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Running head: BUSINESS CASE STUDY 1

Introduction

Expanding a business in another country requires thorough market research and a mix of

analysis from the existing financial reports. Businesses dealing with perishable and consumable

products face a lot competition from their competitors and this requires proper management to

ensure dominance in the market. Establishing a new and unique product in a different country is

a daunting task however, with capital and favorable prevailing environment the business can

pick.

Facts based on caf culture, lifestyle, coffee drinkers

Germany is the best country to set up the coffee shops. This country is among the best in

global tourism destination in European Union countries. It also has a deep coffee caf culture and

the 3rd largest market for coffee after USA and Brazil (Bekker 2007, p.144). In Germany coffee

is highly consumed than water and alcohol. This is an indicator of a great market for the coffee

caf in the country. Most of the people with a higher crave for the coffee are the young coffee

drinkers. Its also becoming a matter of lifestyle in Germany as most people consider the coffee

machine as a status symbol. The rate of coffee consumptions is still increasing and to the

advantage of the caf, most of the drinkers are the young people who prefer exploring different

products before settling for one.

Ethical considerations: Fair-trade adoption, staff welfare

Germany is one of the countries with fair-trade adoptions with COTECA, BioFach and

Anuga trade-fairs located in Germany (ECKES 2011, n.p). By partnering with this three fair-

trades the fair-trade supplier in Uganda can have better negotiable terms in Germany to continue

enabling the farmers in Uganda to earn an independent income and to run their own farms. This

would ensure that the coffee beans supplied still have a very high quality and a unique and
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desirable taste. Germany is first world country values equity and the labor rights of laborers,

therefore the welfare of staff is at heart of the German people.

Structural considerations: location, layout, transport

Germany is at the heart of the European Union surrounded by Poland, Ukraine, France,

Italy and UK. The layout of the country is at a very close proximity to its neighboring countries

(OCSE 1999, p.79). The possibility of most tourists in the mentioned countries to pass through

Germany as they move on to the other countries is very high. Germany will therefore serve as the

meeting point for the visitors (BEKKER 2008, p.115). Germany is a very developed country

with a wide road and high speed rail network. It also has very modernized airports with extensive

landing spaces and high security personnel making it an admirable destination from the

customers and the coffee beans from Uganda.

Logistics: based on location - supplier deliveries, customers to provide your

services/products

The coffee supplies through a fair trade to Germany can be easily delivered without delay

since there are direct Cargo freights from Entebbe to Germany. Germany has many and easily

accessible locations where the customers can locate by use of GIs location technologies.

Therefore, customer demands and preferences can be met at convenience any time. The only

difference between UK and Germany under this is language and location, otherwise the

technology if favorably fair and the cafe shop would boom in this area with through a continuous

supply of consumables (Jonson & Tengstrom 2005, 111).

Marketing Mix

Product
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Marvin & Smiths Coffee Shops is mainly concerned with the sale of coffee with the

East Africa flavor in it. The product has a very unique mix of ingredients from the finest coffee

beans from Gumutindo Coffee a fair trade supplier based in Uganda. The consumers can opt to

take the coffee while relaxing but is also available in take away. The most unique thing about the

Marvin & Smiths tea is the taste. The supplier supplies the best and finest beans of coffee from

the region free from chemicals. It also has a very sweet aroma fringing to it the German lifestyle.

The coffee is served based on the customers preference, white coffee, black coffee, ice cold or

hot.

Price

In order to only incur profits and have better marketing strategies the coffee will be sold

at a relatively lower price in Germany than in United Kingdom. However to counter for the

expenses the price in Britain will be slightly raised. This will ensure that the Marvin & Smiths

Coffee Shops survive in the initial stages. For example if lets say, a cup of coffee was selling

at 3 euros in United Kingdom the price can be lowered to 2.7 in Germany and raised to 3.2 UK.

By penetrating the German market with a lower price but a very high quality product, there is a

high possibility of enticing customers and regulate the prices slowly as the business grows

(Tankersley 1990, p.145). However, the price will not be any lower than the production cost

price. From the research, the customers expected price and the prevailing price of the

competitors ranges slightly higher.

