International Expansion: Analysis of Environmental Factors and Entry Modes Evaluation for CAFEPOD

This report provides an analysis of environmental factors impacting international expansion and entry modes evaluation for CAFEPOD, a British coffee company. It includes the impact of Brexit, GDP, and labour pool on expansion, as well as push and pull factors for expansion in the United States. The report recommends licensing as the best strategy for expansion and provides strengths and weaknesses of SMEs.

International
Expansion

Contents
INTRODUCTION...........................................................................................................................3
ANALYSIS OF ENVIRONEMENTAL FACTORS IMPACTING INTERNATIONALISATION
PROCESS........................................................................................................................................3
Impact of Brexit on expansion.....................................................................................................4
Impact of Gross domestic product on expansion.........................................................................5
Impacts of labour pool on expansion...........................................................................................5
ENTRY MODES EVALUATION..................................................................................................6
REFERENCES................................................................................................................................8

Section1: Introduction
International expansion refers to those processes under which management of
organisation follows to that strategy in their business which helps them to establish their business
in international markets across the globe. There are large number of benefits are present which
the company enjoys due to the expansion of their business in international markets (Dadi, 2021).
One of the benefits of international expansion is that it helps to increase the level of revenue and
profit margins of the organisation.
Company overview: The organisation which is chosen here to demonstrate this report is
CAFEPOD coffee company. It is British small and medium enterprise which provides number of
coffee from their cafe and restaurant. It is an independent craft coffee business which was
established in the market in 2011. The concerned organisation was developed by Peter Grainger
and Brent hadfield with an aim to bring happiness in the life of their customers. There are
different types of products are offered by the company such as Brunch blend, Supercharger
espresso, Intense roast and many more. Currently the company are having 12 employees which
serves their business in United kingdom.
Justification: The management of company is very active and always aims to expand their
business in international markets. The country which is suitable for the expansion of company is
United States of America. America is one of the biggest economy of the world which are having
multiple opportunities for the growth in market for the business organisation which becomes the
reason for the attraction of people towards the company. The management of CAFEPOD
operates their business only in the markets of United Kingdom which disables them to increase
the scope of their business. The main reason behind the expansion of company in international
markets is to achieve the growth in market and satisfaction of need of customers from their
product range. This report provides description related to impact of different external factors and
different modes of entry. The cultural aspect of the America reflects that the people often
consume coffee for the speed and quantity rather than the enjoyment and relaxation. The market
size of coffee shop industry reached 47.5 billion US dollar in the year 2019 which reflects them
growth of more than 3% from the previous year. The positive growth of industry can be the
reason for the attraction of new companies towards the market.
Push and Pull factors for expansion of CAFEPOD in United States of America
Push Factors:

 Push Factors: Cultural Difference: The difference of culture is one of the important culture
which the management of the company at the time of expanding their business in different
countries of the world. The management of CAFEPOD also face number of problems to
expand their business in America due to cultural differences. Push Factors: Taxes and legal environment: There are number of legal rules and regulation
has to faced by the companies of United Kingdom due to the Brexit. These rules and
regulations are compulsorily complied by the organisation. This can create many problems
for CAFEPOD to achieve their business in the market of United Kingdom.
Pull Factors:
Pull Factor: Demand for innovative beverages: The customers of United States are very
preferential towards the enjoyment which enables the demand of different types of drinks in
country. It is positive for the management of CAFEPOD to have innovative strength which
helps to achieve the attraction of the customers towards the company and their products.
Pull Factor: Macroeconomic stability: The economy of United States is one of the most biggest
economy of the world which involves huge number of opportunities for business
organisations. The management of CAFEPOD becomes beneficial because all the resources
can be grab by them easily in the market of USA. All the factors of the economy shows
positive growth of US economy with an estimation of 25.3 trillion in 2024.
Section2: Analysis of environmental factors impacting internationalisation
process
Macro environment factors refers to those factors which is present outside the organisation but
are having serious concerned under the business of the company. International expansion is one
of most critical and difficult function of the organisation under which company need to take huge
risk (Pattnaik, Singh and Gaur, 2021). There are number of requirements are present which
company needs to fulfil to expand their business in international markets. Finance is one of the
most important and valuable factor which is needed by company to expand their business in
international markets. There are many measures are present with the company to organise funds
for international expansion such as bank loans, share capital, seed funding, venture capital and
many more. Another important requirement which the company need to fulfil at the time of

expanding their business in international markets is the analyses of different external factors. The
external factors impact international expansion of business across different locations. It is very
important for the management of CAFEPOD to make considerable research of market which
helps them to analyse the number of external factors in the organisation. There are three external
factors are present such as GDP, Brexit and Labour poll which are having serious impact on
international expansion. Following are the brief description related to external environment
factors impacting international expansion.
Factor2: Impact of technology
USA is one of the economic superpower of the world and it is possible only due to the presence
of business organisation and their effective operations. Technology has played important role in
the success of business in the market because it enables the organisation to make their process
effective and efficient. The level of investment in the country are very high which promotes the
development of new and advance technology in the market. The technological aspect of USA is
very high which becomes the pull factor for the number of businesses towards the market.
Factor2: Impact of Gross domestic product on expansion
Gross domestic product is one of the important indicators for the measurement of success
of product in the market. The GDP of country reflects the monetary value of final goods to which
the consumer are ready to buy goods and services. The higher rate of GDP reflects positive
growth for the business in the market (Devone, 2019). If the GDP of country becomes high then
it is easy for company to charge higher prices of products and if it becomes low then vice versa.
The management of CAFEPOD planned to establish their business in the market of United States
where the rate of GDP is very high. It is very important for the management of CAFEPOD to
analyse the impacts of these factors because it helps them to establish and develop effective
strategies in the market.
The present condition of the market reflects the positive growth in the future
which attracts number of companies towards the market of US. The industry of coffee shops

