Business Essentials: Expanding Marvin and Smith's Coffee Shop into Spain

This report analyzes the viability of expanding Marvin and Smith's Coffee Shop into Spain. It examines the Spanish coffee market, logistical considerations, ethical implications, and structural challenges. A tailored marketing mix is presented, and the impact of expansion on organizational culture and supply chain is discussed. Financial ratios are evaluated to assess profitability and liquidity, providing insights into the company's financial readiness for expansion.

Business Essentials
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Table of Contents
Introduction:....................................................................................................................................3
1. Research and decide on a country (within the European Union) that Marvin and Smith’s coffee
shop could expand into. Justification for your choice must be given regarding choice of country,
logistical considerations, ethical considerations and the structural challenge of expanding into
that country. Note that you should assume for the purposes of this assignment that the Brexit
negotiations will make no difference to the trading environment as it is at present.......................3
2. Present a tailored marketing mix in relation to the coffee shop expansion plan abroad.............5
3. What are the implications of the need for Marvin and Smith’s to cover a wider geographical
area in terms of a different country? Consider any impact this may have on any two of the
following and show how these issues are interlinked:.....................................................................7
4. Using the financial information provided, evaluate two profitability and two liquidity ratios
and discuss how this may influence decisions available to them....................................................9
5. Write a concluding summary about the overall viability of overseas expansion at this stage.. 11
Conclusion.....................................................................................................................................12
Reference list:................................................................................................................................13
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Introduction:
This business report has been prepared to plan an expansion for a renowned coffee shop in the
other countries within the EU. The organization Marvin and Smith’s coffee was established in
the year 2016 and at present, it is one of the renowned coffee businesses globally. This business
is planning its expansion after getting immense success in UK. The analysis of this report is done
in order to gain a clear geographical idea about Spain, as it is the country chosen in which the
company will expand their services. This report also highlights the strategies, which will help the
company to expand their services in a proper way within the geographical location. The reason
behind choosing Spain as the country in which the company will focus on to expand their
services is the preference of the Spanish people. Coffee is highly preferred among the Spanish
people and the market of Spain is very huge, which will eventually help Marvin and Smith’s
coffee shop to connect with more customers and gain more profit. This report will also shed light
on the marketing mix strategy and its role in the expansion of Marvin and Smith’s coffee shop in
Spain.
1. Research and decide on a country (within the European Union) that Marvin and Smith’s
coffee shop could expand into. Justification for your choice must be given regarding choice
of country, logistical considerations, ethical considerations and the structural challenge of
expanding into that country. Note that you should assume for the purposes of this
assignment that the Brexit negotiations will make no difference to the trading environment
as it is at present.
Marvin and Smith’s Coffee shop has established them as a highly competitive business in UK.
The company has never-ending customers and it is highly preferred by the international visitors.
The present state of success of the company has opened a door to expand their business in a new
country targeting a new segment of customers (Meyer and Peng, 2016). The coffee market in
Spain went through huge growth in 2012 and the rate of growth was 4.26 %, however this
percentage then continued to decline and kept on being steady at a downbeat average growth
pace of 1.25 %. Due to this growth percentage, it is evident that Marvin and Smith’s coffee shop
will get huge profit if they expand their business in such a country (Knoke, 2018). Marvin and
Smith’s coffee shop is known for practicing fair trade in business. Fair trade plays very effective
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role in the industries of Spain and the reason behind this is the customers’ choice towards
authentic products.
