Global Business Management: Illy Coffee's Market Entry Strategy

This report provides a comprehensive analysis of Illy Coffee's potential for global expansion, focusing on the use of CAGE (Cultural, Administrative, Geographic, and Economic) and SWOT (Strengths, Weaknesses, Opportunities, and Threats) analyses. The report examines the coffee market in several countries, including Brazil, China, Germany, Japan, the United Kingdom, the United States, and India, to assess market entry potential. It evaluates the cultural, administrative, geographic, and economic distances between Italy (where Illy originates) and these target markets. The SWOT analysis examines Illy's internal strengths and weaknesses, as well as external opportunities and threats, such as competition from Starbucks and McDonald's, changing consumer preferences, and economic conditions. The report concludes that Illy's core competencies lie in its Italian style, high quality, and coffee culture, presenting opportunities for international expansion, particularly in markets with high coffee demand and favorable economic conditions, while also acknowledging the challenges of intense competition and cultural differences. The report highlights that the UK market seems promising for expansion.

Running Head: GLOBAL BUSINESS MANAGEMENT
GLOBAL BUSINESS MANAGEMENT
Students ID:
Name of the University
Authors Note

1GLOBAL BUSINESS MANAGEMENT
1. CAGE analysis
Country Cultural
Distance
Administrative
distance
Geographic
Distance
Economic distance
Brazil  Language
is
Portugues
e
 Second
largest
consumer
in the
coffee
sector
 Almost
11% of the
franchise
are based
on foreign
partnershi
p
 9054 km
distance
from
Italy
 Distance
taken on
flight is
almost
12 hours
from
Rome
 Limited per
capital
depletion
 GDP for
Brazil was
8,649.95
USD
 In terms of
modernisatio
n, Brazil
achieved the
highest
position with
87%
China  They
drink tea.
 Customers
preference
in eating
while
drinking
coffee
 Difficult
to
facilitate
business
 High
competitio
n
 8147
distance
from
Italy
 Flight
distance
is almost
11hours
 The GDP for
China was
8,123.18
USD in the
year 2016
(Zahra 2015).
 Urbanisation
rate in China

2GLOBAL BUSINESS MANAGEMENT
 Does not
prefer to
eat coffee
from
Beijing
To Italy
with 46%.
Germany  Cultural
interest
with
espresso
associated
drinks.
 Fosters
trade
relations
within the
economic
merger
 High
ranked on
ease of
conductin
g business
 Intense
competitio
n and high
consumpti
on of
market
 736
distance
from
Italy
 Flight
distance
is almost
2 hours
from
Italy
 GDP for
Germany was
41,936.06
USD
 Rate of
development
in Germany
was 74%
Japan  High
opportunit
y of
growth for
beverages
 Challenge
s in
franchise
operations
 Innovation
 Distance
is almost
6138 km
from
Italy
 GDP growth
38,894.47
USD
 The
percentage of

3GLOBAL BUSINESS MANAGEMENT
of the
product
and its
packaging
 Flight
duration
is almost
13 hours
to Rome
urbanisation
in Japan was
running at
67%
United
kingdom
 Diversific
ation in
demograp
hy
 Cultural
fascination
with
coffee
 Intense
saturation
with high
competitiv
e market
 893km
away
from
 GDP of
United
Kingdom
with
39,889.38
USD
 Rate of
modernisatio
n in UK is
80%
United States  It is the
worldwide
leader of
coffee
 Miscellan
eous
demograp
hy with
fine
reasonable
 Rank of
doing ease
of
business
United
States
owned the
highest
position
 High
 Distance
is almost
4,497km
away
from
Italy
 The
flight
distance
to Rome
 United States
has the
highest
percentage of
GDP with
almost $
57,446.79
USD
 Rate of
modernisatio

