Financial Ratios and Marketing Mix

This assignment delves into the connection between financial ratios and marketing mix decisions. It examines how financial metrics can be used to assess firm performance and inform strategic marketing choices. Students are expected to analyze relevant research and apply concepts related to financial ratio analysis, marketing mix models, and consumer behavior.

Case Study

Table of Contents
INTRODUCTION...........................................................................................................................1
1. Justification. ...........................................................................................................................1
2. Marketing Mix .......................................................................................................................2
3. Implications of need for Hank and Patty Coffee Shop...........................................................4
4. Financial Position of coffee shop............................................................................................5
5. Summary.................................................................................................................................7
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Australia is the most growing country in the world. This country is growing with the
population, opportunities and with the economy as well. In Australia, one such commodity which
is growing fastest is coffee. Most of the population love to drink coffee all the times. This
country is perfect to open the shop of coffee. According to the present report based on coffee
shop, people spend huge amount of money on coffee; now, they are spending $4-$5 for one cup
of coffee. The project that is undertaken is to open a coffee shop in Australia.
1. Justification.
Australia is the developed country. Australian coffee chain is very big. Most of the
population love to drink coffee anytime. Coffee lovers drink different flavours of coffee.
Therefore, Australia is the preferable city to open the coffee shop nearby the colleges or schools
or at any crowded place where people can easily go and drink the beverage. Another coffee shop
will open in Australia city to attract number of customers. It is something innovative and
attractive through which customer get attracted. Along with rich coffee beans of India, the new
coffee shop is named Marvin and Smith’s. Marvin and Smith’s initial investment of $300,000
and rest of the money is taken from the bank(Armstrong, et.al, 2015). Marvin and Smith’s is the
newly coffee shop in the Australia. This new start-up come with their new ideas from which they
attract a coffee lover towards them. Marvin and Smith’s coffee shop needs to adopt some
legislations and ethical rules and regulation so that they can easily run their business without any
risk(Baker and Haslem, 2015). Coffee culture trend is very famous in Australia. Australia is a
nation of coffee lovers. On the basis of statistics, Australians spent $773.5 million on coffee
beans as compared to tea. Their culture of coffee is most famous. In Australia, coffee culture was
started by European immigrants. Today, coffee culture is become an integral part of the
Australian lifestyle. 80% of population were addicted towards coffee. Apart from this, Marvin
and Smith’s has to adopt some ethical fair-trade practices to protect their own business. Ethical
fair-trade practices are important to minimise the uncertainties. Ethical trade was originated in
the 1990s. This act explains the fair behaviour towards the staff and customers. Marvin and
Smith’s needs to maintain their coffee shop in terms of safety(Brooks, 2015). Ethical trade
includes some important key points like, the cited business need to adopt step by step
improvement in condition of workers, staff etc. Besides this, fair trade practices means Marvin
and Smith’s needs to make fair payment with customers or give quality of coffee which is not
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harmful in any terms. This is a major concern which is important to be considered while opening
any new business. Furthermore, Marvin and Smith’s should train their workers about the
customer service at the counter. Workers are very crucial component in the coffee shop. They are
responsible to handle the customers. Apart from this, ethical and fair-trade practices are very
important factors(CLOR‐PROELL and Maines, 2014). This helps to create trust and faith among
customers. These practices attract large number of customers towards the company. It also helps
to improve image of the brands. In terms of customers, they always want to go to safe places
where all the things are managed perfectly. For new shops, this is very important to adopt all of
these features which will further assist in achieving success for the firm . Marvin and Smith’s is
the newly coffee shop in the Australian city. To promote their coffee shop, the mentioned firm
needs to adopt some new offers and discounts to the new customers which helps to spread
awareness about the new coffee store. Apart from the quality and legislation, Marvin and Smith’s
needs to make their structure different and innovative. Shop layout should be attractive and
hygienic. This element would take shop image upwards. Besides this, Coffee shop needs to be
that place, where customer can easily find out. However, people like takeaway services
sometimes so in that case, Marvin and Smith’s will easily reach at the customer place. Coffee
shop should be in centre of the city in order to increase customer reach and attract them. For this
purpose, the business needs to give quality of services to the customers(Delen, Kuzey and Uyar,
2013).
Logistics Based Location: Coffee shop must be at that place where they arrange their
requirements easily without wasting time and transportation costs. In addition, it should be
situated where supplier can easily supply material to the shop. It helps to reduce additional costs
to the company. This also supports in attaining flexibility in the business.
2. Marketing Mix
Marketing Mix is the tool of marketing. It is the mixture of several plans and ideas. It
helps to promote the business products and brands. Marketing mix make strong strategies and
business plans to gain the customers' attraction. It is the process which helps company to
promote their business products. Marketing mix includes some important element through which
Marvin and Smith’s can easily make their strategies to enhance their brand value(Giordani and
et.al., 2014.).
