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Home or Abroad? I believe that Coffee Delight should expand by opening outlets in Romania then expanding further in UK

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Introduction

Parth Patel Case study: Home or abroad? It could be argued that it would be beneficial for Coffee Delight plc. to further their expansion in the UK. On the other hand, it could be argued that it would more profitable for them to expand aboard in Romania. I believe that Coffee Delight should expand by opening outlets in Romania then expanding further in UK. One reason for my decision is that the market growth in the UK for a coffee shop has been predicted to drop significantly from 6.2% to 3.9% by 2010. This is highly influential for Coffee Delight as they would be put at a disadvantage as their growth may also decrease. As a result the remaining coffee shops will be in high competition and this will result in Coffee Delight needing to compete for customers, this may lead the business having to reduce prices. ...read more.

Middle

Although, it could be argued that the financial support alone would not be enough of a reason for the expansion, Romania currently has limited competition. This would be ideal for Coffee Delight as they will be able to promote their products and brand early, resulting in the business gaining a high reputation quickly. On the other hand, Coffee Delight expanding further in the UK could also be beneficial for the business. Firstly, the cost expansion is less in the UK at 8.1million where it is 10.6million for Romania. It could be argued that Coffee Delight may not even get any financial support from Romania if they do decide to expand there. The money saved from not expanding abroad could be used efficiently elsewhere such as reinvesting. Coffee Delight could reinvest and conduct market research in order to increase sales as the market share in the UK is falling. ...read more.

Conclusion

The money saved from tax could be used to reinvest and train employees further to ensure that a better customer service is provided. This could result in the current 6% market share of the UK market to increase significantly. The labour turnover for UK has increased from 11% to 19% which shows that the employees are working effectively. Overall, in the future the business has the potential to increase their labour turnover whilst remaining in the UK, resulting in the business being more efficient. In conclusion, I believe that Coffee Delight should expand into Romania as although the forecast for costs of expansion is higher, the expected net returns are also higher. It is predicted that Coffee Delight will make 7.99 million in year four from the expansion in Romania, whereas it will make 3.45 million in year four if it was to remain in the UK. Although this is just a prediction, there is more potential for the business to grow in Romania resulting in higher returns. ...read more.

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