4GLOBAL BUSINESS MANAGEMENT
coffee
 Cultural
fascination
opportunit
y in
franchise
expansion
is nearly
9 hours
n in UK is
82%
India  Changing
lifestyle
with the
expansion
of high
end coffee
shopw
 Lower
levels of
saturation
 Dynamic
industry
growth
 Immature
franchise
sector
 Distance
is almost
5,929 km
from
Italy.
 Flight
distance
is almost
8 hours
 GDP of India
with 1,709.39
USD
 Rate of
modernisatio
n is lowest in
India with
only 30%
Cultural distance
Cultural distance refers to various language, ethnicities, different religions and social
rules. In this context, there are highly sensitive cultural principles in Germany, the United
Kingdom and the United States. This due to the fact that the citizens of the countries have a
different type of cultures, languages and religions and social belief. In contrast, to the
majority of the people in India, Brazil and China which have similar customs and languages.
However, based on the analysis of exhibit 4 Germany has similarity cultural dimensions with
Italy, that is based on the factors of individualism (67 vs76), the range of masculinity (66 to
70) and long duration orientation is 31 in contrast to 34 (Alon and Lohwasser 2012).
Administrative Distance

5GLOBAL BUSINESS MANAGEMENT
The trade relations amongst the countries have the capacity to influence the
administrative distance that includes ancient as well as political dealings shared by countries,
privileged arrangement of trade, currency and political association. In terms of political
union, it has been found that the United Kingdom and Germany both are present in the
European Union. Therefore, helps them to foster trade relations within the economic merger.
However, in terms of the ranks of ease of conducting business based on the factor of exhibit
3, it has been observed that the United States owned the highest position. This was followed
by the United Kingdom, which is in 7th place, and Germany in the 19th and Japan is in 20th
position. However, China has a middle position with 91st rank whereas Brazil and India
possess the same rank nearly with 126th and 132 correspondingly (Alon and Lohwasser
2012).
Geographic Distance
Geographic distance is not just about the location of potential market, but other
features need to be measured like the size of the country, the transportation and infrastructure
of communication activities of the location, however, in case of physical distance, Germany
and the United Kingdom, are the associates of European Union which are both located in
Europe. These will help in fostering the transport of Coffee products across the borders.
Based on this case, it has been found that flight from Tokyo, Brazil and Beijing to Rome was
the same, which takes nearly 13, 12 and 11 hours consecutively. In addition to this, at the
median distance, the United States and India takes 9 to 8 hours consecutively from Rome.
Economic distance
From the economic distance, it has been found that consumer's income, wealth is the
most necessary economic component, therefore, wealthy countries with higher per capita
GDP and high level of development tends to typically involve in more cross-cultural financial

6GLOBAL BUSINESS MANAGEMENT
accomplishments. Moreover, high quality of coffee is not a required expense and a high
income is not required to obtain the discretionary income needed for the purchase. However,
based on the factor of exhibit 3, the United States has the highest percentage of GDP with
almost $ 57,446.79 USD in the year 2016, followed by Germany with 41,936.06 USD, the
United Kingdom with 39,889.38 USD and Japan 38,894.47 USD in the year 2016.
2. SWOT Analysis
SWOT of Illy
Strength
 The coffee brand has a large
presence in almost 140 countries and
50,000 restaurant as well as coffee
shops.
 The brand has a zero defect
approach that makes it Unique
 Turned in to a popular brand based
on the quality and culture of
espresso
 Their focus on premium travel and
B2B functions, fashion and culture
are popular (Atkinson 2018).
 The brand has the finest tasking
coffee quality
Weakness
 Premium prices of the coffee
product
 High-end product
 ‘it is mostly viewed as the Italian
brand
 Dependent on the urban customer
base.
Threats
 High concentrated market
Opportunities
 The brand has better opportunities to

