Business Essentials: Marvin and Smith Expansion in German Market

This report examines the expansion strategy of Marvin and Smith, a London-based coffee shop, into the German market. It begins with an introduction to international business and the benefits of global expansion, focusing on the European Union and Germany's attractiveness due to its open business environment, strategic location, strong economy, and coffee culture. The report then delves into the 7Ps of the marketing mix, highlighting product quality, competitive pricing, strategic location, effective promotion, skilled workforce, efficient processes, and appealing physical evidence. It further analyzes organizational culture differences between the UK and Germany and how Marvin and Smith should adapt. The report also covers gaining a competitive advantage, emphasizing quality, price, marketing, and local knowledge. Finally, it assesses the company's financial health using liquidity and profitability ratios, providing a comprehensive overview of Marvin and Smith's expansion plan and financial performance.

Business Essentials

Table of Contents
INTRODUCTION...........................................................................................................................3
1. .................................................................................................................................................3
2...................................................................................................................................................5
3. .................................................................................................................................................6
4...................................................................................................................................................8
5...................................................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Every business has the main motive to increase its revenue and profit but there
is limited demand for the business in the domestic business environment and it has to
face many issue such as market competition, lower margins etc. To grow the business it
sees international business opportunities and with the help of globalisation it has
become easy for the company to do business globally the benefits of doing business
internationally is that company can increase the scale of its operation and it can raise
capital easily as it has tap various countries so it can raise capital from the country with
the cheapest lending rate. However, there are many obstructions for the enterprise for
doing business globally due to various factors such as environmental factors,
governmental factors, customer demand factors etc. Many internal factors also affect
the business and its environment such as leadership, cost of production etc. and
external factors such as political environment, legal policies etc.
1.
It is very important for the organisation to do proper research and analysis of the
country before entering into any country as the political factors, legal policies, per capita
income, growth rate of GDP etc. plays a key role in deciding that in which country,
company has to enter so that the performance of the organisation can be enhanced.
Marvin and Smith coffee shop wants to expand its business within European Union.
European Union is a union of 28 member states having no economic barrier between
them (Beamish,2013). Marvin and Smith could expand its business in Germany due to
the following reasons:
 The government of Germany is very open for the new business ventures and it
does not matter that whether the business is established by there own resident
individual or by any foreigner.

 The border of Germany is attached with 9 other countries such as Austria,
Belgium, France, Netherlands etc. so many people from those countries can
easily visit Germany which provide greater business opportunities for the
business conducted in Germany. Germany has very assess from UK(Cavusgil
and et.nt. 2014).
 Germany is the largest economy in Europe with the GDP of approx. 3.73 trillion
USD though its GDP growth is constant and it has a per capita income of
approx. 43000 USD which is in top 20 of the world with less than 5%
unemployment rate(Hofstede and et. al., 2010). Germany is also known for its
engineering and automotive industry.
 The climate of the Germany is cold which is in the favour of the coffee
drinking .i.e. the people of Germany loves drinking black coffee in various parts
of Germany i.e. Berlin, Hamburg (Penrose, 2013)
 The coffee market of Germany is second largest in the whole Europe and it is
growing at around 15%. Coffee is most drinking beverage of the Germany.
 The political environment of the Germany is very stable and there is very less
terrorism activity as compared to other countries such as France(Hynes, 2010).
 The consumers of Germany have a demand increasingly higher for coffee
quality and they are very keen to try out new drinks which gives great
opportunity to companies like Marvin and Smith to set up there shops
there(Anderson, Sweeney and Williams2011).
 There is very less trade barrier between between Germany and UK along with
good connectivity between London and Berlin. So Marvin and Smith has the
advantage when the business can be set up in the Germany.
2.
Marvin and Smith is an coffee shop based in London. They want to expand its
business into new geographies such as Germany. To be effective in the new market the
company needs to implement the marketing mix properly(Coskun, Ozdenizci and Ok,
2013). Following are the 7P's of marketing mix:
Product: It is a very essential element of the Marketing mix as it directly related
to the product and the service provided by the company. To attract customers in

