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

International business 1
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.

International business 2
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

International business 3
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

International business 4

International business 5
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.

International business 6
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

International business 7
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

International business 8
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

International business 9
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

International business 10
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

International business 11
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