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THE EXPRESSO

LANE TO
GLOBAL

Q1. Conduct a CAGE analysis


of the seven countries under
consideration to help in
decision for global expansion.

7/8/15

BRAZIL
Urban-Coffee culture
Second largest consumer coffee market
Successful in FDI
Expected growth of 30% in coffee shop industry
High-interaction relationships
Low per capita consumption
Growing franchise sector
Strong local brands- Only 11 per cent of franchises were
foreign-based franchisors .
Brazils capital, Brasilia, was approx 9,054 kilometers away
from Rome, Italy.

CHINA
Projected growth of 10.7 % through 2015
China boasted a huge population, 43 per cent of which
lived in urban areas.
Saturated and matured market
Minimal to-go sales
Coffee an established product category
Franchising popular but difficult
Urban transition (45%)
Rising consumer income and increasing standard of
living
Chinas capital, Beijing, was approx 8,147 kilometers
away from Rome, Italy.

GERMANY
Coffee was ranked second in the world in pounds per coffee
consumed per person
Average German coffee consumption was 150 liters per person
15% per-capita decline in consumption
Interest in freshly prepared specialty drinks
Ease of doing business
Projected growth of 10.5% between 2011-2015
Fierce competition
High concentration (1000 franchise systems)
Germanys capital, Berlin, was approx 736 kilometers away from
rome, Italy.

INDIA
Emerging economy
Sixth largest producer of coffee
Franchise success but young
Coffee consumption increase by 6% over 5 years
300M-350M middle-income earners
Room for 5000 cafes
Overly bureaucratic
Indians had increased exposure to international lifestyles and
global trends
New Delhi, was approximately 5,929 kilometers away from
Rome, Italy.

JAPAN
Ranked 3 as coffee importer
Expected 5.4% compound growth through 2015
Innovation in product and packaging
More growth opportunity for hot beverages (Less
alcohol consumption)
Difficult to franchise
Japans capital, Tokyo, was approximately 6,138
kilometers away from Rome, Italy.

UNITED KINGDOM
Recent growth of 6% remained stable
Shift from tea culture to coffee culture
High projected growth
High concentration of current coffee bars
One of the easiest places to franchise
Ease for foreign investors
The United Kingdoms capital, London, was
approximately 893 kilometers away from Rome, Italy.

UNITED STATES
Ranked 1 in coffee consumption(25%)
Rank 4 in ease of doing business
Highest income with
Saturated and highly concentrated market
Lowest growth potential
Costumers want: Retail experience, WIFI, product
innovation, health trends
The capital of the United States, Washington, DC, was
approximately 4,497 kilometers away from Rome, Italy.

2. Create a SWOT analysis


for illy to assist them in
creating a positioning
statement.

OPPORTUNITIES

3.Conduct analysis through


3x3 GE matrix (market
attractiveness and
competitive position) as also
2x2 BCG matrix (market
share and market growth for
the seven countries under
consideration

GE MATRIX

BCG MATRIX

4. Identify the variables from


the case which are most
important in reales decision
making.

IMPORTANT VARIABLES
FOR DECISION MAKING
COFFEE CONSUMPTION
COFFEE SHOP CONCENTRATION
URBANIZATION RATE
GDP PER CAPITA
COFFEE SALES
EASE OF DOING BUSINESS
COMPETION FROM LOCAL AND INTERNATIONAL
PLAYERS
ATTRACTIVENESS OF SEGMENTS

5. Use CAGE, SWOT, GE and


BCG matrix to help reale
prioritise the foreign markets.

CAGE WISE PRIORITIZATION


Culture

Administrati Geographi
on
cal
distance(F
ly Time
wise)

Economy

Brazil

China

Germany

India

Japan

UK

US

SWOT WISE
PRIORITIZATION
1 - Uk
2 US
3 - Germany
4 - India
5 - Japan
6 - China
7 - Brazil

GE WISE
PRIORITIZATION
1 - Brazil
2 - US
3 UK
4 - India
5 - China
6 - Germany
7 - Japan

BCG WISE
PRIORITIZATION
1 - BRAZIL
2 - CHINA
3 - JAPAN
4 - INDIA
5 - UK
6 - United States
7 - Germany

6.What is the impact of


hofstedes dimensions in
doing international business?

Hofstede's dimensions define different countries


on various cultural parameters.
Cultural parameters play an important role in
framing a strategy for doing business or entering
a foreign market
Countries which are similar to the original country
in which the business lies are very easy to enter
For countries which are different on cultural
parameters, different approach needs to be
adopted

EXAMPLES
A country with high power distance has inequality in
power distribution and that is accepted too. In china,
which has a high power distance, bureaucratic hurdles are
very high and it is difficult to run direct operations there.
A country which has high individualism, have people who
love privacy and have loose relations with others. It may
imply that personal choice is very high and scope of more
customization is there.
A country with high long term orientation will be very
reluctant to change and perseverance is highly dominant
there. Hence it is difficult to start new ventures in such
country, for e.g. china.

7. What mode of entry


should reale consider?
Should it be different
based on the market
selected? What are the
environmental and
organisational variables
that should impact the
decision?

The market specific approach should be used for


international operations of the company.
Different countries have different environmental
factors and hence the approach has to be different
and in alignment with the environment.
For example, the bureaucratic hurdles are too
many in china. so joint ventures or strategic
alliances may prove to be helpful in navigation of
the Chinese customer's behavior and the market
norms and preferences.

ENVIRONMENTAL FACTORS
IMPACTING THE DECISION
1. Political
The level of ease of doing business in a particular country helps to
make corporate level decisions. The rules and regulations define the
success of the business.
2. Economical
Various economical factors like the per capita income, disposable
income, GDP per capita etc help to determine the behavior of the
consumer and their responses will affect the pace and rhythm
decision of reale.
3. Social
The lifestyle of the people and the kind of social behavior they
engage in will affect reale's decision.
4. Legal
Various rules and regulations ,for e.g., the rules in buying land will
largely affect the strategy of the business.

ORGANIZATIONAL
FACTORS
1. Trade orientation
The company is more oriented towards global market
and hence decisions need to be taken in that direction.
2. Organizational structure
The decision to make the structure organic or
mechanistic for complying with the environment in
different country needs to be emphasized upon.
3. Flexibility
The level of flexibility in the organization and the work
style of the company needs to be decided for being
successful overseas

THANK YOU

GROUP-1