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INTRODUCTION

Before starting up any business venture, it is essential for entrepreneur to undertake various functions which are related to launching new product or service, expanding current business etc. Thus, these factors are considered as essentials and thus business 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 could follow them appropriately and thus accomplish the business activities. Present report discusses about 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 planning to launch the coffee shop in European Union country. This, would result firm in growing the business venture and thus enhance the sales and profitability of firm in 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 factor that directly impacts upon the business and therefore, firm need to assess the same before launching the coffee shop in any specific country. As Marvin and Smith decided to enter into foreign location and grow their business in European Union country it is essential for them to identify the country which is suitable for them and helps in influencing target consumers. There are around 28 nations in European Union that possess trade policy in regard to analyse the expectations of customers towards the products within those countries. However, in regard to expand the business in international market, entrepreneur needs to identify the needs and wants of customers that possess huge impact upon firm (Sherry and Canon, 2014).Assignment assistance online at Assignment Desk

Hence, Germany has been selected which is EU nation and thus possess cold climatic conditions therefore, it creates more demand of coffee among consumers. Therefore, Marvin and Smith focuses upon expanding the business functions in Germany and thus aims to expand in such EU nation so that best results could be carried out (Jaggia and et. al., 2016). Following are the different factors that need to be considered in regard to analyse them before starting the business-

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

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

Through developing marketing mix it helps business to emphasizing upon 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, firm needs to make their strategies according to expansion of business in international market. Following are the different marketing mix strategies such as-

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

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

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

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

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

Following are the different financial information that needs to be identified by business in regard to make effective decisions about expanding business in new market-

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

Current ratio- Such ratios are calculated by business in regard to determine whether firm is capable to fulfil its short term debts or not (Min, 2015). Further, it is also calculated by dividing total assets by total liability. 2:1 is the idea ratio and the higher the ratio it helps company to pay the liabilities against the assets. However, lower ratio is ineffective for firm and creates bad image consumers . Following is the calculation of 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 firm in regard to pay short term debts. 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 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- Company uses such ratio in relation to identify net profits that is earned by firm and carry out business activities. However, net profit margin is being calculated from sales and also subtacting 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 about overall viability of overseas expansion

Marvin and Smith aims to expand its business operations in European Union nation. Therefore, it selects Germany so that business could be expanded in that country and enhance sales and profitability of 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, company aims to enter into international market and selects Germany so that they can identify the needs and wants of customers and provide them coffee products. For this, firm needs to carry out proper market analysis and identify the needs and wants of customers so that target market could be selected in regard to improve sales and performance in market. Marvin and Smith analyse the market conditions of Germany and attain high growth and success. As per the needs of customers, firm provides different products or services related to coffee and attain high sales. It is essential for firm to adopt cost effective pricing strategy so that low prices could be maintained by firm at initial and then gradually increase them so that market share could be enlarged (Smith, Mills and Dion, 2012).

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

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

CONCLUSION

It can be concluded from the study that entrepreneur needs to plan different factors before launching any new business concept in 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 firm in market. Mavin and Smith also identifies effective marketing mix strategy i.e. product, price, place and promotion in regard to deliver quality products and services to customers. Also, identifying the profitability and liquidity ratios of firm it helps in proving that 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 guest overall satisfaction. Journal of Quality Assurance in Hospitality & Tourism. 12(4). pp.272-288.

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