Marvin and Smith’s investment analysis

Introduction

Marvin and Smith’s coffee shop is a small business with high prospects for growth. It has already established few branches locally but also aspires to venture into international markets.  However, the first priority is within European markets but this requires the critical assessment to come up with the most favorable destination. Venturing into international markets is not a decision that requires a lot of comparative assessment and an effective planning. Expanding into international markets is challenging task for both big and small businesses.

There are important factors that one need to evaluate key among them being the availability of the targeted customer as well as evaluating their needs. This paper examines the most appropriate investment destination for Marvin and Smith’s and the appropriate marketing mix to apply in the first part. The second part discusses some of the implications of its internationalization strategy. There are a number of benefits and challenges that come along with the internationalization strategy. Personnel management and competitive advantage are some of the aspects covered in the second part including analyzing the profit and liquidity ratios of Marvin and Smith’s business.  The last part summarizes the entire assessment and offers an advice to the Marvin and Smith’s about the viability of its international investment plan.

Preferred country in Europe Germany

The best country location to situate the Marvin and Smith’s will depend on several factors key among them the region demand for the coffee drink, the coffee drinking culture, demand for ethical sourcing of coffee supply,  the income index of the target customer, ease of doing business.  First, it is important that the main idea of expanding the Marvin and Smith’s business internationally is to attract new customers with a taste of some of the best products offered by the business (Lewin, Giovannucci and Varangis 2014).

The decision to set a coffee shop is therefore driven by the availability of target customers in the region.  In Germany, people have a high demand for coffee and keep seeking more information on some of the best coffee shops offering the unique flavors and diverse categories of coffee. Generally, Germans are high demanding coffee beverage consumers and it is their most preferred beverage consumed daily.  Germany demand for coffee is very high and on average 8.5 million tons of coffee annually (Johnson and Turner, 2015). It’s among the highest consumers of coffee beverages in Europe. It consumes more coffee as compared to Sweden, Spain, Netherlands and und United Kingdom.  This makes Germany one of the best countries in Europe to set up a new coffee shop due to its high demand for coffee beverages.

Germans have also a good culture that favors coffee drinking especially due to their insatiable demand for specialty coffee.  Although there may be a percentage of Germans looking for cheaper coffee a great percentage especially from high-end consumer segment are willing to pay more for specialty unique coffee products. Locating the Marvin and Smith’s coffee shop in such region can help market its unique blended coffee products that will invite the new customers in the business. The potential customers in the German high-end consumer segment can afford higher prices which will increase the profits margin (Gmbh, 2009).

German consumers are also very sensitive on promoting sustainable sourcing of coffee. They have a high demand for ethical coffee. They are very selective and only prefer coffee certified coffee products from the fair trade certified suppliers.  Sustainability standards is a very important factor that is considered for entry into German markets.  This makes the country the most favorable investment destination for Marvin and Smith’s coffee shop since its supply sourcing of the coffee products is sustainable. Owing to the fact that the coffee shop promotes sustainable supply source with ethical considerations and offers east African inspired unique products it’s likely to have the best competitive advantage in Germany (Jolliffe, 2010).

Another consideration that makes Germany the most preferred for the Marvin and Smith’s coffee investment is the ease of doing business in the country. Germany is placed in position seventeen globally according to the latest global index about the scale of ease of doing business. This measurement is based on the country’s conducive environment for doing business.  Germany is also ahead of several countries such as Greece, Spain, Croatia, France, Italy and many other European countries (Johnson and Turner, 2015).  This implies that Marvin and Smith’s coffee business can be able to easily establish their new business in Germany as compared to other countries which are ranked lower in the index. It makes the country a more favorable investment destination for foreign and local business investment based on their business legal operating environment as well as the infrastructural development.

The city of berlin provides a strategic location for setting up Marvin and Smith’s coffee shop especially when targeting the high end and middle-level income earners. Berlin City in Germany boasts of holding a variety of prestigious coffee shops and provides the best strategic position where it is easier to target the potential customers.  Getting the human resource power may not be problematic in the region especially given that there is a good pool of human resource from the neighborhood coffee shops.  Berlin City is well known for having experienced coffee brewers and this provides the Marvin and Smith’s with an opportunity to hire the most experienced and skilled employees from the industry. Favorable legal business operating environment makes property registration and business operationalization cost effective.

