Marvin & Smith Coffee: Justification for Italy Expansion Plan

This report details Marvin & Smith Coffee Shop's strategic plan to expand its business into Italy. It begins by justifying the choice of Italy, highlighting the high demand for coffee, the favorable cultural environment, and the country's significant coffee import volume. The report then explores the marketing mix, including product (coffee and related items), place (Amalfi Coast location), price (penetration strategy), and promotion (social media and advertising). Key factors for expansion are discussed, such as human resource management (employee training and local recruitment) and marketing (7 Ps). Finally, the influence of profitability and liquidity ratios (current and acid-test ratios) on decision-making is examined, demonstrating their importance in assessing the company's financial health and ability to meet short-term obligations. The report concludes with a summary of the key findings and recommendations for successful expansion.

MARVIN & SMITH
COFFEE SHOP

Table of Contents
1. JUSTIFICATION OF THE CHOSEN COUNTRY FOR EXPANSION....................................1
2. MARKETING MIX.....................................................................................................................2
3 KEY FACTORS CONSIDERED BY MARVIN & SMITH TO EXPAND THEIR BUSINESS
..........................................................................................................................................................3
4 INFLUENCE OF PROFITABILITY AND LIQUIDITY RATIOS IN MAKING DECISIONS 5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

1. JUSTIFICATION OF THE CHOSEN COUNTRY FOR EXPANSION
Marvin & Smith Coffee Shop are planning to expand their business. After analysing and
evaluating the situation of different regions they found out that if they want to enlarge their
business Italy is one of the suitable place. Italy has come out to be a beneficial country as the
demand for coffee is quite high. The average utility is approximately 3 cups per day. The Italy's
market fits well with Marvin & Smith model of providing premium coffee. The royal class of
consumers in Italy do not hesitate with the high price charged for high-quality coffee. The
country is the 8th largest coffee importer in Europe and that makes it total of 6% of the country's
import. In 2017, Italy imports generated a revenue of over 170 thousand tonnes. This supported
that the country is beneficial for expansion plan( Kotler and et.al., 2015).These figures are the
answers to the high consumption pattern in Italy. These all data's relate to the fact that Italy
market is favourable for Hank Marvin and Patty Smith to expand their business of coffee.
Lifestyle And Culture in Italy
Italy has its own lifestyle and culture that is different and unique in every sense from
other countries. The people of Italy belongs to the culture that brings a desire to enjoy their lives
freely. And their cafe culture is different then one can think. A person on an average visit cafes
for 6-7 times a week which is comparatively high than other countries. People at Italy have
joyful and loving nature that brings them to celebrate even smallest of happiness that came into
their lives and that to with their friends and family. And people are ready to pay the prices
though high but they know that they are getting the coffee that is worth that money. There are so
many coffee shops in Italy which tends to show that people their have quite deep interest for
coffee and consumers have high liking for chocolate and coffee that brought them to like that
combination. Hence it is logical to expand their business in Italy.
Ethical Considerations
Code of Ethics followed by the people of Italy is high so Marvin & Smith has to look
after all the agreements and have to be attentive about all the ethical codes followed by the
company. They have ensured that they are clear about the agreements made with local partners
and other authorities. They have various benefits for the people working at the shop and they
follow the code to have customer satisfaction that will eventually help them to have good
customer base(Lovelock and Patterson 2015).
Structural Challenges
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Before everything a good and suitable place needs to be decided by to open the coffee
shop. Amalfi Coast is the one of the best destinations to start the business and open a coffee shop
as it is encircled with beautiful heritage site. The site is so attractive that nature and coffee lovers
are tend to be regular customers. As there are many hotels near by the area that becomes a plus
point for the coffee shop. The coffee shop is being planned at such place where there is no
conveyance problem.
2. MARKETING MIX
Marketing mix is a foundation model of any business. It is define as a combination of
marketing tools that an organization uses to fulfil its marketing objectives in the chosen market.
Marketing mix help the company in broad level of decision making. It combines many factors
which are as follows:
Product
Product is the good that (Kotler and et.al., 2017)the firm is willing to offer to customers.
The product is developed according to the customer's needs or should be so influencing that they
actually believe that they want that product. The marketer should have a plan for every part of
the product life cycle. It depends upon the product how much the company can charge for the
same, where the product should be placed and how the product can be promoted in the chosen
market. Marvin & Smith are offering coffee to the people of Italy. The product specifically
focuses on the physical thing that is only the product and nothing else. The company has decided
to serve coffee mixed with some chocolate products inspired by Europeans and with this they
will also provide some snacks, beverages, cookies and pastries all on the base of coffee and
chocolate. This can attract the customers to UK, it will provide some different flavour to the
people out their and can win the heart's of people of Italy.
