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Business Essentials

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INTRODUCTION

Before starting up any business venture, it is essential for an entrepreneur to undertake various functions which are related to launching new products or services, expanding current business etc. Thus, these factors are considered as essentials and thus businesses need to adopt them before starting any new venture (Wilson, 2014). Entrepreneurs need to assess varied political and economic conditions prevailing in the country so that they can follow them appropriately and thus accomplish their business activities. The present report discusses Hank Marvin and Patty Smith who possess a dream to start their own coffee shop. Thus, for that, they are planning to analyse various factors such as location, target market, suppliers etc. After starting the business in South London, they think to expand the business in European Union country.

1. Deciding the country to expand coffee shop

After starting the business in South London, Hank Marvin and Patty Smith decided to go overseas expansion plan and thus planned to launch the coffee shop in the European Union country. This would result in the firm in growing the business venture and thus enhance the sales and profitability of the firm in the market (Anderson and et. al., 2014). There are various factors such as political, legal, economic, environmental and social that affects the activities of business. However, market growth is one of the factors that directly impact the business and therefore, firms need to assess the same before launching a coffee shop in any specific country. As Marvin and Smith decided to enter into a foreign location and grow their business in a European Union country it is essential for them to identify the country which is suitable for them and help in influencing target consumers. There are around 28 nations in the European Union that possess trade policies in regard to analysing the expectations of customers towards the products within those countries. However, in regard to expanding the business in the international market, an entrepreneur needs to identify the needs and wants of customers that possess a huge impact on the firm (Sherry and Canon, 2014). Assignment assistance online at the Assignment Desk

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Hence, Germany has been selected which is an EU nation and thus possesses cold climatic conditions therefore, it creates more demand for coffee among consumers. Therefore, Marvin and Smith focus on expanding the business functions in Germany and thus aim to expand in such EU nations so that the best results can be carried out (Jaggia and et. al., 2016). Following are the different factors that need to be considered in regard to analysis before starting the business-

  • Fairtrade policy- Here, an entrepreneur needs to identify the policies of the German government and thus they assess that the country supports and encourages entrepreneurs who are using fair trade policy. As per this policy, the supplier is able to make a supply to businesses that are operating worldwide and thus provide them varied benefits to carry out their business within the nation (Cavusgil and et. al.,  2014). Thus, the German government supports entrepreneur who plans to expand their business in such a market.
  • Environmental aspects- Within Germany there is a cold environment and thus demand for coffee is high. As the current business deals in coffee products, it benefits consumers and influences them towards the firm. The majority of the consumers living in Germany like black coffee and thus it provides various health benefits to them so that firm could expand its business in such a market (Min, 2015).
  • Market- There is a high number of German population who consume coffee on a regular basis and thus Marvin and Smith face tough competition within such a market as there are varied coffee shops operating in the country (Ajagbe, Long and Solomon, 2014). However, the demand for coffee is high therefore, the firm could plan to expand in such a market as the climatic conditions of Germany is cold and thus majority of people prefer to consume hot drinks over cold.
  • Gross Domestic Production- The automobile industry of Germany is flourishing and therefore it has € 3.70 Trillion in gross domestic production thus large number of employees are working within such an industry. Therefore, Marvin and Smith could plan to open their coffee shop at such a location and enhance their business opportunities (Cobanoglu and et. al., 2011).

2. Marketing mix in relation to the expansion plan of coffee shop abroad

Developing a marketing mix it helps businesses to emphasise various factors and thus decide that Marvin and Smith are planning to expand their business in Germany which is a European Union nation (Ebert and et. al., 2014). However, the firm needs to make its strategies according to the expansion of business in the international market. Following are the different marketing mix strategies such as-