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Product: The main element of Coffee shop is what is your main Product through which they
earn Profit. Every customer looks at the menu of the cafe, therefore, the menu and their products
need to be very perfect in terms of taste and appearance. Product element describes the quality of
services(Hanssens, et.al, 2014). Marvin and Smith’s needs to present their coffee in a different
way through which customers get attracted towards them. It is analysed that Marvin and Smith’s
coffee shop deal with the fair trade supplier for coffee beans. Product quality helps to connect
more new customers. According to the analysis it recognized that Marvin and Smith’s use
quality of material to make perfect product.
Price: Second element of marketing mix is price. The price of the coffee needs to be reasonable
and attractive. Price is based on positioning. Product price send the message to the customers in
terms of quality. Price of the product is based on cost to produce your products. However,
Marvin and Smith’s needs to adopt price on the basis of customers’ perception. On the basis of
advertisement cost and promotional cost Marvin and Smith’s coffee shop set adequate price of
coffee.
Promotion: Most effective and important element of marketing mix is promotion. In this
element, Marvin and Smith’s needs to make strong and innovative promotion techniques to
promote their product awareness(Helm and Gritsch, 2014). Australia coffee lovers are very large.
It depends on the taste. So that Marvin and Smith’s needs to spend money on promotional
activities so that they attract large number of customers. To promote the business Marvin and
Smith’s use many promotional ideas like newspaper, magazines and social sites to make aware
customers about new coffee shop.
Place: Place where people coming to buy the coffee. It is the big question which is very
important(Huang and Sarigöllü, 2014). Customer finds this coffee shop which is more reachable.
Location of the coffee shop must be in prime location. Like consider places are Shopping malls
where most of the people visit every time. Besides, Location of the coffee shop must be
according to the customer suitability. Including this, it is identified that how far shop is from the
customers place. Appropriate place attract customers towards the coffee shop.
Packaging: Another element of marketing mix is packaging. How your product is look like. It
must be attractive. Innovative and impressive to the customer. Marvin and Smith’s needs to use
some visual elements to make their product more attractive. Marvin and Smith’s needs to use
some new design and infrastructure which is attractive. Along with that your presentation of
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employees who interact with the customers should be proper. These all elements give better
results and satisfied to the customers.
Positioning: Where do you stand in the market. It is the big question for the businesses.
Positioning of the brand shows the actual condition of the business.
People: In this marketing element, it describes about the target market and the customers. In this
element Marvin and Smith’s needs to attract their target market customers who are coffee lovers.
People is the main key factor through which business earn profit. According to the scenario
Australian love coffee and they spend huge amount on the coffee products(Leonidou, Katsikeas,
C. S).
Overall Marketing Mix is the most important element through which company make their
marketing strategies. These helps to enhance the performance and give more brand value.
3. Implications of need for Hank and Patty Coffee Shop.
Planning to make Marvin and Smith’s more effectively. It needs to make proper
planning and evaluating the external environment. It helps to mainatin the operation of
management. Apart from this, Employees are the most important factors to achieve the overall
target. But sometimes they arise some issue in the management due to lack of coordination and
mismanagement. Manger is responsible to coordinate the work and explain the strategies to the
employees. Marvin and Smith’s needs to manage the work and give motivation to the employees
for better performance. For making Marvin and Smith’s planning and decision making process.
It needs ton evaluate some factors to make better decision making. Like Information system,
organisation culture, competitive advantages, issue related staff. Therefore, better business plans
gives help to expand the business. It also impacted on operation and other activities of business.
Methods to solve the matter as discussed below.
 Competitive advantages: In Australia there are many business provide Coffee services
to the customers. Therefore, Competition level of coffee business in Australia is very
high and competitive(Liu, et.al, 2017). For Marvin and Smith’s it is very big task to
compete with all other business. They need to make their toffee different to attract
number of customers. Apart from this customer needs and wants has changed time to
time. It impacts on the demand of goods and services. Marvin and Smith’s needs to
analyse the actual market situation to make marketing strategies accordingly. Marvin and
Smith’s also make attractive promotional activities to attract the customer. It helps
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company to sustain in the market in long term. To compete with the rival companies
Marvin and Smith’s needs to adopt some new flavour and quality of coffee which gives
higher level of satisfaction the coffee lovers. New business are should be based on new
ideas by which customers get attract easily.
 Information system: Information technology is source through which information can
easily transform from one place to another. It exchanging the ideas, data etc. this
technique helps to promote the product and services of Marvin and Smith’s. It also helps
to work in more attractive way. Information system provides future opportunity to sustain
in the market. It removes the inefficiency in the business and give new technologies for
work. As providing proper knowledge to the employees, it impacts on customer
relationship and gives new idea of working. These techniques give new way of working
and methods which gives new business expansion.
4. Financial Position of coffee shop.
Marvin and Smith’s coffee shop new branch is in Australia. For that it needs to identify
their financial position. Finance factor help company to expand their business into new area. It
can be done through earn more profit in the business. Finance is the blood in the management
without financial sources business could not spend much on the other activities. Some ratio helps
business to identify the actual position. Some of these are discussed below:
 Profitability Ratio: This financial tool helps to identify the actual position of Marvin
and Smith’s. It includes net profit, gross margin from these factors profit earning capacity
of the business will identify easily(Mintz and Currim, 2013).
