Caffe Nero: SWOT and PEST Analysis for Expansion in Finland

This study presents a SWOT analysis of Caffe Nero and a PEST analysis of Finland to analyze the business environment for Caffe Nero in Finland. The report also suggests that expanding in Finland will provide a bigger market and more market opportunities for Caffe Nero.

Running head: BUSINESS AND THE BUSINESS ENVIRONMENT
Caffe Nero
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Table of Contents
Introduction......................................................................................................................................2
Background of the Caffe Nero.........................................................................................................2
SWOT analysis................................................................................................................................3
PEST analysis..................................................................................................................................5
Technological environment.............................................................................................................7
Conclusion.......................................................................................................................................7

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Introduction
Caffe Nero Group Ltd or Caffe Nero is a coffee brand which is headquartered in London.
The company was founded by Garry Ford in the year 1997, the initial branch of this company
was located in the Brompton Road, South Kensington. Worldwide 825 coffee houses are found
which is located in 8 different countries: United States of America, United Arab Emirates,
Turkey, Croatia, Cyprus, Poland, Ireland, and United Kingdom. Considering the presence of
Coffee Nero in the eight different countries, expanding in country like Finland will provide a
bigger market and more market opportunities (Caffè Nero 2018). Media reports suggest that
coffee consumption in Finland is one of the largest in the world, which is 12kg per capita per
year. This study is based on the UK based company Caffe Nero and its expansion into country
like Finland (The Telegraph 2018). The report will also present a SWOT analysis of the
company and a PEST analysis of Finland which will help to analyze the business environment
for Caffe Nero in Finland.
Background of the Caffe Nero
Caffe Nero was first opened in the year 1997, in the South Kensington area of London.
Caffe Nero Group is one of the largest espresso operator shops in UK, which is trailing behind
Costa Coffee and Starbucks Corporation. Caffe Nero operates more than 150 shops in United
Kingdom in over 50 cities. The several sites where the shops are located include Scotland,
Glasgow, England, and Brighton. Caffe Nero also endeavor in to tailor making each of the shops
in accordance with the peculiarity of the region. Caffe Nero plans to increase the number of
stores in the small regional markets and even in the large metropolitan cities. The company also
plans to open different stores outside and inside the mainland Europe. The company has a simple

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Strengths
Rapid growth
High profitability
Big market share
Number of outlets
Strong brand name
Geographical location
Partnership with other brands
Weakness
Dependence on a single supplier
Lack of adaptability in case of change
In UK only, majority of the outlets are
located
Opportunities
Internet café
Expansion plans in future
Diversified product line
More stores will be opened up in
Europe
Threats
Exchange rate of currencies
15,000 outlets of Starbucks
Bargaining power of the suppliers
High price rise of coffee
Pressure groups emphasizing on fair
trade
Change in trend in coffee drinking
SWOT Analysis
philosophy- food, atmosphere, coffee and service. The company promotes these elements and
strives to achieve excellence in the four areas (Caffè Nero 2018).
SWOT analysis
SWOT analysis is an identification of the strengths, weakness, opportunity and threats of
any specific company. This helps in to understanding the external and internal factors that will
effectively impact the viability of an undertaken project.

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Strengths- the Caffe Nero Company is ranked one in the UK customer choice for the
past 10 years. This can be attributed to the brand image of the Caffe Nero (Press.which.co.uk
2018). Thus, strong brand positioning plays a major role in the domestic European Market and
the chain of the coffee outlets. This is the central point of the Caffe Nero business model. Caffe
Nero offer products to the customers at a cheaper price in comparison to the rivals (Starbucks,
Costa Coffee). Other than the coffee products other food items are also sold in the outlets which
account for 35 percent of the sales. The style of offering is continental which is different from
the other rivals that offer in American style. The company emphasizes on putting coffee house
environment which is unique to the European tastes. This is one of the unique selling point of
Caffe Nero. The company emphasizes on renting the outlets rather than acquiring the shops for
the units. The company has 825 outlets in 8 major countries (United States of America, United
Arab Emirates, Turkey, Croatia, Cyprus, Poland, Ireland, and United Kingdom) which increase
the reach of the brand to the worldwide customers (Caffè Nero 2018).
Weakness- one of the major weakness of Caffe Nero is the location of the outlets in the
Central London and the outlets are more aggregated in the UK provinces. This has led to the
saturation of the outlets in the high streets. Caffe Nero lacks the experience of having true global
presence. Thus penetrating in to the international and the local markets of other countries can
lead to a problematic situation. Caffe Nero practices only the Italian style which may cause of
concern if the company wants to expand outside the European Market (Fenwick.co.uk 2018).
The company depends excessively on a single supplier to meet all its raw material resources, this
overdependence might create issues like bargaining suppliers. It is already mentioned that Caffe
Nero has 825 outlets in certain countries, however over 150 outlets are alone located within the
United Kingdom.

