The Espresso Lane to Global Markets Case Solution

2. Reasons for International Expansion

Espressamente made a famous name in the global coffee industry. It competed on the basis of refined coffee taste. Espressamente went global due to the high coffee business. According to the International Coffee Organization, the market of coffee will rise by 20% each year. The main aim of the business was to expand into retail markets. The company established a fact that it would enter globally on the sole basis as the only promoter of Italian culture. The international trend also shows an expansion in the middle-income bracket. The Indian and Chinese economy especially felt that the middle income has risen consistently over the past few years. The competition also boosted the confidence of the business to increase operations. The major competitors include Starbucks, Coffee Bean, and Tea Leaf. Other rivals include McDonald’s coffee, Lavazza and Costa Coffee (Osorio, 2002). All these competitors helped Espressamente to continuously innovate and adapt to changing global atmospheres.

The company has options to develop in Brazil, Japan, United Kingdom, China, United States, Germany, and India. However, it needs to be considered that the same Espressamente needs to be marketed in a different context for every culture. Diversity needs to incorporate and adjusted accordingly within each country.

International expansion had been extensive, but the business encountered barriers to entry in terms of legality and sustainability issues. The legal issues involved the rights of suppliers and laborers. The supply of coffee beans had been crucial due to rigid climatic conditions. The rights of suppliers were hindered due to the assigning of a limited proportion of total revenues. The share of suppliers hardly included 7.14% of the total income generated by coffee sales (Rhodes, 2002).

3. Sources of Competitive Advantage

Espressamente retained its original Italian identity. The unique selling points were formed on the basis of fame, business market dynamics and traditions. The coffee company has the aim to produce defect free coffee. The coffee production equipment has the capacity to detect quality and color standards of coffee beans. Any color or size of the bean that deviated from the standard was automatically eliminated. The main characteristics of coffee were directly communicated to coffee lovers. The attributes included the right amount of cream or foam, dark flavored, presented in a tradition Italian way (Ferraroni, Tavani, & Paripinel, 2004). The company also adopted the style of different premium luxury stores to attract business. The posh and premium image of coffee interested many buyers worldwide.

4. Analysis of Different Markets

i. Brazilian Market

Brazilian business has the reputation of the major coffee growers of the world. Most of the exports are produced from coffee bean receipts. But the Brazilian market is more prone towards American style coffee outlets. So business seemed lucrative to cater to a varied coffee form. Brazil had been difficult to enter due to a saturated market in terms of production and marketing. Hence, Espressamente can face a higher risk of entry. The return on coffee selling in Brazil depends upon core competencies and promotional activities. It has been estimated that Brazil has the potential to supersede and overtake the United States’ coffee market. Brazilian business has the competitive edge of both making and selling; it can develop promotional activities and become a successful business. Currently, Brazil has 12% of the total business as international franchises (Kruger, 2007). The country still has less confidence in external businesses. Nonetheless, the corporate culture of Brazil is attracted to joint ventures and partnerships.

ii. Indian Market

Indian culture is associated with tea servings. However, since the past 10 years, the Indian economy has boomed and has invited many conglomerates and international businesses to settle in the country. The country welcomed new restaurants, hotels, bars and coffee shops. Espressaemente can tap the potential market due to low barriers of entry and cheap labor costs. It can also take benefit of advanced psychographics of the middle income, high income and the elite. The Indian market also had a lower risk due to a less saturated market. The Indian market also has the potential to attract coffee retailers from abroad to support the local and traditional taste of food. 

The Indian economy was most desirable to enter the era of 2009. Most developed countries face a credit crunch and economic recession whereas the Indian economy faced unexpected growth. Indian economy is replete with innovators, thinkers, and survivors. The middle segment struggles to achieve a higher status. Brand equity for coffee can be expected. The market is large for tea. Coffee constitutes a substitute and can compete without major risks. India also can be a strategic business area to enter as the flight time distance between Italy and India is eight hours (Damodaran, 2002). Business and executive dealings could be easily managed.

iii. United States

The United States is also one of the coffee pioneers. The United States has a high number of consumption due to people’s choice of taste. Espressamente can compete in the United States market, but it is associated with more risks. World business leaders operate in the United States and capture the significant proportion of profits from the United States. Every age group and segment consumes coffee as it is more of a habit than a trend. Coffee is still rated as a premium good. The United States market owns advanced technology to support its coffee production and marketing campaigns. It has initiated better roasting bean systems along with expert standardization (Romani, Sacchetti, & Lopez, 2000). The quality of each cup is assured to sustain customer satisfaction. Moreover, Starbucks had already set a benchmark for competitors to meet. Espressamente faces higher risk and barriers to entry. However, at the same time can expect higher returns from a responsive economy where the purchasing power of the majority is stable. The coffee shop in the United States cannot be a traditional one as marketed in Italy. It needs to incorporate other items in the food menu and other restaurant facilities.