Marvin and Smith Coffee Shop Expansion

This assignment analyzes the potential expansion of Marvin and Smith coffee shop into Belgium. It examines the Belgian market, proposes a marketing strategy including pricing, distribution, and promotion, and evaluates the company's financial position for expansion based on ratio analysis. The document concludes with a recommendation to pursue expansion in Belgium due to the company's strong profitability and liquidity.

CASE STAY CAFESHOP

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Selection of country for business expansion and justification behind choosing the country. 1
TASK 2............................................................................................................................................3
Presenting a tailored marketing mix of coffee shop expansion plan......................................3
TASK 3............................................................................................................................................4
Implications of basic two factors on business of coffees shop...............................................4
TASK 4............................................................................................................................................5
Evaluating liquidity and profitability of coffee shop and their impact on decisions..............5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
In order to make any kind of business decisions at the workplace, wide range of factors
and aspects are taken into consideration by managers. The present study is based on Hank
Marvin and Patty Smith who are partners and worked from past many years in food as well as
catering industry. As of now, they are going to make plan for expanding business at the best
location of European Union. Throughout the current project, a particular country or place is
selected which will be highly suitable for Marvin and Smith coffee shop. Apart from this,
reasons for selecting specific country are provided. Further, tailored marketing mix which
consists of 4 P's is explained in the project which will help to make effective marketing strategies
in the new market. Besides this, implications of any two factors at the workplace are described
properly. Along with issues associated with these two aspects are clearly presented in the current
assignment. At the end of study, financial performance of Marvin and Smith coffee shop is
evaluated using liquidity and profitability financial rations.
TASK 1
Selection of country for business expansion and justification behind choosing the country
As per the current case study, two partners Hank Marvin and Patty Smith has a business
in food and catering sector. As of now they are going to expand existing business in new market
which will provide opportunities for generating more sales and profit as compared to present
conditions. For expanding coffee shop, Belgium country will be the most suitable market which
located in Western Europe. Basic reason behind considering this particular country is that it has
cold weather at most of the times in year. When climate of the country is cold then hot coffee
will be preferred by local community which will help to generate huge sales. Further, Belgium is
one kind of constitutional country, popular in monarchy and has a federal parliamentary
democracy (Belgium, 2007). Due to this, wide range of legal as well as political factors will not
affect to coffee shop. When looking at the population of selected country then largest people are
urbanised in Belgium. In this condition, they will consume more coffee products which is sign of
enhancing customers in more proportion. As number of users improve consistently then Marvin
and Smith coffee shop become more capable for generating sales and profit.
Legal structures and government of Belgium country are very smooth and highly
supportive for new businesses. Further, wide range of legal laws, rules and legislations are not
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applied on the new entrants in suggested country. Therefore, the coffee shop easily and smoothly
enter as well as operate in the market. Living of standard of Belgium's local community is high
as well as luxurious. This kind of life style will become great opportunity for Marvin and Smith
in order to generate huge level of sales. Apart from this, people of selected country spend time
and holidays with family where they generally go outside. At most of the times they go in coffee
shop and food stalls (Pay, 2009). This specific situation will support to selected coffee shop to
attract huge level of customers and become financially sound in the food industry. When
profitability condition of the firm is higher, then it will become capable to provide goods and
services at the low price. It will support to gain competitive benefits in Belgium country.
Moreover, logistics facilities are also available in cited country by which Marvin and Smith
coffee shop easily able to purchase raw materials and deliver finished goods on time.
Other than the above reasons for selecting Belgium country for business expansion,
another cause is related to availability of raw materials. The suggested area of Western European
Union has coffee beans in enough quantity which are basic raw materials of the chosen shop.
When it will purchase raw materials from the internal environment of country then cost of
inbound logistics will be reduced up to the certain level. It will support to decline total expenses
of production by which management able to provide coffee products at the low prices. Therefore,
due to easily availability of required raw materials, Belgium country will be the most suitable for
Marvin and Smith coffee shop.
However, there is only one lack available in Belgium country which is that every coffee
shops have to follow functional organisational structure at the workplace. The Marvin and Smith
coffee shop using divisional structure where the whole business is divided on the basis of
divisions. After expansing business in Belgium it has to apply functional structure which is first
and last problem available in the suggested market. When it will replace existing organisational
structure with required then some changes have to made which impose some financial burden on
the coffee shop (Ataman and et.al., 2010). Moreover, this particular kind of negative aspect is
very low which will affect negligible on the Marvin and Smith coffee shop.
