Assessing the Viability of an Expansion Plan

In 2016, Marvin & Smith's liquidity position was highly sound, with a quick ratio of 4.42:1, indicating that the company had sufficient current assets to meet its obligations and maintain liquidity. This allowed the firm to explore business operations and functions effectively, target students and young people in Kolding, provide high-quality coffee beverages, and manage staff-related issues to deliver satisfactory services to customers. The company's expansion plan was highly viable from both financial and non-financial perspectives.

Finance and Marketing

Table of Contents
INTRODUCTION...........................................................................................................................3
1. Analyzing the country in which Marvin and Smith should open coffee shop.........................3
2. Presenting a tailored marketing mix for the expansion plan or purpose.................................4
3. Assessing the implications of following issues on the expansion plan of Marvin & Smith. . .5
4. Stating the profitability and liquidity performance of Marvin & Smith..................................7
5. Assessing the overall viability of an expansion plan...............................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Finance and marketing both are the main areas of business which in turn closely
influences the growth as well as success of firm. In the context of business organization,
optimum utilization of financial resources is highly required for the proper implementation of
plan. Further, to achieve success in the strategic environment business entity lays more emphasis
on doing marketing practices. Moreover, through the means of marketing strategies and tactics
entrepreneur can easily develop awareness among the people regarding offerings. The present
report is based on the case scenario of Marvin & Smith. By considering then existing growth and
success level business entities have take decision to expand business operations abroad. Thus,
report will highlight the name of country which will prove to be beneficial for expansion
purpose. Further, it will also shed light on the liquidity and profitability aspect of firm. Besides
this, it also depicts the extent to which tailored marketing mix is highly required for influencing
the decision making aspect of customers.
1. Analyzing the country in which Marvin and Smith should open coffee shop
Cited case situation entails that Marvin & smith coffee shop wants to expand business
operations with the aim to enhance customer base and thereby profitability. Hence, business unit
is planning to enter in the country which is the part of EU countries. In accordance with such
aspect, Marvin & Smith should enter in Denmark country which will offer several benefits to the
business entities. Hence, by opening coffee shop in the Kolding city of Denmark business entity
can get the desired level of outcome or success (Clark and et.al., 2016). The rationale behind the
selection of such city, that it is the hub of transportation, manufacturing and educational sector.
Further, it is the seventh largest city of Denmark and filled with the highly skilled and talented
personnel. Hence, through the means of competent personnel Marvin & Smith would become
able to offer high quality services to the potential customer base (Wood, 2016). Further, Kolding
city of London is known for high tech machineries and other equipments. Hence, by making use
of high tech equipments Marvin & Smith can make control on cost level.
In accordance with the ethical aspects, Marvin & Smith has accountability to offer
products or services to the customers at reasonable prices. Along with this, ethical concern shows
that Marvin & Smith should present fair information to the government and other authorities

while fulfilling the documentary formalities. Moreover, license for start-up is offered by the
respective country on the basis of documents submitted. Hence, business entities are required to
comply with all such ethical aspects at the time of starting operations in Kolding city of
Denmark. Along with this, tax policies, laws and legislation, location etc. are the main factors
that business entity considers while taking decision about expansion. Moreover, tax is one of the
main factors that closely affect the profit margin of firm. Hence, from assessment it has been
identified that tax policies which are introduced by the government is highly supportive
(Taxation in Denmark, 2017). Further, income, education and standard of living of people are
good. Thus, by keeping all such aspects in mind it can be presented that by opening coffee house
in Kolding city of Denmark entrepreneurs can achieve success.
2. Presenting a tailored marketing mix for the expansion plan or purpose
By making in-depth assessment of each and every aspect, business entities have selected
Denmark country for expansion purpose. Hence, with the aim to achieve success in the overseas
market Marvin & smith has prepared marketing mix. Moreover, marketing mix tool enables firm
to persuade people towards the products or services offered and thereby makes contribution in
the attainment of organizational goals and objectives (Damodaran, 2016). Hence, marketing mix
will be followed by Marvin & Smith in the overseas market enumerated below:
Marketing mix
 Product: Hot and cold coffee is the main products which will be offered by Marvin &
Smith to the customers. For this purpose, business entities will make use of high quality
coffee beans and deliver quality products to the customers.
 Price: By considering the factors that affect customers purchasing behavior business
entity will follow penetration pricing strategy. Moreover, price is the major factors that
closely influence the decision making of people. The rationale behind this, high income
group people are ready to pay more prices for the quality products and vice versa
(Stewart and Gugel, 2016). From evaluation, it has been assessed that in Denmark,
majority of the people belong from middle income group. Hence, at initial level, by
offering coffee products or services to the customers at lower prices Marvin & Smith can
enhance customer base and thereby ensures long term growth or success.

