Marvin and Smith Case Study
The choice of Italy as Marvin and Smith’s preferred host country to expand their coffee business will only be considered viable if various aspects of the country such as the people’s coffee drinking culture and the infrastructural development of the area are carefully analyzed. These considerations along with the sufficient capital will be the significant determinants of Marvin and Smith’s success in the Italian coffee market. Viability of Italy as a Host Country Justification for Choosing Italy Italy has a long-century history of authentic coffee culture dating back to 16th century and since then the Italians’ passion for coffee has not relented. The Italian coffee market is endowed with numerous tourist destinations, rich culture and generally good ad favorable environment for business and coffee is definitely one of the most appealing to the Italians.
Italy’s capital city, Rome has been identified as one of the most visited European cities by both local and international tourist due to its appealing tourist sites (Valls, Sureda & Valls-Tuñon, 2014). Becchetti and Costantino (2010) examined Italy’s economic outlook and revealed that the country’s economic growth stood at 1. 4% in the 1st quarter of 2017, a trend that has been consistent over the years. With favorable economic policies, consistently growing GDP and the political stability, the country is the best choice for the coffee business. Further, the planned Italian economy takes into account labor considerations. Among the key competitors that Marvin & Smith have to compete with is Starbucks which has already invaded Italian coffee market. The airport connects over 60 countries including Uganda.
The infrastructural advancement of the country will fast-track the delivery of coffee products Uganda to Fiumicino Airport and facilitate free-flow of local and foreign visitors from various destinations to the capital Rome. Ethical Considerations One of the significant ethical considerations is the fair-trade policy in the Italy. Italy’s fair-trade model embraces marginalized producers and extends to the broader concept of well-being. The primary goal of the Italian fair-trade movements is to address social justice issues and safeguard the rights of the marginalized producers (Becchetti & Marco, 2010). The average cost of espresso in Rome, Italy is €1 and as at 2017, it was set to increase by 10 to 20 cents. The high demand for the coffee drink will enable Marvin and Smith to set an appropriate price per cup.
Place The choice of Rome, Italy as the appropriate place to expand the coffee shops is driven by a number of considerations, the more significant one being the huge market for coffee. The Italians have insatiable thirst for coffee as it is embedded in their cultural lifestyle. Rome is the center for a host of social events and festivities some of which are held monthly and annually. Implications of Covering a Wider Geographical Area To expand their business, Marvin and Smith have to increase their staff, streamline service delivery and restructure their chain management. The move will affect Marvin and Smith’s coffee shops’ management structure and competitive advantage. Impacts of Wider Geographical Coverage on the Management Structure Different management structures work differently for different businesses.
Management structure inevitably change with the change in the scale of operation. For Marvin and Smith, expansion implies aligning the management with the new business roles to effectively address the challenges of expansion. Marvin and Smith’s coffee shop’s coverage of wide geographical area is likely to make its business known in the areas. As a result, the business will experience huge sales and ultimately optimum profits. Being a member of the European Union, Italy will not impose difficult trade regulatory policies on member countries. Marvin and Smith will enjoy free entry into the market which is an advantage over the competitors. If the business export its home advantage to Italy, it is likely to outperform the competitors such as Starbuck and scoop a sizable market share in the Italian coffee market.
Based on this disclosure, the business’ profitability is health and signals a tremendous positive progress in the home country market. This impressive financial performance in the home market is an indication of the ability to successfully sustain an overseas expansion. The business can use the profits it has earned over the years to fund its operations in the foreign market. Analysis of the Net Profit A net profit is a revenue a business earn after making a deduction of all depreciations and other expenses. In light of the disclosed financial statement of Marvin and Smith for the period ended 31st December 2016, the business made a net profit of 26,000 Euros. Conversely, a negative ratio shows inability of the business to pay its creditors when the money is due.
Besides the current ratios, other solvency ratios such as acid test play a significant role is determining the liquidity of a business. According to Wilkinghoff (2009), the current ratio gives an insight on whether or not a business has sufficient current assents to cover the current liabilities. Mathematically, current ratio is determined by: Current Ratio =. In light of the business’ disclosed financial statements, Current Ratio = =5. References Antoine S. , Sillig C. , & Ghiara H. Advanced Logistics in Italy: A City Network Analysis. Tijdschrift Voor Economische En Sociale Geografie. Eckes, A. E. The contemporary global economy: a history since 1980. Malden (Mass): Wiley-Blackwell. JöNson, G. The concept of profit and British accounting 1760-1900. [Place of publication not identified], Business History Review. Reider, R. Developing successful business strategies: gaining the competitive advantage.