Germany, Marvin and Smith should provide high quality of products as people of
Germany are very particular towards the quality of the product(Fratocchi and et. al.,
2014). The beans imported from Uganda should be given special importance as it is
most important raw material for coffee.
Price: The product should provide proper value of money to the customers. The
company should provide the product at cheaper price as compared to its competitors
because it is a new entrant(Musso and Francioni,2014). This will also create competitive
advantage for the firm. The margins in Germany is very low so the Marvin and Smith
can use premium pricing for some of its product so that it can tap higher margin
segment.
Place: Place plays a important role in the Marketing Mix. Marvin and Smith has
to choose a premium location in Germany where the footfall of people is very high such
as landmarks, shopping malls etc. so that customers can be attracted which indeed help
the organisation in increasing its performance(). The enterprise can provide free Wi-Fi
and charging docks as it is providing in London store. Marvin and Smith can also take
orders through telephone or internet.
Promotion: Marvin and Smith needs to use effective advertisement techniques
which is cost effective and will help to promote the brand in the country. As the
company is new entrant it can not use high cost tools of advertisement. Firm needs to
use social media platform and organise any engaging event so that it can create loyalty
among the people regarding its brand image.
People: Marvin and Smith has to hire skilled and talented workforce. The
company should focus on hiring the people with local knowledge so that that can create
bonding with the local customer-base. Proper training should also be provided so that
quality is maintained without compromising with productivity.
Process: The process of caring the business plays an vital role as more the
process is efficient higher the performance of the organisation. The venture can
optimize the capacity utilization by designing process to meet the demands.
Physical Evidence: The store of Marvin and Smith should be such that it
provide the specific identity of the firm and provide great ambience to the customers.

The cutlery to be used by the company should provide upmarket image of the
organisation.
3.
b. Organisational culture
Organisational culture plays a very significant role in the development and
performance of any company. Organisational culture can be stated as the value and
beliefs which governs the behaviour of the people in the organisation. These value and
beliefs helps the people in the organisation to understand the culture of the company
and let them know how to perform there duty. It helps the firm to understand the
behaviour of the employees and link that behaviour with the firms overall objectives so
that company can divert the focus of the employees towards the objective of the
business. It is very essential for the people associated with business to follow the
culture of the business environment. Every company has to have a strong organisation
culture where the staff is been properly embedded in the business system and there
execution can be properly aligned whereas in the weak organisation culture the work of
staff is not properly aligned. There are various benefits of strong culture such as better
alignment goals and vision, motivated employees, increased coordination, efficient
performance of the organisation.
There are different organisational cultures in UK and Germany. It is very
important for the Marvin and Smith to understand both the culture so that it can easily
embed itself with both the cultures. Following are the difference between business
culture of UK and Germany:
 The people of UK are polite while on the other hand the people of Germany are
sudden and not diplomatic. Marvin and Smith should take care of that it should
provide any term and conditions boldly in Germany.
 The UK people are very open whiles Germans are very closed in nature.
 The UK people does not take perfection very seriously on the other hand
German people focuses very much on perfection. Marvin and Smith should give
special focus on the quality of coffee it provide.

 The price of the coffee should be less as compared to its competitors such as
Starbucks and Mc-cafe. As the people of Germany should focus on efficiency.
d. Gaining competitive advantage
To be in a superior position as compared to its peers can be termed as
competitive advantage. As a new entrant Marvin and Smith should focus on creating a
competitive advantage in the German market by providing quality coffee and at a
cheaper price than its competitors and it can provide better ambience in its stores to
attract people. It can use extensive marketing techniques before entering the markets
so that it can create surprise element for the people of the country. Marvin and Smith is
sourcing its beans from Uganda, it can establish a new trade agreements with the
suppliers so that there cost does not get increased due to change in the consumption
place. Marvin and Smith should open there outlet in the place were there is high
footfall. German companies work on tight margins so the company should focus on
reducing its cost structure(Linnenluecke and Griffiths, 2010). Marvin and Smith should
hire local people for there store which will help the company in gaining local knowledge.
There is growing coffee culture in the Germany so there is huge value unlocking
which is needs to be done. Marvin and Smith is specializes in providing authentic
African coffee which can create its own market. The disposable income of the people of
Germany is very high so they can afford to try new coffee. The population of Germany is
very much into perfection so the company should provide good quality product and
service should also be great along with good atmosphere(Malik, Danish and Usman,
2010). The working environment of the store should be fun and easy so that the labour
turnover should not be less which will in-turn create a great customer experience. The
ideas of employees should not be ignored it should be considered as they know the
customer more well.
4.
Liquidity Ratios
Liquidity Ratios are the ratio which provide the information regarding companies
ability to pay off its short term liabilities. Following are the forms of Liquidity Ratios:

