The business expansion is a significant task which must be done with the help of a systematic planning and application of concrete strategies. As per this need, it is necessary to select the area accordingly and make further plans of expansion which can help in generating higher profits (Hair, 2015). The present report is based on the similar topic where Hank Marvin and Patty Smith are going to expand their cafe business in Finland which can help them in earning better profits. Further, the marketing mix for expanding business will also be helpful tool that will make different aspects of product understandable. In addition to this, with the help of financial information, suitability of expansion plan will be investigated so that right decision can be made.
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1.1 Selecting place for expansion
Marvin and Smith's coffee shop is a well established venture in London where they have made a good success with the help of planned procedures. Now, in the present time, they have made decision to expand their business in other places so that they can get better response (Wilson, 2014). In this regard, they have made a decision to set up their new business in Finland for which they have researched a lot. As per the study, it has been found that Finland has been ranked on the 10th position for carrying out the business. Said country's Oulu city can provide a better option for doing business as it has a stable political and economic environment. The points which make this country viable for Marvin and Smith to develop business are as follows:
- The country has sound political condition where government of country help various new ventures for developing and setting up their business here. Further, the level of corruption is very less in the stated place (Cobanoglu and et.al., 2011). Thus, the organization can set up the business in the environment with the aid of government assistance in R&D and various other activities.
- The educational level of referred country is also very high and belongs to superior quality. This will help the new business for acquiring highly skilled and competent employees as they are the asset of the business.
- Apart from this, the country's geographical location is also suitable and has many natural places which are capable in attracting large number of tourists. Thus, it will be a beneficial factor for developing business in such place which will attract more number of local customers as well as tourists (Woiceshyn, 2011).
- The country is well developed and advanced where use of modern technologies is a part of daily life. Thus, it will help the mentioned business to carry out marketing with the help of better and advanced tools.
The major issue in this place which can be faced by the said country is a tough competition as the conditions of country is favourable which attract large number of companies to set up their business. Hence, said organisation will have to develop some innovative strategies to establish and operate their business successfully (Hair, 2015).
2.1 Marketing mix
As per the current market need, company want to introduce one more coffee shop in Finland for business expansion. So they need to identify the current market environment with the help of marketing mix tools. Preparation of marketing mix strategies are helpful to business expansion where company focus on such elements like: ( Datta, Ailawadi, and van Heerde, 2016)
- Product: In this tool company focus on their products where they bring some uniqueness in products which is different from others. So organisation identify need of the customers and then produce their product according to needs. They launched hot and cold coffee product where it is made by quality coffee beans. Company must focus on quality of products and provide better service with it. With the help of uniqueness in product they will attract large number of customers.
- Price: Customers and people of Finland can be characterized on the basis of price aspect. Where firm set price of coffee according to people who have high consuming rate of coffee in daily routine. Company set prices according to quality of services which is offered by the customer. Firstly they set affordable price because this is the introduction stage where they introduce product and ensure large number of people have to consume. Once customer will be satisfied with their product and build a loyalty with it so thereafter company will charge competitive price for the services offered.
- Place: Company want to attract large number of customers with their products. So they set target market in Finland where living standard of people is good. Moreover, they target office going people and college going persons these person consume coffee in less time periods. Placing is affected business concern which means proper placing is more important for the new business and select the suitable market segment to introducing there product. (Fan, Lau and Zhao, 2015)
- Promotion: Promotion is a very effective tool of marketing mix where proper promotion of suitable product is help to increasing their productivity in current market. So Marvin and Smith promote their products on large scale where they use social media , television advertising, promotion flex, canopies and many more advertising tools, which are helpful in increasing productivity and promotional activities. These are also helpful to provide information all around the country. Marvin and Smith ensure creativity and innovative strategies in promotional activities which can attract large number of customers. ( Hanssens and et.al., 2014)
- People: Company hire skilled people for product managing and for business entity, they ensure people will be creative and innovative in thinking for promotional strategies. They will make sure people will be more knowledgable and good communication skills. Those person are most important persons of the company where they convince customers and sell product effectively. They will generate innovative and creativity in ideas where it is beneficial for the company productivity. ( Huang and Sarigöllü, 2014.)
- Process: Company have to focus on effective process to deliver their product. Cited enterprise will follow specific process for preparing coffee and services which are more hygienic. People will get products easily and with the special appearance.
- Physical evidence: In this tool customer highly influenced from the shop interior and exterior of the coffee shop. They will make sure ambiance of coffee shop is warm and create a positive environment in the customers mind ( Leonidou , Katsikeas, and Morgan, 2013)
Implications of different factors on the Marvin and Smith's coffee shop
The coffee shop such as Marvin and Smith is currently operating its business in catering and food industry of London country. There are various types of factors which affect the firm in a positive as well as in a negative way. Mainly two factors influence the business environment and sales of the Marvin and Smith's coffee shop. There are two main elements which impact on the firm at the time of business expansion are such as earning competitive advantage and issues regarding employees which are delineated as below:
- Personnel and managing staff issues: Personnel or employees are the key assets of every business entity whether it operates in any kind of industry. Without these, the firm cannot survive and provide products and services to the customers (Hair, 2015). Along with this, to attract and retain skilled and effectual employees, the company is required to provide highly better business environment. In different countries, process of recruiting and staffing is also different which creates issues for the firm. Here, the Marvin and Smith's coffee shop is required to expand firm in the Finland where it has to take care about employees and working environment as well. It needs to make effective process for recruiting and selecting the personnel which helps in recruiting the skilled employees in the firm. Further, in order to manage and retain existing staff, the company needs to provide better working environment. In addition to this, salary, wages, compensation, motivation, rewards are also Marvin and Smith's coffee shop needs to provide which helps to the employees in order to become more efficient. On the other side, if the company unables to manage and provide such kind of services to employee in Finland then it will directly affect the productivity of business. It can be said that the above analysed all factors needs to be fulfilled by the company related to new and existing employees (Urry and Corbett-Burns, 2012). With this, the firm is highly able to achieve objectives and targets of the entity i.e. to expand business and earn higher sales in the Finland market.
