International Business Report: Lavazza Coffee Expansion into Australia

This report examines the international expansion strategy of Lavazza Coffee, a renowned Italian coffee brand, with a specific focus on entering the Australian market. The report begins with an executive summary and introduction, highlighting the brand's global presence and the rationale for further international expansion. It then delves into a PESTLE analysis of both Australia and China, evaluating the political, economic, social, technological, legal, and environmental factors influencing business operations in each country. Based on this analysis, Australia is selected as the target market due to its favorable business environment, technological advancement, and coffee culture. The report recommends a global standardization strategy to maintain brand authenticity and a joint venture entry mode, potentially with a company like Woolworths, to leverage local market knowledge and share risks. Further, the report suggests various promotional strategies including television advertising, joint venture advertising, social media marketing, and digital marketing. The report concludes with recommendations for Lavazza to succeed in the Australian market, including understanding market dynamics, pricing strategies, place strategies, and effective promotional activities.

International business
Lavazza coffee

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Executive Summary
Lavazza coffee is a renowned coffee brand which was founded in Italy in the year 1895 by Lavazza
family. The organization blends different coffees imported from different parts of the world to suit a
unique taste. This report throws light on the international expansion of Lavazza coffee. The considered
markets include China and Australia. After immense macro and micro environmental analysis, Australia
has been selected. This report highlights various possible entry strategies that can be used by Lavazza to
cater to its Australian customers. Upon selecting the area, marketing mix analysis is conducted and
strategies are recommended that will lead the company to success in Australia. Various strategies in
terms of the company’s pricing and product definition have been defined in the report. Suggested
promotional tools have also been focused upon.

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Contents
Executive Summary.....................................................................................................................................1
Introduction.................................................................................................................................................1
International expansion...............................................................................................................................2
Potential markets.........................................................................................................................................2
Australia..................................................................................................................................................3
Political................................................................................................................................................3
Economic.............................................................................................................................................3
Social...................................................................................................................................................3
Technological......................................................................................................................................3
Legal....................................................................................................................................................4
Environmental.....................................................................................................................................4
China.......................................................................................................................................................4
Political................................................................................................................................................4
Economic.............................................................................................................................................4
Social...................................................................................................................................................5
Technological......................................................................................................................................5
Legal....................................................................................................................................................5
Environmental.....................................................................................................................................5
Selected market...........................................................................................................................................6

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General strategy – Global standardization...................................................................................................6
Entry mode in Australia – Joint Venture.....................................................................................................7
Local knowledge.....................................................................................................................................7
Trust........................................................................................................................................................7
Shared risks and costs..............................................................................................................................8
Improved relationships and growing network..........................................................................................8
Growth.....................................................................................................................................................8
Promotional strategies.................................................................................................................................8
Television advertising..............................................................................................................................9
Joint venture advertising..........................................................................................................................9
Social media marketing...........................................................................................................................9
Digital marketing...................................................................................................................................10
Challenges of starting a new business in Australia....................................................................................10
Recommendations.....................................................................................................................................11
Know about the market..........................................................................................................................11
Pricing strategy......................................................................................................................................11
Place......................................................................................................................................................11
Promote well.........................................................................................................................................12
Conclusion.................................................................................................................................................12
References.................................................................................................................................................13

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Introduction
Lavazza coffee is a leading coffee brand which was founded in 1895 by Luigi Lavazza. The
brand started as a small grocery store. It is still run by the fourth generation of the same family.
Lavazza imports coffee from various parts of the world and have given birth to the idea of
blending different coffees. They organization believes that the blending of different coffees is the
key to their success and unique taste. The brand is a market leader in Italy and has a wide
presence in over 90 countries across the globe.
Café Crema is one of the leading offerings of Lavazza coffee. This particular coffee consists of a
100% Arabica blend. It has a unique and fragrant aroma and is composed of Indian and Brazilian
coffee. The coffee is fairly strong and is largely in demand among people across the globe.
Lavazza coffee brand classifies their coffee in 10 different profiles based on their taste, flavor
and body (Carey, 2016). Café Crema falls in the ‘7’ category signifying that it is a balanced
coffee which is rich in taste.
This report throws light on international expansion recommendations for the brand. The
countries considered for the same are China and Australia. This report highlights the business
environment for Lavazza to enter and flourish into these two countries as well as the modes of
entry recommended to the firm.