From $10 to earn access
Only on Studyloop
Use Our Premium Study Documents & Samples Database
Over 5 million documents
Any topics and subjects
The situation is even messy for businesses dealing with consumable and perishable products. These businesses usually face an uphill task trying to penetrate new markets whose buyers have totally different cultural beliefs. To face the existing competitors with confidence, such businesses require a devoted management to dominate the new market. Marvin & Smith’s desire to expand their coffee shop to Sweden will be a daunting task but nevertheless, with sufficient capital and favorable prevailing conditions in the country, the business has good prospects to take off. The choice of Stockholm City, Sweden is driven by its strategic location, sufficient infrastructural facilities and the deep coffee-drinking culture known as Fika among the Swedes. 8% more than the 15 main EU nations (Schön, 2016). The status of the Swedes economy implies that the citizens have a high purchasing power.
Despite of being mapped as one of the world’s 20 biggest coffee drinkers, Sweden has not been penetrated by some of the world’s renowned coffee companies such as Starbucks. Thus, Marvin & Smith are not likely to face any completion from an established coffee firms in Sweden. Logistical considerations Sweden has one of the best logistics in the Scandinavia and in the European Union because of its strategic location. These trade fairs can partner with their fair-trade counterparts from Uganda to develop better and negotiable terms. The significance of harmonizing these two fair-trade arrangements is empower the Ugandan traders earn independent incomes while at the same time running their farms. Another one of the critical ethical considerations is the quality of the coffee beans supplied.
Marvin & Smith must ensure that the coffee products supplied from Uganda are of high quality with desirable and unique taste. Besides, Sweden is one of the EU countries with most appealing labor laws (Valls, Sureda & Valls-Tuñon, 2014). 55 kr (Sweden Krona). A cup of coffee in Stockholm City is higher compared to other European Union cities and thus Marvin and Smith will not be operating on loss. The duo can then regulate the prices slowly as the business grows. In overall, the prices adopted by Marvin & Smith should be slightly lower than the prevailing prices of the competitors. Place The most visited place in Sweden by tourists is Stockholm City and it is the appropriate place to locate the new coffee shops.
Implications of Covering a Wider Geographical Area Expanding the coffee business to Sweden implies that Marvin & Smith have to hire more employees, improve their supply chain management as well as their service delivery. These changes will have a profound especially on the management structure as well as the gaining of the competitive edge of the coffee shops. Impacts of Wider Geographical Coverage on the Management Structure Businesses have the habit of adopting unique management structure which best suits their unparalleled needs. Marvin & Smith’s move to expand their business operations to Sweden will significantly alter the management structure to accommodate the new layers of management. The number of employees will increase which implies new training, hiring of new staff and promoting other employees to fill the new positions.
Impact on Competitive Edge The coffee shop is already a brand in the UK with excellent customer rating. Sweden is a bona fide member of the European Union which implies Marvin and Smith will take the advantage of the free entry and exit from the market to grow the business. One of the key sources of competitive advantage will be lowering the operation costs. Marvin and Smith will transmit these home advantages to the Swedish market. Maintaining the coffee prices at slightly lower than the competitors will attract more customers and ultimately drive more sales than the competitors. These figures represent an increase in profits by large margins which is a sign of tremendous positive progress in the coffee industry. Marvin and Smith’s coffee cafés are performing impressively at the home market.
The stable financial feasibility is an indication of the ability to sustain an expansion to overseas markets such as Sweden within the European Union. Analysis of the Net Profit The revenue earned by a business after subtracting all depreciations as well as business expenses constitute a net revenue. Base on the disclosed financial statements of Marvin and Smith’s coffee shop, 26,000 Euros was made as the net profit in the period ended 31st December 2016. The ratio shows that the business is profitable. Analysis of Current Ratios Current ratios and other ratios are of paramount importance to the health of a business. When a business has sufficient liquidity, it demonstrates the ability to meet its financial obligations while poor liquidity implies the inability to pay creditors when the money is due.
The liquidity of a business is determined by solvency ratios such as acid test and current ratio. The significance of such ratios as current ratio is that they tell whether or not a business has a sufficient current assets to cover the current liabilities (Wilkinghoff, 2009). Sweden being one of the countries in the European Union that advocates for fair trade and labor laws, it will champion the overall labor rights and provide a conducive environment for the business. The marketing g mix of Marvin and Smith’s coffee shop has to be unique from that of the competitors. The coffee from Gumutindo Coffee should be of high quality with natural East African flavors and be served in different forms: black coffee, white coffee, ice cold or hot.
From $10 to earn access
Only on Studyloop