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Romania case study
Romania is mainly known for its forested region of Transylvania. It has a various medieval town as well as fortified churches and castles. Romania has a high number of individuals who consume coffee. It is a net importing country for coffee. From 2005, the country has had stable coffee imports. It is estimated that the country imports about 50,000 tons of coffee per year. However, over the years the shares of Green soluble and roasted coffee have highly changed. For instance, in 2002, there was a high percentage of imported green coffee compared to soluble and roasted coffee. Nevertheless, in 2011, the share of imported green coffee dropped by half while that of roasted and soluble coffee increased. In 2002, Romania mainly imported its green coffee from Indonesia and Vietnam. Nevertheless, things change in 2011 as the country mainly sourced the coffee from Vietnam (Gavrilescu 2012). In the same year, Romania imported 11.4% of its green coffee from Uganda and 10.9% from Brazil. Its import from Indonesia significantly dropped. The country imports its roasted coffee from different countries. The highest percentage of its roasted coffee is imported from CEFTA countries that are Hungary and Czech Republic. It also imports its coffee from EU countries they include German as well as Italy. The country also re-exports high quantities of roasted coffee on the EU market. The price of coffee in the Romanian market is about 9 EUR per kg for the current coffee while the super-premium coffees are sold at about 30EUR per kg. In 2011, there was an increasing trend for the price of coffee.
In 2014, the Romanian coffee market increased to 420 million euros. The annual average consumption per capital was 2.3 kilograms. In 2015, the country was placed 26th in Europe based on coffee consumption. There are various taxes and levies imposed on coffee (PwC study: Romania’s coffee market reaches 420 million euros in 2014, 2015). The taxes are imposed in three major points in the production line for instance when the product crosses the border of the importing states. The taxes are known as customs duties; there are also the inland taxes, excise duties, and VAT. There are also the import duties that are imposed on the coffee imports. The EU offers special trade access to a various number of exporting states that are under different programs and agreements. Therefore, about 37 exporting states are offered 0% tariffs on coffee imported into the EU. However, the largest exporting states do not enjoy special trade access; they include Brazil, India, Indonesia and Vietnam and this affects the rate of the import duties. The EU is one of the five EU member states that still impose excise duties on coffee. The retail market for coffee in Romania is high, and it includes high VAT as well as excise duties.
It is vital for every organization to consider its clients (Lilien & Grewal, 2012). Currently, the Romania imports its coffee from different states. The country is also ranked among the top coffee consumers worldwide. It is important for Filiz and Smith to consider the quality of coffee so as to attract a huge clientele. Various types of coffee are sold in Romania they include roasted coffee and green coffee. For Filiz and Smith to gain the competitive advantage, they have to import quality coffee beans. Their coffee beans are mainly imported from Kenya. The coffee shop should also offer the clients a great environment to relax. They can introduce Kenyan-themed coffee shops in Romania which will offer individuals a different feeling and experience.
Price is an important aspect considered by every client when purchasing a product. It is a very sensitive factor as clients determine the quality of the product based on the price (Lilien & Grewal, 2012). If the price is too low, the consumers may assume that the product is of poor quality. If it is too high, they may assume that it is overpriced. In Romania, the price of coffee is high due to the high rates of taxes imposed. The average price of a cup of coffee in Romania is $3. The price of Filiz and Smith coffee should be slightly higher than the current standard price. In this case, it should be $5 based on its quality.
There are various means that organizations use to promote their products (Lilien & Grewal, 2012). Filiz and Smith should put a lot of focus on the method they use to promote their coffee in Romania. It is important for them to introduce promotional methods such as gift cards for the consumers. This will encourage people to visit their coffee shop. They should also create banners and place them in strategic areas.
A place is another factor that organizations should consider when putting up a company (Lilien & Grewal, 2012). Filiz and Smith are setting up a coffee shop in a new country. They should consider busy areas where there is a huge number of individuals. Additionally, the cafeteria will be fitted with free Wi-Fi, where the clients can have a chance to use the internet while having a cup of coffee. The Wi-fi will allow the customers to download the latest music; they will also be able to download movies and other files.
Personnel and managing staff issues
Every organization expanding to a new country should consider the issues linked to the management of workers. Organizations should ensure that they manage their employees well and they also need to understand how to handle diverse problems concerning employees so as to gain a competitive advantage in a new country. They should consider the cultural difference that may affect how employees are managed. Romania has different business ethics that organizations are required to consider. There are labor laws that protect the workers’ rights (Adekola & Sergi, 2012). Filiz and Smith are required to treat all the employees fairly. They should also protect them from dangers. The coffee shop should have the non-hazardous equipment. The employees should be trained on how to handle various equipment so as to minimize chances of sustaining injuries. For instance, workers should be trained on how to brew coffee.
Another important aspect that Filiz and Smith should consider is communication. Proper communication increases efficiency within the workplace. The managers should ensure that they maintain excellent communication with other workers (Adekola & Sergi, 2012). They should allow them to present their grievances and offer them guidance where necessary. It is important for the organization to consider the cultural differences so as to minimize issues that may arise due to poor management of clients (Mcintyre, 2016). Filiz and Smith should as well understand the business culture in Romania. It will allow them to work in close collaboration with the workers. Employees’ motivation is also a vital factor that organizations should consider. Understanding the country’s business culture will help in motivating the employees.
