Business Expansion Project in Austria

The assignment involves analyzing the feasibility of expanding a coffee shop business in Austria. It considers various factors such as market conditions, competition, cultural compatibility, logistics, and profitability. The goal is to determine whether expanding the business in Austria would be beneficial and viable.

COFFEE SHOP

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
Selection of country for expansion of coffee shop of Marvin and Smith along with
justifications behind selection of the country.........................................................................1
QUESTION 2...................................................................................................................................3
Presenting tailored marketing mix with reference to expansion plan of coffees shop...........3
QUESTION 3...................................................................................................................................4
Implications of two key aspects on the business expansion of coffee shop in Austria..........4
QUESTION 4...................................................................................................................................5
Evaluating impact of profitability and liquidity position on expansion decision of the coffee
shop.........................................................................................................................................5
QUESTION 5...................................................................................................................................7
Conclusion and summary about viability of expansion in another country...........................7
REFERENCES................................................................................................................................8

INTRODUCTION
At the workplace of every business, wide range of decisions are required to take at
different levels like strategic, operational and tactical. Apart from this, while taking different
kinds of decisions several factors also create huge impact on the managers. The current case
study is on the basis of Hank Marvin as well as Patty Smith who are partners. Further, they are
working in food industry along with catering from last many years. In the present times, both are
making plan of business expansion in another country of European Union only. In the present
study, one particular country is to be selected which will be highly suitable for the coffee shop
and support for generating more profit in proposed market. Apart from this, reasons due to which
particular country only chosen is also described in the project so that Marvin and Smith able to
make strategies accordingly. Other than this, marketing mix is to be presented here by which it
aids to aware people about the coffee shop in new market. Besides this, impact of some factors
which are like management structure and organisation culture on business expansion is analysed.
At the end of study, profitability as well as liquidity position of Marvin and Smith coffee shop is
to be determined and its impact on business expansion is reflected.
QUESTION 1
Selection of country for expansion of coffee shop of Marvin and Smith along with justifications
behind selection of the country
At the time of expanding business then crucial aspect needs to analyse is related to the
area or market. The reason is that selection of market must be proper and appropriate so that firm
able to operate smoothly as well as earn desired profit. In the current study, Marvin and Smith
both partners want to expand coffee shop in European Union (EU). This stated union consists of
wide range of countries or nations. For the present business, Austria country of EU is one of the
best and suitable for proposed coffee shop to enter and expand firm. Further, several aspects of
Austria are in favour of the firm so that entrepreneurs able to boost up sales and profit with the
high growth rate (Ataman, and et.al., 2010). When looking at the weather then Austria comprises
with winter, summer and rainy all three seasons. The coffee shop will offer both hot and cold
coffee as per the weather by which easily customers will attract towards it. Therefore, the
business able to improve financial performance on consistent basis in Austria market of EU.
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Looking at the logistical aspect of Austria then it considers as hub of logistics in the
European Union. Generally, a place where resources are available in plenty then cost of that
specific aspect will be highly lower as compared to another states. Being a logistic hub,
expenditures of transporting raw materials and finished goods will be declined in the coffee shop
up to a greater extent. This particular term will provide facility of reducing cost of production,
offering coffee items at low price and enhance profitability in the market (Logistics Hub Austria,
2017). Apart from this, raw materials like coffee beans as well as sugar is highly needed for
producing products in the company while operating in potential country. In context to this,
availability of such raw materials in Austria is in enough quantity. Due to these things, the
material will be available at the low prices which is beneficial aspect of it. Along with this, when
raw materials are easily available within country then logistics expenses declined up to higher
level. Hence, Austria is suitable for Marvin and Smith coffee shop to expand business and boost
up profit.
As per the survey of last two years it can be seen that, Austria is fourth highest country of
EU in terms of consumption of coffee products. Apart from this, revenue generated by coffee
industry in Austria nation is worth of US$1163 million in 2017. Moreover, it is expected that in
the future or upcoming five years coffee sector of Austria will grow by 2.2% annually (Coffee in
Austria, 2017). Considering to this, it can be clearly said that Marvin and Smith coffee shop can
easily operate in the proposed market. Along with this, become highly capable for generating
huge revenue and profit smoothly in selected market. Further, in terms of ethics and legal rules
also Austria is one of the favourable nation of EU for the stated coffee shop. On the such kinds
of businesses, any strict rules and regulations are not imposed by Austrian government which is
another beneficial aspect for Marvin and Smith coffee shop.
However, an issue which has to face to the coffee shop entering in Austria market is
related to structure of organisation. As of now Marvin and Smith considering divisional structure
for operating in existing market. As per the rules and regulations of Austrian government, coffee
shops have to follow functional organisational structure. After expanding business in proposed
country of EU only structure has to change to the coffee shop which is minor or negligible.
