Abstract

The paper involves assessing a fitting country in the European Union that would be suitable for the expansion of Marvin and Smith coffee shop. Netherlands has emerged as a favourable destination given that the demand for coffee is quite high over there. The average consumption is about 2.4 cups/day. The country’s market also combines well with Marvin and Smith’s model of offering premium coffee with an East African origin. The elite class of consumers in Netherlands do not have a problem with paying extra for high-quality coffee. They also enjoy the prospect of there being a story behind their cup of coffee. The marketing mix has been detailed, and it shows favourable aspects of the coffee shop operating in Netherlands. However, the organisational culture and ways of gaining competitive advantage are likely to be impacted by the prospect of covering a wider geographical area in the overseas market. Despite the prospect of operating in Netherlands seeming quite attractive, the business ought to make the expansion decision taking into consideration the profitability and liquidity aspects. This is due to the significant role that finances play in the running of a business.

1.Country of Expansion

Netherlands comes out as a favourable destination for Hank Marvin and Patty Smith to expand their coffee shop business. The demand for coffee in the country is quite high. It is the seventh largest green coffee importer in Europe; which accounts for almost 5% of the country’s imports. In 2015, Netherlands imports amounted to over 159 thousand tonnes (Chapagain and Hoekstra, 2016). This plays in showing how the country is a favourable destination for coffee related products. These high import figures are a result of the high consumption patterns in the country. This concept is even enabled by Netherland’s geographical location, which is between the largest coffee ports; Hamburg and Antwerp (Lorist and Snel 2013). This also explains why Netherlands sources almost 71% of its imports in Europe. The consumption average in the country is 2.4 cups/day (Chapagain and Hoekstra, 2016). This shows that the demand is quite favourable hence making it a logical market for Hank Marvin and Patty Smith to venture in.

When it comes to ethical considerations, consumers in Netherlands have varied issues that they take seriously when purchasing products and services. Among them are quality, trust, and compliance issues. Traditionally, coffee consumers in Netherlands are used to taking Robusta and Arabica coffee. However, the demand for premium coffee has increased rapidly over the years. This has been attributed by the demand for high-quality coffee. Most of the consumers are now educated and hence are willing to pay higher prices to get higher quality (cbi.eu, 2017). The segment is developing significantly as coffee houses are being recognised for offering other specialty items in addition to the coffee. This is a similar type of model being used by Marvin and Smith hence it is logical for the business to be established here. The consumers have started to develop an interest in the story behind the cup of coffee they are consuming (cbi.eu, 2017). This entails focusing on where the coffee originates and the production circumstances. Coffee offered at Hank Marvin and Patty Smith falls well in this category as it has a story behind. The story behind its origin from East Africa will go well with such consumers. When it comes to compliance, the coffee shop will be aiming to follow all the legal requirements hence earning the trust of consumers. The coffee shop has a formidable ethos of upholding fair trade, and this will work to its advantage.

The structural challenges that the business is likely to encounter include the requirements that coffee ought to comply with before it is sold to the Netherland’s market. Food control and food safety are vital issues when it comes to EU food legislation. Regulation (EC) 178/2002 requires that food products that have been presented to the market to be traceable through the entire supply chain to help guarantee food safety and limit the risks of contamination (Lorist and Snel 2013). This would not be an obstacle since the coffee offered at Hank Marvin and Patty Smith can be traceable throughout the supply chain. The coffee uses the finest beans from Gumutindo Coffee that emanates from a fair-trade supplier in Eastern Uganda whose objective is to enable farmers to earn independent income while running their own farms.

Locations of Coffee Consumption in the Netherlands in 2016

Source: www.statista.com

The graph above shows that most coffee consumers prefer taking their coffee at home and work. Given the model that Marvin and Smith coffee shop operates with, it will have the ability to attract those consumers since its services are likely to make someone feel at home given the environment that is created.

2. Marketing Mix

Product

The main product that Marvin and Smith will be selling is coffee derived from the Gumutindo Coffee beans. The coffee shop will also be offering other products such as pastries, snacks and cold drinks such as fresh mango juice. All these offerings should be East African inspired since this is where the business’ brand revolves around. This will help present Marvin and Smith as a premium brand that consumers can associate with. The product is the vital element for the marketing mix of the coffee shop since the entire marketing strategy of the business is dependent on the consumers loving the products on offer. The focus should be more on a pull strategy rather than a push strategy.

