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Marvin and Smith’s Coffee Shop Expanding to Germany
The Fast Foods and Drinks industry is, from an analytical perspective, very competitive. However, there is still room for more investors considering that there exists some untapped market. From a professional perspective, it becomes necessary and sufficient for an investor in the sector to consider all sorts of avenues in which it can improve its market scope and even elevate the revenue levels. The same case applies to Marvin and Smith’s Coffee Shop. The fact that the shop has already invested in the London Market, it would be equally important to invest in an alternative market. However, it is also imperative to conduct a reconnaissance study regarding the best future destination. The paper intends to first identify the next choice of country in which the Coffee shop will invest. That will include providing a rationale for selecting the country as a center for investment. Further, a marketing mix will be established considering that it is a tool that is used to determine the suitable investment or expansion plan.
An Evaluation of the Country of Choice
The country of Choice in this case is Germany. From a general perspective, Germany is considered to be an economically stable American nation amidst the ongoing financial crisis that has influenced economic moves such as the Brexit. The process of making the country a target market especially for the coffee shop business venture is influenced by a series of factors most of which constitute the external and internal environmental factors. In a bid to elaborate the rationale for making Germany a country of Choice, it is essential to consider the logical considerations, the ethical considerations and even the feasible structural challenges that could influence the decision.
From a logical perspective, there are myriad issues that ought to be considered. For instance, the contemporary economic status of the country and its prominence in terms of being an investment hub are essential (Foreign investment in Germany 2017). Germany, according to research is stipulated to be a highly attractive nation for FDI or foreign direct investments. It is, however, essential to mention that the FDI measure has been slightly affected upon the recent recession and series of Eurozone crisis that occurred towards the year 2012. That does not affect the decision towards investing in Germany considering that the country has a strong or powerful industry network. The workforce in Germany is highly skilled owing to the excellent education system in the country. The country’s citizens have a good command of the English language making it feasible for international investors to have an easy time communicating with the locals.
Further, there exists a favorable social climate an element that attracts foreign investment. Predictably, the social environment is an assurance that the management of the coffee shop shall not have a difficult time trying to relate with the new market consumers or even the law makers. Germany is also characterized by a stable and reliable infrastructure. That makes it feasible for the shop to identify a suitable location for investing (Foreign investment in Germany 2017). The stable legal framework in the country also makes it Germany a destination for foreign direct investments. However, in as much as the country has excellent properties or features that could feasibly support the FDI venture, it is imperative that the management of the Coffee Shop to consider that the country has a high level of tax rate and also a rather inflexible labor law system.
Germany, in the context of choosing a destination for investment or expansion, is strategically situated. Particularly, it is at the center of the Europe continent. It also possesses the largest population in the European Union. The infrastructure is also considered to be competitively developed as compared to most members of the European Union making it a competitive destination for investment regardless of whether the business that intends to invest is huge or small. Further, the level of technology in the region makes it a reliable destination for investment especially because it requires a reliable technology system especially in the context of communicating data to the mother establishment across boarder in London.
From an ethical perspective, unlike most developed countries situated in the European continent, has a very strict system. For instance, in the context of formality, as well as, flexibility, Germany lacks flexibility especially in terms of keeping time (Business Etiquette and Values in Germany 2017). Accordingly, elements such as time of arriving in meetings is often very not considered as elementary. The Germans are very formal. However, in the case of making decisions in businesses, there is the use of hierarchy towards determining the ultimate and viable decision. Usually, business negotiations, as well as, contracts are usually approved by the management. Further, the issue of professionalism is highly considered. For instance, qualifications of employees is prioritized.
The work ethics are also considered highly. Ideally, in Germany, any project is supposed to be conducted slowly to ensure that there is thorough evaluation of the feasible challenges and risks in a bid to generate outstanding results (Business Etiquette and Values in Germany 2017). It is because of this property that the country has been in the position of generating quality products even in the motor vehicle industry. Ultimately, the issue of fairness and loyalty in business is highly considered. In that case, it becomes necessary and sufficient to observe these elements. According to the structural, logical and ethical considerations of Germany provide an enabling environment for Marvin and Smith’s Coffee Shop.
