Hank Marvin and Patty Smith are the two popular food catering company partners. Their unity, dedication and target-oriented capabilities have allowed them to make quality coffee that is preferred by most foreign customers. In pursuit of a central location for expanding their market in Europe, the two partners have instilled exclusive deals aimed at meeting the demands of their customers, while at the same time attracting sustainable business fair trade and high-quality tea. This paper, therefore, looks into the expansion of plans of the business in the Netherlands and considers the logistics involved such as ethical concerns to retain and attract most customs in the business.
The Netherland is a global consumer of coffee and ranks as the top exporter of coffee as a member of the European Union. The European Union comprise of 28 countries and each country has its own characteristics in consumer behavior .Before they make a choice on where to export coffee from , the European member country pays more attention to the quality and safety of the coffee itself (Nguyen 2014, p.35). The family concern in terms of safety of the coffee to the consumer indicates a strong relationship between the consumers and the coffee firms in the Market.
Netherlands exports its coffee from Vietnam and plays a central role in re-exporting to the member countries. The country is located in Western Europe and the consumers from those areas are known widely. The ground foundation of their consumption habits owes their provenance, reputation and the fair trade of the products. According to Nguyen (2014, p.58), the consumption trend of coffee in the Netherlands demonstrates their stability and constant export despite the influence of the economic coffee crisis in 2008. Since then, this country has developed its market share from more than one percent to 45% in the year 2015 (Ingenbleek and Reinders 2013). In addition, the location of the Netherlands geographically is centralized to the two largest coffee ports Antwerp and Hamburg that contributes to its largest share of Dutch imports source in Western Europe.
The Dutch drinks espresso, a blend of Arabica and Robusta, which are the leading in the market shares at an approximate of 60%. The coffee beans is on the rise in the market, as most customers prefer it to others for example the coffee pods (Nguyen 2014, p.62). Logically, it makes sense for Hank Marvin and Party Smith to expand their business in the Netherlands with a bearing that their product is at higher demand and the availability of the market is well established. According to the Ministry of Foreign Affairs, the Netherlands tops the seventh largest importer of green coffee in Europe and imports a total of 159 thousand tons in 2015. The trend in consumption is fast growing and a need to expand the business in this country is a noble idea. There are a growing number of coffee bars and small roasters, which indicates a good consumer culture of coffee in the Netherlands.
The underlining challenges in the Netherland market include a quick demand for premium coffee. This aspect attributes from the high level of education and technology in the country. The focus of the customers in this country is the quality product and high level of creativity of the suppliers in terms of their branding and opportunities. Due to a high demand for quality coffee, food safety, and control, measures have been put in place to restrict high risk of contamination in the market.
Hira and Ferrie (2006) explain that the sustainability of goods in the market involves tapping into coffee industry resources in order to promote the sustainable supply to the customers. The logistics in the Netherlands markets as defined by Ingenbleek and Reinders (2013) is the process of strategically managing the finished inventory and monitoring the movement and storage of materials. The focus in this magnitude concerns future expansion and profitability maximized through cost effective fulfillment of orders. The Netherlands provides a suitable supply chain to new customers including foreign investors.
The Netherlands offers a cosmopolitan market with a variety of coffee products and commodities. These varieties include firstly, ground coffee which is a basic coffee type consumed by most European Union. Secondly, the roasted coffee beans are strengthened by the fast growing popularity of Italian coffee in the Dutch diet (Ingenbleek and Reinders 2013). Thirdly, decaffeinated coffee contributes to the percentage of coffee sales in the European Union market. However, it still faces the challenges of low market in some parts of the Netherlands country. Instant coffee also shares a unique characteristic in the market segment. Ready to drink coffee has also found a good advantage to the customers. Most consumers prefer this type of coffee due to its flexibility and convenient supply in the market. Finally, the flavored coffee provides the fast growing demands in the market trends (Nguyen 2014, p.74).
Nguyen (2014, p.81) compares the different coffee types in term of consumption in kilograms per capita in European Union and reports that they are lead business in European countries. The reports logically mean that there is a high demand for coffee in Western Europe, since the consumption stay stable in the Netherlands. An estimate average of 5.3 kg coffee per capita was consumed consumption by the Dutch in 2015 as reported by CBI. In order to meet the standards by the Dutch; the investors need to comply with the safety regulations of the coffee managed by the International Coffee Organization (ICO), the Organization for Standardization (ISO). The investors to ensure that high quality coffee is made available to the customers must meet the set standards.
The existence of the coffee market in the Netherlands gives Hank and Smith a better chance to promote their business. The local customers in the Netherlands have high taste and preference and therefore the strategic entry for the business would realize a quick pick up. In order to promote their business, they can introduce the themed evenings to attract neighborhood customers (Lewin et al. 2013). Due to its experience in the East African-inspired coffee shop, the focus of the business will be of fast growth and the most trending.
The coffee culture of the Dutch provides the best ground for Hank and Smith to invest their business. The fair trade and the history of the Netherlands is ideal for the promotion and expansion of the business. The stability in exportation of the coffee from the two coffee firms makes it very reliable and convenient for the surplus to its customers (Nguyen 2014, p.84).
Gaining Competitive Advantage
The Netherlands as a country comprise of 17 million inhabitants and an estimate of $ 4 of her total population consumes green coffee. This illustration indicates that a bigger population consumes coffee in their daily diet or does the sales or otherwise. According to Nguyen (2014, p.87), the growing number of bars and the baristas is an opportunity to invest in the coffee business. In a span of 10 years to come, statistics shows that the great innovators in the coffee firm will have to attain a complete customer bond and noble relations.