Figure 1: Economic Statistics of Spain
Source: (Statista, 2018)
As per records, the coffee industry in Spain achieves a huge amount of revenue, which highlights
the potential of expansion of this industry. Spain has experienced huge investments in coffee
industry due to the practice of fair trade and this has allowed coffee business to enhance their
sales in order to maintain a proper payment structure as well as better employee legislations
within the industry. The practice of the country towards fair trade has made it inevitable that
Marvin and Smith’s coffee shop will also expand their business in Spain in no time. For
expanding the business, a secondary market research is performed which helped in shedding
light on the area that will be best for starting a new coffee shop. The country has huge potential
towards coffee industry because families run most of coffee businesses in Spain. The identified
place is Valencia, which has the best possibility of profit gain for the business, most of the coffee
businesses of Spain are in Valencia. The choice of this place is because Valencia is among the
oldest market area in Spain (Fritsch et al., 2015). Presently Coffee Productions is the largest
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manufacturer of coffee brands, which are sold in the Spanish domestic market, with its own
Distributor Brand. It produces approximately more than 125 different references of roasted
coffee. This market is a daily preference for people of Spain and foreigners as well and this
place is famous for producing various brands of coffee to increase mass distribution. If Marvin
and Smith’s coffee shop is started at Valencia, it will not only get a huge customer market but
also be able to attract more customers and gain more profit (Fritsch et al., 2015). Other than
these, the other factor, which will help the company to get better chances to run their business, is
the present business infrastructure of the country. This is because Spain has one of the most
efficient business structures in the world.
2. Present a tailored marketing mix in relation to the coffee shop expansion plan abroad.
As Spain is found to have the potential of providing Marvin and Smith’s Coffee shop a huge
market and customer base, there is a necessity to prepare a marketing mix strategy for the
business, which will help it to expand and make more profit in the new chosen market. The
marketing mix strategy for the company is discussed below:
Price Due to having only four shops in London,
Marvin and Smith’s coffee shop has enhanced
limited branding in the global market.
Furthermore, Spain also has few old coffee
shops, which will provide Marvin and Smith’s
coffee shop a competitive environment. Hence,
in order to enhance their business in the market
area, this business needs to implement
competitive pricing strategy that will attract the
customers more (Baker, 2016).
Coffee industry in Spain is produced and
packed in boxes with the help of the advanced
equipments. This whole process is done in
their own laboratory, the Spanish people try to
carry out the best quality controls in every
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roast in order to ensure that the aroma is
properly preserved of and taste remains
unaltered in the coffee products (Fritsch et al.,
2015).
Product Marvin and Smith’s coffee shop is famous for
providing the best coffee as they are known for
using the best quality of coffee beans. The
coffee shop is also preferable by the existing
customers to help them follow their culture of
Gumutindo Coffee. As families run the coffee
businesses, Marvin and Smith’s coffee shop
will get great opportunity to expand their
business in the market.
The Coffee industry of Spain produces coffee
and packs them in tight boxes with the help of
the advanced equipments. This whole process
is done in their own laboratory, this is because
the Spanish people try to carry out the best
quality controls in every roast in order to
ensure that the aroma is properly preserved of
and taste remains unaltered in the coffee
products
Promotion As the coffee shop is opening a new outlet in
Spain, it is recommended for them to focus on
promotional strategies that will help the
company to gain more customers and along
with that enhance a brand image for their
company. With the help of promotion over
television, newspapers and new media the
business will be able to position their brand in
advance in the market as well as gain customer
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attraction and feedback at the same time (Khan,
2014).
The other promotional strategies that the
company might use are providing discounts on
coffee for a certain period or come up with
some happy hours where the customers will be
provided with cookies and snacks on buying
coffee. This promotional strategy along with
practicing fair-trading will be helpful for the
company to enhance their productivity and
gain profit in the new market.
Place The market of Valencia is a daily preference for
people of Spain and foreigners as well and this
place is famous for producing various brands of
coffee to increase mass distribution. If Marvin and
Smith’s coffee shop is started at Valencia, it will
not only get a huge customer market but also be
able to attract more customers and gain more profit
(Fritsch et al., 2015).
Table 1: Marketing Mix strategy
Source: (Created by learner)
3. What are the implications of the need for Marvin and Smith’s to cover a wider
geographical area in terms of a different country? Consider any impact this may have on
any two of the following and show how these issues are interlinked:
In case of Marvin and Smith’s Coffee Shop there are a couple of implications that the company
would face while presenting the idea of covering wider geographical region which includes the
United Kingdom and Spain. For any organization to spread or expand its business to a much
broader geographical region or area, they need to implement certain changes or alterations with
respect to the business setting of the concerned country (Crane 2017).