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International expansion
International expansion is when organization move ahead of their local boundaries and expand
into international geographies. The era of globalization has made this fairly easy and largely
prominent. Lavazza coffee already has presence in over 90 countries of the world. Expansion of
Lavazza coffee further would be another milestone for the brand owing to the strong brand name
the company possesses. The level of brand awareness is high among people and hence it would
be easy for them to accept it. Depending on the creativity and uniqueness of product promotions,
it is even possible to generate curiosity and excitement in the minds of new customers for the
brand. The increasing coffee consuming population is adding cherry on the cake.
Potential markets
The potential markets chosen for the brand are Australia and China. The reason behind
considering these two countries is their increasing population, changing demographics, ease of
doing business index, disposable income of their people and growing economic environment.
Both Australia and China are developed economies and have a significant contribution to the
world’s growth. The macro environment of the two countries can be better understood by
conducting a PESTLE analysis which is as below (Newton, 2014):
Australia
Political
Politically Australia is a democratic liberal democracy. The intervention of government is partial
and most of the businesses are in private hands. The open government is a clear advantage for
any new business. The tax system is largely favorable and the costs involved in starting a new
business are competitive.
Economic
Economically Australia is a great opportunity for any entrepreneurs. The ease of doing business
in the country is high and at present it ranks 14 in the world. Australia’s non-farm payrolls
employment number are rising and hence the country is welcoming new businesses with open

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arms. The inflation is contained and the overall business market is open with bare minimum
restrictions.
Social
Socio-cultural factors affecting any organization refer to the set of beliefs, customs, behaviors
and practices that people of a region predominantly follow. The country is ranked 42nd in the
world’s coffee consumption which is more than most countries. The level of education in the
country is highest yet. The influence of the British is very large on the population and hence the
coffee culture is on a rise.
Technological
As of 2011, almost 79% of the population in the country is internet savvy. Over 17million people
are smartphone users. These two factors alone are evidence enough of the technological growth
and development of the country. Technological advancement of any country acts in the favor of a
new business establishment as it helps the business in enhancing the reach to the customer.
Legal
Australia’s business laws are simple and make the entire process of starting a new business
rather convenient. The company must be registered as a foreign company followed by obtaining
permits to run operations in Australia are the two basic necessary steps that must be adopted by
the company before venturing into this country. The business taxes that need to paid are as
below:
1. Corporate tax
2. Goods and Services Tax
3. Capital gains tax
4. Other business taxes.
Environmental
Managers of any organization must take into account the environmental and ecological factors
impacting the country of operations. Lavazza has a project Tierra running in order to ensure

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sustainable development of the planet. After due consideration of the ecological environment of
Australia, similar project can be included. Australian governments are particular about their
carbon footprints. It is essential that the wastes from businesses in Australia is disposed in an
efficient manner.
China
Political
China is a constitutional monarchy. Both formal and informal organizations must abide by
government rules and regulations. The political stability of the country is currently a question
mark. The increasing privatization is a boon for new businesses. However, the intervention of
government in the starting up of a new business is one of the highest in the world.
Economic
China is a developed economy with a rising inflation. The employment numbers are getting
better and the steps taken by the government to control the population are expected to improve
them further. China is ranked 78th in terms of the ease of doing business in the world according
to World Bank reports. The increasing inflation is reducing the disposable income of people
making the country a non-favorable destination for marketers.
Social
Socially, China has improved leaps and bounds over the last few years. The government has put
efforts in curbing the unfathomably and aimlessly growing population of the country. The coffee
consumption is evident and the large population of the country reduces the impact of existing
competition. The level of education is growing and so is consumer awareness.
Technological
China is a birthplace for second hand technology. Any technology existing in any part of the
world would have a ‘me too’ product in China at a cheaper price. Even so, only close to 40% of
the people are using the internet. Due to the uneven income distribution, some of the cities have