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QUESTION 2
Presenting tailored marketing mix with reference to expansion plan of coffees shop
While entering in new market i.e. Austria, Marvin and Smith coffee shop consider some
marketing strategies to aware local community. So that, able to enhance customers, revenue and
profit in proposed market. Further, this thing is described using marketing mix or 4 P's below:
Marketing mix Description of 4 P's
Product The Marvin and Smith coffee shop will enter in Austria market with its
existing products and services which are provided amount customers at
present. Apart from this, ingredients for producing coffee items will be used
of the higher quality as well as hygienic. As it will grow in proposed market
then will offer additional and innovative kind of beverages to attain huge
customer towards it. Further, reason for considering same products at
introduction stage is that changes in production procedure not has to change
(Berthon and et.al., 2012).
Price Every person of each market is highly concerned for pricing of the products
and services offered by the firm. Lower the prices will be supportive for
Marvin and Smith coffee shop in order to attract customers and enhance
profit rapidly. Further, competitor based pricing method will be considered in
Austria market by both the entrepreneurs. Moreover, sometimes cost plus
pricing strategy will be also used when competition level is comparatively
low in the potential market.
Place In order to sell or deliver the products and services among up to customers
place is required to select. In the Austria market, the business will deliver
coffee items using online and offline both the places. In online, it will create
mobile application where people easily able to give order of the products
where home delivery service will be provided (Marketing Mix - Meaning and
its Elements, 2017). Further, under offline physical store will be opened
where people easily able to reach and consume services and coffee products
of Marvin and Smith's coffee shop.
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Promotion For increasing awareness among local community of Austria market
promotional strategies will be considered by the Marvin and Smith coffee
shop. Herein, it will focus on social media marketing where major attention
to Facebook and Instragram will be given in Austria country. Apart from
this, traditional marketing strategies will be also considered using newspaper
and television (Zeng and Gerritsen, 2014).
QUESTION 3
Implications of two key aspects on the business expansion of coffee shop in Austria
When a company moves towards another place or expands business in new market then
geographical location become changed. Once location of the company differs in various aspects
and create impact on the business up to a greater extent. As per the current case, when Marvin
and Smith will enter in Austria nation then different terms will be needed to follow which create
negative impact upon it. In the present section, basically two elements are considered which
involve culture of organisation and structure of management. Furthermore, implications of such
factors on the coffee shop are stated below:
Organisation culture: A method of shared values, assumptions, estimations and beliefs
which are governed that people behaves in the firm in which manner is referred as organisational
culture. When geographical location of the company changes then values and beliefs of local
community create huge impact on it. Due to this, the business cannot generate amount or profit
as earned in the old or existing market. Organisational culture leads to affect employee
performance as well as their motivational levels. When cultures of workforce fluctuates then they
will unable to deliver same work within the setted time frame (Foxall, 2014). Therefore,
efficiency of workers productivity of Marvin and Smith coffee shop will be affected up to a
higher level. Apart from this, culture of organisation when changes then business unable to gain
competitive benefits easily in Austria. Moreover, culture of people in proposed market differs
where entrepreneurs of the coffee shop have to adopt strategies to fulfil needs and wants of them.
Hence, it can be said that change in culture of organisation will affect to the entire business.
Management structure: Another factor which impact on the firm due to change in
geographical location is structure of management. It is not necessary that all the countries follow
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same kind of structure to operate in market. A system or procedure which is used for defining
hierarchy of an enterprise is considered as management or organisational structure. It consists of
several formates which are like divisional, functional, matrix, hierarchical etc (Challagalla,
Murtha and Jaworski, 2014). At present, the coffee shop implemented divisional structure and
operate in existing market on the basis of this. However, as per the proposed nation of business
expansion, coffee shop has to consider functional organisational structure. When Marvin and
Smith will make changes in structure of management then other different aspects will also affect
up to a higher level. Hence, it can be said that management and organisational structure creates
huge influence on business while expanding in Austria country.
QUESTION 4
Evaluating impact of profitability and liquidity position on expansion decision of the coffee shop
At the time of making any kind of business decision, financial position plays a major
role. For this, it is essential to determine financial performance of the company in different ways
like profitability, solvency, liquidity etc. In order to assess such performance, financial ratios are
computed with the help of balance sheet and income statements of Marvin and Smith coffee shop
(Da Gbadji Gailly and Schwienbacher, 2015). This selected tool reflects clear scenario of
business in terms of financials. Further, liquidity and profitability condition of selected firm is
stated below:
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Analysis: From the above presented calculation, it can be seen that gross profit ratio is
57.78% which is highly appropriate and shows that Marvin and Smith coffee shop is capable for
generating profit. Further, cited firm considered various effective strategies and tactics for
managing and reducing cost of sales. The reason is that GP determined after deducting cost of
sales from revenue generated at the end of year. Looking at another profitability ratio i.e. net
profit then it can be visualised that the coffee shop has capacity for managing indirect expenses
incurred in the business. 7.44% NP ratio shows that it has enough amount for making expenses
on business and decides for expanding in Austria. Apart from this, amount of bank overdraft is
also not with the shop where it easily able to enter in new market. In addition to this, return on
capital employed ratio of Marvin and Smith coffee shop is 25.09%. On the basis of this value, it
can be said that proportion of net income is higher as compared to capital employed by the firm.
