Costa Coffee Expansion in Finland: A Business Report

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Business Organisations and Environments in a Global
Context
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Executive summary
The provided report has the discussion on the information about the company, Costa Coffee that
is expanding in Finland. The details concerning the economical and other aspects of the country
has been discussed. There has been the use of analytical approach in determining the effects of
environment both internal and external on Costa Coffee’s expansion. The supply and demand
scheme has been applied in the context of business. Recommendations have been made on the
strategies of the company that can e helpful in dealing with the environment and demand issues
in a foreign region.
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Table of Contents
Introduction......................................................................................................................................4
Main body........................................................................................................................................5
Conclusion.....................................................................................................................................16
Reference list.................................................................................................................................17
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Introduction
This study will be on the expansion of Costa Coffee in Finland. They are going to use FDI and
expand their business. The validity of this method will be understood here. Costa Coffee’s
background will be understood by considering the size of workforce, ownership and international
operations. The economy of Finland in the last few years and their present political inclination
will be included in this discussion. Moreover, the legal system in Finland relating to laws, the
culture of people in this country and their financial system will be considered. Then by utilising
appropriate frameworks, the business scenario of Finland in terms of Coffee industry will be
analysed.
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Main body
Background information on (Costa Coffee)
Size
Figure 1: Workforce increment
(Source: statista.com, 2019)
There has been a gradual increment in the workforce of Costa Coffee over a few years. In 2012,
there were only 10031 employees. This grew into 11432 employees from 2013 to 2014. From
2014 to 2015, this grew into 12645 employees. This took a major turn from 2016 to 2017, as
employees increased to 18162 from 13990. At 2018, in all over the world, Costa Coffee’s
employees are 18412 in total.
Legal form
Costa Coffee is a subsidiary of Coca Cola, and this organisation follows a private limited
company’s structure.
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International operations
Figure 2: Store numbers of Costa Coffee
(Source: statista.com, 2019)
In the UK, there are 2422 employees working for Costa Coffee. In China, this figure reaches 499
staffs. In UAE countries, 147 people are working for this company. About 144 people work in
Poland in stores of Costa Coffee. In Saudi Arabia, this figure is less, and only 60 people work for
them. This is same for countries like Ireland, India, Egypt, Czech Republic, Kuwait, Russia,
Qatar, Spain, Hungary and Bahrain. About 50 people in average work in these mentioned
countries for Costa Coffee. Therefore, this organisation employs many people across several
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units in different countries. It gives evidence of their huge amount of workforce, which signifies
their amount of strength.
Background information on the business environment in (Finland)
Economy
GDP of Finland in 2017 reached to 224 billion Euros. The growth slowed down in May of 2017,
and in April, growth was 1.8 percent. In 2018, the growth rate of GDP was five if the highest rate
is taken and lowest reaches to -6.90. Gross national product of Finland is 27989 million Euros.
From agriculture, they have received 873 million Euros; construction business gave Finland
1774 million Euros, the manufacturing business gave them 3242 million Euros (focus-
economics.com, 2019). Per capita GDP of Finland was 45927, which changed to 50068 in 2018
(statisticstimes.com, 2019). Therefore, it is seen that there is an overall growth in Finland in
every sector.
Elevated increment in GDP shows that the country is now economically stable. Various
industries in Finland are flourishing, and it is making the economic backbone of Finland
stronger. It is making other companies more interested in investing in this country, and their
economic strength is becoming a prominent factor. GDP per capita has seen some growth, which
signifies the prosperous condition of this country. It shows that people have great economic
strength right now and can spend money at a much higher amount. Therefore, the economy of
Finland is booming due to the contribution of different industries.
Culture
Finnish people belong to Finno-Ugric families in Europe. Their language comes most close to
Estonian and Livonian. Milk is included in their daily diet. They use it as a beverage and
consume it in curdled, soured forms. Coffee is their national drink and acts as a distinction
between urban and rural interior. Their genetic evidence suggests that they have comb ceramic
culture. Symbolism can be related to understanding their culture. Symbols like Savusauna and
their ancient string instrument Kantele is a major symbol of Finnish culture. In 3000 B.C, they
were inspired by “Battle-Axe or Corded Ware” culture. Their religious culture revolves around
Christian culture. There are Scandinavian influence and shamanism.
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Finland’s business culture is much advanced. Finnish people love their environment, and for this
reason, companies operate to ensure that they do not make a negative impact on the environment.
They understand their responsibility towards society. Finland believes that punctuality should be
maintained. They start and finish meetings at correct times. Later arrival at the workplace is not
allowed in Finland. Nordic countries like Finland are affluent society, where they condemn
bribery. They detest corruption and believe honesty is the best policy. Finland is ranked on the
top ten lists when it comes to honesty.
Political
Finland uses “d’Hondt” system when it comes to the electoral system. This is used in 15 multi-
member constituencies. There are two elections, one is legislative, and another one is
presidential. A person can become president if he or she gets the maximum amount of vote in the
first round. If this does not happen, then a second round is conducted between the first two
candidates, who were leading. Main political parties are Centre party with 49 seats, national
coalition party with 38 seats, The Finns, Left Alliance, Swedish people’ party, Blue reform,
Green party, Christian democrats of Finland (country.eiu.com, 2019).
President of Finland does not exercise political power solely. They are a representative
parliamentary democracy. Sauli Niinisto was the first person to become a conservative head in
five decades after winning the presidential election in the year 2012. This victory suggested that
people have wanted to keep their country in Euro zone, even EU bailouts happened. This person
won consecutively in 2018. Juha Siplia was elected as prime minister in 2015. He belongs to
liberal centre party and succeeds the parliamentary election in April. He controls two groups,
which are the Finns party and National Coalition Party. His government resigned in 2019
because they were unable to reform the welfare system and healthcare in Finland (bbc.com,
2019.