 Place: Marvin & Smith will offer coffee products or services to the customers by opening
café house in Southern Denmark. In Kolding city, percentage or ratio of students is
higher to the significant level. Hence, going to coffee shop or house is the part of
student’s lifestyle. Further, population of Kolding city is 52000 which is neither too
higher nor too lower. Hence, by following such aspect business entity has taken decision
in relation to the opening of coffee shop in the South region of Denmark.
 Promotion: Both traditional and modern techniques of promotion will be undertaken by
business entity. With the rise in technological advancements it is highly easy for Marvin
& Smith to promote their services. In the current times, individuals are using social
networking sites such as Facebook, Twitter more frequently because now each individual
has smart phone (Repetti, 2013). Thus, by uploading the images of coffee shop and
products Marvin & Smith can develop awareness among the people of Denmark
regarding the services provided. Further, business entities will also place advertisement
on local television and newspaper of Kolding city of Denmark. Hence, by using both
traditional and modern forms of business entities can develop awareness among the
people.
 People: In the service sector, personnel are the key elements who develop high level of
satisfaction among the customers by offering quality services. Hence, Marvin & Smith
will focus on appointing highly talented personnel who have ability to prepare and serve
coffee to the customers in an innovative manner.
 Process: Business entity will follow standardized process for offering coffee services to
the customers. Hence, by maintaining standardization or delivering similar services to
each customer Marvin & Smith can develop satisfaction among people. Further, Marvin
& Smith will also make focus on maintaining hygiene and usage of high quality beans.
Thus, such specific process will help business entities in fulfilling the goals and
objectives. Physical evidence: Interior and exterior of coffee shop also have greater impact on the
decision making aspect of customers. People make assumptions in relation to the quality
of offering by keeping in mind the interior and exterior look (Demirel, 2015). Hence,
Marvin & Smith will establish coffee shop in Kolding with unique physical evidence.

3. Assessing the implications of following issues on the expansion plan of Marvin & Smith
Gaining competitive advantages: In the competitive business situation, it is highly
difficult for the firm to gain competitive edge or position over others. Moreover, now changes in
the customers need, taste and preferences are taken place more frequently. Further, Marvin and
Smith are planning to expand business operations and function in the overseas market. Usually,
customers prefer to go to the coffee shop which is highly well-known and enjoying high brand
identity (Moffett, Stonehill and Eiteman, 2014). In this, Marvin & Smith can build or sustain
competitive position only when it offers coffee products or services to the customers of Denmark
according to their requirements. For instance: Customers lay more focus on hygiene and quality
of product.
Along with this, people also make selection of coffee shop after making evaluation price,
ambiance, taste etc. In Denmark, there are several coffee shops which are offering coffee
products or services to the customers. On the basis of this aspect, business entity is required to
offer quality and nutritional coffee products to the customer at affordable prices (Embrechts,
Klüppelberg and Mikosch, 2013). Along with this, Marvin and Smith also place emphasis on
creativity for building distinct image in the mind of target market. Further, by offering friendly
environment Marvin & Smith can build high customer base in Denmark and thereby would
become able to
Personnel and managing staff issues: The manager has to deal with various issues
related to human resources. Personnel and staff in any organization such as Marvin & Smith's
coffee shop at Denmark are the key elements. In service industry these are the one who directly
come in contact with the customers. So their satisfaction from the side of company is very
important. As they are satisfied with their work they serve and treat the customer in the same
manner.
The personnel conflicts like disrespectful attitude, personal issues, favoritism, lazy
behavior, competition among them, lack of communication skills and so on. It is necessary to
control over the staff issues because it reflects in their performance which is not good for the
image of an organization. It is the duty and responsibility of human resource manager of Marvin
and Smith's coffee shop that to manage these kinds of issues and make sure that there should not
any problem raise among the staff members (Addison, 2017). Sometimes staff has issues with

management regarding salary, work load, over time etc. These type of issues also taken into
consideration and try to resolve them through staff counseling, taking suggestions or any other
way.
The effective management of staff issues may improve the performance level of
organization. Because this problem can raise the employee turnover rate which disturbs the
process of work. M & S ensures that there must be proper collaboration and coordination among
the staff members for performing well. The can plan for time to time meeting with staff and ask
them for any issues which they are facing at the workplace. And give them appropriate solution
to the problem so that they give their best in the work. This will make the organization more
effective and efficient in performance.
4. Stating the profitability and liquidity performance of Marvin & Smith
On the basis of cited case situation, with the motive to attain success and attaining high
profit margin Marvin & Smith has taken decision in relation to business expansion. For this
purpose, business unit requires more funds because without having enough financial resources it
is not possible for the entities to execute the plan more effectually. Hence, by conducting
liquidity analysis entrepreneurs can assess the extent to which they have enough assets for
meeting the obligations (Peirson and et.al., 2014). Further, profitability ratio analysis helps in
assessing the extent to which profitability aspect of coffee shop is sound. Hence, by conducting
ratio analysis business entities can get information regarding their existing financial health and
performance.
Profitability ratio analysis
Particulars Formula 2016 (Amount in £)
Gross profit (GP) 208000
Revenue or sales 360000
Gross profit ratio GP / Revenue * 100 57.78%
Net profit (NP) 26800

