Marvin's Coffee Shop Expansion Plan: Romania Market Entry

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BUSINESS ESSENTIALS ADVANCED
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Table of Contents
Question 1-Introduction and justification for choosing Romania......................................3
Question 2- Marketing mix development..........................................................................7
Question 3-The factors that Marvin and Smith should consider against the market
expansion in Romania....................................................................................................10
Question 4-Financial analysis of the organization..........................................................12
Question 5- Viability of expansion and conclusion.........................................................14
Reference List................................................................................................................ 15
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Question 1-Introduction and justification for choosing Romania
Hank Marvin and Patty Smith run the Marvin’s coffee shop for many years. Their coffee
shop in South London and based on their experience in the food and catering business
they have been thinking of expansionary plans. Multiple factors need to be considered
in the process of feasibility check by the owners before deciding on the chosen market
for expansion plans. Around 30% of the global consumption of coffee can be linked to
Europe and it is a popular beverage in Romania as well (cbi.eu, 2019). This study is
focusing on trying to understand the reason why it is suitable to choose Romania as a
suitable host country location.
Figure- 1- Consumption of coffee consumption of Romania in comparison to 5
most coffee consuming nations
(Source-statista.com, 2019)
The logic of trying to expand to Europe is that Europe has the highest per capita
consumption of coffee to the extent of 5 Kgs of coffee per year (cbi.eu. 2019). It has
been observed over the years that that the capital of Romania Bucharest, is gradually
becoming established as the hub of specialty coffee.It has been witnessed that
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Bucharest is gradually becoming a hub of coffee shops and the popularity of the
beverage is growing phenomenally.
Figure- 2- Growth of coffee shops in Bucharest 2016(top), 2018(bottom)
(Source- business-review.eu, 2016)
Most of these cafés are known for their ability to serve exotic coffee and this is the
reason why Hank and Patty have become interested to serve their own specialised
brew in the country. The reason for choosing Romania as a destination is this that the
growth of revenue in the coffee segment is 4.4% CAGR from 2019 to 2023
approximately (statista.com, 2019). The roast coffee segment is the largest segments
and it has a market volume of US$1,658 m in the current year (statista.com 2019). The
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revenue growth graph in relation to instant coffee in Romania is as shown in the graph
below:
Figure- 3- Revenue growth of roasted coffee been source coffee over the years
(Source- statista.com, 2019)
The coffee production in Romania has yet not reached enough proportion to meet the
sudden rise in demand and this is where the Marvin’s coffee shop can make a certain
mark. They have been trying to use Gumutindo Coffee sourced from a supplier in
Uganda and this new flavour is their proposed high end exotic offering that they wish to
present in the Romanian market, with an east African ambience in the shop, that will be
a novelty for the growing consumer segment there.
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Figure- 4- Revenue share of imported coffee in the Romanian market
(Source- statista.com, 2019)
The above graph shows that revenue share of coffee in the Romanian market is high for
imported exotic coffee. There is also the opportunity in the market to ensure that
Marvin’s coffee shop can exploit the market by selling packaged coffee beans from the
Ugandan fair trade supplier in Romania, as there is the dearth of exotic coffee sources
in Romania. Thus, there is possibility to earn revenue through selling exotic high value
coffee beans in the Romanian market, after establishing the Ugandan flavour through
the café.
Fair trade operations in the Romanian market is not very primitive there was the factor
that was associated with craft related international programmes held in Romania that
have proved that there is an environment of fair practice and competition in the country
(globalcommunities.org, 2019).
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Question 2- Marketing mix development
Marketing mix are the various tactics that are adopted by the business to ensure that
business goals are met. Marvin’s and Smith have been associated with multiple
strategies to successfully establish a business in Bucharest old town area in Romania.
The product related marketing mix of Marvin and Smith’s Coffee shop is as follows:
Product
Multiple variants of the east African coffee flavour will be on offer. Fresh Brewed coffee
along with cream (kaymak) is the most popular coffee in drink, in Romania. There is
strong influence of Turkish flavours in the coffee drinking practices of Romania. Roast
coffee beans are growing in the market largely and that is the reason why it is essential
that Romanian experiment with African roasted bean flavours which is the USP.
In order to attract the Romanians, Marvin and Smith’s coffee shop has the plan of pull
strategy that will ensure that the coffee guzzling population of the target country will be
lured into the taste of the east African coffee, that is the speciality that they want to
present. In this product, there will be variations to ensure that the product serves all
pockets. There will be exclusive, premium, and everyday coffee that will be made
available. The reason behind this is that through this product the company is aiming at
trying to establish the product brand in Romania, along with the café. Hence, the
products will be designed keeping in mind the paying capacity of the entire target
population. The service is an intangible factor that also has to be of supreme quality.