  • Products- Marvin and Smith belong to the food and catering industry, therefore they plan to start their own coffee shop and thus later decided to expand it in overseas markets. The firm needs to analyse the needs and expectations of customers and then prepare a list of products that need to be provided (Ferrero and Sison, 2014). However, it has been identified that most of the people living in Germany focus on their health and aim to consume healthy drinks therefore, Marvin and Smith decided to provide proper healthy coffee for their target consumers.
  • Price- It is another factor of the marketing mix which needs to be decided by firm before entering into a new market. Marvin and Smith need to decide the purchasing power of consumers in the target market and then set the prices of products accordingly. The company needs to select a cost-effective strategy and thus at the initial stage, they need to sell their product at low rates and then gradually increase the cost of the coffee (Smith, Mills and Dion, 2012). It is also essential for firm to use such a strategy because there are various competitors available in the market selling similar products and thus tend to decrease their prices in order to influence clients towards the firm.
  • Place- Marvin and Smith need to assess the place factor which is essential for them to select in order to start the operations. Here, the firm selects the German market and thus identifies the needs and expectations of customers and then provides them with similar products so that sales can be enhanced. However, Germany was selected because it has having cold environment and thus people consume a large amount of coffee as compared to cold drinks (Wilson, 2014). Thus, it is a suitable place and thus firm to expand its operations in the market.
  • Promotion- Further, promotion is another crucial factor that helps in advertising the Marvin and Smith coffee products in Germany. However, most consumers are using social media i.e. internet, e-mails and Facebook so that companies can promote themselves over them. For instance, the firm can carry out contest through Facebook and thus influence consumers towards the firm (What is Supply Chain Management?. 2011). Further, a company could also use print media i.e. newspapers, pamphlets etc. in regard to inform customers about new business in the market.

3. Implications of the need for Marvin and Smith to cover a wide geographical area in a different country

Following are the different points that need to be discussed for Marvin and Smith in regard to covering the wide geographical area in Germany such as

  • Organisational culture- It possesses a huge impact on the Marvin and Smith coffee shop which is currently operating in South London. Thus, after such growth, the firm plans to enhance its business abroad. Therefore, the company aims to maintain an effective organizational culture and obtain beliefs and values so that it does not badly impact Germany consumers (Wilson, 2014). Hence, Marvin and Smith maintain a similar culture in Germany also and safeguard ethics while carrying out their business activities. However, the business works independently and brings new changes so that needs can be fulfilled by customers. Improving the business culture and bringing innovation within the coffee shop helps in attracting customers towards the firm in regard to enhancing sales and profitability of the firm in the market. It is essential for a firm to maintain a business culture and thus carry out activities so that the performance of the firm can be enhanced. Building an innovative culture helps influence German consumers towards the firm and therefore, it aids in improving the firm's sales and profitability (Anderson and et. al., 2014).
  • Supply chain- Further, it is another factor that needs to be considered by businesses at the time of geographical expansion. For instance, Marvin and Smith need to manage the supply chain and thus focus on customers who are directly consuming coffee products in the market (Sherry and Canon, 2014). Hence, it is essential for a firm to carry out a supply chain and thus deliver products to customers effectively. The organization needs to carry out an effective supply chain within the German market and thus enhance the sales and profitability of firm in the market. Here, the firm chooses a single supply chain and thus directly delivers coffee and other food products to consumers who are visiting coffee shops. Thus, such aspect helps in influencing business opportunities and enhancing customer satisfaction in the market (Jaggia and et. al., 2016).

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4. Evaluating financial information and how their profitability and liquidity impact decisions

Following is the different financial information that needs to be identified by the business in regard to making effective decisions about expanding business in new markets-

  • Liquidity ratio- Such a ratio helps in defining the liquidity status of the firm. However, it helps in identifying the total ability of a business to pay off its short-term debts against its assets out of the total profits of the firm (Cavusgil and et. al.,  2014). Further, after evaluating the liquidity ratio, if the answer comes to more than 1 then it means that it is fully recovered by the firm. Following are the different types of liquidity ratios such as

Current ratio- Such ratios are calculated by businesses in regard to determining whether the firm is capable of fulfilling its short-term debts or not (Min, 2015). Further, it is also calculated by dividing total assets by total liability. 2:1 is the ideal ratio and the higher the ratio it helps the company to pay the liabilities against the assets. However, a lower ratio is ineffective for firms and creates a bad image for consumers. Following is the calculation of the current ratio of Marvin and Smith-

Formula

Current ratio= current liabilities /current assets

Calculation

35400/6200=5.7

2:1 is the ideal ratio therefore current ratio for Marvin and Smith is 5.7:1, which is more than the set limit. Therefore, it is good for business.

Quick ratio- It helps in identifying the abilities of the firm in regard to pay short-term debts. The quick ratio is also termed as acid ratio (Ajagbe, Long and Solomon, 2014). Here, if the ratio is less than 1 then business is not able to pay its liabilities and debts while, if it is more than 1 it helps the firm to pay the debts and liabilities.

Formula

Quick ratio= cash +marketable securities /current liabilities

Calculation=

(35400-8000)/6200=4.42

Acid ratio that has been calculated is 4.42: 1, which is alos higher than ideal ratio and thus it is a good sign for business. As ideal ratio is 1:1.

