Market Opportunity Assessment: Danes Coffee Expansion into China

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Assessment 2
Individual Country Analysis Report
Investigation of market opportunities for Danes Coffee in China
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Executive summary
In this study, the PEST analysis of Danes Coffee will be done. As this company is currently
operating in Australia but now because of globalisation they are seeing the opportunity of
establishing their business in China. China is known as the coffee drinking nation and China is
also counted among the largest coffee beans consuming nation. This coffee brand has a very
good reputation in the Australian market because of its great taste and customer hospitality.
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Table of Contents
Introduction......................................................................................................................................4
Why China’s market is suitable for Danes Coffee?.........................................................................5
Environmental Variables.................................................................................................................5
Economic and financial factors.......................................................................................................6
Political and legal factors.................................................................................................................8
Social and cultural environmental factors.......................................................................................9
Technological Factor:....................................................................................................................11
Conclusion:....................................................................................................................................13
References:....................................................................................................................................14
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Introduction
In this assignment, there will be a discussion about the market opportunity that succours the
business to accomplish its purpose. On the other hand, there will also be a discussion about the
market threats that hinder the performance of the business. In this study, the investigation will be
done for the promotion and sales of the business goods in Country China. China is a developing
nation which will benefit the business of Danes coffee. This country can provide enormous
opportunity for increasing their revenue and reputation across the nation. Currently, Danes coffee
is operating in Australia, and they had won many awards by the Champion Australian Roaster
title from the Australian International Coffee Association two years running. Danes coffee
establishes in 1994 by Paul Jackson. In this study, all the important factors that affect the
functioning of the business will be discussed. These factors are responsible for predicting the
future value of this company in the Chinese market.
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Why China’s market is suitable for Danes Coffee?
China is a developing nation. Therefore, their market can provide enormous growth and
advancement opportunity for the company. However, China provides a platform in which there
is no barrier to accessing the market; their legal procedure system is quite good and simple; they
have a great infrastructure facility with enormous financial institutions system. Danes Coffee has
a golden opportunity to set up their business in the emerging market of China, but Danes Coffee
may need to make little amendments in their processing of making the coffee according to the
people of China (Aisen and Veiga, 2013).
Great legislation system of China succour the Danes Coffee to get higher revenues and more
benefits. When the legislation system is in support, then it acts as the blessings for the new
business because it reduces the entry barrier. When the procedure of entry barrier reduces then it
also reduces the tension of the management and help them to focus on other important issues like
production, cost, and selecting distribution channels. Apart from this, In China, there is a lot of
financial institution which credits or loans at an affordable rate. So, if any case any discrepancy
arises in the production then management can easily apply for a loan by following simple legal
formality procedure (Brandt, et al., 2013).
This is the reason for selecting the Chinese market for Danes Coffee. It has been clear that easily
entry, financial services, good legislation system and great infrastructure will be a blessing for
this company. They can increase their revenues more than expected and they can also increase
their global reputation. These both will result in increased market share for the Danes Coffee. In
China, Danes Coffee will create new business opportunity so the unemployment rate of this
nation will be reduced. In short, it will be a win-win situation for both.
Environmental Variables
In this, there is an external environment which is responsible for affecting the overall
performance of the business. These factors impact the internal environment also. Before
establishing a business in the Chinese market, as a Marketing Manager, it's very important for
me to conduct the research of the external factors because these factors can put the adverse effect
on the profitability and reputation of the brand.
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Economic and financial factors
Economic factors of the Chinese market have shown significant GDP growth over the past few
years. According to the research, the Chinese market will surpass the GDP of the United States
market soon. As the marketing manager, it's very crucial for me to judge how much return the
Chinese market can give back to Danes Coffee. Economic factor has a major impact on the
business of Danes Coffee because Chinese people are adding more and more value to society.