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Two of the implications that Marvin and Smith’s Coffee Shop might face are evaluated and
discussed here:
Organizational culture: Marvin and Smith’s Coffee Shop being a localized organization with
limited reach has a compact and distinct organizational culture. Organizational culture of an
organization determines the business output and revenue of the organization. As of now, the
country is functioning in the United Kingdom and the organizational ethnicity and culture of the
company differs from the nature of other countries. The company follows the clan culture
methodology. In a clan culture the overall ambiance is lenient and the chain of execution is
gracious and cooperative. However, the culture that the company follows cannot be implemented
in Spain. The work setting and culture of Spanish companies can differ from the work culture of
the United Kingdom. The company needs to adopt certain changes in order to conduct trade in
Spain. The Spanish work culture is more concerned with the presented outline and structure. The
people follow the stencil cultural structure and the country has faced gender discrimination other
cultural issues, so the company needs to address the methodology of the work environment of the
country. Compared to Spain the work setting of the United Kingdom is more inclined towards
creativity and improvisation (Crane 2017).
Supply chain: Supply chain is the method by which the manufactured products are distributed
via marketing and distribution channels. Supply chain is an important parameter that a company
needs to address because the final output of the business is determined by the method of
distribution. In case of Marvin and Smith’s Coffee Shop, supply chain management is an
important parameter because being a part of the food and beverage sector, the company needs to
have frequent access to the industries for raw materials. Marvin and Smith’s Coffee Shop has a
specific supply chain strategy which is designed for business and trade in the United Kingdom.
However, if the company needs to expand, Marvin and Smith’s Coffee Shop needs to implement
strategies and ideas by which the supply chain management is synchronized with the business
structure followed in Spain or other countries (Christopher 2016).
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4. Using the financial information provided, evaluate two profitability and two liquidity
ratios and discuss how this may influence decisions available to them.
The financial statistics and figures presented on Marvin and Smith’s Coffee Shop determines the
profitability and liquidity ratios of the company. The ratios are used for evaluating and analyzing
the impact and effect on the idea of expansion of business in Spain.
Evaluation of Profitability Ratios:
Ratio Formula used Result
Gross profit (Gross profit/ Total sale)*100 0.6002
Net profit (Net profit/Total sales)*100 0.8001
Return on capital employed
(ROCE)
(Net working profit/ Total asset
accountabilities)* 100
0.26
Table 2: Evaluation of Profitability Ratios
Source: (Created by Author)
Gross profit: Gross profit or sales profit or gross income of an organization can be defined as
the turnover or profit the company earns after deducting the possible costs that has been
observed during the manufacture, distribution and maintenance of the products. The gross profit
of an organization is necessary in order to determine the final output of the business. As of 2017,
the gross income received by Marvin and Smith’s Coffee Shop was about 60.02%. Therefore, the
financial potency of the company for business expansion in other countries is positive
(Khamidah et al .,2018).
Net Profit: Net profit can be defined as the fixed and constant costs subtracted from the gross
income. In case of net profit the expenses observed from operations, tax and other costs are
subtracted from the gross income of the organization. Net profit of an organization is also
necessary in order to determine the financial potency of Marvin and Smith’s Coffee Shop with
respect to its earning after deducting the external costs. As of 2017, the net profit earned by
Marvin and Smith’s Coffee Shop was 8.01%. From this figure it can be deduced that there is a
positive growth in the business with respect to its financial growth and development (Khamidah
et al .,2018).
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ROCE: ROCE or return on capital employed can be defined as the economical ratio of an
organization that calculates and determines the productivity of the company with respect to its
effectiveness and efficiency by which the capital amount is engaged. Return on capital employed
can be determined by dividing the net profit earned from the value observed while deducting the
current accountability of the organization from the total value. As of 2017, the return on capital
employed of Marvin and Smith’s Coffee Shop is 26%. Hence, the return from the total capital
invested in the concerned market is positive (Khamidah et al .,2018).