 Current Ratio – This ratio is calculated to measure the company ability to pay of
its short term debt as well as long term debts. It can be calculated by dividing
total current assets of the firm with the total current liability. Higher the ratio more
it is better for the organisation. The ideal ratio is 2:1.
Formula
= Current Assets / Current
Liabilities
Calculation
= 35400/6200
= 5.7
The ideal ratio is 2:1
whereas the ratio of Marvin
and Smith is 5.7:1 which is
greater and better for the
company.
 Quick Ratio – This ratio is calculated to measure the company ability to pay any
short term liability by using the cash component or its equivalents. It can be
calculated by dividing Cash or its equivalents, Marketable securities, accounts
receivable of the firm with the total current liabilities(Samli, 2011). Higher the ratio
more it is better for the organisation. The ideal ratio is 1:1.
Formula
= Cash and its equivalents
+ Marketable securities /
Current Liabilities
Calculation
= (35400 - 8000)/6200
= 4.42
The ideal ratio is 1:1
whereas the ratio of Marvin
and Smith is 4.42:1 which is
greater and better for the
company.
Profitability Ratio
Profitability Ratio are the ratios which provide the information regarding the
company ability to generate profits and it also helps to determine the return to its
investors and ascertain the overall performance of the business. Following are the
forms of Profitability Ratios:
 Gross Profit Margin - This ratio is calculated to measure the cost of
manufacturing its product against the sales of the firm. The Gross profit margin
can be calculated by be dividing gross profit by sales. Gross profit can be
calculated by subtracting COGS from Sales. The larger the Gross profit margin, it
is better for the company.

Formula
=(Gross profit/sales)*100
Calculation
= (208000/360000)*100
=57.77%
Marvin and Smith earns a
very handsome Gross profit
Margin.
 Net Profit Margin – The ratio is calculated to measure the net profit earned by
the company against the sales of the firm. The Net Profit is calculated by
subtracting all the indirect cost related to business from Gross profit. The Higher
the Net profit margin, it shows that company is having better position in the
industry.
Formula
=(Net profit/sales)*100
Calculation
= (26800/360000)*100
=7.44%
Marvin and Smith has a
very less Net Profit margin
as compared to its Gross
profit margin which shows
that company is having very
high indirect cost.
5.
It was stated that Marvin and Smith wants to expand its business into new
geographies. The company wants to enter in the new market where it sees a good
growth opportunity. Doing business internationally is very difficult task as there are
various factors affecting the organisation. There are various risk associated with
international business such as strategic risk, operational risk, political risk, technological
risk, environmental risk, economic risk(Sherry and Canon, 2014). Apart from that this
report also explain that how Marvin and Smith can use marketing mix such product,
price, place, promotion in order to success their expansion plan in France
From the above data we can analyse that Marvin and Smith is an a great position
to enter into new market such as Germany because Germany is the largest economy in
Europe and it is known for its engineering and automotive industry. There is very high
disposable income and with the increasing trend of the coffee culture in the country so it

can be a great geography for the Marvin and Smith to enter into the market. There is
less trade barrier between the UK and Germany.
It is also stated in the above report that the financial position of the Marvin and
Smith is very sound which will further help the firm in entering the new market there is
calculation of quick ratio, current ratio, Gross profit margin, Net profit margin. Which
helps in determining the financial position of the organisation.
CONCLUSION
The report has discussed the expansion strategy of Marvin and Smith, which
has a coffee shop in south London. They want to expand its operation in others
European country which can provide it a better market. In the above report it has been
suggested that Germany will be ideal option for the Marvin and Smith to expand its
operation due to its economic, demographic, political factors etc..The report also shows
the marketing mix related to the company. There is also analyse of organisation culture
and gaining competitive advantage so that Marvin and Smith can be able to cover
wider geographical areas. The above report also provide the key ratios such as quick
ratio, current ratio, Gross profit margin, Net profit margin which provide the financial
position of the organisation and in the last it has been concluded that Marvin and Smith
is in the position to expand into new geographies such as Germany.

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definition-factors-quiz.html>. [Accessed on 14h March 2017].