  • Profitability ratio- With the help of such ratio, it helps in identifying the capabilities of firm and thus make income over expenses. There are different forms of profitability ratio-

Gross profit ratio- Through the financial statement of Marvin and Smith gross profit ratio of firm could be identified in relation to assess cost of goods and services against the sales that are generated by business (Cobanoglu and et. al., 2011).

                 Formula

Gross profit ratio=(Gross profit/sales)*10

        Calculation

= (208000/360000)*100

=57.77%

Thus, gross profit margin of  firm is much higher than ideal ratio. Hence, it is beneficial for Marvin and Smith.

Net profit margin- The company uses such a ratio in relation to identify net profits that is earned by firm and carrying out business activities. However, net profit margin is being calculated from sales and also subtracting all the indirect costs and expenses incurred by firm in relation to assess net profits. Company aims to identify the business profitability and thus make necessary changes so that firm could increase or decrease their net profit (Ebert and et. al., 2014).

Formula

Net profit margin=(Net profit/sales)*100

Calculation

= (26800/360000)*100

=7.44%

It assesses that Marvin and Smith are less compared to the gross profit ratio.   

5. Summary of overall viability of overseas expansion

Marvin and Smith aim to expand its business operations in the European Union nation. Therefore, it selected Germany so that business could be expanded in that country and enhance the sales and profitability of the firm. It would result in improving business viability and thus carry out overseas business expansion so that market share could be improved (Ferrero and Sison, 2014). After starting the business in London, the company aims to enter the international market and selects Germany so that it can identify the needs and wants of customers and provide them with coffee products. For this, the firm needs to carry out proper market analysis and identify the needs and wants of customers so that the target market can be selected in regard to improving sales and performance in the market. Marvin and Smith analyse the market conditions of Germany and attain high growth and success. As per the needs of customers, the firm provides different products or services related to coffee and attains high sales. It is essential for a firm to adopt cost cost-effective pricing strategy so that low prices can be maintained by the firm initially and then gradually increased so that market share can be enlarged (Smith, Mills and Dion, 2012).

Further, Marvin and Smith analyse that the market in which the firm aims to expand is a cold area and therefore, the demand for coffee is high. Hence, it is beneficial for them to improve business performance and sales in the market. The firm needs to adopt different promotion methods and identify the needs of its clients so that sales can be improved. In order to attract customers in a new market, the firm needs to keep low prices at the initial stage and then gradually increase them (Wilson, 2014). It will help in influencing a large number of consumers towards the firm and thus improve business performance in the market. Also, the company needs to develop a proper supply chain that results in identifying the way through which they could easily reach end users.

After identifying a suitable market it helps the business to start up the venture and thus give tough competition to rivals. Also, using different promotional strategies such as Facebook, the internet, e-mails and pamphlets helps businesses to carry out desired results in terms of enhancing sales and profitability in the market (Anderson and et. al., 2014). Thus, adopting all such aspects results in improving the overall viability of business in overseas expansion.

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CONCLUSION

It can be concluded from the study that entrepreneur needs to plan different factors before launching any new business concept in the market. Therefore, it is essential for business to identify different factors such as location, innovation change, target customers' needs etc. in order to enhance sales and profitability of a firm in the market. Mavin and Smith also identify effective marketing mix strategies i.e. product, price, place and promotion in regard to delivering quality products and services to customers. Also, identifying the profitability and liquidity ratios of a firm it helps in proving that the business aims to enhance its market share and sales.

REFERENCES

  • Wilson, J., 2014. Essentials of business research: A guide to doing your research project. Sage.
  • Anderson, D.R. and et. al., 2014. Essentials of statistics for business and economics. Cengage Learning.
  • Sherry, C.S. and Canon, C.L., 2014. An Introduction to “Business Essentials”. Journal of the American College of Radiology. 11(2). pp.110-111.
  • Jaggia, S. and et. al., 2016. Essentials of business statistics: communicating with numbers. McGraw-Hill Education.
  • Cavusgil, S.T. and et. al.,  2014. International business. Pearson Australia.
  • Min, H., 2015. The essentials of supply chain management: New business concepts and applications. FT Press.
  • Ajagbe, M.A., Long, C.S. and Solomon, O., 2014. The impact of sales promotion and product branding on company performance: A case study of AIICO insurance Nigerian PLC. Procedia-Social and Behavioral Sciences. 129. pp.164-171.
  • Cobanoglu, C. and et. al., 2011. The impact of technology amenities on hotel guests overall satisfaction. Journal of Quality Assurance in Hospitality & Tourism. 12(4). pp.272-288.
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