China is also known as high consumption of caffeine. This will succor the sales of the company,
and it will increase the reputation of the brand. In this there is one drawback also, in China
international global brands are already operating their operations. Global brands like Starbucks,
Café Coffee Day, Costa coffee, etc. These coffee chains are growing rapidly with the economy,
and now China is called the "Coffee Drinking Nation". One of the major economic factors in
China is that labour cost is low (Chi, et al., 2012).
In other words, economic factors are the fundamental information that affects the functioning of
the business in the Chinese market. Various economic factors need to be taken before predicting
the current and future value of the business. Danes Coffee have to undertake the economic
analysis of the Chinese market before predicting their expected rate of return from the Chinese
market. For Danes Coffee important key factors includes labour costs, interest rates, government
policies, taxes, and management. These are the important factors which affect the overall
functioning of the government. All these factor costs have a heavy influence on the value of an
investment in the future.
Labour cost: This is one of the most controversial economic factors in the world. This economic
factor will support Danes Coffee because the labour cost is extremely low in China. Danes
Coffee can get high skill labour at extremely cheap rates. However, the company has to follow
all the rules and regulation made by the government for the protection of the labors. This will
help the Danes Coffee in reducing their cost of production (Elfstrom and Kuruvilla, 2014).
Interest rates – This economic factor will also bring the benefits for the Danes Coffee because in
the developing country governments wants to encourage more and more foreign direct
investments, Government of China provides enormous benefit to new multi-national companies,
in which one of the prime benefits is that they offer loans and credits at very low interest rates.
So, this economic factor will also help the Danes Coffee in reducing their cost of production.
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This will succour the company in accomplishing its objectives effectively and efficiently (Fang
and Lin, 2015).
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Political and legal factors
The political environment has a huge effect on the company which has to be considered by the
company. The Chinese government has a positive point of view regarding economic
development, but the government wants to improve the export to enhance the internal foreign
funds for economic growth. Legal factor is that factor which refers to how the law affects the
way and operations of the business. Legal factors can predict how the business will become sale
or produced their products. Legal factors provide protection and a safe environment for both
business and consumers. There are many laws which protect the rights of the business and the
rights of the consumer as well. In China, the government has made the general laws which affect
the functioning of the business (Lusardi and Mitchell, 2017).
Consumer law – It is designed in such a way by the government of China to protect the
consumer from the fraud companies, practices, and preserve their rights in the marketplace.
Consumer law protects the rights of the consumers; if in case any company not provide the
product or offer the service as per their description in the advertisement then any consumer can
file a lawsuit against them. Special courts are designed in China. These courts only deal in the
lawsuit filed against the companies (Van Rooji, 2012).
Employment Law – Like consumer law, employment law protest the rights of employment.
Employment law covers aspects like the minimum wage policy, child labour law, etc. Danes
Coffee have to follow all the rules mention in the employment law. They need to provide
adequate wages, flexible working hours, timely holidays, yearly bonus, etc. If in case if any
employee faces any discrepancy, then they have the right to go to the courtroom directly.
Although, the foreign direct investment law and other imports laws succour the Danes Coffee in
carrying their operations. China is a developing economy. This country also wants to encourage
more and more foreign direct investments to enhance its economic growth. For encouraging
multi-national companies, they provide subsidies and special rebate in their tax rates. These
actions by the government encourage more and more foreign direct investment. This factor plays
a crucial part in deciding how the business will operate in a certain environment, how much
profit they will receive, etc. This law also protects the rights of Danes Coffee. In case any if
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government not filled their promises then business houses can approach to the court of the
country (Yang, et al., 2012).
Social and cultural environmental factors
There is no doubt that the social factor of the Chinese factor will affect the functioning of Danes
Coffee. The growing population of China also implies the growing popularity of social media.
However, in China social media sites like Facebook, WhatsApp, etc. are banned, they have their
own social networking sites. That social media sites also succour the Danes Coffee in enhancing
their productivity. It has been noted that people are continuously using (irrespective of their age)
cell phones and computers. They also have social media accounts on all the major platform. So,
it's a golden opportunity for Danes Coffee to establish its brand (Gupta, 2013).