Moreover, profitability position of Marvin and Smith coffee shop is strong and attractive
at the end of accounting period. When this condition of the company is high then it is able to
make investment in various business projects. Further, higher profitability leads to create positive
impact on the company where manager can easily take financial decisions (Damodaran, 2016).
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On the basis of present profitability situation, Marvin and Smith should expand business in
Austria.
Analysis: Liquidity ratio shows capability of company in order to meet of fulfil debt
obligations raised from market for short period of time. Higher value of these ratios is beneficial
for the company which reflect better as well as strong performance in the industry (Slater and
et.al., 2010). Aforementioned table depicts that current ratio of Marvin and Smith coffee shop is
5.71:1 which is better for the company. Apart from this, in comparison to standard ratio of CR
which is 2:1 also the coffee shop is too much capable. It can be analysed from this that profit
generation capability of the firm is very high where bank overdrafts are at the very lower or
negligible proportion. Moreover, firm's ability to pay all the short-term debts is also too much
strong in the industry. Apart from this, value of quick ratio of Marvin and Smith coffee shop is
4.42:1 which shows that it is highly capable for the same. As compared to ideal ratio of QR i.e.
1:1, business performance of the coffee shop is very well. In addition to this, amount of current
as well as quick assets is more at the workplace of cited firm as compared to current liabilities. In
the calculation of QR, prepaid expenses and inventory is not included because these both are not
having nature of cash convertible easily.
When liquidity position of the company is strong then it depicts that management has
more level of assets and liabilities which are easily converted into cash form. As per the current
case, this condition of the coffee shop is very strong where it has capability for making
investment in new business project of expansion (Morgan and et.al., 2012). Hence, Marvin and
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Smith should take decision for business expansion in Austria which is a suitable country for the
coffee shop.
QUESTION 5
Conclusion and summary about viability of expansion in another country
It can be summarised from the above analysis that, for expanding the coffee shop of
Marvin and Smith, Austria nation of European Union will be highly appropriate. The reason
behind this is that, in terms of geographical location as well as availability of raw materials i.e.
coffee beans the selected country is the best. Apart from this, in terms of logistics which are like
inbound as well as outbound any kind of issues and difficulties not have to face by the coffee
shop in Austria. In terms of ethics and cultures of the local community of chosen country, the
proposed business will become able for generating huge sales. Therefore, level of profitability
condition will be also affected up to a greater extent. In addition to this, key benefit is that Brexit
negotiations will not make any type of influences on the business expansion. However, the issue
associated with this is that, Marvin and Smith coffee shop has to make changes in organisational
structure only which is from divisional to functional. Moreover, in terms of profitability and
liquidity conditions also the coffee shop is performing well. Therefore, the business expansion
project in Austria country will be highly beneficial and viable. Hence, both the entrepreneurs
need to take decision for expanding in proposed nation of European Union.
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REFERENCES
Books and Journals
Ataman, M. B., and et.al., 2010. The long-term effect of marketing strategy on brand sales.
Journal of Marketing Research. 47(5). pp. 866-882.
Berthon, P. R., and et.al., 2012. Marketing meets Web 2.0, social media, and creative consumers:
Implications for international marketing strategy. Business horizons. 55(3). pp. 261-271.
Challagalla, G., Murtha, B. R. and Jaworski, B., 2014. Marketing doctrine: A principles-based
approach to guiding marketing decision making in firms. Journal of Marketin. 78(4). pp.4-
20.
Da Gbadji, L. A. G., Gailly, B. and Schwienbacher, A., 2015. International analysis of venture
capital programs of large corporations and financial institutions. Entrepreneurship Theory
and Practice. 39(5). pp.1213-1245.
Damodaran, A., 2016. Damodaran on valuation: security analysis for investment and corporate
finance. (324). John Wiley & Sons.
Foxall, G., 2014. Strategic Marketing Management. Routledge.
Morgan, N. A. and et.al., 2012. Export marketing strategy implementation, export marketing
capabilities, and export venture performance. Journal of the Academy of Marketing
Science. 40(2). pp.271-289.
Slater, S. F. and et.al., 2010. Factors influencing the relative importance of marketing strategy
creativity and marketing strategy implementation effectiveness. Industrial Marketing
Management. (4). pp. 551-559.
Zeng, B. and Gerritsen, R., 2014. What do we know about social media in tourism? A review.
Tourism Management Perspectives. 10. pp. 27-36.
Online
Coffee in Austria. 2017. [Online]. Available through: <http://www.euromonitor.com/coffee-in-
austria/report>.
Logistics Hub Austria. 2017. [Online]. Available through:
<https://investinaustria.at/en/sectors/logistics/>.
Marketing Mix - Meaning and its Elements. 2017. [Online]. Available through:
<http://www.managementstudyguide.com/marketing-mix.htm>.
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