The Marketing Mix
In the process of establishing a reliable marketing plan, it is essential to fathom that the marketing mix is an integral part of the marketing plan. It constitutes four particular elements that are elementary and that a firm produces the kind of response that it wants in the identified and target market (Miless 2014). The four element that constitute the marketing mix constitute the Place element, position element, the promotion and the product or service. Below is an in-depth overview of the 4ps of the marketing mix.
The Coffee shop, in this case, intends to offer fast foods, smooth drinks and offer services to the consumers on account of demand. For instance, the coffee shop intends to offer East African-inspired coffee and tea products. There is a high likelihood for the consumers to prefer the tea and coffee with the quality as that which is acquired in Uganda. Further, the shop will offer East African soft drinks and snacks including fresh mango juice. These products have an exceptional and attractive taste. The aim offering these products is to ensure that besides getting a foreign feel of the soft drinks and snacks. Besides the diversity of products. The shop will also focus on offering quality services both within the facilities and even offering delivery services for the consumers who are busy to an extent that it becomes hard for them to pick products from the physical premises of the shop. Hence, a combination of the diverse products and delivery services intends to facilitate exemplary performance through satisfying the customers.
It is imperative to denote that the shop will not be the first investor in this sector. That implies that there is a likelihood of experiencing a challenging environment especially in the context the fact that there are more established firms and shops. Accordingly, it is rational to use the penetration pricing strategy (Maguire 2016). A perfect example is that the shop will put into consideration the cost of cup of coffee will be rated at 2.2 euros. The idea here is to ensure that the shop manages to maneuver the extreme forces of competition from other shops that offer the same cup of tea at a higher price. In consideration of the perception that there still exists an untapped market in the German population, it is essential to approach the same market through a realistic and persuasive approach (Maguire 2016). There is a likelihood that the approach will initially result in a loss. However, the long-term outcome is the main target.
First, the shop is expected to be invested in the selected country, Germany. From a more precise perspective the target market is the executive persons or the working class, as well as, the students who can equally afford the products offered. Accordingly the most suitable location in this case Berlin and particularly close to the Berlin Institute of Technology. The target market exhibits a high level of traffic around the sited area.
Germany is an investment decision where quality is highly prioritized (Edwards & Fischer 1996). Accordingly, the country will embrace a variety of avenues through which the idea of the shop, the products offered and services of the shop will be publicized. Ideally, the main approaches or mediums will include the television commercials, the social media ads, the use of flyers, as well as, exhibitions at the shop. A combination of these methods will ensure that the shop successfully informs the potential market of its existence. From a professional perspective, the use of these modes of communication is a way of adding value to the company in the competitive market.
Implications for the Need for Marvin and Smith’s To Cover a Wider Geographical Area
The basis of this analysis is that Marvin and Smith intends to invest in an international market which in this case is Germany. Normally, that results in some implications regarding different areas of management of the business. The paper intends to focus on a set of them attempting to elaborate the extent in which these factors are implicated by the move to go international.
The Marvin and Smith has only two shops that are situated in London. The information system that has been adopted by the management at this juncture is expected to only serve the two shops. That implies that any attempt to expand and furthermore in the international context requires that the shop improves its information system to such an extent that it can serve the expected purpose of linking all the establishments (McKenney 1995). For instance, from a technical perspective, the shop will have to develop a fresh system that will effectively handle the huge or big data that will result from the establishment of additional operations (Abner 2015). Most importantly, it is essential that the management team converges its operations in a bid to merge its potentials. Remember, it is only feasible for the management of the coffee shop investment to gauge its overall performance if it establishes a common platform through which it can easily assess on a daily basis.
Rationally, that would call for a new system that will be hosted online to ensure successful and speedy networking. Further, the initial operating months requires that the top management team to remain in London. That means that the information will have to be transmitted to them frequently to influence future decision making. Hence, it becomes indisputable for the shop to not only adopt a new information system but also enhance it with absolute securities as a measure of protecting it.
