Analysis of International Expansion for a Coffee Shop Business

This report analyzes the international expansion of Marvin and Smith's coffee shop, focusing on establishing new branches in Luxembourg. It begins with a justification for choosing Luxembourg, considering factors like lifestyle, coffee preferences, and ethical considerations such as fair trade practices and staff welfare. The report then details the marketing mix, including product offerings, pricing strategies, location choices, and promotional methods. It examines the implications of expansion, such as the impact on information systems and management structure, and proposes solutions to mitigate challenges. Financial information, including profitability ratios (gross and net profit margins) and return on capital employed (ROCE), is presented to assess the financial health of the expansion. The report concludes with a summary of key findings and recommendations for successful international growth. The report highlights logistical, ethical and structural considerations for business expansion in a new geographical location. Also, the report includes financial analysis to support the business decision making.

INTERNATIONAL
EXPANSION OF A COFFEE
SHOP

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1) JUSTIFICATION FOR CHOSEN Luxembourg ........................................................................1
2) MARKETING MIX ...................................................................................................................2
3) IMPLICATIONS OF MARVIN AND SMITH'S TO COVER GEOGRAPHICAL AREA IN
TERMS OF Luxembourg ...............................................................................................................4
4) FINANCIAL INFORMATION AND RATIO ANALYSIS.......................................................5
5) SUMMARY FOR SETTING UP NEW ENTITY......................................................................7
CONCLUSION................................................................................................................................8
REFERENCE.................................................................................................................................10

INDEX OF TABLES
Table 1: Marketing mix for coffee shop .........................................................................................3
Table 2: Profitability ratio for Coffee shop......................................................................................5
Table 3: Return of capital employed of coffee shop........................................................................6
Table 4: Liquidity ratio analysis for coffee shop.............................................................................6

INTRODUCTION
Expansion of business entity is essential for its growth and improving competitive
strengths. However, it is one of the great tool to spread its services and sustaining good position
in market. The present report is based on understanding decision making for expansion of coffee
shop operated by Hank and Patty Smith through establishing new branches in different locations
globally. In this regard, decisions in terms of all angles including fund and resources to be
allocated is to described. However, marketing mix and its all components for enlargement of
entity can be introduced through this assignment. In addition to this, implications occurred in
setting up new coffee shop is to expressed as well solutions to solved out them can addressed.
Moreover, actual financial position of the organisation can express that leads to make decisions
for further operations. Thus, students are able to understand decision making tools for coffee
shop regarding expansion of entity in international market through this report.
1) JUSTIFICATION FOR Luxembourg
Choice of Luxembourg: For expansion of coffee shop, after 12 months' research over
place for establishing its new branch. In order to this, they choose to set up new entities across
London. It is decided as per factors including Luxembourg's people lifestyle and interests
towards varieties of coffee. In addition to this, several other determinants are analysed like; using
coffee beans from Gumutindo coffee, fair trade supplier in Uganda and so on (Aydin and
Kacker, 2015). Therefore, Marvin and Smith's coffee shop is going to expand in Luxembourg. It
is able to meet customers' expectations and providing them services globally. However, it has
strong ethics towards consumer protection and producing effective services to build up their
trust. Including this, after its establishment, it has opened its two branches round London. In
accordance to this, this Luxembourg is selected for establishing new branches influences
expansion of coffee shop.
Logistical considerations: In context to this, factors are determined related to supplier
deliveries, customer protection and so on. However, it is needed for Marvin and Smith to
consider public welfare and providing them safe and secured services of coffee shop (Beamish,
2013). Therefore, different tools are to be considered for effectiveness of coffee shop and its
expansion effectively.
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Ethical considerations: There are some of the factors on which considerations are
needed for setting up new branches of the coffee shop in Luxembourg. In accordance to this,
following determinants are to be focused that can understand as:
 Fair trade adoption for contacting with suppliers and collaborative including providing
safe and secured services effectively. In addition to this, all ethics are required to be
focused for enlargement of entity. It influences market position and society's trust
regarding services provided by coffee sop (Boso, Hultman and Oghazi, 2016). Staff protection and welfare is essential to be considered for Marvin and Smith.
Therefore, staff can contribute his work performance more efficiently. In addition to this,
insurance facilities are provided for workers like; health insurance and life insurance etc.