Furthermore, when looking at the logistics facilities, kind of population, coffee drinkers,
availability of raw materials etc. then Belgium country is one of the highly suitable for the coffee
shop to expand as compared to other European countries. In addition to this, legal laws and
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structures are also highly appropriate as well as favourable for selected coffee shop to enter in
Belgium and meet desired objectives and goals.
TASK 2
Presenting a tailored marketing mix of coffee shop expansion plan
When an entrepreneur expands business in the new market then he makes several kinds
of strategies for meeting desired objectives and goals. For this, usually marketing mix method is
considered which comprises with 4 P's. In order to expand Marvin and Smith coffee shop in
Belgium country of EU, marketing mix is presented as below:
Marketing mix Description of 4 P's
Product First P of marketing mix deals with products which will be offered by
company in the new market after expanding (Morgan and et.al., 2012).
Marvin and Smith coffee shop is providing a wide range of coffee items to
the existing customers in market where it currently operates. After expansion
in Belgium, it will offer same or existing coffee products rather than new
items. The reason is that, if it enters with new coffee items then it has to
make changes in existing operation procedure. Therefore, cost will be
improved which will become financial burden on it.
Price Every customer is highly concerned towards pricing aspect of products and
services at the time of purchasing. In Belgium, it will charge moderate level
of prices so that people can easily afford coffee products. Further, cost plus
and competitor based pricing strategies will be considered by Marvin and
Smith to derive the price of coffee items. On the basis of first method, it will
become able to recover all the expenses and earn desired profit. Apart from
this, second pricing method will be supportive to beat rivals and gain
competitive benefits in the Belgium market.
Place Another or third P stands for place which is used to deliver products and
services offered by an entity up to customers (Marketing Mix - Meaning and
its Elements, 2017). The chosen coffee shop will consider two kinds of
places which are like online and offline both to provide coffee products. For
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selling goods, physical store will be opened in proposed country which is one
kind of offline place. Apart from this, a website and mobile application will
be created by Marvin and Smith of their coffee shop. From these methods,
they will take online order of the products and deliver also using the same up
to consumers.
Promotion At the end, fourth P shows about promotion which is used to advertise goods
and services in the market and attract people. There is a wide range of
promotional activities available within firm when it enters in Belgium
(Bloch, 2011). It will focus on social media marketing because in today’s
scenario, most of the people regularly surf on internet and use social sites. In
this, it will consider Facebook and Twitter which are widely applied social
networks. Apart from this, it will be advertising of the coffee products in
newspaper and television as well. The reason is that few people who not
using social sites, will aware from such traditional approaches of marketing.
TASK 3
Implications of basic two factors on business of coffees shop
Geographical location of an organisation must be proper and appropriate so that, every
customer can easily reach up to there. On the other side, if company is not situation at easily
reachable place then sales and income will affect up to the greater level. While expanding
business in new market then several kinds of factors affect to the company either in positive or
negative direction. Due to change in geographic location, some aspects also fluctuate due to
which existing position of the firm affects (Slater and et.al., 2010). When Marvin and Smith will
expand their coffee shop in Belgium country then location will change. Due to this, income,
sales, business process, beliefs etc. will change up to higher extent. Further, some factor which
will affect to Marvin and Smith coffee shop in new market are analysed below:
Organisational culture: It is an approach which consists of shared assumptions, beliefs,
values etc. which helps to assess behaviour of people towards organisation. Apart from this, as
culture of company changes then various issues come into consideration which are like increase
cost, decline sales and profit, reduce return on investment etc. In accordance with this, when the
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coffee shop will recruit workforce from Belgium country then able to provide better services to
their customer. On the other side, if it hires employees from home country rather than host
country then it will impose extra costs like accommodation etc (Iglesias and et.al., 2017). Along
with this, if workers are hired from home country then the coffee shop has to learn them
language used in Belgium. Hence, it can be said that organisational culture change due to
geographical location which create impact on the business.
Gaining competitive benefits: Another factor which has major impact is related to the
competitors of the firm available in market. Higher the competition level become a major threat
for every firm which directly affect to the sales revenue adversely. Looking at the competition
extent of food industry in Belgium then it is high. In this position Marvin and Smith has to enter
with unique coffee products along with the low level of prices. When the coffee shop will
consider and apply various kinds of attractive strategies then able to gain competitive benefits.
