Filiz and Smith should open the next coffee shop in Belgium. It is one of the most populated countries in Europe. The country has a population of 10.8 million people, and it is culturally diverse. The coffee shop will be opened in Brussels near Atomium turistice. Brussels is the capital of Belgium, and it is also considered as the center of European politics (Belgium country profile, 2016). It is the home of many EU and NATO employees, and it is considered as one of the most secure cities globally. On the other hand, Atomium Turistice objective is a landmark of the Belgium (A Belgian Landmark, 2014). It is an attractive place for people to visit. Therefore, it will is an ideal location for Filiz and Smith to open a coffee shop.
Belgium has the highest per capital incomes in Europe and a balanced income distribution. Therefore, the country has a well-spread purchasing power which makes it a suitable place for investment (Doing Business in Belgium, 2013). Brussel is one of the most culturally diverse city with 30% of the population being of foreign origin. In this case, the city has a unique atmosphere, and it is easy for foreigners to assimilate the culture. Brussels is known as the major center of Belgium’s economy (Cleaf, 2010). Just like any other capital in the world many people in Belgium move to Brussels to look for employment. It supports various initiatives to boost the country’s income.
Although the country is culturally diverse, businesses are required to uphold the country’s business culture. The entrepreneurial culture in Belgium follows an egalitarian culture. It is a mixture of hard-working German and Dutch style (Doing Business in Belgium and Work Culture | Expat Arrivals, n.d.). This shows the uniqueness of the business culture in the country. Meetings are important in Belgium as they signify that a person is willing to work with his or her partner. If one wants to start a business, they are required to hold a business meeting (Meeting etiquette, 2014). The meetings should be formal, and one should show the willingness to compromise as it is a Belgian value. If the meeting goes well, people can arrange a lunch date where people can have a social conversation. Meetings assist in developing mutual trust which is a significant component among Belgians.
Nevertheless, there are structural challenges that a new company should be ready to meet. An important thing about Belgium is that there are two business cultures. One of the cultures resembles egalitarian culture which consists of hardworking German and Dutch style. In the particular culture, businesses embrace horizontal organization (Doing Business in Belgium and Work Culture | Expat Arrivals, n.d.). They also have a Belgian-French business culture whereby companies are strictly organized horizontally. Another challenge that a new company expanding in Brussels should consider is the labour laws (Labour laws, 2016). Companies are required to follow the working, pay and employment conditions stipulated in the law.
The marketing mix is the set of actions or tactics which are utilized by companies to promote their products or brand in the market (Richter, 2012). Filiz and Smith should consider developing a marketing mix so as to promote their coffee shop in Brussels.
When opening a new coffee shop it significant to consider the clients and their preferences. Clients have different ways of using their money and places they can spend it (Richter, 2012). Therefore, Filiz and Smith should introduce a menu that the clients want. In this case, a market research is necessary so as to understand the customers’ preferences when it comes to coffee. Initially, people in Brussels preferred what one may consider a decent coffee that they could take away (Lindemans, 2014). They were not used to flavored coffee like people from other parts of the world. However, people are becoming accustomed to the new caffeine trend. Coffee shops are opening around the city, and the public well receives them. Nevertheless, for the coffee shop to stand-out from the rest of the coffee shops, we will use finest coffee beans from Kenya. The coffee beans are from Fairtrade Growing Women in Coffee Foundation which focuses on helping women farmers in Kenya. It is also important to offer a uniquely relaxing environment encompassing the Kenyan feel.
The pricing of the coffee is important as it will highly impact how it sells in the new market. In this case, the clients’ perception is significant in determining the pricing of the coffee (Richter, 2012). The coffee will be moderately priced so as every person in Brussels can enjoy the Kenyan coffee. Using low price may negatively impact the coffee brand; hence, it is important to introduce a price that will be attractive to the clients and also help the coffee shop to remain competitive in the market. The price of regular coffee in Brussels is higher than other regions in Belgium (A Cup of Coffee (Regular) price in Brussels, n.d.). A cup of regular coffee costs 2.706 EUR in Brussels; therefore, for our coffee, it will be priced at 3.45 EUR which is a fair price for the Kenyan special coffee.
The company will use online and television advertisement to promote the coffee. This will enable us to reach to a wide range of clients (Richter, 2012). Currently, most people are embracing online marketing hence; it will be an excellent approach. Additionally, we will introduce fliers that will be given to people in the streets of Brussels.
Filiz and Smith will introduce a coffee shop in Brussels near to Atomium turistice objective. Atomium is a great Belgium landmark, and different foreigners are visiting the area (Atomium, 2016). The environment will be relaxing with a Kenyan feel to it. It will also include free Wi-Fi and access to power point socket where clients can charge their phones or laptops.
Expansion to wider geographical area
Covering a wider area will profoundly assist in gaining competitive advantage. The company will be able to introduce its products to a new set of clientele which will increase its competitive advantage (Hitt, Hoskisson & Ireland, 2013). Currently, various coffee shops are opening in Brussels; the shops deal with different types of coffee. Many coffee houses sell 100% single origin coffee just like Filiz and Smith coffee shop (Lindemans, 2014). Hence, investing in a wide area internationally will allow the company introduce its products in the Belgium coffee market. It will assist in ensuring that many people have a Kenyan feel. Belgium is highly populated and culturally diverse country; hence, occupying a vast geographical area will assist the company in reaching many clients (Cleaf, 2010). The huge number of customers will help the country in gaining competitive advantage. The coffee house will gain tremendous brand recognition throughout the globe.