Price

Marvin and Smith should target on using a premium pricing strategy. The business aims at giving high-quality coffee that has a story behind it. This is something that consumers will be willing to pay for due to the high quality associated with the products.  This pricing strategy is meant to take advantage of the consumers’ behavioural tendency of purchasing highly-priced products due to the perceived correlation between elevated prices and high value (Richter, 2012). The coffee products in the business are expected to be more expensive than most of the competitors in the market of operation.  This will assist the business to maintain a high-end specialty image.

Place

Marvin and Smith will be offering its products through coffee shops. The first coffee shop will be established in Amsterdam. Being a major city, the population is favourably high hence the potential of capturing a substantial market share is high.  There will be a need of establishing the shops in places that are easily accessible and have high traffic. As the business continues to mature in this market, there can be a consideration of making home deliveries. This approach can be supported by offering the products via the internet. This will be necessitated by the fact that the largest percentage of coffee in Netherlands is consumed at home. As a result, this approach would help in serving the needs of the consumers hence helping to build the necessary loyalty.

Promotion

Marvin and Smith will focus on promoting the products mainly through advertising. The platforms to be used for advertising will include print media, television and the internet. This promotion strategy is likely to reach as many target consumers as possible. Social media will come in handy given the rate at which people have embraced it. In addition to advertising, other promotional strategies such as public relations and sales promotions are likely to work too. This is due to the personal touch that comes with these strategies as it augers well with the nature of products being offered (Fan et al., 2015).

3. Implications of Covering a Wider Geographical Area

The need for Marvin and Smith to cover a wider geographical area while operating in a different country will have an implication on the organization’s operations. This is because there will be a need to adopt systems and strategies that seem universal in all the countries of operation. This would imply some changes in the UK market to help actualize a universal look. The business wants to establish itself as a brand, and therefore, there is need to have a general, similar outlook in all the markets that it operates in. However, this might not be feasible at all times due to the differences that exist in varied markets. This aspect will have an impact on the organisation culture and gaining competitive advantage.

Organizational culture

To ensure that operations run smoothly in all the markets involved, there will be a need to embrace the aspects of inclusion and diversity within the organization’s culture. This will require the organization to establish an anti-discrimination policy that will be used in shaping the culture. The policy will prohibit all forms of discrimination that come as a result of race, gender, sexual orientation, ethnicity, cultural backgrounds, age and religion among others (Schein and Schein, 2017). This will enable the business to establish a favourable rapport with the employees since there will be a feeling that they are welcomed at the coffee shop.

There will also be a need to establish effective communication and collaboration. The baristas should adopt a way of communicating clearly with their colleagues and the potential customers. This is something that Marvin and Smith have worked on to ensure that it prevails in the UK market. The staff is usually expected to take part in themed evenings such as playing short board games with customers that do not have partners. Such aspects are likely to enhance efficiency, which translates to quality of service hence favourable consumer experience.

There ought to be a relationship-driven approach too that will help in ensuring that employees are treated appropriately at all times. The employees will work towards translating similar sentiments towards the customers, and everyone remains contented (Schein and Schein, 2017).

Gaining Competitive Advantage

The business cannot use similar approaches in the markets of operation while trying to gain competitive advantage. Despite the business aiming to establish a brand that is easily recognised in all the markets of operation, trying to use similar strategies to gain competitive advantage might not work. This is due to the different cultures and dynamics in these markets (Schilke, 2013). One strategy might work in one market but fail miserably in another market.

The best approach for Marvin and Smith to gain a competitive advantage in a similar fashion in all its markets to maintain a brand identity is by way of using strategies that could be universally applicable. Consumers from different markets might be different, but there are some elements that will always be similar (Schilke, 2013). A good example is how every consumer desires to get a value for their money.

As a result, among the ways that Marvin and Smith would gain a competitive advantage is through the provision of quality products and offering good customer experience. Provision of quality products will come with the usage of the finest coffee beans. This is something that the business can handle since it is already offering premium coffee courtesy of Gumutindo Coffee beans. Connected customer experience on its part will help to establish favourable long-term relationships. This makes the customers feel at home hence establishing a good rapport with the business (Schilke, 2013). The business can also put more emphasis on differentiation and focus. These are elements that help the business to stand out. These strategies can be applied in any market, and have the ability to bring benefits.

4. Impacts of Profitability and Liquidity

The profitability and liquidity of Marvin and Smith coffee shop are likely to have an impact on the decisions that they are likely to make regarding the business while moving forward. This is because finances usually play a significant role in the running of a business. It is the amount of finance in the business that determines the type of investments to be made and the expansion probabilities (Cunningham, 2012). This makes it imperative for the business managers to have a good analysis of the finances as a result.