Therefore, staff protection is also one of the essential consideration for entity to operate
new coffee shop in decided location for coffee shop.
Structural challenge for expansion of coffee shop: For enlargement of coffee shop in
Luxembourg, all factors are analysed including location, layout as planning structure to be
followed on and transport facilities to exchange goods and services for its varies places (Cavusgil
and et.al., 2014). However, all of these tools are considered for operating further new branches.
It is determined that under logistical considerations, best appropriate location is selected for
business operation and implementing transport facilities. Moreover, for international marketing
and exchanging goods as import and export of coffee. In addition to this, allocating resources
and fund are also analysed for production and distribution of coffee more effectively. Thus, all of
these mentioned factors are required to be considered for establishing new branches
systematically.
Apart from all of the above mentioned tools, as per analysing political environmental
factors, it is recognised that Brexit does not impact on marketing of goods and providing
services. In addition to this, trading environment and culture do not affect at presently for
implementation and further operation of business entity (Fan, Lau and Zhao, 2015).
2) MARKETING MIX
Before launching and advertising services provided by Hanks and Patty's coffee shop, all
elements are required to be focused. It includes product, price to be determined for producing
and distributing services, place for customer conveniences and promotion for advertising goods
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and services in market as well for Luxembourg (Huang and Sarigöllü, 2014). In this regard, all
marketing mix elements for the coffee shop can understand as below:
Table 1: Marketing mix for coffee shop
Element Description
Product The coffee shop provides varieties in coffee, tea, snacks, cold drinks,
sandwiches and other fast food services.
Price  Sets price according to material used in manufacturing and
production system.
 Cost for production of goods and services is also associated
according to market demand and competitive strategy to pull
customers for coffee and other services.
Place  Coffee shop's branches are located across London and in
other countries.
 Coffee beans from Gumutindo coffee
 Fair trade supplier: Uganda
 High quality tea and herbal infusions; Fair trade
 Snacks, pastries, cold drinks and fresh mango juice; East
African
Promotion Hanks and Patty promotes services provided by coffee shop through
several mediums like; advertisement in newspaper, magazine,
publicity, using social media sites and so on. Product: Hanks and Patty provides varieties of coffee in different flavours as well tea of
varieties like herbal and others. Moreover, snacks, juice, pastries and other fast foods are
also produces comprised of quality and attractiveness of different countries' people. For
analysing product and quality, material used in manufacturing and production are
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identified as per which price is determined for producing its services. Thus, product is
recognised according to quality material used in coffee and other services (Leonidou,
Katsikeas and Morgan, 2013). Price: Cost for producing coffee services of Hanks and Patty's shop is based on expenses
incurred for purchasing material and production process. In addition to this, for sustaining
its market position and facing competition, price can change accordingly (Pavlou and
Stewart, 2015). However, price of produced products and services are set by analysing
different substances and competitiveness. Therefore, price is considered as effective
marketing mix tool for launching and promoting goods and services of coffee shop. Place: It involves different factors for production and distribution of services provided by
Hanks and Patty's coffee shop. It is recognised that entity has good relationship with its
customers including suppliers, agents and other businesses (Sutherland, 2016). However,
international marketing for coffee products is created among countries. In addition to this,
different places for providing conveniences and comfortability to customers are
identified. It is benefited for further business operations and producing services
efficiently.
 Promotion: For launching and promoting goods and services produces by entity,
different tools are used. For instance; advertisement through newspaper, magazines,
tamp-lets, social networking sites and online marketing etc. Therefore, promotion of
Hanks and Patty's coffee services are created to influence people for taking advantage of
its services at maximum level (Tsang and Yamanoi, 2016).
3) IMPLICATIONS OF MARVIN AND SMITH'S TO COVER
GEOGRAPHICAL AREA IN TERMS OF Luxembourg
Marvin and Smith's coffee shop has strong ethics that encourages its staff to respect and
value them. It is one of the main source for recruitment of new workers and increasing their
working efficiencies. In the given scenario, it is identified that it was established in 2016 in
Wandsworth in South London. After this, it set up its two new branches across city and further
again planning to establish two new entities in Luxembourg(International Business Expansion,
2016). As per critical evaluation, it is recognised that because of its regular expansion,
information system is becoming outdated as well management structure is getting mismanaged.