provides many opportunities to their business organisation as per the increasing demand of more
than 3% in the economy.
Factor3: Impacts of labour pool on expansion
The availability of labour is one of the most important and valuable task which the
management needs to perform their business. The international expansion involves the
establishment of business in another country which require availability of different types of
workers. It is very costly for the management of company to take labour from their base country.
They have to recruit employees from new country where they established their business. It is
important for the management of CAFEPOD to recruit the skilled employees which helps to
conduct their business in effective manner.
The market of United States involves number of workers which are having effective
skills and abilities which is positive for the business of CAFEPOD. It is important for the
CAFEPOD to recruit talented employees in the organisation which are having effective skills set.
One of the sole problems which can be faced by company to operate their business is that the
costs of labour are high in country due to availability of minimum wage rate. This negatively
impacts the profit margins of the organisation (González-Gómez, 2022). There are number of
rules are present for the protection of employee from malpractices of the organisation.
Section3: Entry modes evaluation
ENTRY MODES EVALUATION
Looking at the United State target market of the CAFEPOD, there is necessity to pick a
reasonable technique for market expansion. It might be financially savvy for CAFEPOD to put
resources into creation of new branches in the United States of America through expansion
strategies. In this specific situation, various techniques for global expansion are referenced
underneath:
Exporting: Exporting is the immediate offer of products and/or services in another country. It is
perhaps the most popular technique for entering an unfamiliar market, as well as the least
gamble (Hunt, Watts and Bryant, 2018). Here, the firm can likewise picked wholesalers or
nearby specialists to sell their items at global market. Exports are the exceptionally utilized
strategy for internationalization.

Joint Venture: A joint Venture comprises of two organizations laying out a together possessed
business. The two organizations would then give the new business a supervisory crew and
offer control of the joint venture.
Franchising: It is just like licensing that includes sales of intellectual property for running and
developing the business in international market. In any case, the guidelines for how the
franchisee completes business are typically exceptionally severe - for instance, any cycles
should be followed, or explicit parts should utilized in make.
Licensing: Licensing could allow expansion by permitting another organization in The United
States to utilize the property of CAFEOD. The property given for use is typically elusive -
for instance, brand names, creation methods or licenses.
Best Strategy for Expansion of CAFEPOD business in the UK
Licensing could be chosen for the expansion of business by permitting another organization
in The United States to utilize the property of CAFEOD. The property given for using the
organisational property is typically elusive - for instance, brand names, production methods,
equipment or licenses. There are a few advantages to this kind of venture like it could permit the
advantage of hospitality business information in unfamiliar market and permit CAFEPOD to
reduce risks. The licensee will pay an expense to be permitted the option to utilize the property.
Licensing requires next to no venture and can give an exceptional yield on speculation
(Ranfagni, Runfola and Sarti, 2018). The licensee will also deal with any assembling and
showcasing costs in the unfamiliar market. In setting of the CAFEPOD, they can involve the
licensing strategy to go into the business sectors of United States. There are many ways for
CAFEPOD to expand its business but the most suitable ways to expand their business in the
international market can be licensing. The disadvantage in licensing is that organisation requires
providing property of the business and joint venture may lead to problems with the partnering
firm (Rottig and Torres de Oliveira, 2019). The licensee will likewise deal with any assembling
and showcasing costs in the unfamiliar market.
Strengths and Weaknesses of SME
Strengths Weaknesses
-Innovation: The management of CAFEPOD -High Costs: The cost maintaining the

has high focus on making changes in their
existing product range according to the
changing needs and desire of customer.
-Expertise: The management of the company
has expertise on providing number of
innovative beverages which makes the
company more competitive in the market.
restaurant business is very high because of huge
workforce and place decorations and
maintenance.
-Low resources: The management of
CAFEPOD is small organisation so that the
availability of the resources is very low which
creates a threat for the company’s expansion.
CONCLUSION
It has been concluded from the above report that an organisation must evaluate various
environmental factors prevailing within the international areas where the organisation intends to
expand their business. The organisation could use various statistical data like GDP, Labour
Market and Country International Trade conditions before expanding to the international
markets. It has been discovered that there are large numbers of benefits that a company could
enjoy due to the expansion of their business in international markets. The following report has
been showing that there are many factors that may affect the internationalisation activities
therefore it is important for the organisation to choose suitable international market entry mode.
It has been discovered that there are various ways of expanding the business in the international
market but licensing could provide various advantages such as low risks, market information,
and availability of local market knowledge etc. The major disadvantages that may be faced in the
international market are changing customer behaviour, market trends and the threats to expand
market coverage.
RECOMMENDATION
It can be recommended to CAFEPOD that they should focus on understanding the
demand for their products in the market. This could be done by demonstrating, experimenting
and placing the products in the smaller parts of the international market to understand whether
customers purchase them or not. If the organisation gets success with its products in the smaller
market area it can sell its products in the bigger market across the place. Another strategy that

can be recommended is that the organisation can reduce the costs of products initially when they
sell them in the international market so that demand can be created. After acquiring greater
demand for their products the CAFEPOD can gradually increase the prices of their products to
get higher profits.

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