Revenue or sales 360000
Net profit ratio NP / Revenue * 100 7.44%
By doing ratio analysis, it has been assessed that in the accounting year 2016, GP ratio of
Marvin & Smith was 57.78%. It shows that business entities have generated enough gross profit
margins by making control over the expenses. Further, higher sales revenue also entails that
people or customers have positive attitude towards the coffee products or services offered by
Marvin & Smith coffee shop. On the contrary to this, NP margin of the firm was account for only
7.44% which is highly lower as compared to GP. From financial statement analysis, it has been
assessed that electricity, salaries and wages, rent & rates are the main elements due to which
expenditure level increased significantly. Hence, for the attainment of high profit margin
business unit is required to make control on expenses. Thus, by reducing the level of expense
Marvin & Smith can maximize profitability aspect. By keeping all such aspects it can be stated
that profitability position and performance of the firm was not highly sound. Thus, in the
upcoming time period business entity should lay emphasis on framing highly sound budgeting
framework. Such measure will aid in the profit margin of firm to a great extent.
Liquidity ratio analysis
Liquidity ratios Formula 2015 (Amount in £)
Current assets (CA) 35400
Current liabilities (CL) 6200
Current ratio CA / CL 5.71:1
Current assets (CA) 35400
Stock 8000
Prepaid expenses 0
Current liabilities (CL) 6200

Quick ratio
CA – (Stock + prepaid
expenses) / CL 4.42:1
Outcome of financial statement analysis shows that current ratio of Marvin & Smith was
5.71 times at the end of 2015. It presents that business unit had more current assets that can
easily be converted into cash. In accordance with the ideal ratio business unit must have 2
current assets for meeting 1 obligation. Hence, results of liquidity ratio shows that business
entities had maintained 5 current assets in against to 1 obligation or liability. In contrast to this,
quick ratio of Marvin & Smith was 4.42:1 which was greater than the ideal ratio. Moreover,
ideal quick ratio accounts for .5:1 that helps in assessing the level to which business unit had
enough current assets that can easily be converted into cash. Hence, quick ratio performance
presents that Marvin & smith maintained enough assets except inventory and prepaid expense. It
shows that Marvin & Smith can generate money by converting such assets into cash.
From overall evaluation, it can be presented that liquidity position of the firm was highly
sound in the year of 2016. Thus, by raising funds from current assets such as cash, debtor etc.
business entities can raise fund for expansion to the significant level. This in turn will also offer
opportunity to the firm to maintain liquidity aspect in line with the ideal ratio such as 2:1 & .5:1
respectively.
5. Assessing the overall viability of an expansion plan
By summing up this report, it can be concluded that expansion plan which is undertaken
by Marvin & Smith highly viable from both financial and non-financial perspective. It can be
seen in the report that liquidity position of Marvin & Smith was highly sound. Hence, by taking
the benefits of higher liquidity business entities can explore business operations and functions
more effectually. Besides this, it can be inferred that by targeting the students and young people
of Kolding business entity can meet goals to a large extent. Further, it has been articulated that
by providing customers with quality coffee beverages Marvin and Smith can attain success at
global level. It can be summarized from the report that innovation is the key which in turn
provides assistance to the firm building effective image over the rival firms. It can be revealed
from the report that by managing the staff related issues business entities can deliver
satisfactorily services to the customers.

REFERENCES
Books and Journals
Addison, P. S., 2017. The illustrated wavelet transform handbook: introductory theory and
applications in science, engineering, medicine and finance. CRC press.
Clark, T. and et.al., 2016. Where/How Does Marketing Fit? What Is Marketing’s Place in the
Firm and Within the Family of Business Disciplines?. In Let’s Get Engaged! Crossing the
Threshold of Marketing’s Engagement Era (pp. 199-202). Springer International Publishing.
Damodaran, A., 2016. Damodaran on valuation: security analysis for investment and corporate
finance (Vol. 324). John Wiley & Sons.
Demirel, E. U., 2015. Relationship between Movie Industry and Marketing with Respect to
Cultural Economy. In Handbook of Research on Developing Sustainable Value in
Economics, Finance, and Marketing (pp. 476-486). IGI Global.
Embrechts, P., Klüppelberg, C. and Mikosch, T., 2013. Modelling extremal events: for insurance
and finance (Vol. 33). Springer Science & Business Media.
Moffett, M. H., Stonehill, A. I. and Eiteman, D. K., 2014. Fundamentals of multinational
finance. Pearson.
Peirson, G. and et.al., 2014. Business finance. McGraw-Hill Education Australia.
Repetti, T., 2013. The finance and marketing dilemma: Do promotional allowances actually
increase revenue and profits for Atlantic City casinos?. UNLV Gaming Research & Review
Journal. 17(1). p.1.
Stewart, D. W. and Gugel, C. T., 2016. Accountable Marketing: Linking Marketing Actions to
Financial Performance. Routledge.
Wood, D. A., 2016. Comparing the publication process in accounting, economics, finance,
management, marketing, psychology, and the natural sciences. Accounting Horizons. 30(3).
pp.341-361.