Place
It decides where the company is going to sell its product and how the product is delivered
to the target market. The aim of business developers is to get the company's product near to the
customer's reach so that they can buy it. Place should be suitable and convenient for the
consumers to avail the services. This strategy refers to placing the product in particular stores but
this also means to the placement of the products in a store(Kotler and et.al., 2018). Like the
product should be stored in the wide quantity and at that place where the customer's will
definitely look it. As this tool plays an important role in the distribution of the product so it is
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critically evaluated where the product should be placed. The place chosen by the company
Amalfi Coast is the best destination chosen as the cafe would be near the heritage site, close to
nature and is suitable to reach. The cafe would be near to the hotels so it an added benefit for the
firm as it will attract the other tourist customers as well. It is the most favourable place for the
survival of the business.
Price
Money charged for the product. The marketers should connect the cost of the product that
means the real value considering supply costs, discounts(if) and price of rivalry firms. In
exceptionally different cases, the business developers may increase the cost of the item to make
the product look more like a luxury product or will lower the cost so that most of the consumers
can taste or try the product(Kerin and Hartley 2015). The firm should keep in mind that there are
other competitors who are focusing on how to address to a large size of population so by keeping
the price's of the items at the coffee shop comparatively low. The company should follow price
penetration strategy to capture the bigger share in market as there are already established firms,
so it will be difficult for Marvin & Smith coffee shop to survive if they charge high for the
products in the starting phase. It is simple that the if the people in Italy liked the coffee they will
attracted and tend to come to their cafe and then they can increase the price of the items.
Promotion
This strategy focuses on advertising the product, increase public relations and
promotional strategies to market the product. Promotion is linked with the rest 3 strategies as
promoting a product indicates why the customers need the product and why will they pay the
price for it. The marketer should try and tie promotion with place together so that the company
can reach to the maximum customers. People in Italy prefer high quality product, they prioritize
quality above everything. People there are highly active on social media, so the company should
promote through it or by advertising through commercials can be done the company to market
the products(Wilson and et.al., 2016).
3 KEY FACTORS CONSIDERED BY MARVIN & SMITH TO EXPAND
THEIR BUSINESS
As the company is developing it's business into new market there are some key factors that the
business should focus on to achieve success are:
Human Resource Management
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The Human Resource of the organization are the crucial factor in success of the business.
As when the new business is developed that is the human resource of a organization that will be
actually working on the implementation part. It is the human resource that will analyse about the
new dimensions of the business. The team will figure out the place where it can develop their
business. Then HR Manager will train their employees to develop the skills according to the
new product. The expertise of current staff will ensure the success of the expansion plan as they
are one's who are going to implement the strategies. Weather it's product development,
manufacturing, packaging and promoting all of these is done by the human resource of the
company(Chaffey and Ellis-Chadwick 2019). So they are needed to train so that can acquire such
skills to perform the tasks. Human Resource Management is the key to successful expansion plan
as they are motivated to not to resist change, as change is the key element to success. Employees
should welcome change as it brings some opportunities for them as well. Marvin and Smith
should consider human resource management as they expand their business in an unknown
market. The employees there are the only factor that will help the company to achieve it's target.
The company should provide some extra benefits to the employees to motivate them and with it
training and guidance should be given to work in the new market. Local people should be
recruited to be know better about the local market. The company should focus on personnel
management as they are responsible for the basic development of the plan, they should be
included in planning process, their opinions should be considered in decision-making.
Marketing
Marketing department is considered with making basic marketing decisions about the
new product that is being launched by the company. They have to handle all the activities
relating to market new product. The marketer can find different and unique way to market their
products that can be through social media. Social Media is very powerful tool to grow one's
business. Business are building solely on the basis of social media. Similarly Marvin and Smith
Coffee Shop can start a new blogging page about introducing their new shop in Italy. Blog about
the place where the company is going to start business, what products they will be offering, what
other discounts they will be giving and what are doing to attract the customer. Company can use
Facebook and YouTube ads to address the target customers(De Mooij 2019). As if the ads will
pop up again and again this will distract the customers and for once they will see to it and
possibly go for it. Company's business developers should focus on increasing the sales of the
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firm by targeting the youth consumers who prefer coffee. The marketing department should
carefully develop the 7 P's of marketing. Place should convenient to visit, product should be the
one demanded by the market, price should be as per the customer's willingness to spend and
promotional strategies should reach maximum number of customer's, process should be cost
effective, people should be motivated and accept the change and physically it should be
attractive(Ryan 2016). These all should be aimed to achieve the desired sales, capture the
market, help the product grow and help the company flourish in the new market. Marvin and
Smith Coffee Shop should develop such marketing strategies that ensures company's success.
