Business Model
The assignment will be focusing on the expansion plan of the coffee business. The business has already been established in the market of London and opened more than one shop in different areas of London (Abrams 2017). The business model of the business is to use the best quality of coffee beans which is supplied by Gumutindo Coffee which is from Uganda (Casadesus?Masanell and Zhu 2013). The shops also have refreshments options that is different kinds of beverages along with pastries, eatables which goes with beverages.
For the purpose of expanding the business the owners Hank Marvin and Patty Smith has chosen the country of Spain. Spain is widely known for its culture, football clubs, refreshment centres. In early 2009 when the economic crisis hit the markets of many countries, Spain was also one of the countries which was affected by the economic crisis. But eventually the markets of Spain recovered by 2013 stabling the markets and attaining a sustainable growth. As per the research conducted by the owners, the city of Barcelona will be the most suitable place to start the coffee shop business. As per the research the city is one of the highest gross earning cities in Spain and provides around 19% towards the GDP of the country. In addition to this, the city has a diverse population which is reflects the culture of Spain. It is also a known fact that the people of Spain prefer mostly street food and beverages and refreshments which are available from the local markets (Carvalho, Paiva and Vieira 2016). The choice of Spain is because of the countries rich culture and love for street foods and beverages. The owners of the shop are of the view that they will be able to tap into the market with their beverages and fast food items. In addition to this the flavour and the quality of coffee which is provided by Marvin and Smith’s Coffee Shop will be a rare product in the new market.
As per the plan of the owners they will be operating from a shop which will be in the market area of Barcelona and which will be able to attract local customers. The business will be following more or less the strategies which was adopted by the store in London markets with certain useful additions as well (Morozova, Postan and Dashkovskiy 2013). The raw materials which consists of coffee beans will be imported from Uganda as per the previous policy of the business and raw materials which are necessary for preparation of snacks will be resourced from the neighbor markets which can ensure the freshness of the raw materials such as potato, tomato, and certain other ingredients as well. The raw material as will be required in bulk will be transported by delivery trucks which will be purchased for such purpose only (Kotabe and Helsen 2014). The shop will be baking and preparing the snacks in the store itself therefore the owners plan to hire few of the local chefs and support staff for the coffee shop.
Target Market
The targeted market of the coffee shop will be the younger generations of the population. As per the research conducted by the owners of the business, the demand for the beverages and refreshments from the street markets are mostly from the younger generations and school and college students. However, the shop will also be considering the needs of working class and households and others as the business plans to have variety of choices for its customers.
In order to start the business, the owners need to incur certain start-up costs which includes buying a shop or selecting a shop location, furniture and fixture requirements and also the legal costs (Patton, Sawicki and Clark 2015). The owners of the company have incorporated a certain amount of cost which they expect will be incurred on getting the license for opening the shop. In addition to this, there are instances where ethical checkup on the food quality is made by the authorities for public interest and the owners expects such activities in the initial months of starting the business which also might involve certain costs. The staffs will be trained to behave in a respectful and polite manner with the customers and the owners also wants to promote ethical standards of equal treatment and honest behavior in the business.
The new market will be requiring the business to adopt to the culture of Spain. The designing of the shop and the atmosphere has to be set up accordingly. The business will be offering three to four types of coffee with complementary cookies for the initial months. The choice for the cookies will be on the customers. In addition to this they will be offering cakes, burgers, ice creams sundae and a variety of baked products for the customers. The business model of the company is to provide best quality of products at lowest possible price. As in the case of the London shops, the shops in Spain will also have free Wifi services, charging areas for phones and laptops. There will be a candy counter as well for kids which will not be much costly. The shop will also keep board games where people can enjoy and spend time with friends and family during the evening time.
The marketing mix refers to the different factors which can be controlled by the business to market the products of the business. There are 4P’s of marketing mix which was initially introduced and later on 3 P’s were added more to the mix Armstrong et al. 2015). The marketing mix for the expansion plan of the coffee shop is given below:
- Product: The products which will be provided by the shop are beverages like coffee, stevia, tea. The coffee will be of three or more types mainly cappuccino, normal milk coffee and cold coffee items(Huang and Sarigöllü 2014). The main attraction will be the normal coffee and the cappuccino with the younger generations. In addition to this, the shop will be offering cookies, pastries, sandwiches, finger snacks and different variety of baked food products. As the shop is importing coffee beans from Uganda, the coffee products of the shop will be different in taste and flavor in comparison with the competitors of the shop. The plan of the owners is to incorporate a product which is popular among the locals.
- People: This refers to the targeted group of customers which the shop will be focusing on for maximum sales of their products(Khan 2014). The targeted customers of the shop will be college students and high school students who normally hang out in a café with friends. The shop is also putting up board games for evening so the business can expect all variety of customers. The products list will also be containing food products for the working class who need quick bites before work. Therefore, as per the plan of the management, the shop will have something for every customer.
- Price: The prices of the products are expected to be kept at minimum so that the business is able to make a place for itself in the competitive market(Fan, Lau and Zhao 2015). The raw materials for the snack are to be purchased from the local markets and therefore the cost might be less. The coffee beans which are being imported will be costing less as the purchases will be in bulk and also subjected to discounts.
- Promotion: This means all those activities which can draw the customers and increase the sales of the business(Fine 2017). The activities as per the plan of the owners will be involve local market advertisements which can involve television advertisements, distribution of posters and other methods as well. Even the plan of the management to provide complementary cookies as per the choice of the customers also forms a part of the promotion activities of the business. The evening board games set up will also be one of the promotional activities of the business.