Marvin and Smith coffee shop profitability as at 31st December 2016 was £26,800. The business was initiated on a base capital of £100,000, which was contributed equally by both parties. This is to say that the current profits would not be sufficient to make a similar investment by way of expansion. Marvin and Smith intend to set up shop in another EU country, but such a decision is not solely dependent on what they want, but the financial capability of the business too. Given the current profitability prospects, Marvin and Smith cannot expand into the Netherlands since there are no sufficient funds to oversee such an initiative. Given that this is a foreign market, the initial investment is expected to be even higher than what was spent in the home country. If Marvin and Smith plans are based on reinvesting the business’ profits in the planned expansion, then the viable decision to make is that the plan to expand is not viable at the moment. The decision to venture into the foreign market would only be made when the business has actualized a profitability that is sufficient for the course (Cunningham, 2012). However, the business can still make the decision to venture into the foreign market by way of using external funding. Formal loans would not be that difficult to acquire given that the business is operating at a profit, and has varied assets to act as collateral. The interests associated with the loans will form part of the fixed costs, and the management has to ensure that they increase the sales levels to the desired amount to ensure that they are able to cover the increased costs.

The profitability prospects also help in making the decision on whether to offer employees bonuses and how much for that matter. It is always shrewd for a business to offer bonuses to its employees (Velu and Stiles, 2013). Financial related remuneration works as a good motivation for employees.

When it comes to liquidity prospects, the business has £27,400 in liquid cash. This would go a long way into determining the money that is available for the business to fund its additional marketing initiatives. Given the current cash at hand, the business should seek avenues that are cheap, but effective at the same time. As a result, it would be judicious to make the decision of concentrating more on the internet as opposed to television commercials.

5. Conclusion

Netherlands would serve as a favourable destination for the expansion of Marvin and Smith coffee shop. Among the reasons is that the demand for coffee is high hence probability of acquiring a substantial market share is high. Coffee alone accounts almost 5% of the country’s imports. The average consumption of coffee is 2.4 cups/day. The coffee offered by Marvin and Smith is also premium and of high quality. This is something that coffee consumers in Netherlands have started to embrace as they are willing to pay higher prices for that extra quality. They are looking forward to have a story behind their cup of coffee; something that Marvin and Smith were offering as the Gumutindo coffee beans have their origin in East Africa.

Despite the prospects of Marvin and Smith coffee shop being favourable, the viability of overseas expansion is not feasible at this stage. This notion comes from a financial point of view. As at 31st December 2016, the business had profits amounting to £26,800. This amount would not be sufficient to establish a new business in Netherlands. If the business was to push for establishment of overseas coffee shops at this stage, the only way to do this would be through external funding i.e., formal debts. This would result in financial constraints to the business since it is still young and focusing the financial gains in repayment of loans and the applicable interests would leave the business stagnant since other developmental activities would be abandoned. Issuing something like bonuses to employees would be difficult due to the financial constraints. Decisions made under financial constraints also tend to  limit the business in a way since they are mostly made with the fear of not losing funds, and this tends to kill creativity and innovation.

 References

cbi.eu, (2017) Exporting coffee to the Netherlands. CBI – Centre for the Promotion of Imports from developing countries. Available at: https://www.cbi.eu/market-information/coffee/netherlands/ [Accessed: 10 March 2017].

Chapagain, A. and Hoekstra, A., (2015) ‘The water footprint of coffee and tea consumption in the Netherlands’. Ecological Economics, 64 (1), pp.109-118.

Cunningham, B., (2012) Accounting: Information for Business Decisions, South Melbourne, Vic: Cengage Learning Australia.

Fan, S., Lau, R. and Zhao, J., (2015) ‘Demystifying Big Data Analytics for Business Intelligence Through the Lens of Marketing Mix’. Big Data Research, 2 (1), pp.28-32.

Lorist, M. and Snel, J., (2013) Nicotine, Caffeine and Social Drinking: Behaviour and Brain Function, Hoboken: Taylor and Francis.

Richter, T., (2012) International marketing mix management:Theoretical Framework, Contingency Factors and Empirical Findings from World-Markets, Berlin: Logos-Verl.

Schein, E. and Schein, P., (2017) Organization culture and leadership, Hoboken, New Jersey: Wiley.

Schilke, O., (2013) ‘On the contingent value of dynamic capabilities of competitive advantage: The nonlinear moderating effect of environmental dynamism’. Strategic Management Journal, 35 (2), pp.179-203.

Velu, C. and Stiles, P., (2013) ‘Managing Decision-Making and Cannibalization for Parallel Business Models’. Long Range Planning, 46 (6), pp.443-458.

 
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