International Expansion Strategy For Espressamente

CAGE analysis

Cultural distance refers to various language, ethnicities, different religions and social rules. In this context, there are highly sensitive cultural principles in Germany, the United Kingdom and the United States. This due to the fact that the citizens of the countries have a different type of cultures, languages and religions and social belief. In contrast, to the majority of the people in India, Brazil and China which have similar customs and languages. However, based on the analysis of exhibit 4 Germany has similarity cultural dimensions with Italy, that is based on the factors of individualism (67 vs76), the range of masculinity (66 to 70) and long duration orientation is 31 in contrast to 34 (Alon and Lohwasser 2012).

The trade relations amongst the countries have the capacity to influence the administrative distance that includes ancient as well as political dealings shared by countries, privileged arrangement of trade, currency and political association. In terms of political union, it has been found that the United Kingdom and Germany both are present in the European Union. Therefore, helps them to foster trade relations within the economic merger. However, in terms of the ranks of ease of conducting business based on the factor of exhibit 3, it has been observed that the United States owned the highest position. This was followed by the United Kingdom, which is in 7th place, and Germany in the 19^th and Japan is in 20^th position. However, China has a middle position with 91st rank whereas Brazil and India possess the same rank nearly with 126^th and 132 correspondingly (Alon and Lohwasser 2012).

Geographic distance is not just about the location of potential market, but other features need to be measured like the size of the country, the transportation and infrastructure of communication activities of the location, however, in case of physical distance, Germany and the United Kingdom, are the associates of European Union which are both located in Europe. These will help in fostering the transport of Coffee products across the borders. Based on this case, it has been found that flight from Tokyo, Brazil and Beijing to Rome was the same, which takes nearly 13, 12 and 11 hours consecutively. In addition to this, at the median distance, the United States and India takes 9 to 8 hours consecutively from Rome.

From the economic distance, it has been found that consumer’s income, wealth is the most necessary economic component, therefore, wealthy countries with higher per capita GDP and high level of development tends to typically involve in more cross-cultural financial accomplishments. Moreover, high quality of coffee is not a required expense and a high income is not required to obtain the discretionary income needed for the purchase. However, based on the factor of exhibit 3, the United States has the highest percentage of GDP with almost $ 57,446.79 USD in the year 2016, followed by Germany with 41,936.06 USD, the United Kingdom with 39,889.38 USD and Japan 38,894.47 USD in the year 2016.

2.SWOT Analysis

SWOT of Illy

SWOT analysis

 Japan

 Brazil

 India

 United Kingdom

It is evident from CAGE and SWOT analysis that Illy’s core capacities lie in the Italian style focusing on aesthetic design, high quality and coffee culture. It is the growing demand for coffee in a worldwide location that represents the high opportunity for Illy to develop a venture into the international markets (Fransen and Burgoon 2014). It can be said from the CAGE and SWOT analysis that Illy has a competitive advantage and has a capability to create An overseas value with the unique and high quality of coffee espresso. This is because the high-end restaurant and unique culture are rare and hard to replicate.

Moreover, it is anticipated from the CAGE analysis that the growth in the UK is going to increase with 12% yearly in the next 3-5 years. From the exhibit 3, it is found that the GDP per capita of UK is almost $35,900 that is almost $5,800 more than that of Italy. This shows that there is a high market potential for the finest coffee goods in the UK market. Along with the matured consumers who are generally capable of escalating standards coffee, Illy will be able to distinguish themselves by selling its core capabilities and high-quality product (De Villa et al. 2015). Moreover, from CAGE and SWOT analysis it has been seen that the UK has a limited cultural and geographical distance from Italy and is ranked at seventh in case of easily conducting business. All of these factors from CAGE analysis signifies a suitable condition for Illy to expand its business in the United Kingdom market.

From the BCG and GE matrix, it is evident that the UK is the most appropriate market where they can expand their market. From the Hofstede exhibit it evident that Italy and UK have less difference in culture, which provides them with the opportunity of being on the side of the business.

Germany would be the second appropriate country for expansion due to the closest proximity of cultural similarity and growing market of coffee, there is a potential opening in Germany to enter in to the market, there is a high population of people in Germany who are willing to pay for the espresso products (Knight and Liesch 2016).

 The third country for expansion would be Japan. This is because Japan has a developed market of coffee with many opportunities in case of a customer with a high popularity of coffee stores like Espressmente. Although the industry of franchise is falling down, the country persists as one of the largest importers of coffee in the work, which provides special opportunities to expand into mass market .