- Place: The place which is selected for opening the store is the city of Barcelona in Spain. The place has diversity of culture and is a popular tourist attraction mainly due to the football club and street market of the city. The plan of the owners is to attract such tourists and also spread the name of the coffee shop.
- Process: The process involves various activities which the shop engages in for the purpose of making the food products and also involves the promotional activities of the business(Davari and Strutton 2014).
- Physical Evidence: The physical evidence refers to the physical characteristics which the customers can feel such as the furniture, the food products provided and similar other stuffs.
Marketing Mix
The plan of the management is to ensure that the area coverage of the shop around the market of Barcelona is maximum. The main advantage of the wide coverage of markets are given below:
- Gaining Competitive Advantage: The business of the shop will be built on the ability of the shop to access customers and resources and therefore for such a purpose the owners of the shop need to select a shop location which can give the business the advantage of a wide spread access to maximum area(Ghapanchi, Wohlin and Aurum 2014). In order to operate in the new market freely withstanding the competition the owners of the shops will be needing to apply extensive advertisement techniques which can attract potential customers of the market and increase the sales of the market. The advertisement techniques which will be used by the management to attract customers widen the market range of the shop and also the area which is covered by such advertisement is immense which will help the business to create a name for itself in the new market. In addition to this, the possible shop location of the shop should be such that it gives the business the access to wide range of people. This location as per the plan of the management can be a popular tourist attraction which will then enable the shop to attract such foreign customers into the shop and develop a customer loyalty and a brand name for the business. Such activities of the business will help the business to gain competitive advantage (Urbancova 2013). The competitive advantage for the shop is important as this will be providing a means for the business to survive in the new market where there will be tough competition among the existing coffee shops and cafes.
- Supply Chain: The supply chain of a company refers to the process in which raw materials are purchased from the suppliers and ultimately final products are sold to the customers. The supply chain involves all those processes which can help the goods move from the suppliers to the final consumers(Christopher 2016). In the case of coffee shop, the owners have decided to purchase all the raw materials from the local market and import special items like coffee beans from a supplier in Uganda. For the purpose of purchasing raw material in bulk the business also plans to purchase delivery trucks which can deliver the raw material in the shop itself. Moreover, there is a requirement of storing the raw materials and also the baked foods in suitable conditions. For such purpose the business plans to have a separate room where raw materials and stocks can be stored and a refrigerator for storing the baked products as well as the sandwiches and pastries. In addition to this, the business also plans to start up a delivery van which can distribute food items which can be ordered online or by a telephone. This will result in wide range coverage of the area of the city of Barcelona. The business will be able to have access to more customers and thereby spread a name for the coffee business in parts of Spain which does not know about the shop. This would help the business to create a brand loyalty and brand name for the products of the business. The supply chain of the business should be such that it can benefit the customers at the same time make the process transferring the final products to the customers easier for the business (Monczka et al. 2015).
The financing decisions of the company would involve estimating the start up cost of the new business in the market of Spain and also estimating the profits which can be earned from the business. In addition to this the management of the business also needs to decide what are the sources through which they will be acquiring the initial capital needed for supporting the start-up expenses as well meeting with the day to day obligation of the business (Brigham and Ehrhardt 2013).
As per the plan of the management the initial capital requirements of the business will be fulfilled by taking funds from family members, friends and internal sources. In addition to this, the owners have established four shops back in London from where the funds can also be accumulated and used accordingly for the requirements of the business (Arrondel, Debbich and Savignac 2013). The net profit of the shops operating in London shows a profit figure of 26,800 which is fairly decent. If the raw material costs of the London shops are to be considered similar for the new shop which is to be established in Spain is 1,52,000. The cost can increase a bit for the new market and the required quantity for the startup will be more as the business is positive that the shop will be successful in Spain. The current business performance of the shop in the market of London show that the business has no liquidity issues and moreover there has been no requirements for loans which shows that the business is progressing in the markets of London. The owners of the business are expecting similar results from the shops which is to be established in the market of Spain. The liquidity requirements will not be an issue, however if there is a requirement to finance activities relating to advertisement, promotion of the business than the owners can apply for a loan (De Visscher 2016).
Conclusion
As per the analysis of the market and other factors the expansion strategy which is to be applied for the coffee shop business seems promising. The overall market structure of Spain, its culture and the diversity of people who visit the country not just for its culture or sport but also for its street food market which makes it a destination place for tourists makes it favorable to establish a coffee shop. In addition to this, the targeted customers of the company which are younger generation are attracted to food stuffs which are will be offered by the business. The activities as per the plan of the owners will be involve local market advertisements which can involve television advertisements, distribution of posters and other methods like offering cookies with refreshments in initial months, board games arrangements in the evenings for the customers of the shop. The financing requirements of the business will be internally sourced between the partners or owners of the business. The business is expected to earn profits and establish itself in the markets of Spain.
Start-up Costs
Spain is a developing nation and it is growing in markets which will be attracting new business to establish itself in the markets of Spain. The expansion strategy which has been prepared by the owners of the coffee shop is a sound one. As the business has already attained success in the markets of London, therefore it is high time that the business tap into the opportunities which are offered by international markets and built a brand name for itself in the market of fast food chains. Therefore, the owners of the business must accept and implement the business plan as soon as possible and prepare the funds which the business will be requirement for the start-up expenses.
References
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