest coffee, extracted from Uganda the Gumutindo Coffee which is quite
remarkable since employment of high efforts in business are at times unachievable or are too
high to follow (Hair, et. al., 2015).
The services provided by Marvin and Smith’s are outstanding and explicable for they already
have a huge amount of experience in functioning the same industry. They are well and highly
aware of morals, ethics, and value of the business whilst ensuring the excellent quality and
services. With high competitive advantages, it is important to note that cultural sensitivity
and the knowledge of local protocol are paramount in effective business marketing. The
intricacies of any nation, state, city its general beliefs, faiths, even its superstitions can
disrupts the course and functioning of business at any point is its growth.
It is quite horrendous to even assume that marketing strategy of ay nation is transplantable to
a new nation. It is typical to believe and even to follow marketing strategies of another
nation are transplantable to a foreign country (Kuratko, 2016).
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Question 4: Using the financial information provided, evaluate two profitability and two
liquidity ratios and discuss how this may influence the decisions available to them.
Accounting ratios
The calculation accounting ratios will assist the Marvin and Smith’s coffee shop in
understanding the financial position of the company by measuring its performance. This
includes liquidity, solvency profitability and efficiency ratios.
Profitability ratios
The profitability ratios will allow the Marvin and Smith’s coffee shop to measure the
profitability position of the firm.
The two profitability ratios are –
Gross Profit ratio
This ratio measures the profitability health of the Marvin and Smith’s coffee shop by using
the gross profit and sales of the firm. The higher ratio implies financial stability.
Net Profit ratio
This ratio measures the profitability health of the firm by comparing the net profit and sales
of the firm.The higher ratio implies financial stability(Needles et. al., 2013).
Profitability Ratios
Gross Profit 208000
Net Profit 26800
Sales 360000
Gross Profit Ratio 57.78
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Net Profit Ratio 7.44
After seeing the profitability ratios, it can be said that the Marvin and Smith’s coffee shop has
high profitability and the firm has positive future prospects. This will enable the firm to
expand into new areas and ensure that it is able to recover its costs. This will assist the
company in fulfilling its expansion plans(Drake and Fabozzi, 2012).
Liquidity ratios
The liquidity ratios will assist in measuring the liquidity position of the Marvin and Smith’s
coffee shop.
Two liquidity ratios are –
Current ratio
This ratio compares the current assets and current liabilities of the firm to assess the liquidity
position of the firm. The ratio of 2:1 is considered suitable for the company.
This ratio checkswhether the firm will be able to meet its short-term liquidity requirements or
not.
Quick ratio
This ratio compares the quick assets of the company with its current liabilities to assess the
liquidity position of the Marvin and Smith’s coffee shop. The ratio of 1:1 is considered
suitable(Needles et. al., 2013).
This ratio checks whether the firm will be able to meet its immediate liquidity requirements
or not.
Liquidity Ratios
Current Assets 35400
Current Liabilities 6200
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Quick Assets 27400
Current Ratio 5.71
Quick Ratio 4.42
After seeing the liquidity ratios, it can be said that the Marvin and Smith’s coffee shop is
over-invested in the current assets. This represents mismanagement of the financial resources
of the firm. If the company wants to expand then this extra liquid resources will increase the
cost of expansion and will negatively impact the profitability of the firm(Drake and Fabozzi,
2012).
Formulae –
Net Profit ratio - Net profit/Net sales * 100
Gross Profit ratio–Gross profit/Net sales * 100
Current ratio–Current assets/Current liabilities
Quick ratio –Quick assets/Current liabilities
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Concluding summary about the overall viability of overseas expansion
It order to maintain business in Italy, Marvin and Smith have to maintain the entire viability
of the business overseas with practice and conduct availing in service delivery. Marvin and
Smith follow an exceptional way of providing its customers with finest coffee beans from
Uganda Farms, the Gumutindo Coffee. To regain the originality, they must be honest and
righteous in their business practices. Herbal infusions and high quality tea has been imported
for processing. Marvin and Smith provide edibles such as cookies etc with coffee which is
unlikely to be found in other coffee chains (Scarborough, 2016).
The change and expansion in Italy has its own affects and effectiveness on the basis of cost,
labour, cost of transportation of goods and services. The inflow of material is comparatively
inexpensive due to minimum quota restrictions. Marvin and Smith have added more value to
their coffee shop with introduction of relaxing environment to add the hint and taste of
Uganda to its ambience. They have also for customer needs and requirements have employed
effective power sockets and free wifi connection.
To maintain, manage, and retain employees, staff of business has been provided with
development opportunities in Italy. The evenings are to be ensured full of fun and eventful to
engage customers and attract more of them. If the sales are to be targeted then the product
must be supplied with add-on coupons suggesting/implying discounts and offers to maintain
the inflow of customers. Italy is an highly capable and suitable country to work in as the
country has the most renowned romantic and attractive background, and also for the base
reason that the country has a easy business registration process. The funds and base of the
business can be procured from high promotions, marketing efforts and banks to beat the high
and yet rising competition of coffee shops i.e. Starbucks, CCD, Barista.
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References
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ModelDrake, P.P. and Fabozzi, F.J., 2012. Financial ratio analysis. Encyclopedia of Financial
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Brand Performance-The Moderating Role of Retail Format and Brand Type.
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Learning.
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