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THE EXPRESSO LANE TO GLOBAL MARKETSQ1. Conduct a CAGE analysis of the seven countries under consideration to help in decision for global expansion.

7/8/2015BRAZIL Urban-Coffee cultureSecond largest consumer coffee marketSuccessful in FDIExpected growth of 30% in coffee shop industryHigh-interaction relationshipsLow per capita consumptionGrowing franchise sectorStrong local brands- Only 11 per cent of franchises were foreign-based franchisors .Brazils capital, Brasilia, was approx 9,054 kilometers away from Rome, Italy.

CHINAProjected growth of 10.7 % through 2015China boasted a huge population, 43 per cent of which lived in urban areas. Saturated and matured marketMinimal to-go salesCoffee an established product categoryFranchising popular but difficultUrban transition (45%)Rising consumer income and increasing standard of livingChinas capital, Beijing, was approx 8,147 kilometers away from Rome, Italy.

GERMANYCoffee was ranked second in the world in pounds per coffee consumed per personAverage German coffee consumption was 150 liters per person15% per-capita decline in consumptionInterest in freshly prepared specialty drinksEase of doing businessProjected growth of 10.5% between 2011-2015Fierce competitionHigh concentration (1000 franchise systems)Germanys capital, Berlin, was approx 736 kilometers away from rome, Italy.

INDIAEmerging economySixth largest producer of coffeeFranchise success but youngCoffee consumption increase by 6% over 5 years300M-350M middle-income earnersRoom for 5000 cafesOverly bureaucraticIndians had increased exposure to international lifestyles and global trendsNew Delhi, was approximately 5,929 kilometers away from Rome, Italy.

JAPANRanked 3 as coffee importerExpected 5.4% compound growth through 2015Innovation in product and packagingMore growth opportunity for hot beverages (Less alcohol consumption) Difficult to franchiseJapans capital, Tokyo, was approximately 6,138 kilometers away from Rome, Italy.

UNITED KINGDOMRecent growth of 6% remained stableShift from tea culture to coffee cultureHigh projected growthHigh concentration of current coffee barsOne of the easiest places to franchise Ease for foreign investorsThe United Kingdoms capital, London, was approximately 893 kilometers away from Rome, Italy.

UNITED STATESRanked 1 in coffee consumption(25%)Rank 4 in ease of doing businessHighest income withSaturated and highly concentrated marketLowest growth potentialCostumers want: Retail experience, WIFI, product innovation, health trendsThe 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.

S3.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 considerationGE MATRIX

BCG MATRIX

4. Identify the variables from the case which are most important in reales decision making.

IMPORTANT VARIABLES FOR DECISION MAKINGCOFFEE CONSUMPTIONCOFFEE SHOP CONCENTRATIONURBANIZATION RATEGDP PER CAPITACOFFEE SALESEASE OF DOING BUSINESSCOMPETION FROM LOCAL AND INTERNATIONAL PLAYERSATTRACTIVENESS OF SEGMENTS

5. Use CAGE, SWOT, GE and BCG matrix to help reale prioritise the foreign markets.

CAGE WISE PRIORITIZATION

CultureAdministrationGeographical distance(Fly Time wise)EconomyBrazil4466China5755Germany2313India 7534Japan6677UK3122US1241SWOT WISE PRIORITIZATION1 - Uk2 US3 - Germany4 - India5 - Japan6 - China7 - Brazil

GE WISE PRIORITIZATION1 - Brazil2 - US3 UK4 - India5 - China6 - Germany7 - Japan

BCG WISE PRIORITIZATION1 - BRAZIL2 - CHINA3 - JAPAN4 - INDIA5 - UK6 - United States7 - 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 marketCountries which are similar to the original country in which the business lies are very easy to enterFor 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 factors1. 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

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