Filiz and Smith's Coffee Shop Expansion to Reykjavik, Iceland

2021-05-12 08:10:23
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The city of Reykjavik in Iceland would be an ideal place for the Filiz and Smith's coffee shop to expand their business given the coffee culture in that city. After the Dutch, the Scandinavians are considered to have the highest coffee consumption per capita around the globe. Consumption of coffee in Iceland is second highest in the world, and this would offer the Filiz and Smith's coffee shop a ready market as opposed to their first start up in London. Icelanders are said to be coffee crazy as compared to other countries in the European Union such as Italy, England and France CITATION Jme93 \l 1033 (Baker, 1993).

Despite getting a ready market in Reykjavik, Filiz and Smith's coffee shop will also have to deal with competition from other coffee cafes such as kaffitar, te og kaffi and grai kottu Erinn. However, Filiz and Smith's coffee shop has the advantage of being the only cafe offering coffee related products and services only. All other cafes were transformed from food courts to start offering coffee when the coffee craze hit Iceland. People started caring about how their coffee was served around 25 years ago, and that is when Reykjavic become Iceland's city of coffee craze.

The expansion of Filiz and Smith's coffee shop will get a major boost because the business environment in Iceland is favorable to new businesses. The island's operating environment is competitive to other developed or developing countries in the European Union. The country has a low tax structure that will favor Filiz and Smith's coffee shop because they are just setting shop and hence cannot want to be burdened by additional costs. The country also has some advantages such as high levels of education, competitive costs for skilled labor. Land and electricity are also cheaper in Iceland than other countries hence making it a good destination for businesses that want to set up shop there. These favorable conditions make Iceland be the best candidate for businesses that are seeking for new territories to expand their businesses CITATION Jac91 \l 1033 (Enen, 1991).

The choice of Iceland can be justified by the fact that the country's corporate tax stands at 18%, which is one of the lowest in the European Union. Businesses also have an advantage of accessing tariff-free products on the single European Union market. Iceland is also strategically located between Europe and North America and is also close to other coffee loving cities such as London and Rome.

Expanding its services to another country will spell new challenges for the Filiz and Smith's coffee shop. The first challenge will be communications because most natives in Iceland do not speak English. To counter this, the partners will have to employ chefs who are natives hence they will be tasked with the responsibility of communicating well with customers. Another challenge will be human resources whereby the company will rely first on employment agencies to help them in getting the best labor force. Business culture will also present another challenge to Filiz and Smith's coffee shop because it differs greatly from that in London or other European countries CITATION Yad99 \l 1033 (Luo, 1999).

Filiz and Smith's Coffee Shop Marketing Mix

Filiz and Smith's coffee shop prides itself as one of the leading coffee shops today, with an ambitious expansion plan that includes expanding to some of the Europe's big cities. The coffee shop offers different products that appeal to audiences of all demographic groups, lower, middle and upper classes. The marketing mix of Filiz and Smith's coffee shop is discussed below;

Product;

Filiz and Smith's coffee shop product mix is made up of a variety of products that are meant to appeal to the new Iceland market. Most residents of Iceland's major city, Reykjavik, love the latte or cappuccino, and that is what exactly the business will focus on. For it to be successful, the partners understand that they need to meet the expectations of the Iceland population of getting the best. The population only demands the best; be it food, or coffee hence Filiz and Smith's coffee shop will seek to meet this consumer demands by offering the best coffee products. Latte, which is a classic coffee, is mostly famous in the summer and is a mixture of coffee and ice cream blended. The business will use this product to attract the young population. In the winter, cappuccino is the highest selling product, and the business will make sure to understand this differences CITATION Reb14 \l 1033 (Marschan-Piekkari, 2014).

Pricing;

Filiz and Smith's coffee shop values its customers hence all products will be priced according to the value that they add to the consumer. The business will not lower prices to attract customers but will focus on meeting consumer demands and serving its customers according to their expectations. The prices will remain the same as those in London since in both countries there is a common currency, the euro. In future, the business may decide to lower the prices because of low taxes that are charged in Iceland.

Place;

This means the physical location of the business. The business needs to be located in a good location because an unfavorable location would mean that the business is not attracting customers. This is a major factor especially for a new business that seeks to gain ground on a new market. Filiz and Smith's coffee shop will place its outlets strategically so that it can attract more customers.

