Business Essentials Advanced: Romania Market Expansion Report

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BUSINESS ESSENTIALS ADVANCED
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Table of contents
1-Introduction and justification for choosing Romania......................................................3
2-Development of marketing mix.....................................................................................6
3-Factors Marvin and Smith should consider for the market expansion in Romania.......8
4-Financial analysis of the organization.........................................................................11
5- Viability of expansion and conclusion........................................................................14
References.....................................................................................................................16
Appendix-1: Financial statements..................................................................................18
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1-Introduction and justification for choosing Romania
Business expansion in the international market is associated with identification and
analysis of multiple factors that an organization would have to face prior to expansion in
the nation coupled with issues post-expansion in a foreign market. The aim of this study
lies in the analysis of the potential viability of expansion in Romania by Marvin and
Smith Coffee Shop. The scope, however, lies in the identification of the attributes that
might hamper or alleviate the mentioned expansion relative the financial status of the
organization including the aspect of seed funding raised by the founders during its
inception.
From the list of the member nations of the European Union, the coffee shop chain
should expand into Romania that became a member of the union as late as 2007
(europa.eu, 2019). There would be three reasons for the mentioned choice, which
would be in the following order:
Relative to the factor of the rate of consumption of coffee, Romania sits below the
ranking of UK in terms of coffee consumption.
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Figure 1: Quantum of coffee consumption
(Source: Armstrong, 2017)
From the above figure, it is evident that Romania projected a 2.51 Kg per capita
consumption of coffee in 2017. This was much lower than the 3.61 Kg per capita
consumption of the UK itself (Armstrong, 2017). However, since the organization is in its
initial phase of operations and international expansion, Romania would provide many
opportunities for a small-scale organization that has been active in the coffee business.
Additionally, unlike the other nations that would project a static business development
index, expansion in Romania might result in an increase of the customer base. In the
long end, the per capita consumption would increase which would result in business
development of the organization.
Relative to the factor of the distance between the two locations, the distance between
Bucharest, the capital of Romania and London, the capital of England is much less than
the distance between Uganda and Romania.
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Figure 2: Comparison of the distance between the two locations
(Source: Google Maps)
In the event that the organization expands in Romania, the distance required to be
travelled would be greatly reduced. This would reduce the operational cost as well as
the supply chain cost of the raw materials (Eriksson et al., 2015). Hence, the
organization would be able to sell its products for a lower value without compromising
the percentage of profit relative to each batch of sales.
Relative to the factor of ethical consideration, Romania has been increasingly been
associated with multiple fair trade practices across the retail food and beverage sector.
The recent Bucharest festival is a testament to that (Bucharestcoffeefestival.com,
2019). This would complement their high degree of ethical consideration coupled with
the adherence to the multiple fair trade practices preferred by the owners. In the long
end, this would result in greater acceptance of the product in the region. This would be
due to two reasons. First, the fine quality of the coffee from Uganda would incite high-
end flavours to a potential client. Second, a high-end ethical consideration by the
owners and the acceptance of fair trade practices and government-sponsored coffee
promotions would enable the organization to expand in the market (Lyon, 2015).
2-Development of the marketing mix
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A marketing mix is defined as the factors that are placed in such a way by an
organization to influence the behaviour of a potential customer. The sole reason for the
existence of the marketing mix for any organization includes conduction and increase in
sales volume for achieving business goals (Wu and Li, 2018).
Figure 3: The 4Ps of the marketing mix
(Source: The Marketing Mix, 2015)
The above figure represents the 4Ps of the marketing mix. The factors associated with
the 4ps would enable the organization to control customer behaviour for the conduction
of business and execute relative sales. The foreign expansion plan would include the
following:
 In the segment of products: Tangible products would be mostly coffee-based
products from the finest coffee beans sourced from the fair trade coffee supplier
Gumutindo Coffee in Uganda. Additional tangible products that would be
provided to the customers would include the herbal infusions as well as tea,
which would be sourced again from registered Fair-trade practitioners and
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organization. However, this would be limited to eastern Uganda. Intangible
products like customer services would include providing a combined environment
relative to Ugandan influence coupled with high-speed Wi-Fi. Additionally, it
would include technological support like sockets for charging electronic devices
coupled with playing partners during a gathering or particular events.
The USP of the products would be high-quality customer services as well as the
quality of the coffee being served to the customers.
 The pricing strategy would be directly influenced by the volume of the coffee
ordered coupled with the package so ordered with the same. There would be
three volume of serving in the strands of 75 ml, 100 ml, and 150 ml. While the 75
and 100 ml cups would be served in paper cups to adhere to strict environmental
norms, the 125 ml pack would be served in a wooden cup. The price for the
same would vary from 2.5 GBP to 4.5 GBP. The reason for dividing the volumes
would be for catering to the consumption capacity and preferences of the
customers. However, the rationale for the mentioned price would be based on
the current prices of the products in the UK and the corresponding prices of
another coffee chain across the UK (Romania Insider, 2019).