Price
In the opinion of Armstrong et al. (2018), penetration-pricing strategy is usually used in
market entry. There is the need to ensure that competitive pricing is the way to make a
mark in the market. The objective of the business is to ensure that there is the need to
establish the brand in the market and that is achievable only when prices are kept low in
the initial stages and the volume of the sale will be increased. The differentiated prices
are kept in the cafe in order to ensure that the business is able to cater to people with
different paying capacity thus increasing the business manifold.
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Place
The place is a vital decision that every business has to take when they set up business
and that is the reason why it is an integral part of the marketing mix (Išoraitė, 2016). The
old town is a popular location for tourists and it has some offices that is the reason why
this location in Bucharest has been chosen by Hank and Patty to set up the café. The
tourism related population will also help in a market survey regarding what nationality is
preferring the flavour in comparison to others, so that further decisions to set up shop
can be taken by the owners. Another fact is this that, due to various factors associated
with the connectivity of the location of Bucharest, which is a hub of coffee guzzlers. That
is the reason why there will be a proper market and transportation facility in the route
that will ensure that it will be possible to effectively transport the coffee beans from the
place of origin.
Figure- 5- Old town location
(Source- Google maps)
Promotion
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Promotion is the communication that is essential to create awareness about the product
(McDONALD, 2016). Visibility is increased largely if there is proper promotional strategy
that is inculcated in the organisation. Strategic plans are required to be put in place in
order to ensure that through social media and promotions through introductory vouchers
(Kotler et al., 2015). It is important that the popularity of the entire café be increased to a
large extent. Café culture is associated with a social fabric and through social media
post, the café will try to capture the attention of the target customers. Discounts for
larger parties will also be encouraged in the initial six months times to make the café
visible. There will also be effort taken to introduce some African festivals to draw crowds
to the uniqueness of the ambience that will be built in the café.
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Question 3-The factors that Marvin and Smith should consider against the market
expansion in Romania
Human resource management
There is the need to ensure that the business knows that the minimum age to hire is 16
years. In the host, country one work contract does not prevent the labour from holding
another position if there non-competition clause is not there. The café business is highly
labour intensive and that is the reason why it is essential that the owners know about
leave policies. Employees are entitled to 20 days vacation minimum per year and there
is 8 hour work, 5 days of the week and in the weekend there is the need to do overtime
then it cannot exceed 48 hours per week (lpg-roumanie.ro, 2014). The labour laws are
binding and in case of temporary employees if adopted then there is the need to ensure
that these contracts are not extended beyond 36 months.
There is also the need to ensure that when the work force is more than 21 employees
then the collective contracts have to be considered in place of single contracts (lpg-
roumanie.ro 2014). The work culture in Romania is formal and there is a hierarchical
pattern of behaviour that is considered in the context of authoritarian practices in
workplaces. This helps to retain discipline in the café as most of the staff are young and
inexperienced. Romanians are receptive to business and that is the reason why it is
important that if proper work life balance is maintained then there is not much problem
associated with handling the workers in the café. This is an impediment as it has been
witnessed that Romania has the lowest percentage of people working in the service
sector that is 43% in comparison to the European average of 69.8%
(businessculture.org, 2019).
Marketing
Marketing is the most important function that Marvin’s coffee shop should consider in
trying to expand in a new market in a foreign land. There is the need to do campaigns
and social media posts that will reflect a distinct Romanian culture. The best way to
enter the Romanian market is to understand the culture and to ensure that there are
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agents who are advising the owners regarding the way to do business in the host
country. There is the need to develop an unique campaign that will reflect the unique
selling proposition of the brand which is related to east African theme. The look and the
ambience of the café has to be distinctively different and the reason for this is that it will
ensure that there will be excellent placement regarding the exotic angle that the firm
will be able to place in this context. There is the reason to ensure that initially there are
discounts offered along with savoury titbits to attract the consumer to the new café.
There can also be effective campaigns run that will be reflecting the fact that the fair
practice that is followed by the company is associated with the fact that the coffee
beans are collected processed and packed without the influence of any child labour.
This CSR activity can ensure that it endears the consumer towards the café.
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Question 4-Financial analysis of the organization
Figure 6: Financial ratios
(Source: Created by learner)
Figure 7: Liquidity Ratio
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