The management structure of any business is often expected to change or face advancement on any accounts of investing in an international market. Usually, the difference in ethical, logical and even structural changes imply that there is a likelihood that the management structure will also change (Abner 2015). For instance, the fact that the coffee shop is expected to expand its operations towards Germany will require that the management structure also gets influenced and comply with the expectations.
Upon conducting in-depth research regarding Germany, it is clear that it highly considers the element of hierarchical management. For instance, there is the issue of the top management team being required to perform the role of making the ultimate decisions. Hence, it will be essential for the company to incorporate a section of the top leadership of the shop to German originated individuals (Miless 2014). That will assist in complying with the labor laws of the country, as well as, influencing the market to appreciate the integration between it and them. Finally, the country will offer skilled employees hence making it feasible to have every position being manned by a qualified personality.
Evaluation of the Profitability and Liquidity and Their Impact on the Business Decisions
The elements of profitability and liquidity are often used to evaluate the potential of a firm or company to sustain itself. That could be even more essential in the scenario where the investor intends to expand the operations. Below is an overview of the singled out profitability and liquidity rations that could be used to determine the extent to which the Marvin and Smith’s coffee shop will make sober or misguided decisions.
In this case, the research will make use of the net profitability and the Gross profitability ratios. Below is a decisive break down of each.
The Net Profit ratio
Usually, profitability ratio is calculated as the Net profit as a fraction of Net sales.
The Net Profit = 26, 800
The Net Sales = 360, 000
Hence, Net Profit Ratio = Net Profit/ Net Sales
= 26, 800/360,000
= 0.07 which is equated to 7 percent.
Gross profit ratio
Gross Profit is considered to be the Gross Profit as a fraction of Net Sales. Below is the formula approach as applicable in the case of Marvin and Smith’s financial statements.
The Gross Profit Ratio = Gross profit/ Net Sales
= 208, 000 / 360, 000
= 0.6 which can also be stipulated as 60 percent.
On both accounts, the outcomes of the profit ratios postulated in this case provides that the business is financially health to engage in such a venture as investing in the international market. Precisely, the net profit ratio of the coffee shop as of the recent financial statement is 7 percent or 0.07 making it a viable business. The coffee shop’s net profitability is considerably high implying that in any case that the sales decline, there will be little or no effect on the business. Ideally, the business stands a position of taking absolute control of the expenses as they emerge. Concurrently, the gross profit indicates that the company has sufficient funds to address its financial obligations as it accrues its profit accounts. Remember, when the company manages to acquire profits and even manage these profits means that it can successfully address its operational obligations. Hence, it will be feasible for the shop to invest and operate successfully in the new target business environment.
Upon identifying the strengths of the coffee shop in terms of its financial management, it becomes necessary to evaluate at least one liquidity ratio to affirm the analysis above. The acid-test ratio will the serve the purpose.
Acid Test Ratio is considered to be the difference of current assets and inventory as a fraction of the current liquidity. Below is a numerical breakdown.
Acid- Test Ratio= (Current assets- inventory)/current liabilities
= (35,400- 8000)/ 6,200
From a professional perspective, the fact that he acid-test ratio is 4.42 implies that the coffee shop enjoys a high level of financial security considering that it can easily address its short-term financial obligations without having to seek bail out alternatives or receiverships. That makes it viable for investment in Germany (Saleem & Rehman 2011).
Marvin and Smith’s intentions to expand operations to the international market is a rational and viable idea. First, the fact that the coffee shop intends to deal with high quality drinks and snacks in the new market and at a notably low price implies that there is high likelihood that the consumers will take preference of the products owing to the low pricing strategy (Maguire 2016). Further, the business environment being provided by Germany is conducive for the foreign direct investments like that of Marvin and Smith’s. Besides the fact that, the coffee shop has a strong financial background. That means that it can easily address its financial obligations to the extent of addressing its financial obligations without having to refer to the profits earned in the preliminary months of operations. Ideally, the idea of opening or expanding to Germany was a brilliant one despite the fact that the country as an unrealistic tax system.
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