Opportunities and Challenges for Danes Coffee in the United Kingdom

This report discusses the opportunities and challenges faced by Danes Coffee in the United Kingdom, including the impact of Brexit and competitive forces. Recommendations for market entry strategy are also provided.

Running head: GLOBAL MARKETING
Global marketing
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Executive summary
The aim of this report is to discuss about the opportunities and challenges to be faced by danes
coffee in operating in the United Kingdom. This report identified the key major external trends
that will have impact on the business viability of danes coffee in the country. It is identified that
danes coffee will face the threat of brexit and advantages of the social globalization in the United
Kingdom. On the other hand, the competitive forces are also discussed and high level of intensity
is identified. This report suggested that direct exporting mode of entry should be followed by
danes coffee along with market adaptable approach.

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Table of Contents
Introduction......................................................................................................................................3
Identification of the host country.....................................................................................................3
External factors analysis..................................................................................................................4
Political factors............................................................................................................................4
Economical factors......................................................................................................................5
Social factors...............................................................................................................................6
Technological factors...................................................................................................................7
Legal factors................................................................................................................................7
Environmental factors..................................................................................................................8
Competitive forces in the industry...................................................................................................8
Bargaining power of the buyers...................................................................................................8
Bargaining power of the suppliers...............................................................................................8
Threat of new entrants.................................................................................................................9
Threat of substitute......................................................................................................................9
Competitive rivalry......................................................................................................................9
Recommendations............................................................................................................................9
Conclusion.....................................................................................................................................10
Reference.......................................................................................................................................11

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Introduction
The current business state of affairs is posing challenging prospects to the business
entities and coupled with the intensity of globalization, businesses are not bounded by the
geographical distances. The contemporary business entities are operating across the world and
also facing the issues from global perspectives. The current growth strategy of the contemporary
business organizations is also based on the global factors and foreign market operations. Entering
in a foreign market for business is being given the maximum focus currently due to the saturated
market position in the home country. Thus, entering in the foreign markets will expand the
market areas and regions for business along with contributing in generating global identity.
Similarly, danes coffee is also initiating to enter in a new country for expanding their business
globally (Ang, Benischke & Doh, 2015). Currently, danes coffee is having their operations
across Australia and is initiating to tap the European market in expanding their business. They
have considered the United Kingdom for their foreign market operations as it is one of the
leading and developed economies in the region.
This report will discuss about the key external trends that will be faced by danes coffee in
doing business in the United Kingdom. Furthermore, the competitive forces to be faced by them
in the country will also be identified in this report. Based on all the factors identified, the market
entry mode strategy will be recommended for danes coffee that will provide the maximum return
from the host country operations.
Identification of the host country
As discussed in the above section, danes coffee considered the United Kingdom as the
potential host country. It is reported that as of 2017, the annual growth rate of the United
Kingdom stands at 1.8 percent, which should subtle growth of the economy
(theglobaleconomy.com, 2019). In addition, the United Kingdom is the third most populous
country in the European region, which will pose better opportunities for danes coffee. United
Kingdom is also considered as the developed country and thus it can be concluded that market
economical condition will be favorable for danes coffee in doing business in a developed
economy. However, there are few challenges such as brexit will have negative impact on the
business of danes coffee in the United Kingdom. It is thus important for them to analyze and

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evaluate the host country prior to investing to have the proper understanding of challenges and
opportunities (Williams & Horodnic, 2016). Based on these challenges and opportunities, the
market entry decision should be taken to have the maximum return. The following section with
the help of the PESTLE analysis will identify these key trends in the United Kingdom that will
have impact on danes coffee.
External factors analysis
Political factors
Political factors are important to get determined due to the reason that political stability
will be the key in having long term business viability for danes coffee in the United Kingdom. It
is reported that United Kingdom is having democratic political regime in the country and thus
the risks of changing of political situations is present and evident. It is reported in the global
competitiveness index that the United Kingdom is ranked at 14 in terms of transparency of
government policymaking (weforum.org, 2019). This denotes that danes coffee will have lower
challenges in terms of government effectiveness. Moreover, in terms of the corruption index,
United Kingdom is ranked at 81 as of 2017, which denotes that the lower intensity of corruption
will be faced by danes coffee in doing business in the United Kingdom.
On the other hand, it is also identified from the global competitiveness index that danes
coffee will face the challenge of inefficient government bureaucracy in doing business in the
United Kingdom. According to the global competitiveness index, inefficient government
bureaucracy is the third most problematic factor for doing business in the United Kingdom
(Holtz-Bacha, Langer & Merkle, 2014). This denotes that danes coffee will face the difficulty in
getting their investment permitted along with gaining other documents. The major political
challenge that will face currently in doing business in the United Kingdom is brexit. United
Kingdom is considering exiting from the European Union council, which majorly have negative
impact on the businesses (Colantone & Stanig, 2018). This is due to the reason that with the
emergence of brexit, danes coffee will lose the opportunity of doing business in other European
countries without the trade barriers and tariffs. Thus their market will be limited with the United
Kingdom.