Place

In Germany most tourists visit Hamburg and Munich (Bekker 2008, p.115). Setting up

the coffee shops in these two cities particularly, in locations near football pitches and tourist

locations where there is a high population. Also, most people from Hamburg have a caf culture
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and have adopted a coffee consuming lifestyle. With a new quality product in the market, the

young people from the locations will be enticed to try and in the process market the product.

These areas have very distinctive road networks and delivery of the supplies will not be shielded

even under harsh weather conditions. In addition, security in these areas is very high and

therefore no need for risk management which results to lower costs.

Promotion

Businesses that do not invest on promotion make very little profits or losses and end up

closing. Partnering in major seminar, conference and local events and online advertisements

would be the ultimate promotion strategy to put the business on the map in the Germany market.

Part of the business culture is to offer themed evenings such as board game night and chat with

Nanna. To entice more customers, the themed nights would involve a discount for the first

hundred customers (Bowman & Gatignon 2010, p.132). With a discount and relatively low price,

the coffee shop would pick very fast and the profit margins would continue to increase.

Implications of the need for Hank and Patty to cover a wider geographical area in terms

of a different country

The need to expand the business to another country implies that the two owners of the

coffee caf will have to expand their service delivery, order more supplies, and require more

staff. This will therefore, have several impacts on Management structure and gain competitive

advantage.

Impacts on Management Structure

Every business has a certain management structure that makes it outstanding from the

others. The Marvin & Smiths Coffee Shops is now expanding to overseas which means the

management will have to change by employing new staff or promoting the old staff and
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recruiting others. Previously the business was managed by the owners who assumed direct

responsibilities in all the operations. With the expansion the management will require to have a

new plan to ensure that the coffee shop does not fail in the short run and long run. Still, there

requires an addition of employees with a new role on human resource, accountants, and a

marketing IT consultant. Establishing a new product in an existing market with other competitive

cafes is a big move and will require someone with better management skills and experience to

come up with better plans. Using the PESTEL and SWOT analysis the Coffee shops will have to

change everything so as to fit in with the current times and the technology.

Most managers are only profit sensitive and their main objectives ids to make

supernormal profits regardless of the staffs welfare and customers satisfaction. Dealing with

coffee cafes needs a management that will balance between making normal profits, equity and

care to the welfare to the staffs and above all quality services to the customers. The first agenda

is to brand the name of the caf and make it global. This will include an operational customer

care service for easy communication in case of delivery service. The marketing and purchasing

can also be done online and the consumables delivered to consumers as opposed to only

operating around the shops. Marvin and Smiths coffee will therefore assume the role of the

senior CEOs and employ two other managers one in UK and the other one in Germany. One

addition role of the managers will be to manage the risks and ensure there is a good balance from

the cost of production and all other expenses to the revenues accrued by the shops.

Competitive Advantage

Marvin and Smiths coffee caf is an already existing name in UK with a good rating on

customer satisfaction. Since the cafes operates on a free entry and exit market ,it will be in a

good chance to enjoy sales from the unique style of service delivery and lower cost since the
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customers determine the price of the product as well. The location at places close to the iconic

stadiums that host games on weekly bases and tourist destination cities will ensure that it serves a

great number of customers. Reducing in prices means that the business will increase the volume

of sales and make profits by numbers. The unique Ugandan and East African taste of coffee will

also see most customers shift their preference to the Marvin and Smiths. With recruitment of

professional personnels in IT the marketing department and online sales will add up to the

advantage of sales at the shop.

One of the objectives for the Marvin and Smiths coffee caf is to keep the customers

happy all the time. Not so many businesses are focused at delivering great services to their

customers. With the business ethics and strong core values and understanding that the customers

is always right, the coffee shop will entice so many customers and in the process make a name to

itself. Free Wi-Fi will be a big deal especially to the young people. People will find it better to

take coffee from a caf that offers other complimentary services. University students for instance

might find it better to relax within the confines of the caf area and do their research, watch

online videos or do online jobs while drinking coffee. This will not only popularize the caf but

will also add to their marginal profits from increased sales. People like to move with the times

and the unique themed evenings will see most people flocking to the caf. All this are factors that

will ensure the business competes favorably with the existing coffee shops.