Marketing mix plan

Product

The coffee industry in German markets is highly saturated and hence very competitive. Marvin and Smith’s intends to use a combination of a marketing mix that ensures that they remain competitive in the market. The Marvin and Smith’s intends to offer unique coffee with high value based on the finest grade produced by east African Coffee growers from Uganda. A variety of differentiated products such as fresh juice drinks naturally prepared without food additives would be offered in the shop (Babin and Zikmund 2015). Pastries and snacks will also be offered to help the target customers have a refreshing experience in the shop. The environment in which the customers enjoy the unique infusion of coffee will be very natural ensuring that it is relaxing and that the customers enjoy nature. The coffee shop will be strategically set in a serene environment where families and friends can have fun and enjoy the tranquility that resonates with a natural environment.  The coffee shop also will ensure that the barristers and other employees are highly trained to offer efficient and unique experience to the customers.

Promotion

The Marvin and Smith’s intends to communicate with the new customers through digital marketing as well as personal selling. Given the limited resources available from the coffee shop the digital marketing will offer a cost effective methods of reaching out to several of the targeted customers. Various digital platforms such as social media marketing direct mail marketing and website advertisement will be employed to promote business products and services. Sales people will also visit target organizations to advertise the products through word of mouth (Goi 2015).  The major target in those organizations are employees and hence sales people will be targeting human resource managers to convince them to organize a retreat or any other for employees in the business.

Price

Value pricing will be employed in setting the price tag for every unique product. The Marvin and Smith’s intends to position itself as the value driven coffee shop. The pricing of the coffee products will be primarily based on the production costs and the value of the uniqueness of the products. The Germans have high value for unique and innovative products and hence targeting high-end consumer segments Marvin and Smith’s need to focus on value driven products. Prices may be set high depending on the value of the products (Alipour, Ghanbari, and Moniri, 2011)

Place

The coffee shop will first be located in Berlin the capital city for Germany.  The shop will target high and middle-income earners.  The target customers both employees and business people from the city will need to visit the coffee shop to enjoy its products and services.  Later on, it is expected that Marvin and Smith’s will be expanded to reach other areas of the country.

 Implications

Gaining competitive advantage

Marvin and Smith’s expansion to the foreign country means that they have diversified their markets. Market diversification means that they are likely to have a competitive advantage over their competitors in the local markets. The diversified markets also mean that they are able to innovate new products and services that are customized to meet the demands and tastes of the new markets. Expansion into the foreign market, therefore, implies that they will have a competitive advantage over their competitors through identification and exploitation of new market niches (Alipour, Ghanbari, and Moniri, 2011).  Expansion into a more expansive geographical area means that the coffee shop organization can have access to highly skilled and multicultural workforce. Increased revenues and profit derived from expanded market is also likely to make the coffee shop more competitive in the market.

Managing personnel

Most likely the Marvin and Smith’s will be required to higher locally bringing on board culturally diverse workforce. Apparently, diverse workforce is a recipe for innovations. The coffee shop only requires to hire multicultural competent managers and innovation that follows will give the organization a competitive advantage. People from different cultural inclinations are likely to have different values, motivations, and practices.  Employees have different characteristics based on the cultural context within which they were socialized. Understanding those issues and managing the workforce towards one direction may bring conflicts within the organization (Schuler, Farr, and Smith,2013). Staffs will also be widely distributed across different regions and unlike when the physical distance was small the current distance is likely to negatively affect the business especially if they do not an effective internal communication systems. The two issues on gaining competitive advantage and managing personnel and staff issues are interconnected since innovation cannot be realized without effective personnel management. The personnel management needs to recruit highly skilled employees likely to fit into the organizational culture. Equally getting the right mix of human capital and motivating them effectively will help the Marvin and Smith’s gain a competitive advantage in the market. Coffee shop business is a highly service oriented industry and hence the success and competitive advantage are derived from services offered by employees as well as differentiated products.

Liquidity and profitability analysis

Liquidity ratio is very critical to the business since it is an expression of financial freedom of the organization.  It is expressed inform of current assets /current liabilities. In case of the Marvin and Smith’s = 35400/6200

The liquidity of the Marvin and Smith’s is healthy. The Marvin and Smith’s liquidity ratio is very critical since it is used by the potential investors or creditors during borrowing. It is, therefore, favorable for the Marvin and Smith’s to have a high liquidity ration since it indicates the organization ability to meet its shorty term financial obligations in settling their debts.  When such liquidity ratio is low it is likely to expose the business to financing difficulties (Petersen and Plenborg 2010).