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Figure: 1
Most problematic factors in doing business in the United Kingdom
Source: (weforum.org, 2019)
Economical factors
As discussed in the earlier section, United Kingdom is witnessing positive growth in
terms of their national economy. This will have favorable impact on the business operation of
danes coffee. In addition, the global economy reported that the United Kingdom is also
developing in terms of overall economic freedom. Currently, they are standing at 78 and it is
increasing from the last few years since 2012 (theglobaleconomy.com, 2019). This refers to the
fact that the investing entities will have the larger opportunities in terms of the economic
freedom. They will face lower economic restrictions and barriers in their business operation.
Thus, in the case of danes coffee, they can have open market economy in doing business in the
United Kingdom (McLeay, Radia & Thomas, 2014).

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Figure: 2
Economic freedom index
Source: (theglobaleconomy.com, 2019)
However, on the other hand, there are few challenges also being faced by danes coffee in
terms of the economic factors also. The major challenge will be the higher tax regulations. It is
reported in the global competitiveness index that tax regulation is the most problematic factor in
doing business in the United Kingdom. It denotes that danes coffee have to adhere to complex
taxation policies along with the higher tax rates. Global competitiveness index also reports that
higher level of tax rates is also posing challenges for the investing firm (Gregson et al., 2015).
The cost of operation for danes coffee may get higher in doing business in the United Kingdom.
In addition, United Kingdom is also witnessing growth in the economic globalization. The more
will be the extent and level of economic globalization, the more will be threat of entry of new
global competition for danes coffee. Thus, it can be concluded that competition will be a major
economical challenge for danes coffee in operating in the United Kingdom.
Social factors

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Social factors are important for danes coffee due to the reason that they are operating in
the beverage sector and thus the preferences of the target customers determine their market
potential. As per the global economy report, the level of social globalization is increasing in the
United Kingdom. This denotes that customers in the United Kingdom are accustomed with the
global trends and offering the standardized products of danes coffee will be beneficial. However,
it should be noted that the taste and preferences pattern of the British customers should be in line
to the offerings of danes coffee. This is due to the fact the coffee of danes is more sweetened
compared to the traditional dark and rich flavor. Immigrants should also be given considered due
to the fact that immigrants constitute a large part of the population of the United Kingdom and
these immigrants are majorly from the Asian countries (Koch, 2017). Hence, it can be estimated
that danes coffee will face diverse sets of customer preferences in the United Kingdom. It is
reported that the current market size of coffee as of 2019 in the United Kingdom is US$4174
million and it is estimated that this sector will grow at the rate of 5 percent till 2023. This denotes
the potentiality for danes coffee in doing business in the tea dominated culture of the United
Kingdom.
Technological factors
Technology is an integral factor for the coffee industry and it is reported that the recent
popularity of coffee in the United Kingdom is mainly due to the surge in the brewing industry. In
terms of the technological factors also, danes coffee will have the advantage of doing business in
the country because they are already offering higher end brewing machineries with latest
technologies. It is stated in the global competitiveness index that United Kingdom is currently
ranked at 9 in terms of the availability of new technologies (weforum.org, 2019). This will be
beneficial for danes coffee because they can leverage on the availability of the technologies in
the United Kingdom in developing their offerings.
Legal factors
There are number of legal factors should be adhered by danes coffee in doing business in
the United Kingdom related to the food product quality, investment, employee management and
customer service. Thus, there are diverse factors or aspects that will have lagal impact on the
business operation of danes coffee. However, this will have advantages for them as well. In the