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become a massive hub for business and growth while some are still coming to terms with this
growth.
Legal
There are various laws in place that govern new businesses in the country. The control of the
government on the same is relatively high and makes it difficult for budding entrepreneurs to be
creative. There is no such thing as an independent contractor in China. Therefore the company
has to be registered as a foreign entity and be governed by those rules.
Environmental
There are various steps taken by the Chinese government for the betterment of the environment
in the country. China has been conducting immense research in the field of solar energy and the
availability of that technology is a boon for any new business in the country. The central
government ideally issues strict compliances and the monitoring and enforcement of the same is
done by the local governments. China has also been working hard on its carbon footprints and
hence ensures that the organizations effectively use their resources.
Selected market
Given the above analysis, the appropriate market for entry is Australia. There are various reasons
for selecting Australia. These reasons are as below:
 Higher ease of doing business – Rank 14th in the whole world (World Bank, 2018).
 Controlled inflation hence higher disposable income of people.
 Population is more technologically aware and averse.
 Coffee drinking is an important part of their culture. British influence.
 Less government intervention. Increased privatization.
 Lesser competition as compared to China.
General strategy – Global standardization
The biggest advantage of Lavazza stays with the strong brand name and history of the Lavazza
family. For certain brands, it is important that they remain authentic to their roots irrespective of

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their company of operations. Therefore the strategy recommended to Lavazza coffee would be
that of global standardization. This means that the company and its products remain the same
across the world (Kotabe & Helsen, 2014). It is true that the consumer needs and demands of
every country is highly varied and it is largely difficult to presume that such a wide variety of
people’s needs would be catered to by a single product. However, there are various advantages to
adopting this strategy.
The brand name of the organization is preserved. The authentic ideas and products remain the
same. The longer term vision behind a global standardization strategy is to ensure customers
across the world of the same taste, quality, richness and flavor of the coffee across the world.
Such brands become home brands and they act as a safety net for people travelling to foreign
locations. Moreover the huge line of Lavazza products ensures that the company is single
handedly able to cater to the needs of diverse customers across the globe.
Lavazza classifies its coffee into 10 categories. This division is based on the flavor, texture,
richness and aroma of the coffee. Given the efficiency of this division as well as the large range
of products in each range make it plausible for Lavazza coffee to cater to the needs of highly
diverse customers with varied tastes and preferences in coffee.
Entry mode in Australia – Joint Venture
Australia has a booming coffee market. Currently Lavazza products are supplied in the
Australian food market Valcorp fine foods. However, the market penetration is bare minimum
and the company barely holds any share in the market. In order to make its presence felt, it is
imperative that organizations select appropriate modes to enter into a new country. This is
crucial as the mode of entry has a rather longer term impact on the shareholding of the company.
The entry mode recommended to Lavazza coffee for entry into Australia would be a Joint
Venture. A joint venture is ideally a combination of two established companies (one local and
one international) who come together and work in consensus. The exact holding of each
organization in the collaboration is mutually decided. In this scenario, Lavazza coffee must
indulge in a joint venture with a well-established name brand like Woolworths Limited. The

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various advantages of the joint venture between Woolworths Limited and Lavazza coffee would
be as below.
Local knowledge
The idea behind tying up with a local brand is to gauge the knowledge that the brand holds about
the local culture, customs, people and lifestyles of the area and use it efficiently to improve and
establish business (Yan & Luo, 2016). Woolworths limited has been in existence in Australia
since 1924. After almost a millennium of a business, the brand obviously holds immense
knowledge about the locals and Lavazza could really take advantage of that.
Trust
When two leading brands like Lavazza coffee and Woolworths come together, they yield
immediate response owing to the long term trust in the two organizations. Woolworth’s long
history in the country has garnered immense goodwill in the market. When Lavazza coffee ties
up with such a reliable brand, there will be a certain amount of trust and respect associated with
the venture from the beginning.
Shared risks and costs
When two companies come together for a joint venture, they share the risks and costs of the
ventures. Hence the burden does not entirely fall on one organization (Shah, 2015). This is a
major advantage of joint ventures. Since Australia is a relatively new market for Lavazza, it is
expected to come with a certain amount of risks in the business. These risks can be covered by
Woolworths experience and knowledge of the area.
Improved relationships and growing network
The biggest advantage of a joint venture is the long term relationships and bond that forms
between the two organizations. When two leading brands come together and work
collaboratively, it signifies a road map for future growth and success of both the brands. Owing
to Woolworth’s history in the country, they have built and established a grand network of
suppliers, vendors, media personnel, distributors and other stakeholders of the business. Lavazza

