Business Expansion Plan: Marvin and Smith Coffee Shop in Portugal

Desklib provides past papers and solved assignments for students. This report analyzes Marvin and Smith's potential expansion into Portugal.

Business Essentials
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Table of Contents
Introduction...................................................................................................................... 3
Question 1........................................................................................................................4
Question 2........................................................................................................................8
Question 3......................................................................................................................10
Question 4......................................................................................................................12
Question 5......................................................................................................................14
Conclusion..................................................................................................................... 15
Reference List................................................................................................................ 16
Appendix........................................................................................................................ 18
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Introduction
The coffee shop business operated by Marvin and Smith since 2017 is popular among
the British consumers and it is evident through the success and popularity of their
business in the UK market economy. The growing demand for their Ugandan coffee
beans and friendly exotic store environment, the stores are gaining popularity among
the international tourists as well. The study provides a brief idea regarding the potential
benefits Marvin and Smith would experience by expanding their business in the
Portuguese market economy.
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Question 1
Marvin and Smith’s coffee shop business would be popular in the Portuguese market
since the country would be able to provide the company with a high possibility of gaining
profit from their business operations in the foreign business environment. The south
European country became a member of the European Union in 1986. Portugal has a
GDP of €218 billion, and contributes to The Financial Intermediary Funds an average of
€65 billion on an annual basis (Data.worldbank.org, 2019). The country has an average
national income of €26,250 per capita.
Figure 1: Coffee consumption
(Source: The Coffee Universe, 2016)
The country provides the global business environment with an effective trading
opportunity since 43.6% of the GDP is developed through trade and business activities
(theOECD, 2019). The economic and political condition of the country has been stable
for the past 50 years and evidenced exponential growth in the travel and tourism sector
of the global business environment. Marvin and Smith would be able to conduct their
business in the Portuguese market economy by following an effective pricing strategy
for their coffee based on the national annual income.
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Figure 2: Per capita GDP of Portugal
(Source: Eurofound, 2019)
The Cafe culture of Portugal is developed despite the small size of the market economy
in the hospitality business environment. The availability of numerous coffee shops in
every major and minor location in the country provides the population with necessary
caffeine for moving forth with the day. The Portuguese population prefer three major
variations of coffee- galao, garoto and bica. The consumer demographic enjoys the
simple and good flavour of Brazilian coffee. The customers prefer their coffee that is
dark and bitter in taste (The Coffee Universe, 2016). The presence of two major coffee
shop businesses- the Delta Cafes and Nicola, dominate the Portuguese cafe culture
(Host.fieramilano.it, 2019).
Figure 3: National GDP of Portugal
(Source: Eurofound, 2019)
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Every member of the EU, including Portugal follows the appropriate standards of fair
trade and business standards in the competitive business environment. The Portuguese
business environment in the hospitality sector prefers the application of fair trade and
regulations in the competitive business environment through the strict adherence to
International Standards Organisation (ISO) (Eurofound, 2019). The business authorities
of the country follow strict regulations on staff welfare by adhering to the tenets of
Employee Safety regulations that every EU member nation needs to follow in order to
gain access to the European market economy (Export.gov, 2019). Since Marvin and
Smith follow the fair trade regulations in developing their business operations, they
would not experience any issue in expanding their business in the Portuguese market
economy. It is essential for organisations operating in the Portuguese business
environment and the EU market economy to follow proper ethical considerations
regarding the welfare of the staffs and the stakeholders of the business organisations.
Figure 4: Growing demand for coffee and infused drinks in Portugal
(Source: Host.fieramilano.it, 2019)
Considering the structural framework the Portuguese market economy provides to
Marvin and Smith’s coffee shop business, it can be stated that the company would
succeed in performing operations in the Portuguese market economy. The location and
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layout of the country serves as a potential profit generating business environment for
Marvin and Smith. The transportation and layout of the region serves the company with
the potential to develop their business in the market economy with the possibility of
gaining better profits and increasing their sales (Portal.cor.europa.eu, 2019). Marvin and
Smith would gain support from the Ministry of Infrastructure and Planning of Portugal in
gathering raw materials from various suppliers in the market economy. Since the
business owners gather their raw materials from Fair Trade organisation that supports
coffee trade of Uganda, the Portuguese ministry of transport and planning would
provide tax exemptions as well.
Thus, it can be observed that the customer demands, market growth opportunity and
tax exemptions from acquiring goods would provide Marvin and Smith with the chance
of developing their business operations in the foreign business environment of Portugal.
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Question 2
The business expansion plan for Marvin and Smith’s coffee shop business in the
Portuguese market economy would be successful by following an effective marketing
mix that would allow the organisation to cater to the needs and demands of the target
consumer demographic. The following marketing mix would consider the 4Ps of
marketing those businesses follow in order to gain better market shares in the
competitive business environment.
Product
Marvin and Smith’s coffee shop business develops products and services through the
adoption of effective fair trade and ethical standards that enables the business to
succeed in the UK market. Popularity of the brand in the international market economy
is also based on the products they provide to the target consumer demographic. The
tangible elements offered by the cafe business include flavoured and roasted coffee
beans acquired from Gumutindo Coffee, a fair trade organisation that provide the
Ugandan coffee firms to conduct business in the European market economy. Marvin
and Smith can also offer East African snacks such as cakes, pastries and fresh mango
juices to the customers. The intangible assets offered by the coffee shop business
include East African themed evenings and games within their establishment that is
unique and attractive in the Portuguese market economy. The development of the
business in the Portuguese market through the presentation of these products would
improve the sales and profitability of Marvin and Smith’s business.