Evaluation of Liquidity Ratios:
Ratio Formulae used Result
Existing ratio Present asset/ present
accountability
6.33
Acid test ratio (Present asset- inventories)/
present liabilities
5.02
Table 2: Evaluation of Liquidity Ratios
Source: (Created by Author)
Current ratio: Current ratio or existing ratio of an organization is the liquidity ratio. Current
ratio is necessary in a business scenario in order to determine and measure the company’s
capability to pay both short and long-term responsibilities and requirements. Current ratio is
mandatory in order to determine the liquidity ratio. In case of Marvin and Smith’s Coffee Shop
the current scenario as of 2017 was 6.33. This determines the availability of the elevated
advantage value inside the company.
Acid Test Ratio: Acid Test Ratio or Quick ratio can be defined as a liquidity ratio which is
necessary in order to determine or measure the capability of an organization to pay the present
accountabilities. Therefore, acid test ratio determines the long term benefit value or asset value
of a company after deducting the accounts. As of 2017, the acid test ratio of Marvin and Smith’s
Coffee Shop was 5.02. This value represents the capability of the company to indulge into
investments in the much broader international market (Khamidah et al .,2018).
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5. Write a concluding summary about the overall viability of overseas expansion at this
stage.
The analysis of this report is done in order to gain a clear geographical idea about Spain, as it is
the country chosen in which the company will expand their services. In order to expand the
business, a secondary market research was also done which helped in shedding light on the area
that will be best for starting a new coffee shop. In order to enhance their business in the market
area, it is also identified that competitive pricing strategy will be helpful (Al Saifi 2015).
For any organization focusing on the idea of expansion in a much broader geographical area,
there needs to be a specified strategy on which the business functions will work because work
setting and business process varies from country to country. Marvin and Smith’s coffee shop is
an UK based organization and in order to expand its business in Spain the company needs to
address the parameters that the business methodology of Spain. The business process of the
Spain is more inclined towards a firm structure and very little space for creativity and
improvisation whereas in the United Kingdom the work setting is more creative and open to
changes. Keeping this in mind, Marvin and Smith’s coffee shop needs to present a fresh business
structure in order to thrive in other geographical area.
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Conclusion
From the above it can be said that, the chosen country, which will provide Marvin and Smith’s
coffee shop with a huge customer base and an opportunity to gain more profit in Spain. The
reason behind this choice is because Coffee is a highly preferred drink among the Spanish people
and the business industry of Spain is very huge, which will eventually help Marvin and Smith’s
coffee shop to connect with more customers and gain more profit. The chosen market place in
which the company can set up their café is Valencia as it is a very old market in Spain and it is
known to be highly preferred by the Spanish people and the international people as well.
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Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Crane, A., 2017. Rhetoric and reality in the greening of organisational culture. In Greening the
Boardroom (pp. 129-144). Routledge.
Fritsch, M., Kritikos, A. and Pijnenburg, K., 2015. Business cycles, unemployment and
entrepreneurial entry—evidence from Spain. International Entrepreneurship and Management
Journal, 11(2), pp.267-286.
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requires a systematic approach and a flexible organisational culture: a qualitative study among
academic staff. Quality in Higher Education, 20(1), pp.103-126.
Knoke, D., 2018. Changing organizations: Business networks in the new political economy.
Routledge.
Londhe, B.R., 2014. Marketing mix for next generation marketing. Procedia Economics and
Finance, 11, pp.335-340.
Meyer, K.E. and Peng, M.W., 2016. Theoretical foundations of emerging economy business
research. Journal of International Business Studies, 47(1), pp.3-22
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Statista. (2018). Coffee volume growth Spain 2011-2021 | Statistic. [online] Available at:
https://www.statista.com/statistics/710473/coffee-volume-growth-spain-european-union-eu/
[Accessed 21 Jun. 2018].
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