Espressamente: SWOT Analysis and Implications
ESPRESSAMENTE:SWOT ANALYSIS AND IMPLICATIONS
Anysustainable business growth in the corporate world is usuallypreceded by a critical analysis of an entity’s history, its currentposition and its prospects for future growth. Espressamente is anestablished company that operates coffee shops and has itsheadquarter in Italy. The entity is contemplating extending itsoperations into a new market frontier. This paper analyzes thestrengths, weaknesses, opportunities and the threats of Espressamenteand the implications thereof. Moreover, the paper presents theperfect potential market for the entity as well as the best mode ofentry into the proposed market.
Thestrengths, weaknesses, opportunities and threats of Espressamente canbe espoused as below.
Thecompany offers a particularly unique brand of coffee, which sets itapart from its competitors in the global frontier. In addition to thepower brand that its coffee is, the company also has a widely spreadnetwork in 30 countries with 200 locations. Diversification intofashion, culture and business-to-business operation is as muchstrength for the coffee retail outlet. The combination of a uniquebrand, product diversification and presence in 30 countries providesEspressamente with a muscle to flex in the coffee industry.
Themajor weakness of Espressamente is that it is not an independentbusiness that can make serious decisions affecting its operationssince it is a franchise of a parent company, Illy. In this regard, itmay be technically handicapped to adjust its operations in the faceof short-term market dynamism.
Theopportunities available to Espressamente include the growth of themiddle class, which implies increased sales owing to an increase inthe purchasing power. The general increase in the coffee consumingpopulation with a high preference for premium varieties offered bythe retail outlets is as much an important opportunity toEspressamente.
Thecompany faces stiff competition from other reputable firms in thecoffee industry like Starbucks, Costa Coffee, Lavazza, Tchibo,McDonald’s McCafe and Sega Fredo. Another blanket threat that facesfirms in the coffee industry and by extension, Espressamente is theenvironmental and legal concerns that the firms operating in theindustry have to comply with.
Implicationsof SWOT Analysis
Theresults of the SWOT analysis espouse that Espressamente isstrategically positioned to adapt to changes in the industry andensure its continuity owing to its unique brand of coffee and strongclientele base. Moreover, the business can count on its diversifiedline of products to ensure profitability even in the face of globalcrises. Emerging markets and growth of the middle class presentimmense opportunities for the business to grow and expand itsbranches to exceed the current 200 locations in 30 countries. To tamecompetition from other well-placed firms in the industry likeStarbucks, the company has to advance on its endemic brand strengthand innovation to retail the existing clientele base while attractingnew clients. Espressamente can also conveniently use the technologyavailable to them in the form of dichromatic systems to ensurecompliance to environmental standards. If anything, the best way ofbeating competitors for international markets is relying on anentity’s core business competencies (Patel et al, 2014, p.709).Nevertheless, the firm is technically handicapped when it comes tomaking quick changes in its operations and therefore cannot competeeffectively in a very dynamic market.
TheGerman Coffee Market
Germanyshould be the next market to be pursued by Espressamente. There areseveral reasons why Germany would be particularly attractive toEspressamente. To start with, Germany was ranked third in the ease ofdoing business coming second only to the United Kingdom and theUnited States, which are almost saturated in terms of competitorpresence and potential for growth. Germany recorded the highestconsumption of 6.50 kg per capita per annum, which confirms thatcoffee consumption and brand is well established in the economy.Among the potential new markets, Germany has the second largest GDPper capita of 37900 USD which promising for entry of new entitieslike Espressamente. Moreover, accompanying this impressive GDP percapita is an increased preference for espresso and single portiondrinks in Germany, products in which Espressamente exhibits its corecompetencies. Germany also has an impressive income per capita of 90878 USD and as much a promising future having recorded a 34% increasein the Illy sale volume increasing from £12510817.64 in 2010 to£18327762. 04 in 2011. The fact that Germany is only a 2hrs flightfrom the United Kingdom also makes it an efficient potential marketsince it would be easier to run administrative and operationalactivities from the United Kingdom.
InReale’s decision-making, the following factors will be crucial toconsider:
Ease of doing business in a country.
The coffee brands preferred in an economy.
The concentration of coffee shops in the potential market.
The GDP per capita of the target economy
The consumption volume of the potential markets.
Anoptimum combination of these variables will result into the perfectmarket fit for Espressamente given its strengths, weaknesses,opportunities and the threats facing it.
Thebest mode of entry that will suit Espressamente’s entry into theGerman market is through direct franchise. This is because throughthis mechanism, the operational risks undertaken by the company aregreatly minimized. Additionally, the chosen subsidiary in Germanywill oversee the licensing of Espressamente’s trademarks andproducts thereby greatly reducing the initial investment to be madeby Espressamente. Moreover, the Franchise Association in Germany isvery powerful with about 1000 franchise units in the economy. Thisgives it a muscle to flex in the industry as far as compliance withthe regulations and checking state intervention in the industry isconcerned. Nevertheless, franchising has been found to be the mosteffective and cost efficient channel of entry into completely newbusiness frontiers (Michael, 2014, p. 613).
Michael,S. C. (2014). Can franchising be an economic development strategy? Anempirical investigation. SmallBusiness Economics,42(3),611-620.
Patel,P. C., Fernhaber, S. A., McDougall‐Covin,P. P., & van der Have, R. P. (2014). Beating competitors tointernational markets: The value of geographically balanced networksfor innovation. StrategicManagement Journal,35(5),691-711.