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coffee can gain the direct advantage of this network and utilize it to their advantage, gain and
growth.
Growth
Lavazza coffee and its growth in the international market is the agenda in the report. However, a
joint venture with Woolworths limited will also lead to the growth of the local brand. This would
be their introduction in an entirely different business segment. It would help them enhance their
product lines and attract an even wider customer base for the business.
Promotional strategies
In order to be able to succeed in any new business, it is important that the product or service is
promoted effectively. The promotional strategies of any business help the organization in
reaching out a wide customer segment and market their products to them. International
expansion also requires immense promotion from the brand. For the existing product, promotion
strategies can be relatively easier but for an international expansion, the promotional strategies of
the business have the responsibility of creating excitement about a new product in a new market.
This can often be tricky. Strategies recommended to Lavazza coffee for effective promotion in
Australian grounds is as below.
Television advertising
The first and foremost strategy that can be adopted by any business to venture into a new country
is to reach out to people through television. The viewership of television is massive in almost
every part of the globe. This is why television advertisments lead to an enhanced awareness
about the brand and its upcoming presence in their local countries. Lavazza coffee must ensure
that they associate with leading channels and broadcast creative advertisements at peak watching
hours. Interesting taglines could also be used by the brand like ‘Soon in Australia’ or ‘Now in
Australia’ to make people aware about the introduction.

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Joint venture advertising
In this case of a joint venture mode of entry, Woolworths limited must also work towards
promoting Lavazza coffee to its existing customers and using their existing strategies. This
would help in building trust and curiosity in the minds of the consumers.
Social media marketing
Social media marketing is the art of promoting any brand, organization or product through social
media platforms. The growing usage of social media has now made these platforms a promotion
for leading brands. Lavazza coffee already has dedicated Facebook, Instagram, Pinterest and
Twitter accounts with a large number of followers. Social media marketing is a largely effective
tool to reach out a large customer segment with the help of a single platform.
Social media has also become a medium to enable a two way communication with customers
(Solomon & Tuten, 2017). In order to ensure this, Lavazza must enhance their social listening
and be consistently aware of what is being spoken about the brand on various social media
platforms. Facebook posts are often followed by various comments and twitter hashtags are
largely responsible for creating a buzz in the market. These strategies of social media marketing
must be adopted by Lavazza coffee to ensure a higher brand reach and improved customer base.
Digital marketing
Digital marketing enables users to look for a brand on search engines in an effective manner. At
the same time, these users are targeted by the company on numerous digital platforms. This
makes it easy for the brands to target customers based on their preferences, internet search
history, location, cultures, behavior and cookies stored. Digital marketing breeds on search
engine optimization and search engine marketing (Chaffey & Ellis-Chadwick, 2016). Both these
processes make it easy for consumers to reach out to their customers and consistently target them
through different sources and destinations.
Challenges of starting a new business in Australia
No country in the world is perfect in every aspect. Even while starting a business in Australia, it
is important to list down various challenges that Lavazza may face within the Australian market.

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This will help the brand stay prepared and be ready with a contingency plan as and when
required. The various challenges of starting a new business in Australia are as below:
 It is important to submit the ASIC form 201. This is an application for the registration of
a company.
 Availing construction permits is very difficult especially for a foreign company, Lavazza
would be opening up outlets and hence this can pose a severe threat
 Attaining office utilities in Australia is a longer process than any other country. Utility
involves basic utilities like electric and water supply. The company must complete a CT
metering form to arrange for an internal wiring in the office. This entire procedure takes
about 75 days just to get basic utilities in place.
 Taxation is taken very strictly. The corporate tax currently stands at flat 30%. It is
imperative for Lavazza to familiarize itself with the taxation policies of the country.
 Australian culture is difficult to understand and track owing to a significant impact of
nearby countries. Also the country has no majority religion of its own. This diversity in
the population makes it difficult to understand the culture of the country.
 It is highly important to understand the GST (Goods and services tax) levied in Australia.
 There is already an increasing competition especially from Di Bella coffee which has
become a global brand on its own.
Recommendations
Lavazza coffee is a leading brand in Italy and across the globe. After detailed analysis, a new
prospective market Lavazza coffee has been finalized as Australia. This report has laid emphasis
on international expansion strategies that can be adopted by Lavazza in order to expand to the
Australian market. Expanding to any new markets requires immense expertise and knowledge.
There are various circumstantial issues that must be considered. Few recommendations for
Lavazza are as below:
Know about the market
Before venturing into this international market, it is highly recommended to know about the
market well in advance. The firm must decide upon their location and distributors as well as