Legal
The legal system of Finland is based on their constitution of 1919. An up-gradation was done in
2000. Unicameral Eduskunta, which is their parliament, consists of 200 members. These
members are selected for a four-year term, and they can change legislation. There are
independent courts in Finland and administrative courts. There is prosecution service,
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enforcement authorities, prison and probation service. There are no restrictions on foreign
investment. There are some requirements for authorisation. They have legislation, which restricts
investment in banking, payment services and investment services.
Collective bargaining is supported in Finland, which comes under their labour law. Protection of
employees is much higher than in other countries due to Finnish legislation. This includes
“Employment Contracts Act”, “Working Hours Act”, and “Annual Holidays Act”. The unique
feature is that mandatory rules in collective bargaining limit options for companies and their
employees regarding employment conditions. Finnish people enjoy a high level of security when
it comes to dismissal. The new “Intra-Corporate Transfer Act” will help international companies
to transfer labours from third world countries in Finland. They have reformed “Finnish Working
Hours Act”, “Zero-Hour employment contracts” and new “Trade Secrets Act”.
Financial systems
The financial system of the country is large, in which the credit institutions have the largest
share. As per the report of imf.org (2016), the assets of the financial system were equal to around
400% of Gross Domestic Product of the country in the year 2015. The assets of the bank were
about 230% of GDP; the assets of bank foreign-owned were account to 160% of GDP of
Finland. On the other hand, the pension funds, financial intermediaries, and insurance companies
hold 51%, 72%, and 35% respectively.
Analysis of the business scenario
PESTLE
Elements Factors Analysis of Costa Coffee
Political The Republic of Finland has developed
from the agrarian country to an
advanced industrialisation region due to
trading with Western powers
(nationsonline.org, 2019). The Nordic-
style incorporated by the country has
resulted in increasing prosperity.
The enhancement in the
industrialisation in the country
will be beneficial for the Costa
Coffee business. This would
affect the expansion of the
company in Finland.
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Economic The unemployment rate of the country
as per the report of 2016 has been
around 8% (stat.fi, 2016).
The unemployment rate of the
country would able to Costa
Coffee to employ the native
people and reduce cost in
transferring human resources
from the UK.
Social The native people of Finland are fond of
consuming milk and coffee (finland.fi,
2015).
The social aspect of Finland
will benefit Costa Coffee as
people would purchase the
coffee products from the
company; thus, increasing its
revenue.
Technological The technology industry in Finland is
one of the significant export industries
(teknologiateollisuus.fi, 2014).
Costa Coffee would be
benefitted by the
technologically advanced
country, Finland, as it would
not need to export goods form
the UK in Finland’s
operations.
Legal As per the “Finnish Working Act 1996”,
the companies of the country should
regulate the number of working hours in
a week (ilo.org, 2014).
According to the “Annual Holidays Act
2005”, the organisations in Finland
should provide a bonus that is half of
the actual pay for the holiday of the
workers (tem.fi, 2019).
Costa Coffee would be
affected by the legislation of
the Finnish Working Hours
Act, as it would have to limit
the daily working hours of the
employees.
Costa Coffee, in compliance
with the law of Finland,
should provide the workers
with an annual holiday.
Environmental According to the European
Commission, the country must reduce
Costa Coffee, in order to serve
the Commission, would need
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the carbon footprints to reduce
greenhouse gas effects (helsinkitimes.fi,
2016).
As per the “Environmental Protection
Act 2014”, there should control in the
pollution of water (Herler and Lusenius,
2019).
According to the “Finnish Waste Act
2011”, the companies of the country
should manage the waste before
discarding them (Herler and Lusenius,
2019).
to reduce the emission of
carbon. It would need to
reduce the frequency of
transportation to control air
pollution.
Costa Coffee should adhere to
the environment protection
law and reduce the pollution
of water.
The firm should treat the
waste before discarding them
to reduce landfill issues.
Table 1: PESTLE Analysis of Costa Coffee in Finland
(Source: Created by the learner)
Porter’s five forces
Bargaining power of consumers
The bargaining power of the customers of Costa Coffee in Finland is high. This is for the reason
that there are established organisations such as Meira Oy and Paulig in Finland that provides
coffee products to the native people (finnpartnership.fi, 2017). Costa Coffee, in order to
influence the buying decision of the customers should produce high quality coffee products to
the customers along with a discount offer to make sales.
Bargaining power of suppliers
The bargaining power of suppliers is high in Finland because they already have created deals
with the established firms. This would affect the functioning of the firm negatively as the
company would lack raw materials to manufacture products. Costa Coffee in order to make deals
with the suppliers of the native country should make good relation with them as well as provide
them with benefits on their products.
Threat of new entrants
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The threat of new entrants to Costa Coffee in Finland is low. There are established firms in the
country that produces coffee products to the consumers. Costa Coffee is a well-established firm
of UK and new entrants in the market would not threaten its expansion in Finland. Therefore, the
company would not need to be threatened by new entrants; however; it should enhance the
products’ quality to attract the buyers in spite of the existence of native coffee producers.
Threat of substitutes
The threat of substitutes for Costa Coffee is moderate in Finland. This is because coffee is the
main beverage of the native people. The coffee products can be substituted by tea; however, as
per the report of finnpartnership.fi (2017), the tea products are imported in Finland from different
countries. Therefore, it can be assumed that the products of Costa Coffee can be threatened by
the tea consumption habit of native people. The company to handle the threat of substitute should
provide tea products as well to the consumers. This would help it in managing the company’s
functions as per the preference of the customers for survival in a foreign country.
Figure 3: Tea consumption in Finland
(Source: finnpartnership.fi, 2017)
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