Evaluate how their profitability and liquidity may impact on decisions available to

them

Gross Profit
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The business has no formal loans or any external dent. In addition, it made gross profits

with big margins. Gross profit is the total revenues the business made without any deductions on

all the expenditures. In the year ending 2016, the Marvin and Smiths coffee caf had accrued a

gross profit of 208,000 euros. This is an indicator of a well-functioning coffee shop and the

financial feasibility based on the profit is a good signal that the two can invest the money in

expanding the coffee shops.

Net profit and analyze what it means

Net profit is the amount of revenue a business makes after deducting all the expenses and

depreciation to the machines or an obsolete technology. The caf made a Net profit of 26,000

euros as at 31st December 2016. This profit could buy two coffee machines and still remain with

some more money. It indicates that the business had capital to expand.

Identify Return on Capital Employed (ROCE) and analyse what it means

Return on capital refers to the financial ratio which is used to measure an organizations

efficiency and profitability with which its capital is employed. Mathematically its calculated as

ROCE = capital invested before Interest and Tax (EBIT) / Capital Employed (LOWE 1816, p.65)

Identify Liquidity in terms of Current ratios and analyse what it means

Every business requires a liquidity ratio which is used to indicate the business ability to meet its

obligations when they become due using the current assets. It uses the solvency ratios namely

current ratio and the acid test or quick ratio (LOWE 1816, p.70). The current ratio compares

current assets to current liabilities through division while the quick ratio calculated by dividing

your current assets by your current liabilities while the latter is working capital ratio and does not

take into account of the inventory. It is used as an indicator of whether a firm has sufficient

short-term assets to cover its immediate liabilities. Marvin and Smiths coffee caf is at a better
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chance of expanding the business using the indicators since them all yield positive financial

reports.

Using the financial reports from dated 31st December 2015 and 31st December 2016

Marvin and Smiths coffee caf has enough capital to expand its business overseas. Through

SWOT and Pestel Analysis the business seems to have favorable terms and with a proper

management its estimated to make more profits. Locating the business in Germany will increase

its competitiveness and make more sales due to the large pool of visitors in the country.

Generally its viable for expansion from the research and analysis on the existing market and

financial status.
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References

BEKKER, H, 2007, Pocket adventures, Edison, N.J., Hunter.

http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&A

N=180352.

BEKKER, H, 2008, Munich and Bavaria adventure guide. Edison, N.J., Hunter.

http://site.ebrary.com/id/10240603.

ECKES, A. E, 2011, The contemporary global economy: a history since 1980, Malden, Mass.

[u.a.], Wiley-Blackwell.

OCSE, 1999, Urban policy in Germany, Paris, Organisation for economic co-operation and

development. London: Routtledge.

JONSON, G., & TENGSTROM, E, 2005, Urban transport development: a complex issue.

Berlin, Springer. http://site.ebrary.com/id/10129385.

BOWMAN, D., & GATIGNON, H, 2010, Market response and marketing mix models: trends

and research opportunities. Boston :

Now, http://public.eblib.com/choice/publicfullrecord.aspx?p=3383745.

TANKERSLEY, C. B. (1990). Modifying the market mix: strategies for the mature consumer :

an instructor's manual. [Syracuse, N.Y.?], [University?].

LOWE, J. (1816). A treatise on profits, discounts, and interest: explaining how to compute the

gross amount of any net sum to secure a certain net profit, after a discount has been
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allowed therefrom and to compute, by short rules, interest of money. Birmingham,

Printed for and sold by the author.

http://galenet.galegroup.com/servlet/MOME?af=RN&ae=U103333771&srchtp=a&ste=1

4.

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