Table 1: Profitability ratio
Particulars Formula Amount
Sales 360000
Purchases 152000
Gross profit 208000
Gross profit
margin [(Gross profit/sales)*100] 57.77%
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Net profit 26800
Net profit margin [(Net profit/sales)*100] 7.44%
Interpretation: According to the data of Marvin and Smith’s they incurred 152000 on
their business operations. From which they earned 360000. Moreover, gross profit of the
company was 28000 which is effective according to the coffee shop. On the basis of data gross
profit margin of the company as 57.77%. It is good for the company growth. Apart from that
company net profit as 26800 as deducting GP along with additional expenses. According to this
net profit margin calculated as 7.44%. This profit helps company to make further growth. It is
shown that company may enhance their profit more effectively in future times.
 Return on capital employed: it is the tool through which company estimate their return
profit and revenue on capital. Out of the investment how much company earns it helps to
understand the profit margin
Particulars Formula Amount
Earning before tax 360000
Total assets 113000
Current liabilities 6200
ROCE
[Earning before tax/(total assets-
current liabilities)] 3.37
Interpretation: on the basis of evaluation. The market position of the company is good.
The rate of return is 3.37 which is good and effective.
 Liquidity ration: this ratio help to identify the liquidity ration of Marvin Smith's coffee
shop. It includes current ration and quick ratio. Through which this ratio calculated. This
is very effective term to make better decision making process which helps to expand
business into new level(Rahmani, Emamisaleh and Yadegari, 2015).
Particulars Formula Amount
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Inventories 8000
Current assets 35400
Current liabilities 6200
Current ratio (Current assets/Current liabilities) 5.7
Quick ratio
[(Current
assets-inventories)/current
liabilities)] 4.41
Interpretation: on the basis of this data it is considered as a current ratio and quick ration. Current
ratio calculated from. Current assets and current liabilities.
5. Summary
According to the scenario Marvin and Smith coffee shop are planning to open their
business in another country, Before starting their business they research for 1 year in terms of
decision making. Besides, to open new coffee shop in Australia they need to analyse their
environment and coffee culture, so that manage their operation easily. Marvin and Smith needs
to identify the trend and their rules and regulations. Analysing the Australia geographic areas,
people choice needs and wants also play a very important role. Including this financial position
also measured to check the business position in terms of profit, on the basis of monetary
performance, it is good for the company to move further with the business(Huang and Sarigöllü
2014). According to the culture of Australia, it seems like perfect for the Marvin and Smith’s
coffee shop. Another branch of Marvin and Smith’s gives more profit revenue to the company.
CONCLUSION
From the above report it concluded that, different impacted factors which affects Marvin
and Smith’s for opening new coffee shop. In this regard, they analyse the coffee culture, lifestyle
and popularity in Australia. Apart from this, it concluded the actual position of Marvin and
Smith’s in terms of profit ratio. Besides, to make new strategies and business plans.
Development plan has been discussed for making further strategies. Overall, Marvin and
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Smith’s needs to adopt new techniques and creative ideas to attract the customers. Moreover,
decision making involved to open new branch of Marvin and Smith’s in Australia.
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REFERENCES
Books and journals
Armstrong, et.al, 2015. Marketing: an introduction. Pearson Education.
Baker, H. K. and Haslem, J. A., 2015. Information needs of individual investors.
Brooks, R., 2015. Financial management: core concepts. Pearson.
CLOR‐PROELL, S. M. and Maines, L. A., 2014. The impact of recognition versus
disclosure on financial information: A preparer's perspective. Journal of Accounting Research.
52(3). pp.671-701.
Delen, D., Kuzey, C. and Uyar, A., 2013. Measuring firm performance using financial
ratios: A decision tree approach. Expert Systems with Applications. 40(10). pp.3970-3983.
Giordani and et.al., 2014. Taking the twists into account: Predicting firm bankruptcy risk
with splines of financial ratios. Journal of Financial and Quantitative Analysis. 78(4). pp.1071-
1099.
Hanssens, et.al, 2014. Consumer attitude metrics for guiding marketing mix
decisions. Marketing Science. 33(4). pp.534-550.
Helm, R. and Gritsch, S., 2014. Examining the influence of uncertainty on marketing mix
strategy elements in emerging business to business export-markets. International Business
Review. 67(2). pp.418-428.
Huang, R. and Sarigöllü, E., 2014. How brand awareness relates to market outcome, brand
equity, and the marketing mix. In Fashion Branding and Consumer Behaviors (pp. 113-132).
Springer New York.
Leonidou, C. N., Katsikeas, C. S. and Morgan, N. A., 2013. “Greening” the marketing mix:
do firms do it and does it pay off?. Journal of the Academy of Marketing Science. 41(2). pp.151-
170.
Liu, Y., et.al, 2017. The Effects of Products’ Aesthetic Design on Demand and Marketing-
Mix Effectiveness: The Role of Segment Prototypicality and Brand Consistency. Journal of
Marketing. 81(1). pp.83-102.
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