4 INFLUENCE OF PROFITABILITY AND LIQUIDITY RATIOS IN
MAKING DECISIONS
Liquidity Ratio
Current Ratio = Current Assets / Current Liabilities
= 35400 / 6200 = 5.7:1
Acid Test Ratio = Current Assets – Inventory- Prepaid expenses / Current Liabilities
=35400-8000 / 6200 = 4.4:1
Current Ratio – It is also called as liquidity ratio. This helps in measuring the company's ability
to pay short term liabilities or the liabilities that are due within one year. Through it the
company can tell their investors how the company can increase the current assets on their
balance sheet to convince debtors and payables. To calculate the current ratio, company's current
assets are compared to company's liabilities. Current assets consist of cash, inventory and
accounts receivable and current liabilities including accounts payable, taxes and wages etc. If the
current ratio is above than the industry average than is acceptable. The ideal current ratio is that
where current assets are twice of current liabilities. The current ratio of the coffee shop is 5.7:1
so it can evaluated that the current assets are five times than the liabilities. The company have
enough funds to pay back to its creditors and simultaneously can invest the funds smartly in
something new(Atwal and Williams 2017).
Acid Test Ratio – Through this company's liquidity status can be known. Coffee shop have quick
ratio of 4.4:1 so it shows that the current assets are 4 times to meet company's current liabilities.
Profitability Ratio
Gross profit ratio = Gross Profit / Net Sales
= 208000/360000 = 0.57:1
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Net profit ratio = Net Profit / Net Sales
= 26800/360000 = 0.074:1
Gross profit ratio – It is a profitability ratio that tells the link between gross profit and total net
sales revenue. It is tool by which business can calculate the operational performance. Company's
gross profit ratio is 0.57:1. Company have to work on this part.
Net Profit Ratio – It is the ratio calculated after tax to net sales. This calculation shows the
remaining profit after sales, income taxes(Fill and Turnbull 2016). The company's net profit ratio
is 0.074:1.
CONCLUSION
From the above study it can be concluded that Marvin and Smith is planning to expand
their business in Italy. The company is planning to open a coffee shop in Italy for that they have
planned all the strategies to develop it. The company analysed the lifestyle and culture of people
of Italy, they followed ethical code in their working and faced structural challenges to achieve
where they have to reach. As Italy has people who focus on joy and having fun and they don't
think about the money to much. The business needs to focus on every aspect to achieve success.
Then comes the marketing mix that includes Place, product, price and promotion to market the
product. The company choose that place that is best for local people to come and for tourist as
well. As it is near the hotels, the tourists can also come and this is an extra benefit for the firm.
The product choose by the firm was coffee plus chocolate that was loved by the people in Italy.
Addition to it they served cookies, beverages and pastries that too on coffee and chocolate
flavour. The price strategy used by the organisation was price penetration strategy that means
first the cost is lowered to capture the target market and then slowly increase the prices of the
products offered. Then the company focuses on human resource management and marketing to
develop their new business. And finally the liquidity and profitability ratios are calculated to
check the performance of the company and it is found that the company's financial condition I
sound to pay off liabilities.
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REFERENCES
Books and Journals
Kotler, P. and et.al., 2015. Marketing. Pearson Higher Education AU.
Lovelock, C. and Patterson, P., 2015. Services marketing. Pearson Australia.
Kotler, P. and et.al., 2017. Marketing for hospitality and tourism.
Kotler, P. and et.al., 2018. Marketing management: an Asian perspective. Pearson.
Kerin, R. and Hartley, S., 2015. Marketing: the core. McGraw-Hill.
Wilson, A. and et.al., 2016. Services marketing: Integrating customer focus across the firm.
Chaffey, D. and Ellis-Chadwick, F., 2019. Digital marketing. Pearson UK.
De Mooij, M., 2019. Consumer behavior and culture: Consequences for global marketing and
advertising. SAGE Publications Limited.
Ryan, D., 2016. Understanding digital marketing: marketing strategies for engaging the digital
generation. Kogan Page Publishers.
Atwal, G. and Williams, A., 2017. Luxury brand marketing–the experience is everything!. In
Advances in luxury brand management (pp. 43-57). Palgrave Macmillan, Cham.
Fill, C. and Turnbull, S.L., 2016. Marketing communications: brands, experiences and
participation. Pearson.
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