Brand recognition is significant in competition as many clients prefer a known company. Additionally, expansion in vast areas internationally will help the company gain greater respect from the customers (Hitt, Hoskisson & Ireland, 2013). Many customers will have a feeling of their quality coffee which will increase their competitive advantage. Another importance of the expansion is that the Filiz and Smith will have a greater opportunity of meeting potential business partners in the domestic market. The partners will view the company as a huge player in the coffee market, and they will want to associate with it. This will positively impact on the firm’s finances. The company will have the ability to compete with the leading coffee houses all over Europe.
Information system structure
The expansion in different countries is important in enhancing information systems. The first information system that Filiz and Smith had established has become outdated. Hence, its expansion will assist in improving it. The company will be able to introduce a Kenyan-inspired coffee shop in different parts of the world. Many international tourists will have the opportunity to experience the Kenyan coffee. For instance, Brussels is a culturally diverse city with a huge number of foreigners. Information systems play a major role in the international expansion (Rainer & Cegielski, 2011). For a company to perform and innovate productively in the business world, it needs to develop high coordination skills. Information systems help on reaching to new clients. Expansion to new countries enables a company to introduce a quality product that international customers demand. Filiz and Smith will fulfill the growing demands of the international tourists.
Covering a wide area will also make it easy for the company to deal with foreign suppliers. As a large client, it will be possible for the enterprise to negotiate volume discounts. It also impacts the future products supplied to the company. Currently, Filiz and Smith are importing coffee from Kenya; hence, they will be able to negotiate prices if they have a huge global volume of the purchases from the country (Rainer & Cegielski, 2011). The clients also need a consistent level of services everywhere; hence, expansion of the business in different countries would enable the company to fulfill their demand. For instance, Filiz and Smith will introduce quality coffee to their clients in various parts of the world.
Profitability and Liquidity
To check the profitability will calculate the ratios for gross profit as well as net profit.
Gross Profit ratio= Gross Profit/ Net Sales
= 208, 000/360,000
= £0.58 or 58%
Gross profit is vital for a company, and it should be enough to cover all its expenditure as well as offer profit. The ratio is utilized to measure the organization condition (Vickerstaff & Johal, 2014). Filiz and Smith coffee shops gross profit ratio is high which means that they have the capability to control its production. This may positively affect its expansion to Belgium as there is high competition. The company needs to have a stable production for it to fulfill the demands of clients in Brussels. The results also show that the company is selling its products at higher profit percentage.
Net Profit ratio
Net Profit ratio= Net profit/ Net sales
= £0.074 or 7.4%
Filiz and Smith coffee shops net profit ratio is high which means that if the sales decline the profits will not be affected (Vickerstaff & Johal, 2014). It shows that the shops are capable of controlling their costs.
Return on equity capital employed
Return on equity capital employed is a financial ratio utilized to measure the profitability of an organization as well as the effectiveness in which the capital is utilized (Vickerstaff & Johal, 2014).
ROCE= Net Operating Profit/ Capital Employed
Filiz and Smith coffee shops had a high ROCE which shows that it generates high earnings. This shows that the shops may have an easy time expanding and controlling its profitability in Brussels Belgium (Vickerstaff & Johal, 2014).
The current ratio is utilized in measuring company’s liquidity and capability to pay short-term liabilities with short-term assets (Vickerstaff & Johal, 2014).
Current ratio= current assets/ current liabilities
Filiz and Smith coffee shops current ratio is £18.23 which shows that it can pay off its obligations. Therefore, with the current ratio, it will be able to pay its short-term liabilities using short-term assets (Vickerstaff & Johal, 2014). This allows the organization to expand to Brussels, Belgium.
Acid- Test Ratio
Acid- Test Ratio= (Current assets- inventory)/current liabilities
= (35,400- 8000)/ 6,200
Filiz and Smith coffee shops are financially secure in the short-term (Vickerstaff & Johal, 2014). The companies can meet their short-term liabilities; hence, they are capable of expanding into new markets.
Filiz and Smith coffee shop expansion in Brussels, Belgium is highly practical. First, Brussels has a high population which shows that it has a good customer base (Vickerstaff & Johal, 2014). The city also has a huge number of foreigners working and others visiting the Atomium turistice which is a famous landmark. Belgium has the highest per capital incomes in Europe and a balanced income distribution. However, the company might come across various challenges such as taxation and labor law. On the other hand, the company financials shows that it is capable of expanding to Brussels. The other shops’ profitability and liquidity will have a positive impact on the expansion. The acid-test ratio indicates that the coffee shops can meet their short-term liabilities. Additionally, the current ratios show that they can pay off its obligations. It is also evident that coffee shops can control their production as well as costs. The ratios indicate that the company is a better place to expand in a foreign state.
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