Price
The foreign expansion plan by Marvin and Smith in the Portuguese market economy
requires them to develop their product prices according to the consumer market. The
average price of coffee in a Portuguese cafe is €0.50 hence the business needs to
apply effective pricing strategy for their products in the competitive business
environment (Host.fieramilano.it, 2019). Since Delta Cafe and other competitive
businesses charge their products at a premium range, Marvin and Smith need to
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incorporate lower prices for their products through economy pricing strategy.
Considering the cost of creating a cup of coffee in Portugal is €0.10 it can be stated that
Marvin and Smith’s coffee shop business would be successful in gaining profits from the
business transactions performed in the Portuguese market.
Place
Portuguese cafe culture and customer drinking habits of different areas provide the
decision for Marvin and Smith to establish their business in the picturesque city of Porto
in Portugal. Marvin and Smith would gain better scope in developing their coffee shop
business in the competitive business environment of Porto. Six major cafes serve the
customers of the area and the region is popular for their wine, which is the local dessert
(Citypopulation.de, 2019). Marvin and Smith would gain popularity in the region due to
the large number of tourists arriving in the location for Port wine and local delicacies.
The unique cafe experience of East Africa provided by the coffee shop business owned
by Hank and Patty would prove effective in the market economy of Porto. The cafe
culture of the region would be benefitted by the growth of the coffee shop environment
provided by Marvin and Smith through their establishments.
Promotion
The need for effective promotional activities is necessary for a business to expand in a
foreign market economy. The Portuguese business environment relies on appropriate
utilisation of diverse media forms of advertising and marketing in the competitive
business environment of Portugal. However, it has been identified that television and
visual media advertising are popular and effective in establishing popularity of a new
business (Media Landscapes, 2019). Marvin and Smith can develop better profitability
from their business expansion plans in the competitive business environment of
Portugal through improved marketing and advertising tactics in digital and visual media
forms.
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Question 3
Marvin and Smith’s decision to expand in a foreign market economy would present
several issues to the business development plans the owners may create in order to
succeed in the competitive business environment of the Portuguese market economy.
The work structure followed by Marvin and Smith in their business establishments in the
UK would be followed in the Portuguese market economy as well. Since equality, staff
welfare and appropriate working hours are primary concern for the employers, the
business expansion in the Portuguese market economy would be beneficial for the
business. The marketing aspect of the business would have to be developed in
accordance to the market demands.
Human resources management
The brand’s expansion in the Portuguese market requires them to enable effective
management strategies in their internal operations. The management and owners of the
brand needs to recognise the possible issues that may arise while business
performance in Porto, Portugal. The issue of overtime and inappropriate working hours
may affect the coffee shop business as the growth of a business in the competitive
market economy of Portugal. There has been development of strict regulations in
creating better working environment for the employees of hospitality industry. Marvin
and Smith’s coffee shop business provides the employees with necessary breaks and
appropriate working hours that the brand has to follow in order to gain operational
permission in the foreign business environment. The Portuguese Labour Law prompts
the business to adhere to the decided working hours as well as ensuring the employees
are paid for the extra working hours they perform (Portugalglobal.pt, 2019).
The coffee shop business would have to recruit employees with similar ideology that the
owners have regarding the East African culture. Marvin and Smith’s business provides
their consumers as well as their employees with the opportunity to enjoy a peaceful and
relaxing work environment within their establishments. Better recruitment strategy and
training options would allow the business to acquire skilled labour and generate
increased profits through their business transactions. The coffee shop business could
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apply the Fombrun Model or the Matching model of HRM in their business practice to
reduce the impact of any employee issues that may develop during the development of
their business in the foreign market economy (Hallee et al., 2018).
Marketing strategies
Marvin and Smith’s coffee shop business in the UK market operated using a specific
model of marketing and implemented different marketing plan for their products in the
domestic business environment. However, in order to succeed in the competitive
business environment of Portugal, Marvin and Smith needs to implement different
marketing strategy. The market analysis of Portugal and Porto would provide the
business with an idea regarding the needs and desires of the target demographic. This
would allow the business owners to develop better marketing strategies and tactics,
which enables them succeed in attracting new customers to their establishments. The
business needs to highlight the USP of their coffee shops through their advertising in
order to gain competitive advantage in the market economy.
The business operations in the foreign economy of Portugal would require the coffee
shop business to develop improved marketing mixes that are innovative and effective.
The need for better marketing and advertising strategies allow the business
organisations to operate successfully in a foreign environment. Marvin and Smith may
develop their marketing strategy according to the current trends in the Portuguese
market economy or create new marketing and advertising procedures that would allow
them to attract new customers. Since the Portuguese market economy is highly
competitive for coffee shop businesses, it is essential for new entrants to develop
innovative marketing strategies (De Mooij, 2018).
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Question 4
It is necessary to develop a better understanding of the financial aspect of Marvin and
Smith’s business in the competitive business environment of Portugal. The financial
information regarding the company would be calculated according to the information of
balance sheets and income statements for the coffee shop business of Marvin and
Smith.
Gross profit
Gross profit (GP) is calculated using the following formula:
GP = Gross profit / sales * 100
Thus, it can be stated that the GP for Marvin and Smith’s is identified as 57.8%.
Net profit
Net profit (NP) is calculated using the following formula:
NP = Net profit / sales * 100
It is observed that the NP calculated for Marvin and Smith is 7.4%.
ROCE value
The return acquired by the organisation through capital employed is calculated using
the following formula-
[NP / (Reserves + Capital)] * 100
Based on this calculation it is stated that Marvin and Smith have 25.1% in their business
operations.
Current ratio
The current ratio formulated for the business organisation can be determined through
the following formula:
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