Currently, many companies are expanding in foreign countries. Most of the organizations aim at increasing their competitive advantage in the international market. They can gain new clients and increase awareness of their brand (Kasabov & Warlow, 2012). Romania has a strong coffee culture, and it is considered among the top coffee importers. Hence, investing in Romania will give Filiz and Smith a chance to compete with other coffee importers. The company needs to focus on the market and ways to increase their competitive advantage. The Romania coffee market is highly competitive as there is a high number of importers. They are introducing a different quality of coffee beans in the Romanian market. People will have a chance to enjoy coffee from a different country. Many people consider the brand before purchasing any product. If the product has the high brand recognition, it will gain competitive advantage. The high number of individuals that consume coffee in Romania will assist in increasing brand recognition (Gavrilescu 2012). The coffee shop will also earn significant respect from the consumers. The expansion will introduce Filiz and Smith coffee shop to potential clients. Many investors prefer organizations that have great brand recognition. The investors will help in increasing the coffee shop’s finances. They will be able to open coffee shops in different parts of Romania and enhance their competitive advantage. Filiz and Smith coffee shop will have a chance to compete with other coffee houses in Romania. The coffee shop is also selling good quality coffee, and this will help it gain competitive advantage.
Profitability and Liquidity
Gross profit is the profit that a company gains after deducting the cost of products (Williamson et al., 2013). Gross profit is vital as it helps in tracking the organization’s profitability.
Gross profit ratio= Gross Profit/ Net Sales
= 208,000/360,000 × 100
Filiz and Smith coffee shop in London registered a high gross profit ratio. From the results, it is apparent that organization is capable to expand to another country. The coffee market in Romania is highly competitive, and with the gross profit, it will have a chance to compete with other coffee shops in Romania.
Net profit helps in gauging a company’s profitability (Williamson et al., 2013).
Net Profit ratio= Net profit/ Net sales
= 26,800/360,000 × 100
Filiz and Smith coffee shops in London generated a high net ratio. Hence, there is a high chance that the decline in profit will not affect its operations in Romania. Filiz and Smith coffee shops are able to control their costs which are an important aspect of their expansion.
Return on equity capital employed
ROCE is utilized in measuring an organization’s profitability (Williamson et al., 2013). The company can assess whether it is using its capital efficiently.
ROCE= Neth Operating Profit/ Capital Employed
= 26,800/106,800 × 100
The coffee shops in London have recorded a high ROCE in 2015. The coffee shop in Romania will have an easy time controlling its profitability. The coffee shops are able to utilize their capital efficiently.
Current ratios are mainly used to identify the company’s liquidity (Williamson et al., 2013). A company is also able to measure its ability to pay short-term liabilities with short-term assets.
Current ratio= Current assets/ current liabilities
The coffee shops in London recorded high current ratio. It shows that the coffee shops can pay short-term liabilities using the short-term assets. The Romania coffee market is highly competitive and their issues of high taxes, the results show that the coffee shop has the ability to handle difficult financial problems in the country.
Acid test ratio is utilized in measuring an organization’s liquidity (Williamson et al., 2013).
Acid test ratio= (Current assets- inventory)/ current liabilities
= (35,400- 8000)/ 6,200
The coffee shops recorded a high acidic test ratio. This shows that the organization is financially stable. It can pay its short-term liabilities; hence, it will have an easy time expanding to Romania.
( 300 words)
According to research, it is viable for Filiz and Smith coffee shop to expand to Romania. The coffee shop in the country is highly competitive; however, the coffee shop will gain a competitive advantage due to its quality coffee and financial status. People in Romania will have the opportunity to enjoy quality coffee. The company should be ready to meet various challenges such as high taxes and cultural differences. Its profitability and liquidity show that the firm is ready to meet challenges in Romania. The current ratio indicates that it is able to pay short-term liabilities using the short-term assets. Additionally, its net ratio shows that the company has high profitability, hence it is stable. Filiz and Smith coffee shops have positive profitability, and they are in a good position to meet different financial challenges in a new country. The new coffee shop in Romania should aim at becoming a leader in the new market.
Adekola, A., & Sergi, B. S. (2012). Global Business Management: A Cross-Cultural
Perspective. Ashgate Publishing.
Gavrilescu, C. (2012). Romania in The European And World Coffee
Market. Retrieved February 21, 2017.
Kasabov, E., & Warlow, A. (2012). The compliance business and its customers:
gainging competitive advantage by controlling your customers. Basingstoke, Palgrave Macmillan.
Lilien, G. L., & Grewal, R. (2012). Handbook of Business-to-Business Marketing.
Cheltenham, Edward Elgar Pub.
Mcintyre, J. R. (2016). Emerging dynamics of sustainability in multinational enterprises.
PwC study: Romania’s coffee market reaches 420 million euros in 2014. (2015, March 27). Retrieved February 21, 2017, from http://www.nineoclock.ro/pwc-study-romania%E2%80%99s-coffee-market-reaches-420-million-euros-in-2014/.
Williamson, D., Jenkins, W., Cooke, P., & Moreton, K. M. (2013). Strategic Management
and Business Analysis. Routledge.
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