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customer preferences and ideologies. It is also important to understand the customer needs and
work towards catering those specific needs of the consumers.
Pricing strategy
It is also important that while entering into a new market, the product must be priced effectively
to ensure that people buy it. Lavazza follows a premium pricing strategy across the globe.
Premium pricing refers to pricing the product slightly higher than the market’s average
(Hinterhuber & Liozu, 2018). This way the brand, sets an effective positioning for itself and
hence targets a niche market who can afford quality products at a higher price. For premium
priced products, the target market of the organization shifts on the basis of income groups.
Place
Lavazza coffee will be opening up various cafes and hence it becomes crucial to effectively
finalize the place where they set their café. Lavazza coffee must select commercial places which
are easy to locate. It will also be beneficial to have an outlet at leading airports of the country.
Appropriate selection of place makes is plausible for customers to reach the outlet and hence
leads to increased brand visibility and awareness.
Promote well
The last part of the product market involves promoting the product in such a manner that it is
easy to reach out to consumers. Lavazza coffee must allocate unique strategies to ensure that that
the consumers are aware about the product. The promotions of the company should be able to
create a sense of curiosity and excitement in the minds of consumers. Digital marketing, social
media marketing, billboard advertisement, television & newspaper ads as well as email
marketing can be used by Lavazza to reach out to its consumers.
Conclusion
Lavazza coffee is a leading coffee chain established in Italy. The brand has now become a global
brand with a wide presence across the globe. This report throws light on the international
expansion strategies that can be adopted by the company. For consideration, China and
Australian markets have been considered. Of the two countries, Australia has provided for a

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better business opportunity for Lavazza coffee. This is due to the controlled inflation, high
disposable income, increased ease of business, rising coffee population and internet aversion of
the consumers.
Australia is a land of a brilliant opportunity for Lavazza. It has been recommended that Lavazza
must adopt a global standardization strategy and ensure that the look, feel, taste and flavor of the
brand remains the same across the globe. Moreover, the entry mode to adopt is recommended to
be a joint venture with Woolworths Limited. The brand image and the wide reach of the latter is
sure to benefit Lavazza coffee.
Lavazza coffee has a strong brand name and in order for further growth, it is important for the
brand to analyze new areas of operation. Australia seems like that perfect next jump destination
to make for the coffee brand. With appropriate pricing, unique promotions and clear
understanding of the market, Lavazza coffee can surely gain a large market and enhance its
customer base across the world. This would lead to the brand’s increased awareness, improved
positioning and widened reach.

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Carey, J.M., 2016. Visionaries: Creating a Modern Guggenheim. New York. Guggenheim
bookstore.
Chaffey, D. and Ellis-Chadwick, F., 2016. Digital marketing. Prentice Hall.
Hinterhuber, A. and Liozu, S.M., 2018. Thoughts: premium pricing in B2C and B2B. Journal of
Revenue and Pricing Management, pp.1-5.
Kotabe, M. and Helsen, K., 2014. Global marketing management.
Newton, P., 2014. What is the PESTLE Analysis? London, United Kingdom. Bookboon.
Shah, K.U., 2015. Choice and control of international joint venture partners to improve corporate
environmental performance. Journal of Cleaner Production, 89, pp.32-40.
Tuten, T.L. and Solomon, M.R., 2017. Social media marketing. Sage.
World Bank. 2018. ‘Ease of doing businesses’.
https://data.worldbank.org/indicator/IC.BUS.EASE.XQ. Retrieved on 3 February, 2018.
Yan, A. and Luo, Y., 2016. International joint ventures: Theory and practice. Routledge.