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. 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.

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