Apart from this, it has to provide highly attractive discount offers and schemes by which people
try to consume its products in higher proportion (Berthon and et.al., 2012). Moreover, as per the
marketing mix it has been observed that it will implement competition based pricing method
which is one kind of indication for gaining competitive advantages in Belgium country.
Therefore, it can be clearly said that competition and generating competitive benefits have high
level of implications on the coffee shop.
TASK 4
Evaluating liquidity and profitability of coffee shop and their impact on decisions
In order to determine performance of a company, some financial ratios are usually
considered by the management. The reason is that it reflects a clear outline or scenario of firm
related to financial aspects in proper manner (Weygandt, Kimmel and Kieso, 2015). For
analysing profitability and liquidity condition of Marvin and Smith coffee shop, ratios are
explained as below:
Profitability Ratio Formula Outcome
Gross profit 2,08,000
Net profit 26800
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Net Sales 3,60,000
Gross profit ratio GP/ net sales * 100 57.78%
Net profit ratio Net profit / net sales * 100 7.44%
Net profit 26800
Capital employed (total
assets – current liabilities)
106800 (113000 -
6200)
Return on capital
employed (ROCE) Net profit / Capital employed * 100 25.09%
Looking at the aforementioned calculation, it can be seen that the coffee shop generated
57.78% gross profit which is better. It indicates that cost of goods sold is nearby 42% only at the
end of accounting period. Apart from this, net profit ratio is 7.44% which shows that
management has an ability to manage indirect expenses in the firm. Net profit is an amount
which remained from revenue after deducting all the expenses like direct, indirect, operating etc.
When the company has more and high profitability condition, then it will decide to enter in new
market and gain additional incomes. Therefore, it can be said that this condition of the firm
affects decisions in both manner i.e. positive and negative. As per the evaluated kind of better
profitability situation it can be said that, Marvin and Smith should expand coffee shop in
Belgium country.
Liquidity Ratio Formula Outcome
Current assets 35400
Current liabilities 6200
Inventory 8000
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Prepaid expenses 0
Current ratio (CR) Current assets / current liabilities 5.71:1
Quick ratio (QR)
Current assets – (stock + prepaid expenses) /
current liabilities
4.42:1
On the basis of liquidity ratios, cash position of the firm is analysed in the industry.
Further, higher the value of these ratios are beneficial for the management (Robinson and et.al.,
2015). It can be pertained from the above table that the coffee shop has 5.71:1 current ratio at the
end of fiscal year. Further, value of quick ratio is 4.42:1 which shows that selected firm has high
level of performance in the food industry. Comparing with standard value of CR and QR i.e. 2:1
and 1:1 respectively, it can be said that coffee shop has attractive cash position. When value of
these ratios is high, then management takes decisions for investing in different alternatives or
business project. On another side, due to poor liquidity condition, company will not make any
kind of expenses and investments.
Considering to the overall financial ratio analysis it can be analysed that, liquidity as well
as profitability condition of Marvin and Smith coffee shop is very strong in the industry. Due to
this, they easily able to take decisions for entering in Belgium country. Moreover, with the help
of providing discounts it can gain competitive advantages properly in proposed market.
CONCLUSION
Herein, two partners who are Marvin and Smith going to make plan of business
expansion in new country. For this, Belgium will be one of the most beneficial country for the
coffee shop to expand existing business. Basic reason for suggesting this country is that, it has
better and easily reachable geographical location. Further, it has cold weather at most of the time
due to which coffee products will be mostly preferred by the people of Belgium. In addition to
this, in terms of legal structure as well as political conditions also this country is the most
suitable for Marvin and Smith coffee shop. After the business expansion in Belgium country
stated company will provide the same or existing coffee products where it not has to make
changes in existing production procedure. Furthermore, cost plus and competition based these
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two pricing strategies will be considered. When looking at the place and promotion then it will
consider online and offline delivery as well as traditional and social media marketing in Belgium
country respectively. It can be concluded from financial ratio analysis that, Marvin and Smith
coffee shop has strong profitability and liquidity condition. Due to this, it should make decision
for expanding existing business in suggested country of Western Europe.
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