The younger generation only prefers to use digital technology to buy discount vouchers, cash-
back offers, to shop online, etc. So this habit of younger people will affect the changes in the
business. Below is the list of social factors that affect the lifestyle and size of consumers:
 Buying habits
 Education
 Health awareness
 Religion and case
 Disposable income level
 Lifestyles choices
 Income level of their family and their own
 Population growth rate
 Attitude towards international brands
 Attitude towards the coffee.
The social factors operate within the friends, family, colleagues, neighbours and the media.
China is also known as a coffee drinking nation. People click pictures of coffee and post that on
their social media accounts. According to them, it enhances their reputation in front of their
family and friends. So, it is clear that social factors are able to shape and resize the consumer
demand in China. Also in China, mostly all the firm and business houses establish coffee
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machine (of popular brands) for their employees. This is also a great opportunity for Danes
Coffee.
Social factors of China can emerge a great opportunity in enormous ways. Social media sites can
succor Danes Coffee in making effective marketing and promotion. By promoting on these sites
their cost, time and efforts will be saved. However, in social factors other things are also
involved like the lifestyle choices of people of China, consuming habits and drinking habits.
China is known as coffee drinking nation, and they are among the largest consumer of coffee.
Apart from this, the social factor of the Chinese market is in favour of the new coffee brand.
Social media will heartily welcome this international brand. Customers not only want great
coffee quality but with this, they also want the great ambience and great hospitality. Danes
Coffee also need to focus on the quality of their customer services because everyone wants to get
treat nicely. Danes Coffee also have to maintain proper hygiene policy in their kitchen. They also
need to adore every condition set by the state or central government of China (Huang, et al.,
2014).
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Technological Factor:
Danes Coffee have to make a partnership with mobile operating platforms (like iOS, Android,
Windows, etc.) to get the emerging benefit. They will make partnership for launching their
official mobile application which will offer the discounts, bring special offers, the application
can also take special request from the customer, etc. In short that application can provide the
great hassle free viewing and ordering experience to the customer. Danes Coffee also need to
introduce wifi facility in their outlets because interest is now a very crucial need for the
consumer. People of China prefer to take their work in coffee shops and prefer to work on the
internet while taking a sip of coffee. In coffee, people conduct their business meeting also
because even their clients also like coffee. Providing such latest technology will add value to the
brand, and it also enhances the overall experience of the consumers. Once the consumer becomes
fascinated by the hospitality and quality, then he/she become regular consumers. In China, a
technological factor also influences the consumer to even pay their coffee bills online, directly to
the merchant. So, Danes Coffee also have to introduce this feature in their application. Below are
three other technological factors that can affect the operations of the company (Humlum, et al.,
2014):
 Biotechnological developments
 The emergence of innovative technology
 Artificial intelligence
 Technology in agriculture – good for farmers as they can grow coffee beans effectively
and efficiently.
 The technological environment is very dynamic.
However, Danes Coffee needs to be very careful and focused because the technological
environment of China is very dynamic. Time-to-time new technology and latest inventions
change the view of the market. For example, 5-6 years back markets uses text messages,
pamphlets, newspaper advertisement, television commercial, etc. for promoting their products
but now they are still using these traditional methods with some new methods like social media
promotion, application-based discounts, click selfie in our store and get a certain percentage of
amount off in their bill. So, it has been clear that technological factors are very dynamic, the
company should not rigid their management on only one technological aspect because what will
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happen is that customer will shift on a new innovative technology platform and for going with
him, Danes Coffee also have to switch their technology dependency. Innovative technology and
growth also succour the Danes Coffee in reducing their cost and minimises their losses.
However, coming up with a technological factor might seems time-consuming for the
management of Danes Coffee. A technological factor not only helps the company in making
effective promotion techniques but it will also help by reducing the work of their employees. For
example, self-help counter in which consumer can directly makes the payment through artificial
intelligence technology. In this, the workload of the employee will be reduced, and they can give
their attention to other important issues (Koumparoulis, 2013).
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