 Fourth suitable country would be Brazil due to its high coffee export. In the BE matrix Brazil is in medium growth of market share due to its low rank of ease of doing business. The rank is 186 with USD 11,600 of GDP growth. Although the rate of GDP and rate of urbanisation is high but doing business in US is difficult.

GE Matrix analysis

Fifth option for expansion of Illy’s coffee will be China that has been ranked 91 for ease of conducting business with a GDP of USD 8,400.

Therefore, the dynamic market share of United Kingdom and high market attraction makes it a question mark, Germany is a star on the matrix due to its high closeness of cultural dimension, on the BCG matrix.  Japan is the cow due to the close proximity of culture and GDP growth and India is the dog due to its low share of the market and lowest rank of the country will high cultural difference.

The essential variable for Reale’s decision-making is as follows:

• Consumption of coffee
• The absorption of coffee restaurants
• Rate of development
• Per capita GDP growth
• Sales of coffee
• Ease of conducting business
• High competition from domestic and international market
• The appeal of the market segments.
• Direct franchise in Environment
• Diversification of exports
• Acquisition of companies
• Changing trend of coffee organisation including flexibility and adaptability of organisation

CAGE wise decision

1. United Kingdom
2. Germany
3. Japan
4. United States
5. India
6. China
7. Brazil

1. United Kingdom
2. Germany
3. Japan
4. China
5. USA
6. India
7. Brazil

1. United Kingdom
2. Germany
3. Japan
4. India
5. United States
6. Brazil
7. China
8.  Mode of entry according to Reale’s decision-making

The market-oriented approach needs to be used for the managing the operations of the organisation. It has been found from the case study that different countries have different types of influence from the environmental factors (Sleuwaegen and Onkelinx 2014). Amongst all the countries that Reale’s considered, it can be said that first venture market can be United Kingdom, Brazil, Germany, Japan, India and them China. Coffee market in the UK is quite matured that is anticipated to increase by 12% in the next 3-5byears, this represents a high market potential that Illy can utilise to differentiate the products, Therefore, the approach has to be different and inclined to the environment (Holder 2018). For instance, bureaucratic hurdles in Japan may affect the business. Therefore, joint ventures and strategic partnership may be helpful in the navigation of the Japan consumer’s attitude and market behaviour.

Factors such growing market share and growing GDP growth, changing social trend of drinking tea and difficulties in franchise regulations of the external environment has an direct on the decision making. This is due to the fact; the variables may lead to the decline of the business sales and may pose challenges in the expansion of the business. In case the GDP of an economy is high, the need for employment increases along with the increase in wage that may be helpful for the business. On the contrary, challenges in development of franchise may have result in slow down of business.

References

Alon, I., and Lohwasser, M. 2012. The Expresso Lane to Global Markets Ontario, Canada: The University of Western Ontario, Richard Ivey School of Business

Atkinson, C. (2018). NYC needs life in the espresso lane: Illy. [Online] Nypost.com. Available at: https://nypost.com/2014/11/16/nyc-needs-life-in-the-espresso-lane-illy/ [Accessed 30 Sep. 2018].

De Villa, M.A., Rajwani, T. and Lawton, T., 2015. Market entry modes in a multipolar world: Untangling the moderating effect of the political environment. International Business Review, 24(3), pp.419-429.

Fransen, L. and Burgoon, B., 2014. Privatizing or socializing corporate responsibility: Business participation in voluntary programs. Business & Society, 53(4), pp.583-619.

Holder, M. 2018. IllyCaffè: How a family firm is leading the global coffee industry’s climate fight. [Online] https://www.businessgreen.com. Available at: https://www.businessgreen.com/bg/interview/3026619/illycaffe-how-a-family-firm-is-leading-the-global-coffee-industrys-climate-fight [Accessed 30 Sep. 2018].

Knight, G.A. and Liesch, P.W., 2016. Internationalization: From incremental to born global. Journal of World Business, 51(1), pp.93-102.

Sleuwaegen, L. and Onkelinx, J., 2014. International commitment, post-entry growth and survival of international new ventures. Journal of Business Venturing, 29(1), pp.106-120.

Zahra, S.A., 2015. Corporate entrepreneurship as knowledge creation and conversion: The role of entrepreneurial hubs. Small Business Economics, 44(4), pp.727-735.