 The physical location of the organization during the initial days of expansion
would place near to the Bucharest North Railway Station. The actual sales
volume within the first six months of operations and service would determine the
opening up of multiple outlets in the Pipera Business Centre under the central
business district of Romania. This would be because of two major reasons. First,
the location near the train station would increase the reach of the organization
and would be able to cater to the morning rush hour and the evening rush hour
(Romania Insider, 2019). This would increase the sales volume with a projected
growth rate of 20% per quarter. Second, the location near the central business
districts would enable the organization to cater to the extensive customer during
the suppertime coupled with the provision of in house delivery and corporate
vending machines that would ensure regular flow of finances in the long end.
 The target segment would be mostly middle-aged and young professionals who
conduct a daily commute between the two mentioned locations for the execution
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of their job. Awareness of the presence of the organization would be initially
through social media marketing coupled with marketing by radio. Public channels
such as Radio Antena Satelor and private channels like City FM would be taken
into consideration. Hence, I would recommend extensive marketing of the
services and the USPs prior to setting up of shop in the mentioned locations.
This would be due to two reasons. First, marketing of the USPs would enable the
customers to identify the difference of potential service and product from the
existing organizations like 5 To Go and Esquires Coffee (Romania Insider, 2019).
Second, the social media marketing would enable the organization to acquire
relevant data about the interest of the customers for the service by calculating
the average time spent on reading about the services or about the products and
prices (Iankova et al., 2018).
3-Factors Marvin and Smith should consider for the market expansion in Romania
Market expansion in a nation like Romania would be associated with multiple issues.
For the mitigation of such issues, Marvin and Smith would have to consider multiple
factors in multiple segments.
In the segment of human resource management
In the segment of human resource management, the major issue would be the
difference in working culture as well as the general language spoken in the nation.
Hence, three factors would be required to be considered for effective market expansion
in the nation in the following order:
 Government regulation- As Romania is a member of the EU, EU regulations
regarding employment and minimum wages would have to be taken into
consideration. It would be a potential loss in the event that UK citizens are
transferred to the foreign nation, as it would lead to an increase in the basic
expense of the organization. Mitigation of this would include adherence to the
minimum wage of 446.02 EUR on a monthly basis (Romania Insider, 2019).
Additionally, local staff could be hired and trained for the execution of business in
the segment of the barista, pastry chefs, and public relation officer.
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Figure 4: Minimum wages in Romania
(Source: Romania Insider, 2019)
 Technological advancements coupled with workforce demographics- Romania
has a high human development index which includes extensive use of
technology for conduction of business and personal chores
(RomanianStartups.com, 2019.). The organization should consider the general
format of business execution in the nation by taking a cue from the existing
organizations in the coffee chain business. Potential issues might include poor
workforce support and extensive dependence on technology. Mitigation of the
same would include conduction of training of the employees without being
dependent on technology for creative presentation of coffee and coffee related
products.
In the segment of operations and logistics
In the segment of operations and logistics, two factors should be considered by the
organization. This would include the following:
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 Infrastructural cost and political factors- In the current months, Romania has
seen a dynamic shift in its political stability.
Figure 5: Political stability of Romania post being an EU member
(Source: TheGlobalEconomy.com, 2019)
Based on the above figure, it is evident that the political stability index of the nation has
been in a dynamic state over the past decade. As a result, the political interference on
an international business coupled with probability drastic laws in the segment would
project a threat to the organization. However, this could be mitigated and managed by
adhering to all legislation and frameworks during the initial days of operation to create
an environment for bargaining.
 Logistical support: In this segment, the major factor that should be taken into
consideration by the organization would include the use of the great number of
logistical organizations like Yusen Logistics, CEVA logistics, Transmec Group
and others (europages.co.uk, 2019). This organization would provide a great flat
form for expert management of logistics and delivery of the products. However,
no major issue would arise in this segment unless the organization decides to
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carry out the logistical support for them. In such cases, mitigation of inexperience
in the logistics and supply chain segment could be mitigated by the extensive
use of joint ventures with the logistics service providers.
4-Financial analysis of the organization
The financial analysis of the organization would be conducted relative to the financial
statements of the organization.
Figure 6: Financial Ratios
(Source: Created by the learner)
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Figure 7: Liquidity Ratio
(Source: Created by the learner)
In the segment of the health of the current business
Based on the calculated ratios, the health of the current business of the coffee chain
could be discussed in two ways. From the gross and net profit margin, it could be
deduced that the health of the organization is not viable for international expansion. This
would be due to two reasons. First, the net profit of the organization stands at 7.4%,
which is considerably less than the general profit required for international expansion.
Additionally, the extensive gap between the gross profit and the net profit shows poor
use of technology and poor integration of operational process that increases overhead
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