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Opportunities- Expansion of the company within the European mainland can prove to be
beneficial for the company regarding the Italian style of the food offered in the outlets. Thus
starting the expansion in the Western Europe will lead to more opportunities. The acquisition of
the 4 million pounds from the Royal bank of Scotland with assist in opening and expanding new
outlets. Selling brand name is one way of earning more profits in the form of franchising the
business. The company if plans to expand in the developing countries then it can purchase
coffee, tea and food directly from the cultivators at a competitive price. The company can also
directly invest and contract for the cultivation of the tea and coffee in the developing countries.
Coffe Nero can invest capital in to UK market because the both the sandwich and the coffee
market is booming. Removal of the trade barriers that exist in the East Asia and the Middle East
countries can lead to establishment of new outlets (Thetimes.co.uk 2018).
Threats- Threats are the hindrances that hamper and dampen the growth of any company
in achieving the goals and the objectives. The major threat arises from the rival of the company
and the market competitors. Starbucks have 15,000 outlets whereas, Coffe Nero only have 825
outlets and that too only in 8 countries. The other competitions in this field include the
McDonalds, Subway, BB’s Coffee and Costa Coffee. The decline in the number of tourists
visiting UK has reduced and this might have a negative impact on the sale of coffee from the
outlets. Due to the increase in terrorist attack in UK, often small coffee outlets are targeted.
Regarding the brand image, the entrants in to the market can easily copy and this may further
increase the competitive nature of the market. The price can have a negative impact on the rental
prices of the coffee outlets, because a majority of the outlets of Coffe Nero are rented. There are
other risks that may arise from political instability. For example if Coffe Nero plans to open

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outlets in Bangladesh then it might cause them the business, because Bangladesh is a politically
not stable (Muspratt 2018).
PEST analysis
Political environment- Finland is a multiparty country with Parliamentary republican
form of government which is headed by a president. The tax policies of Finland affect the choice
of the companies whether to transfer products to the market or move the production itself. The
corporate income tax is 26%; Standard VAT rate is 24%, withholding tax rate is 10%; income
tax rate in Finland is 30.5%. Overall taxation policy is high in Finland, while the best part is
corporation tax has been reduced to 20 percent (Invest in Finland 2018). According to the
transparency International report, the level of corruption is low in Finland. The corruption
perceptions index reveal that Finland is third among the 177 countries, thus making Finland a
good country for business. This makes the Finland government stable and reliable. Thus, the
government is highly stable and the country is at low risk (Transparency International 2018).
Economic Environment- According to the trading economics data Finland is a stable
country with the GDP of $247 billion. The rate of unemployment is 9.5%, which means that
Finland needs more employment opportunities. The new companies that will enter the market
will bring lots of employment opportunities. Therefore both the hierarchical and intermediate
entry modes a good options for the new firms. Euro is the currency of Finland and due to the
stability of euro that is cuff inflation is low. Low inflation risk reduces the country risk as well.
Finland being a part of European Union is always open for direct investment from the foreigners.
However there are certain industries like alcohol shops and restaurants require license
(Tradingeconomics 2018).

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In Finland delivery cost is high in comparison to the Asian countries. Whereas, on the
other hand the buying power of the consumers is high which makes inland a potential market that
exhibits consumers with strong buying powers.
Social environment- In Finland the social security of an entrepreneur is quite good and
comprehensive. There are options like sickness allowance, occupational health care,
unemployment security, pension insurance for the self-employed people. This features allow
many foreigners to start business in Finland. However there a barriers like people of Finland
speak Finnish as their first language. Finnish people are dedicated to their work life and they
tried to finish the work during their work hours. According to the statistics the Finns are the
highest consumers of coffee in the world. Finnish people consume 12 kg of coffee per year. This
creates an opportunity for the Caffe Nero to setup outlets in Finland in order to expand their
business into to Europe.
Technological environment- Finland has been the center of Europe tech industry. This
certainly in enhances the market of technological industries in Finland. No matter it is local or
International, the country is bound to attract foreign Investments. Service sector contribute a
large portion to the Finnish economy. The leading industries of Finland are high Technology
industries, engineering and manufacturing industries. The Finland government spends 3.5% of
the GDP into research and development (Invest in Finland 2018).
Thus according to the PEST analysis, it has been found that you country Finland is a
stable country and expanding the business of Caffe Nero will provide Caffe Nero with added
advantages. The business environment in Finland will promote steady growth to the business.
Although the people of Finland speak Finnish, recruiting Finns in the coffee outlets will reduce
the issues of language barrier. Whereas, it has been found that the people of Finland drink coffee

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more in comparison to the other countries. Thus, establishing Caffe Nero business in Finland will
increase profit of the company.
Conclusion
Thus, from the above study it can be concluded that Caffe Nero is a promising company
which is a number one brand in United Kingdom. The company has its own strengths,
weaknesses, opportunities and threats. However one of the biggest opportunities lies in the fact
that if a company Caffe Nero tries to establish in Finland then it can accrue more profits. The
country Finland is one of the largest consumers of coffee. This presents Caffe Nero a perfect
opportunity to set up its business in Finland.

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Reference
Caffè Nero, 2018. Read Our Story - The Pursuit of Excellent Coffee - Caffè Nero UK. [online]
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Fenwick.co.uk, 2018. Caffè Nero. [online] Fenwick.co.uk. Available at:
https://www.fenwick.co.uk/stores/colchester/caffe-nero/ [Accessed 14 Feb. 2018].
Invest in Finland, 2018. Invest in Finland. [online] Investinfinland.fi. Available at:
https://www.investinfinland.fi/why-finland [Accessed 14 Feb. 2018].
Muspratt, C., 2018. Caffe Nero profits from expansion. [online] Telegraph.co.uk. Available at:
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r9qb5z2xw8b [Accessed 14 Feb. 2018].
Tradingeconomics, 2018. Finland - Economic Indicators. [online] Tradingeconomics.com.
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Transparency International, 2018. Transparency International - Finland. [online]
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