Promotion;

This involves advertising and promoting the businesses so that its brand can get out and be seen by the target market. To do this, the business will use different advertising channels such as televisions, tie-ups, associating it with movies and offering sales promotions to boost its sales.

Implications of Expansion on Organizational Culture

Many businesses and companies face the challenge of simultaneously growing and still holding on to the same organizational structure they held before. An organizational structure is very important to a business it is the source of its success. Due to this fact, the business needs to maintain the same organizational structure during expansion [processes to ensure its success. Filiz and Smith's coffee shop can maintain its organization culture through three basic ways. The coffee shop will need to maintain its dynamic family to ensure that it takes the success it had in England and repeat it in Iceland. Employees are an important part of the business and whenever a business grows or expands, it adds more employees to the organizational team. Adding a new person to a team means that it will change the groups dynamic in some way. The new employee needs to be shown how to communicate and treat fellow team members so that they can be comfortable working in that environment CITATION Jea02 \l 1033 (Mognetti, 2002).

Another challenge to the organizational structure of Filiz and Smith's coffee shop moving to a new country is the fact that the two owners will no longer be able to manage the business alone. The managers will no longer be able to get involved with all the activities of the company. This will mean that they employ managers who may not be as committed as they are. This can spell doom to the new startup because employees can be rebellious to the new managers.

Implications of Expansion on Personnel and Managing Staff Issues

By expanding, a business agrees to many risks including monetary, personnel, staff and financial losses. Filiz and Smith's coffee shop plan to expand to Iceland presents many risks, and one of the risks is how to manage personnel and staff issues. With expansion, business is forced to employ more people and the more employees a business has, the more it faces challenges trying to manage them. In the recruitment process, the company fears that the new employees will lack experience hence presenting a challenge when working with other employees. Senior staff at the company may feel burdened by the fact that they will be required to sacrifice their time to train the new employees, creating staff issues CITATION Jea02 \l 1033 (Mognetti, 2002).

How Profitability and Liquidity Affects Business Decisions

Profitability is the main goal of all businesses since no business decides to make losses whether in the short term or long term. Measuring a business's past and current profitability and projecting future profitability is very important to business since it determines the type of decisions that the business will undertake. Liquidity is also important financial information because it helps the business in making major decisions such as acquiring assets or expanding to new territories CITATION Reb14 \l 1033 (Marschan-Piekkari, 2014).

The profitability of business is measured by calculating the income of the business as well as its expenses. When a business makes profit and has liquid cash available, it can decide to expand and grow since it can finance its operations. The financial statements of Filiz and Smith's coffee shop show that the company is in healthy position and hence can finance its expansion to Iceland. The coffee shop can also make other decisions and mostly financial decisions because of the available money. Liquidity management is important to a start-up like Filiz and Smith's coffee shop because businesses fear taking loans because of the rising global financial crisis. The main concern of the coffee shop will be to use its current healthy financial situation to devise a strategy for managing its daily operations to meet its obligations as they fall due and increase the profitability of the business CITATION Phi94 \l 1033 (Orsino, 1994 ).

Conclusion

Business expansion is of great importance because it helps bring new revenue to the business. However, the process of expanding needs to be managed well so that it does not end up in turmoil. Filiz and Smith's coffee shop have already established its business in London, England, hence the idea of expanding to Iceland seems to be a viable one. By expanding to another country, the business will make sure to spread its risks so that if the England market collapses, the coffee shop can still be sustained by its businesses elsewhere. Business growth and expansion are important because it enables the management to move beyond the start-up phase. The enterprises sustainability is ensured by identifying opportunities for growth that exists in the target market. The viability of Filiz and Smith's coffee shop expansion plan can be measured by its turnover, market share, profits, sales volume and staff numbers.

References

BIBLIOGRAPHY \l 1033 Baker, J. C. (1993). International business expansion into less-developed countries : the International Finance Corporation and its operations. New York: International Business Press.

Enen, J. (1991). Venturing abroad : international business expansion via joint ventures. Blue Ridge Summit: Liberty Hall Press.

Luo, Y. (1999). Entry and cooperative strategies in international business expansion. Westport: Quorum.

Marschan-Piekkari, R. (2014). Language in international business : the multilingual reality of global business expansion. London: Edward Elgar.

Mognetti, J.-F. (2002). Organic growth : cost-effective business expansion from within. New York: Wiley.

Orsino, P. (1994 ). Successful business expansion : practical strategies for planning profitable growth. New York: Wiley and sons.

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