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In this regard, implications for establishing additional coffee shops that requires to be managed
can express as below: Information system: It is analysed that Marvin and Smith's coffee shop is expanding at
high level that distributes information sources and other facilities. However, it is
becoming outdated and remains ineffective to provide services in efficient manner
(Aydin and Kacker, 2015). Thus, it is required to control over too much expansion and
creating systematic sharing of information.
 Management structure: It includes different factors and departments' functions as
finance, production, HR and so on. In this regard, it is observed that because of
enlargement of entity high level of fund is required. For this reason, management of
entire operations get disturbed (Beamish, 2013). Moreover, environment of entity and
staff performance also get impacted. Therefore, for reducing this implication, manager of
the entity should focus on quality services of coffee shop and maintain customers'
attraction towards services provided by Marvin and Smith's coffee shop.
4) FINANCIAL INFORMATION AND RATIO ANALYSIS
 Profitability ratio:
This ratio shows profitability and profit earning capacity of coffee shop includes gross
profit and net profit margin. On the basis of this analysis, financial position of entity is
recognised by which further decisions are made in future time period (Boso, Hultman and
Oghazi, 2016). In this regard, profitability ratio for Marvin and Smith's coffee shop can express
as:
Table 2: Profitability ratio for Coffee shop
Particulars Formula Amount (in £)
Profitability ratio
Sales 360000
Gross profit Sales-purchase 208000
Gross profit margin (Gross profit/sales)*100 57.78
Net profit Gross profit- expanses incurred 26800
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Net profit margin (Net profit/sales)*100 7.44
Interpretation: Gross profit margin is evaluated through determining percentage of
earned gross profit to gained revenue for producing services of coffee shop. While, on the other
side, net profit margin is calculated as ratio of net profit to sales. Entity has earned 360000 on
business operations for coffee shop and therefore, its gross profit is obtained as 20800 by which
gross profit and net profit margin is calculated. In this ratio analysis, it is interpreted that entity's
gross profit margin is 57.78% and net profit is 7.44% which is effective and further it can
improve profitability through implementing strategies. However, there is large difference
between both profit margins because of variances in expenses and international marketing of
services provided by coffee shop. Thus, it is required to consider all terms and factors related to
profitability and production system of Marvin and Smith's coffee shop for further business
operations.
 Return on capital employed:
Table 3: Return of capital employed of coffee shop
Return on
capital employed
(ROCE) Formula
Amount (in
£)
Net operating
profit 26800
Current assets 35400
Non-current
assets 77600
Total assets 113000
Current liabilities 6200
(Total assets- current
liabilities) 106800
ROCE
(Net operating profit/
Capital employed) 0.25
Return on investment is financial information source in which gained income on invested
capital is determined. In this regard, net operating profit of Marvin and Smith's coffee shop is
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26800 and total assets is of 113000. Similarly, entity has current liability of 6200 by which
capital employed is evaluated. Through this data analysis, it is recognised that Marvin and
Smith's coffee shop ROCE is 0.25 which is quite low. An ideal ratio must be above 1 that
impacts on entity's operations. Therefore, recovery on invested amount is needed for
effectiveness of coffee shop and enhancing its quality services efficiently (Cavusgil and et.al.,
2014).
 Liquidity ratio:
Table 4: Liquidity ratio analysis for coffee shop
Particulars Formula
Amount (in
£)
Liquidity ratio
Current assets
(CA) 35400
Current liabilities
(CL) 6200
Current ratio
Current assets/current
liabilities 5.71
Stock 8000
Acid ratio (CA-stock)/Cl 4.42
It shows liquidity position and cash of Marvin and Smith's coffee shop that evolves
current ratio and acid ratio. As per ratio analysis, it is recognised that amount of current assets is
35400 and on current liabilities, it is 6200. Therefore, current ratio of the coffee shop is 5.71
which is ineffective and remains risky for future operations. However, acid ratio is also indicator
of financial and liquidity position of organisation. In the present time, this ratio is 4.42 which
shows negative influence on other business operations. Therefore, it is essential for Marvin and
Smith's coffee shop to prepare strategies and implementing them efficiently for better quality
services in future time period. On the basis of this interpretation, it is to suggested for Marvin
and Smith's coffee shop for establishing new shops in Luxembourg that all business operations
related to expansion of entity and establishing new branches should be considered in all angles.
