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Business Essentials

Introduction

The business organization who perform their operations in order to fulfill the needs of their customers. They perform their activities in order to accomplish their objectives such as to improve the growth and to generate more revenues. In order to fulfill these goals, they have to face some of the issues related to the competition and high cost in the market (Omachonu and Einspruch, 2010). The present report is based on the case study of Hank Marvin and patty smith who want to open their coffee shop at different places. The below-mentioned report is based on business essentials who explains the country in which they are expanding their business. It is focused on the elements of the marketing mix so that business can be established. Further, how their profitability and liquidity can affect the decisions of Hank and Patty.

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Tasks

1. The country in which Marvin and Smith’s coffee shop could expand

When any organization expands their business operations in another country then they have to focus on some of the factors such as political, social, economic, legal, environmental and so on (Young and Dhanda, 2012). After analyzing these factors they can establish their business into another country. Here, hank Marvin and patty smith can expand their operations in France so that their profitability level can be improved. They can offer their services at this place due to some reasons such as:

  • The people of the country prefer to drink coffee in the cafeteria so this will be a great opportunity for the new small business to offer their services to the customers (Jaggia and et. al., 2016). By establishing their business in such a place they will be able to attract a number of customers towards their services.
  • The economy of France is the 5th largest in the world so it will be helpful for small business enterprises to improve their growth. Along with this, the GDP rate of the country is constant from the last three years so they can generate more revenues.
  • France is also a leader in the automotive and manufacturing industries so its overall brand image is also good. The company will be able to get the labor at a low cost so that they can get the competitiveness in the country.
  • France is one of the largest exporters in the farm products and the political stability is also there in the country so hank Marvin and patty smith can open their coffee shop in the country. Due to the high level of export and import, their relations with other countries are also good and there are fewer chances of the terrorist attack.
  • The country is also following the ethical system so its image is different from other places (Hugos, 2011). They are more focused on the rights of human and their freedom. So, here they can perform their operations in an ethical manner by following all the rules and regulations that are made by the state government.
  • There are no trade barriers when any business organization of France performs its operations in other countries of the European Union. So this will be a benefit for the Marvin and smith to expand their business in the EU.
  • The small business enterprise can buy their resources from the local suppliers of the country so there is no transportation cost and sue to this the expenses of the firm get reduced. Through this their overall performance can be improved and they can increase their profits.
  • France is a good tourist place as there are many people who come to visit the place. They can open their shop in the country where more people come so through this they will be able to attract the number of customers towards their products (Tavitiyaman, Qiu Zhang and Qu, 2012).

2. Marketing mix

To open a new coffee shop in the market of France, Marvin and Smith have to adopt the 4p of marketing effectively (Ebert and et. al., 2014). So, that they can increase their sales and can be able to survive in the market. The 4p are as follow:

Product: So, their product is no new for their consumers. Customers already going to coffee shops with most of their time. So, they have to produce a unique composition of their coffee. It helps them in the increment of their product. Also, they have to maintain their quality. If their quality became poor, so their range of customers also gets reduced.

Price: They have to set their price according to their customer's preferences. They have to set their unique concept price high (Hollensen, 2015). And the price of other things also has to get according to its customer range. Prices have to be settled down to keep customer variation in mind and also keep in view their competitors' prices. They have to maintain their price as relatively low and cheap than their competitors. So, consumers are getting attracted to them. With the price is not just a thing, with low and cheap prices they have to maintain the quality of their product.

Place: It is one of the biggest factors for them. If their place is convenient for everyone then a large range of customers are going there but if it is not then they have to suffer heavy loss. So, with this their location is also to be at well establish and good place so, they are attracting more and more consumers. Also, they have to spend some money on their coffee shop with some innovative idea of making their coffee shop with some designs and use other things for attraction.

Promotion:They have to use a more acceptable promotion strategy. So, that they can attract more and more people (Blumberg, Cooper and Schindler, 2014). They can use social media as a promotion place by making pages, events, etc. this helps them in attracting a large range of target customers. They can use the newspaper as a source of all these things. By providing newspaper coupons and rebate coupons over on any product. They can make their own app for their consumers through that their customers can get discount vouchers. Another important thing in promotion is tag line. If they have an attractive tag line in an innovative manner so large consumers are getting satisfied through that. All these factors help them in their survival.

Peoples: Marvin and Smith have to use their local peoples as employees in the coffee shop, it is helpful for them to communicate with the customers to analyze the demands of them (Xia, 2011).

Process: They have to use an appropriate process to make coffee which helps them to manage taste and quality in the coffee.

Physical Evidence: It is having a huge impact on the customers, they have to use attractive coffee mugs and as well as they have to use an attractive color theme in their shop which helps them to attract customers towards them (Tavitiyaman, Qu and Zhang, 2011).

3. Implications of the need for Marvin and Smith’s to cover a wider geographical area

There are many factors that may affect the performance of Marvin and smith when they expand their services in another country. Some of these issues are related to management structure and competitive advantage.

Management structure: In order to perform well in another country, the small business organization has to follow organizational structure. Through this, proper directions can be established in the firm so they will be able to achieve their objectives (Askhatova and et. al., 2013). All employees will be able to know about their targets that what they have to follow so that their growth can be improved in an efficient manner. Some of the structures that are followed by the business organizations are divisional, functional, matrix and hierarchal. Here, Marvin and smith can follow the functional organization structure so that all members will be able to know about their roles and responsibilities.

There are some of the functional units in the enterprise such as human resource, financial, restaurant executives, research and development. If all these departments perform well then their overall goals can be achieved. Through these, all managers of the different departments will be able to manage their activities or operations so that their growth and positions can be improved in France than any other market leader.

