CAFEPOD's International Expansion: Environmental Factors & Entry Modes

This report provides a comprehensive analysis of CAFEPOD, a British coffee company, and its international expansion strategy, specifically targeting the United States market. The report begins with an introduction outlining the company's objectives and justification for internationalization, emphasizing the potential for increased revenue and customer satisfaction. It then delves into the external environmental factors impacting expansion, including the impact of Brexit on raw material costs, transportation, and labor rates; the influence of Gross Domestic Product (GDP), considering the effects of COVID-19 and US-China trade relations; and the significance of the labor pool, including skill availability and wage rates. Finally, the report evaluates various entry modes for the US market, such as exporting, joint ventures, licensing, and franchising, providing insights into their respective advantages and disadvantages for CAFEPOD's international venture.

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 (Xu, Zeng
and Chen, 2018). 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.
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. 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.
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
are developed by the government of United States. These rules and regulations are
compulsorily complied by the organisation. This can create many problems for CAFEPOD
to set up their business.
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.
Section2: Analysis of environmental factors impacting internationalisation
process
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 Brexit on expansion
United Kingdom was one of the respected members of European Union, which provides
different types of special facilities to their business organisation to operate their business in
different European Union. Due to some disturbance, the government of United Kingdom has
withdrawn their support and name from the group under specialised contract which is called
Brexit. All the trade agreements which are established with European nations become

terminated. The situations of market are negatively impacted due to this decision of the
government (Ledesma-Chaves and et. al., 2020). All the companies of market faced number of
problems and the management of CAFEPOD also faced the heat of the agreements. The negative
impacts of Brexit on business are given below: Increase in prices of raw material :- One of the biggest disadvantages of Brexit is that
the prices of raw material are increases in the market. The increase in prices of raw
material negatively impacts the profit margins of the organisation. There are large
number of raw materials are present which came from European nations. Due to the
increase in restrictions, the price of the raw materials increases. The prices of the material
are increased by 3.1 after the Brexit which is not favourable for the cost struicture of
business. The management of CAFEPOD also faced number of problems due to the
shortage of raw material. It becomes important for the company to manage new suppliers
of coffee if they want to establish their business in the markets of America. Increase transportation cost: - One of the reasons for the increase in prices of raw
material is the increase of transportation cost of companies. The management of company
need to provide number of taxes for passing their products after Brexit. The material of
CAFEPOD also came from number of nations by roads which increases their cost of
production and decreases in profit margins.
 Increase in labour rates: - The rates of labour plays important role in the cost of
production. If the rates of labour are low then it becomes positive for the organisation
(Zahra, 2020). The market of America does not have cheap labour which creates many
problems for the company in the market.
The management of CAFEPOD need to examine the number of effects which is made on the
market of US, if they want to establish their business in same country. There are also number of
problems are present in market of United States due to their trade war with china.
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 (Guercini and Milanesi, 2018). 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. The reason for the attraction of
business organisations towards the market of United States is the high rate of GDP. The GDP of
America negatively impacts due to some reasons. 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.
Covid-19 impact on GDP: - COVID pandemic is one of the critical factor which
negatively impacts the GDP of all the countries of world. Due to the spread of disease in the
market, the government of respected states has ordered to close all the non-essential businesses
of market. There are many companies are present which shuts their business due to COVID
which break the whole business structure of the organisation. It is very important for CAFEPOD
to analyse the impact of covid-19 and try to provide different types of substitute for the same.
US-China trade war: - The trade relations between these nations are not positive due to
the number of restrictions and obligations (Curchod, Patriotta and Wright, 2020). It negatively
impacts the business of the organisation because most of the businesses shift their operations
from other countries. The GDP of America negatively impacts by these negative trade relations.
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 (Noh and Shin, 2018). There are number of rules
are present for the protection of employee from malpractices of the organisation.

Section3: Entry modes evaluation
Looking at the Uxnited State target market of the CAFEPOD, there is necessity to pick a
reasonable technique for market expansion. In this specific situation, various techniques for
global extension are referenced underneath:
 Exporting: Exporting is the immediate offer of merchandise and/or administrations 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). It might likewise be financially
savvy on the grounds that CAFEPOD won't have to put resources into creation offices in the
United States of America. Trading is the exceptionally utilized strategy for
internationalization. It is fundamentally a drawn out responsibility towards the unfamiliar
business sectors. Here, the firm can likewise picked wholesalers or nearby specialists to sell
their items at global market.
 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. There are a few advantages to this kind of
venture like it could permit you the advantage of neighbourhood information on an
unfamiliar market and permit CAFEPOD to share costs. But, this should not be utilized,
because there can be issues with concluding who contributes what and how to divide
benefits.
 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. 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 likewise 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.
 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. It isn't fitting to CAFEPOD to
go for Franchising as it includes speculation costs.
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 exporting is feasible but
not in the business of selling instant coffees, franchising requires to provide intellectual property
of the business and joint venture may lead to problems with the partnering firm. Licensing
requires next to no venture and can give an exceptional yield on speculation (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 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.
 High Costs: The cost maintaining the
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 are
very low which becomes the threat for
the expansion of company.
Section4: Recommendation/conclusion
It can be recommended 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 could be
recommended 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. Certain modes of
expansion like licensing, exporting, franchising, etc. could be use by the company to expand.

REFERENCES
Books and Journals
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miscalculations. Journal of Business Strategy.
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Zahra, S.A., 2020. Technological capabilities and international expansion: The moderating role
of family and non-family firms’ social capital. Asia Pacific Journal of
Management, 37(2), pp.391-415.