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5) SUMMARY FOR SETTING UP NEW ENTITY
Hank and Patty's coffee shop requires to expand its business operation through
establishing new branches across UK and in other countries. Therefore, it looks at performance
and financial position of other competitive entities who are providing services of coffee and
other snacks. In this regard, they research for services of Marvin and Smith's coffee shop, East
African-inspired shop etc (Huang and Sarigöllü, 2014). On the basis of analysing their
performances several ideas are generated for Hank and Patty's shop effective operations. In this
regard, both entities performances can understand as below: Marvin and Smith's coffee shop: It is analysed that this entity has strong business ethics
and values for operating its services. From establishment of entity to till date, it has
expanded two new entity also planning to set up new additional entities in Luxembourg.
It affects its information system and management structure negatively. Thus, too much
enlargement of the coffee shop impacts on its market position which requires to be
control over (Pavlou and Stewart, 2015). East African-inspired coffee shop: The market position and international business of this
entity is growing at high level. There is increasing in number of establishing new coffee
shops and also demand for coffee and services are enhanced on large scale internationally
(Sutherland, 2016). As it provides qualitative and effective services, its market position
get improved effectively.
 Hank and Patty's coffee shop: In the given case scenario, it is analysed that Hank and
Patty's coffee shop has good relationship with other countries for business operations.
However, it has different suppliers from several countries like; coffee beans are imported
from Gumutindo coffee, snacks and pastries from Eastern Uganda. On behalf of
analysing its business operations and different factors, it can forecast that entity can
establish new coffee shop effectively. Similarly, it has that potential to create innovation
and improving quality services that affects further operations (Tsang and Yamanoi,
2016). Hence, it can expand its business entity and effectiveness in international market
for providing coffee and related services efficiently.
Thus, it is concluded that Hank and Patty's coffee shop can expand its business entity
efficiently that affects business operations and demand for its services. In addition to this, it will
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be able to improve its market position and competitive strategies to maintain its position for long
time period.
CONCLUSION
As per the research project, it is concluded that Hank and Patty can expand its coffee
shop internationally in efficient manner. In this regard, their market research for 12 months on
other competitive entities' market position are determined. Including this, various tools and
strategies are presented for effective business operations and establishing new coffee shops are
presented through this assignment. Moreover, financial position of Marvin and Smith's coffee
shop is described that generates varieties of ideas for effective enlargement and improving its
quality services for competitive advantages and establishing relations at international level.
Therefore, several tools and techniques as well market position of Hank and Patty is explained
through this report for its expansion effectively.
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REFERENCE
Books and Journal
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ENTREPRENEURIAL-ORIENTED BEHAVIORS ON REGIONAL EXPANSION:
EVIDENCE FROM A DEVELOPING ECONOMY. In 2016 Global Marketing
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Cavusgil, S.T., and et.al., 2014. International business. Pearson Australia.
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through the lens of marketing mix. Big Data Research. 67(1). pp.28-32.
Huang, R. and Sarigöllü, E., 2014. How brand awareness relates to market outcome, brand
equity, and the marketing mix. In Fashion Branding and Consumer Behaviours. 7(6).
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Leonidou, C.N., Katsikeas, C.S. and Morgan, N.A., 2013. “Greening” the marketing mix: do
firms do it and does it pay off?. Journal of the Academy of Marketing Science. 67(2).
pp.151-170.
Pavlou, P.A. and Stewart, D.W., 2015. Interactive advertising: A new conceptual framework
towards integrating elements of the marketing mix. In New Meanings for Marketing in a
New Millennium. 5(4). pp.218-222.
Sutherland, E., 2016. The international business of mobile telecommunications: Expansion
across Africa. Strategic Management Journal. 8(7). pp.90-99.
Tsang, E.W. and Yamanoi, J., 2016. International expansion through start‐up or acquisition: A
replication. Strategic Management Journal. 67(11). pp.2291-2306.
Online
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International Business Expansion. 2016. [online]. Available through:
<http://www.toknowpress.net/ISBN/978-961-6914-02-4/papers/ML13-349.pdf>.
[Accessed on 11th July 2017].
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