- Gaining competitive advantage: Apart from issues related to employees, another factor which affects the business environment while expanding firm in Finland is related to developing competitive advantage in the food industry. In the current situation, the Marvin and Smith's coffee shop provide hygienic and nutritional food products with the friendly environment. In the Finland, there are many existing coffee shops which are operating in the city so it is difficult for the firm fir gaining competitive advantage. Further, the enterprise needs to offer highly nutritional food items at the low prices as compare to the rivalry firms. When the firm enters in new market then more number of competitors will be there. To gain competitive advantage, Marvin and Smith's coffee shop has to formulate strategies which help in gaining advantage in the competitive market in the food industry of Finland. If the business entity is not able to formulate better strategies, then it will impact the sale and hamper overall business performance (How to Gain a Competitive Advantage in Business, 2017). Moreover, the respective coffee shops needs to provide differentiate and unique food products using cost leadership strategies. These are the best strategies to gain and earn competitive advantage in the Finland's food industry.
Evaluation of profitability and liquidity position and impact of these on the business entity
In order to evaluate financial position of the company and impact of that on business process there are different kinds of techniques and tools are used. Among various tools financial ratios analysis is the best measurement which helps to determine that Marvin and Smith's coffee shop is up to which extent better in terms of financial. In the ratio analysis there are mainly two types of ratios are calculated which are such as liquidity as well as profitability ratios. These kinds of financial ratios shows that company is how much able to earn profit and pay short term debt obligations. Position of Marvin and Smith's coffee shop in terms of liquidity and profitability is described below:
|Profitability ratios||Formula||2016 (Amount in £)|
|Gross profit (GP)||208000|
|Revenue or sales||360000|
|Gross profit ratio||GP / Revenue * 100||57.78%|
|Net profit (NP)||26800|
|Revenue or sales||360000|
|Net profit ratio||NP / Revenue * 100||7.44%|
From the above table it can be assessed that the Marvin and Smith's coffee shop able to generate higher gross profit at the end of financial year 2016. The GP ratio of coffee shop is 57.78% which shows that the company able to sale more number of food products to the customers. Furthermore, cost of goods sold is lower in comparison to turnover which lead to earn gross profit worth of £208000. On the other side, net profit ratio of the company is also better at the end of FY 2016 by which it can be clearly said that it has better strategies to manage cash and expenses. The NP ratio is 7.44% which indicates that the coffee shop able to manage financial resources as well as reduce indirect and direct expenses in production process (Anderson and et.al., 2014). These ratios are impact on the company in positive manner because higher the level of profit helps to expand business. For firm expansion capital is required which is borrowed from financing sources but when firm able to generate more sum of money then it not needs to borrow from outside. Apart from this, the Marvin and Smith's coffee shop is easily able to meet with the goals and objectives of profit maximization in the Finland country.
|Liquidity ratios||Formula||2015 (Amount in £)|
|Current assets (CA)||35400|
|Current liabilities (CL)||6200|
|Current ratio||CA / CL||5.71:1|
|Current assets (CA)||35400|
|Current liabilities (CL)||6200|
|Quick ratio||CA – (Stock + prepaid expenses) / CL||4.42:1|
According to the liquidity ratios, it helps to the company in order to determine position of entity that it has how much liquid assets and liabilities. When the enterprise has higher liquidity ratios then it is more able to fulfil or pay its short term debts in effectual manner. It includes mainly two kinds of measurements such as quick or acid test as well as current ratio (Sherry and Canon, 2014). In the present case current and quick ratio of Marvin and Smith's coffee shop are like as 5.71:1 and 4.42:1 respectively. It can be said that the firm has high and better current assets and liabilities which are easily cash convertible. The standard benchmark for current and quick ratio are 2:1 and 1:1 respectively and as compare to this liquidity position of Marvin and Smith's coffee shop is highly better in the food industry. When the company has higher the liquidity ratios then impact on the entity in very positive way in terms of fulfil debt obligations which are taken for short term.
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Summary regarding to viability of business expansion
From the above analysis it can be said that in the European Union the Finland country is the best and it will be more profitable for the Marvin and Smith's coffee shop for expanding business. Very main reason to choose the respective country for business expansion is that educational level is high of local community. When there are people are educated then it able to recruit and select skilled and qualified employees which helps to increase efficiency and productivity of coffee shop (Arasti, Zandi and Talebi, 2012). Along with this Finland is a well developed country as well as on the basis of geographical location also it is better.
In order to expand firm in Finland, mainly two cities are chosen and after analysis on it business will be establish in any one city. The two cities are like as Oulu and Pori where population of Oulu is more compare to Pori. In the city when there are more number of local community is living then sales of the Marvin and Smith's coffee shop affects in highly positive manner. Higher the level of population lead to purchase more number of food products and services to the consumers. Further, on the basis of number of population the Oulu city is more better and developed in comparison to another selected city Pori (Singh and Khanduja, 2012). Hence, it can be concluded that the Oulu is better for business expansion which will provide higher return and profit in the future.
It can be articulated from the analysis of business essentials that for business expansion of the Marvin and Smith's coffee shop in European Union, the Finland country is the best as well as profitable. With help of tailored marketing mix it able to aware local community of Finland properly and enhance level of turnover. Further, it can be concluded that liquidity and profitability ratios help to determine financial performance and impacts on the business. At the last it can be said that the Marvin and Smith's coffee shop needs to expand business in Oulu city of the country Finland.
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