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global competitiveness index, it is reported that the United Kingdom is ranked at 6 in terms of
settling disputes. This denotes that danes coffee will have the effective legal framework in
safeguarding their interests. On the other hand, it is also important for them to cope up with the
amendments in the legal sections.
Environmental factors
United Kingdom is having the concept of green tax in place. Hence, it is important for
danes coffee to ensure carbon neutrality from their operation. In addition, they should also have
to ensure that materials are sourcing through sustainable process only and their suppliers in
different Latin and African countries are also treated sustainably. Wastages will be another
source of getting taxed in doing business in the United Kingdom. danes coffee should look after
the reduction in wastages and reduced environmental impact of the wastage in the environment.
Competitive forces in the industry
Bargaining power of the buyers
In the case of danes coffee, the bargaining power of the buyers will be high because there
are number of players already operating in the country. United Kingdom is having brands such as
Starbucks that are also selling powdered coffee and is well established in the country. Thus, the
customers are having the option to choose from different brands based on their respective
criterions. The best value for money propositions will attract the larger customer segments and
danes coffee should focus on delivering the best value compared to their competitors (Shams,
2016). In this case, initiation of the differentiation strategy can be beneficial for danes coffee in
dealing with the high bargaining power of the buyers.
Bargaining power of the suppliers
Bargaining power of the suppliers is low for danes coffee because there are large number
of suppliers operating in the industry. In addition, the suppliers from the Latin and African
countries are having the option to sell their coffee beans to the brewing companies. They are also
having forward integration and hence they have to depend on the end manufactures such as
danes coffee (Chambolle & Villas-Boas, 2015). Currently, danes coffee is following the multiple

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sourcing policy involving number of suppliers. This is helping them in reducing the
dependability on a single supplier along with their bargaining power.
Threat of new entrants
Threat of new entrants is moderate for danes coffee because new entrants in the global
level will be less for them but more in the local level. There are number of local breweries
operating in the local level and they are having established and loyal customer segments.
However, the new entrants will not be able to match the economies of scale of danes coffee in
the national level (Van Astyne, Parker & Choudary, 2016). The threat of new entrants can get
more for danes coffee if the existing global breweries are opting to enter the market of United
Kingdom.
Threat of substitute
Threat of substitute is high for danes coffee due to the fact that there are number of
similar offerings already available in the market. Moreover, the switching cost of the customers
is also low, which is further increasing the threat of substitute for danes coffee. The threat of
substitute for danes coffee in the United Kingdom will also get emerged from tea. This is
because of the fact that United Kingdom is the tea dominated country. Thus, it can be concluded
that threat of substitute will be high for danes coffee in operating in the United Kingdom. The
entry of the new brands in the same industry will further increase the threat of substitutes for
danes coffee.
Competitive rivalry
Competitive rivalry for danes coffee in the United Kingdom will be high due to the
presence of number of substitutes. In this case, the product varieties and differentiation can be
beneficial for danes coffee in fending off the competitive rivalry. In addition, price based wars
between the brands can further intensify the competitive rivalry for danes coffee. Initiation of the
differentiated value proposition will be beneficial for danes coffee in reducing the impact of the
competitive rivalry as distinctive offerings will have unique value among the customers.
Recommendations

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 Danes coffee should follow direct exporting mode of entry in doing business in the
United Kingdom. This is because of the fact that direct exporting process will involve
lower sets of risks and liabilities for danes coffee. In addition, it is also important for
danes coffee to gauge the market sentiment towards the new coffee variant in the market.
It will involve of not getting accepted in the market. Moreover, the direct exporting entry
mode will also increase the cost and it will be sold as premium offering.
 danes coffee can follow the franchise model in the later stage by which they will be
partnered with different franchisees in the United Kingdom. These franchisees will be
responsible in carrying out business in the country without the direct involvement of
danes coffee. This mode will also involve lower sets of risks and liabilities.
 The marketing mix strategies should have market adaptable approach in the United
Kingdom. This is due to the reason that the local market preferences in the United
Kingdom will be different to that of the Australian market of danes coffee. Thus, the
marketing mix strategies should be designed according to the local market trends to have
the better penetration in the market. This will also increase the brand recall among the
customers.
Conclusion
This report concludes that danes coffee will have favorable market conditions in doing
business in the United Kingdom except a few challenges. The identification of the key external
trends concluded that brexit is going to be a major challenge for danes coffee. In addition, the
social diversity can also be challenging to tap. Furthermore, identification of competitive forces
stated that high level of competition is to be faced by danes coffee in the United Kingdom and
differentiated approach will be beneficial for danes coffee to face these forces. This report
recommended that market adaptable approach of implementing the marketing mix strategies
should be initiated by danes coffee to have more penetration. Direct exporting mode of entry will
be the most suitable approach to be followed by danes coffee in entering the country.

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2018/05FullReport/TheGlobalCompetitivenessReport2017%E2%80%932018.pdf

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