  • Through an effective management structure, the manager of coffee shops will be able to improve their communication with their subordinates.
  • Transparency can be created among all the members of the different departments so they will be able to improve their performance.
  • An employee in the firm will be able to get an opportunity to do the work as per their interest.
  • The communication channel can be improved that can build trust among all the employees who are working at the workplace.

Gaining competitive advantage: When the organization performs its operations in its external environment then it will be able to get opportunities so that it can gain competitiveness in the market. In order to improve their position in the market, Marvin and smith have to offer quality products to their customers (Anderson, Sweeney and Williams, 2011). Through this, they will be able to create a strong base of consumers. Along with this, they can use some of the strategies in order to gain a competitive advantage such as:

Cost leadership: This is the strategy that can be used by the business organization in order to gain leadership in the cost of the products. There are some people who are price sensitive so they will not be able to but the high-cost products. So the manager has to make some pricing strategies so that their overall satisfaction with the customers can be improved.

Differentiation: This is another strategy that is used by the organization so that they can offer quality products to their service users. Through quality and innovative products, a firm will be able to attract the people who want to buy some unique services (Affuso, Capello and Fratesi, 2011). Marvin and smith can create a strong base of consumers who are brand loyal to the company. By the innovative products, they will be able to convert their regular customers into a loyal ones.

Focus: This is the last strategy which is the combination of cost and differentiation. In this, the manager of the company is focused on a group of people who are looking for unique products at a flexible cost.

Through these strategies, Marvin and smith will be able to gain a competitive advantage in the market of France (Teeratansirikool and et. al., 2013). Apart from these, they can hire some people from the country who have knowledge about the locations of the country. The employment rate in France is high so the spending income of the local people is also high. So, people can buy such as coffee.

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Q4. Evaluate how their profitability and liquidity may impact on decisions available to Marvin and smith

Liquidity ratio as given below:

Ratio

Formula

Result

Acid test ratio

(Current Assets - Inventories) / Current Liabilities

4.48

Working capital ratio

Current Assets/Current Liabilities

5.7

Acid test ratio:

This ratio helps to calculate the liquidity of the cited organization which can help to evaluate the ability of the business unit to pay its liabilities. If a business unit has enough asset which can cover its current liabilities that a firm can pay all short term obligations without a sale of long term asset of the company. As per the scenario of cited business entity their acid test ration is approx 4.5 which refers that the firm having enough asset and financial resources can pay 4.5 times their current liabilities without compromising with their fixed assets.

Working capital ratio

In this ratio, a firm's can measure its working capital and make their decision accordingly. In the context of cited business unit, WCR is approx. 8 which is also a good sign for the company. This shows that the company is able to operate its business operations in a long time without any hurdles.

Profitability Ratio is given below:

Ratio

Formula

Result

Profit margin ration

Net Income/Net Sales

26800/360000*100

7.00%

Return on Assets:

Net income/Average Total Assets

26800/(113000/2)*100

47.00%

Return on capital employed

Net Operating profit/Capital Employed

45200/(113000-6200)*100

42.00%

Profit margin ratio

This another significant ratio for each and every business unit. This ratio helps the higher management in order to make the decision for their long term business plan. This ratio belongs to the profitability or profit margin of the company. As per the given case, the cited business unit profit margin is 7 percent which is good for a small and emerging company.

Return on capital employed

In this ratio, the investor is the measure and calculate their return on their investments. The stakeholders of the business unit are more interested in the ROCE ratio. In the context of the given business, it is approx 42% which is too good for the firm. It shows that a small business unit's financial position is strong and they can expand their business easily.

Q5. Write a concluding summary of the overall viability of overseas expansion at this stage

Hank Marvin and Patty Smith want to expand their business so that they can improve their brand image and their position in the market. When any organization offers its services in another country they have to face some of the issues related to political, economic, social, government laws, technological, environment factors and so on. After analyzing these issues they can expand their business in France so that their growth can be improved. The economy of the country is good so the owner of the company can open their coffee shop in order to enhance their brand image.

They can make their plan on the basis of the elements of the marketing mix so that their overall growth can be improved. Some of the variables of the marking mix are product, price, promotion, and people. These all the important for an organization so the manager of the firm has to make some strategies related to these elements so that their overall profits can be achieved. Along with this, the manager can identify their profitability level and their growth level so that Hank Marvin and Patty Smith can make effective decisions in order to achieve their goals.

The manager has to focus on its organizational structure so that its overall activities can be managed. For this, they can follow functional structure so that their overall performance of the functional units can be improved. All members will be able to know about their roles and responsibilities that they have to follow in the enterprise in order to accomplish their targets. On the other hand, they can use some of the strategies so that they will be able to gain a competitive advantage in the market. Some of the approaches are related to cost, differentiation, and focus. Through these, they will be able to attract the number of customers towards their services.

Conclusion

From the above-mentioned report, it has been concluded that all the organization performs its operations in the business environment. By performing such an operation, companies will be able to know about their strength and opportunities. Along with this, the marketing mix helps the firm in improving its performance in the market. Through this, they will be able to improve their growth and position. Hank Marvin and Patty Smith can open their coffee shop in France so that their overall profits can be achieved. Further, in order to gain a competitive advantage in the market, they can use some of the approaches.

References

  • Affuso, A., Capello R. and Fratesi, U., 2011. Globalization and Competetive Strategies in European vulnerable regions.
  • Anderson, D.R., Sweeney, D.J. and Williams, T.A., 2011. Essentials of statistics for business and economics. Revised. Engage Learning
  • Ebert R.J. And et. al., 2014. Business Essentials. Pearson Education Canada
  • Hugos., M.H., 2011. Essentials of Supply Chain Management (Vol.62). John Wiley & Sons.
  • Young, S.T. and Dhanda, K.K., 2012. Sustainability: Essentials for business. Sage Publications
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