The profit margins available for the business is still very low. Profit a high-profit margin is very important in expressing the stability of the businesses. Highly profitable business are capable of meeting the highest percentage of their expansion costs from the profit proceeds. However small and medium businesses always have a problem of funding their expansion using their profit margins. Marvin and Smith’s is no different based on their profit after tax posted in their financial records.  However the above financial have an impact on several options available to the business. First, a healthy liquidity ratio implies that the business can be able to source some funds from the creditors such as the financial institution to fund their expansion plans. However, based on their ratios there a is the limit  for the amount of money they can obtain from such creditors especially given that their profit margins are still low. The second option is to seek more investors to inject capital into their business to help fund their expansion plan. This approach may work for the business since its initial growth shows that it is a promising investment (Schuler, Farr and Smith, 2013).

Other investors may be interested to inject more capital into the business and share the profit proceeds. The Marvin and Smith’s investors have this option to seek more funding for their expansion.  The third option available to them based on the nature of their business profits and liquidity ratio is to wait for more accumulation of profits to expand their operations later. The Marvin and Smith’s owners, therefore, has the choice between the three options on which direction to take. However expanding a business is the only assured way that profit margins will grow and that it will remain competitive in the market. Sourcing capital for such investment especially for startups and small businesses can always be challenging. Sometimes based on the liquidity ratios and small profit margins businesses chose to invest part of their profits and also source funding from other potential creditors and investors. Combining several alternatives is usually the only best option (Babin and Zikmund 2015)

 

Conclusion

From the above discussions, it is apparent expansion plans for Marvin and Smith’s require a lot of initial assessment to establish the best business destination that favors their model. Germany offers a good market base for their expansion plan. Customers, there are very ready to embrace new coffee products once they are availed in the market. They have a good coffee drinking culture and the demand for coffee imports into the country is a strong indicator that the market is very promising. In consideration of the ease of doing business although Germany is behind United kingdom, it is far much ahead of other European countries such as Spain, Italy , Greece, France among several others. Marvin and Smith’s coffee shop has done tremendously well in the past and now wants to expand into the international market. This option is viable based on the initial assessment. Marvin and Smith’s has very unique and east African inspired products which they can offer to the German markets.

The uniqueness of their products and the proposed marketing mix is expected to hit the German market and translate into increased sales and bigger profit margin. However, Marvin and Smith’s faces the same challenges of sourcing capital for expansion just like any other small and expanding the business. Based on its profit margins and liquidity ratio Marvin and Smiths can source funding from different alternatives such as creditors, investors, and investing part of the profits. Such alternatives are viable and if they can be fully exploited the Marvin and Smiths can succeed in its internationalization strategy. However expanding into foreign markets requires extra caution and planning for success. Few items need to be considered before Marvin and Smith’s venture into foreign markets. The first is the availability of multicultural competent managers. The availability of enough capital without destabilizing existing business financial stability and a good information communication system.

References

Lewin, B., Giovannucci, D. and Varangis, P., 2014. Coffee markets: new paradigms in global supply and demand.

Johnson, D. and Turner, C., 2015. European business. Routledge.

Frankfurter Allgemeine Zeitung Gmbh. (2009). German brief. Frankfurt am Main, Frankfurter Allgemeine Zeitung Information Services

Jolliffe, L. ed., 2010. Coffee culture, destinations and tourism (Vol. 24). Channel View Publications.

Babin, B.J. and Zikmund, W.G., 2015. Exploring marketing research. Cengage Learning.

Kelly-Holmes, H., 2010. 21 Languages and Global Marketing. The handbook of language and globalization, 58, p.475.

Goi, C.L., 2015. Marketing Mix: A review of’P’. The Journal of Internet Banking and Commerce, 2005.

Alipour, M., Ghanbari, A. and Moniri, S., 2011. The impact of marketing mix (4Ps) on marketing audit and performance in Iranian SMEs. International Journal of Humanities and Social Science, 1(2), pp.112-117.

Schuler, H., Farr, J.L. and Smith, M. eds., 2013. Personnel selection and assessment: Individual and organizational perspectives. Psychology Press

Petersen, C.V. and Plenborg, T., 2010. Financial statement analysis. Prentice-Hall.