7GLOBAL BUSINESS MANAGEMENT
 Intense competition from Starbucks,
MacDonald’s, costa coffee
 Threats from emerging markets and
fluctuating government economic
policies
 Declining disposable income in
some of the countries and
challenging differentiation of the
product
grow than their local market
 They have the opportunity to expand
their customer base to obtain EOS
 Option to limit its dependence on
one market
 They can counter-attack the
international competitor in their
local market
 Customers going abroad and may
ask for international service
SWOT Germany
Strength
 High interest in Espresso
 High interest in special drinks
 High rank in terms of ease of doing
business
 Only 736 km away from Italy with 2
hours of flight distance
Weakness
 15% of the decline in per capita
consumption (Alon and Lohwasser
2012)
Opportunities
 High interest in speciality coffee
with an increase of US-style coffee
network
 Anticipated growth of 10.5%
Threats
 Growing concentration
 High competition
 Low forecast of growth

8GLOBAL BUSINESS MANAGEMENT
Japan
Strength
 Third largest importer of coffee in
Italy and France.
 High influence of consumer
preference on Coffee shops
 The expected growth rate of coffee
sales in nearly 5.4% in the year
2015.
Weakness
 Poor operations of franchising
 Declining disposable income
 6,138 distance from Italy with
almost 13 hours of flight
Opportunities
 Packaging and innovation of the
product observed as the major
growth
 Adjusting with the domestic taste
 Recognition of the appropriate
business collaborates (Alon and
Lohwasser 2012).
Threats
 Potential of off-trade sales
 Required innovation in terms of
health concerns, taste, additional
ingredients in the beverage
United States
Strength
 It is the international leader of
Coffee with 25% of the global
market
Weakness
 Low probability for growth
 4,497 km away from Italy with 9

9GLOBAL BUSINESS MANAGEMENT
 Ranked at 4 out of 183 in case of
ease of conducting business
 50% of the American population and
more consumes coffee regularly
hours of flight journey
Opportunities
 Diversification of demographic
factors
 Obsession with cultures
 Growing perspectives on health
concerns and paybacks of coffee
Threats
 The high amount of saturation
 Intense competition in the market
Brazil
Strength
 Second largest manufacturer of
Coffee in the global co
 Increased consumption of coffee
 High interest in the finest quality of
coffee
 Expansion of the middle-class
population with 87% of
development
Weakness
 Hard to sustain business
 Long hours of flight with 12 hours
Opportunities
 High opportunities for establishment
 Preferences of Italian Coffee
Threats
 High risk in joint venture partnership
 Intense challenges from the local

10GLOBAL BUSINESS MANAGEMENT
brands.
 Difference in cultures
China
Strength
 Fastest growing coffee with 10.7%
of growth
 Increasing consumption
 High population with 47% of
modernisation
Weakness
 Hard to sustain business
 Customers preference for food than
coffee
 Customer do not prefer the bitter
taste of espresso
Opportunities
 High interest in the standard quality
of coffee
 Adaptation to local taste
Threats
 Increase competition in the market
 The difficult system of franchise
 Different cultural dimensions
India
Strength
 Fastest growing retail segments of
coffee with space for 5000 cafes
 Two hundred cafes in India with $10
million shops that increased to 1500
in the year 2011(Alon and
Lohwasser 2012).
Weakness
 Poor market share
 Sixth largest producer of coffee
globally

11GLOBAL BUSINESS MANAGEMENT
 Increased preference for speciality
coffee
Opportunities
 Potential banking system and
bureaucracy for successful ventures
and business
 Disclosure to western tends’
 Increase in middle-class population
Threats
 The difference in culture and
language
 The challenging system of the
franchise'
 High competition of other coffee
brands
United Kingdom
Strength
 12% of market growth with 2.5%
with an additional 800 outlets (Alon
and Lohwasser 2012)
 Increased preference for coffee taste
 Growing consumption of coffee
culture
Weakness
 High saturation in the market
Opportunities
 Variation of demographic culture
 Growth projection in the next 3 -5
years
 Obsession with cultures
Threats
 Intense competition