Many of coffee delight’s have now moved into the European market and are achieving great successes in these markets. Sascha Grey and many of coffee delights directors have discussed a plan for future expansion, in conclusion to their research they have found out that Romania’s consumer spending is forecast to grow rapidly, there will be few competitors in the Romanian market is if they get in there early however this will have been researched by many competitors who also move into the Romanian market.
There are many advantages to Coffee delight investing in Romania.
Romania are currently enjoying high rates of economic growth ,consumer spending is rapidly increasing therefore coffee sales should grow as well as consumers will have more disposable income to buy such luxuries. However coffee delight will have to enter the market quite quickly to achieve the full benefits of the growth.
Romania’s market is set to exceed the growth of the UK’s however this will also attract more competitors to start up in Romania.
The UK market is also dominated by large business and coffee delight only has a tiny amount of market share, these large business’s have more resources and create stiff competition for companies such as coffee delight plc.
APR from the Romanian projects is very attractive at 17% which is substantially higher than the ROCE achieved by the company in 2006. Aswell as this the costs of running the business in Romania are very low, therefore would maximise profits.
However the directors have also considered expanding the business in the UK market.
Firstly UK taxes are much lower than those in Romania, this will be important as retained profit will be a major factor in the growth of the company therefore is lower tax rates then higher profits. Coffee Delight are already a well established business in the UK market this is backed up by the growth of sales despite a 10% decrease in the marketing budget.
The companies forecast have also predicted sales growth above the national market growth rate therefore leading to a increase in market share of the UK market.
Finally Coffee delight have been successful in cutting costs which most of the larger firms have not been able to achieve so the UK may be the best option.
Establishing and running a business in Romania could be prove to be more difficult than in the UK. Romania have different laws to the UK, also different customs and a different culture therefore this will have to be studied in depth before a final decision has been made.
There is also a high degree of risk in setting up a business in a foreign country, it will depend on the attitudes of the management teams and shareholders to risk. There is also a limited amount of data available to coffee delight.
Competitors also have a major say in whether the decision will be worth it, for example if they have the financial capacity to enter the Romanian market and to provide tough competition but this is not working then the Romanian market may not be as attractive as first thought.
Finally the company have no experience of operating outside of the UK therefore they would need to hire specialist managers and staff with these expertises.
From the above points I feel that Coffee Delight should concentrate on expanding in the UK market.