The focus of the business builds from the strong story of its achievement and smart customer relations. Offering after sales services and refreshments or recreational facility is the epicenter that Smith and Hank plans to gain a competitive strength in their expansion plan. The demand for innovative technology in the coffee shops makes it more prominent to trust their product quality. After market evaluation, the investors need to fill in the gap by providing the best quality in the market and adhering to the ISO standards. When the sustainability of the business becomes mainstream, the investors compete at the top. Once the business is certified, the, it becomes viable to fast changing demographic hence able to provide for their customers consistently (Killian et al. 2013).
Assessing the market monitoring and evaluation of food contamination from pesticide residue, mycotoxins, and salmonella among other contaminants should be done regularly as per the EU regulations. The climax of the business should focus on good customer trust and high quality product. In addition, the availability of capital from the previous financial statement outshines it expansion and completion since the business will not depend on borrowing of money to business instead invest in its initial profits. The trained personnel with the ability to produce high quality coffee put the smith and Hank shop on top. The rising demand for quality coffee beans in the Netherlands is a good opportunity for workers to invest and commit their energy and time to outshine in the business.
Establishing a strong and reliable supply of the coffee in the business is a number one priority that Smith and Hank would negotiate. Basing from the facts as per the, there is a steady supply of coffee from the two coffee ports Antwerp and Hamburg. The focus should be on the traders and the roasters who imports coffee directly from the source cutting links of big chains to the coffee ensures that the shop spends less in purchase. The shop opts to recruit agents to represent the importing company. The business should consider forming collaboration with supply partners in order to offers the best alternative for the ease for expansion for the smith and Hank coffee shop. Such collaborations include the rainforest alliance, global coffee platform, nespressor AAA among others (Nguyen 2014, p.89). A consultant sustainability of supply should be emphasized or forming individual sustainable sourcing schemes to ensure a continuous flow and the market rates. The Netherlands market suffer several market segments in terms of supply and chain managements the segment has resulted in low demand for the green coffee
Profitability and Liquidity
According to Hira and Ferrie (2006), a gross profit is the profit the company or a business earns after making deductions of the cost of goods sold and selling of its product. During the 2016 financial statements, Smith and Hank made a gross profit of £208.000 in the closing of the business. This adjust is an improvement as compared to the previous financial statement. The sales volume during this year was very high hence, the high gross income realized in 2016. An increase in gross profit margin is centralized to an increase in demand in the market and the business must have experienced many customers buying from them. The expansion plan of the business in the Netherlands will be possible with the fair trade and streamlined sustainability.
The gross profit is anticipated to increase due the high demand of coffee in the market. The cost of goods sold is likely to go high for the first month due to high prices of the neighboring business of the same nature. After a short period, the business is likely to pick up, since it is very competitive in terms of the services they offer to their customers. The trends in the market also help predict the gross profit margins due to the strong culture of the Dutch feeding habits and dependency in coffee business.
The net profit recorded from the 2015 financial year indicates decrease in the sales volume. This decrease might have resulted from the higher expenditure rates that marginalize the net value. However, an estimated increase in the net profit margin might increase when the business expands, because of increase in purchase of more sophisticated machines for innovation and quality produce.
The return on capital usually is the difference between total assets and current liabilities in the business. It shows the whether the company is making any value in its profitable ratios after considering the capital invested in the business
(Total assets – Current liabilities) = (113000-106800) = 6200. This amount is equal to the trade payable. It therefore shows that the expansion plan is viable. The total liabilities and the capital amounts a good start of the business in the Netherlands.
Acid ratio is calculated by:
(Cash + account receivable +short-term investments)
(113000/106800) = 1.0581
This test indicates that the business expansion plan is possible. Had it been less than one, then there would be no viability. The company should then invest by expanding its shares to avoid idleness of the accumulated profits .The liquidity of the business would mean a quick sales of the coffee in the market without affecting the asset prices.
Current ratio = current assets/current liabilities
It means that the current ratio is less than one indicating that the business is not at financial health however, it can still support its obligations.
The expansion plan outlined in this research indicates high chances of expansion into the market. From the statistical view, there is high rate of liquidity without having to interfere with the assets of the business. The literature reviewed in the Netherlands provides a quick workability of the business .The Dutch prefer high quality coffee and so the business needs to provide high quality as an entrance to the market. The business is at healthy financial status, since it does not have any loan in their previous records.
The trend in consumption is fast growing and a need to expand the business in this country is a noble idea. There are a growing number of coffee bars and small roasters, which indicates a good consumer culture of coffee in the Netherlands. In order to meet the standards by the Dutch; the investors need to comply with the safety regulations of the coffee managed by the International Coffee Organization (ICO), Organization for Standardization (ISO). The performance of the business is based on the commitment and the attitude of the workers to give their best produce. Hank and Patty Smith need to upgrade their information systems to meet the fast expanding market in European Union.
Despite the underlining, challenges in the Netherlands market such as quick demand for premium coffee, Hank and Smith coffee can still adjust to meet high thresholds. Much focus should be paid in a smooth running of the business with minimal wastages of resources, since the liquidity might go down in such attempts. This research gives the Smith and hank an opportunity to venture into business in EU and realize the greater benefits of the new members in the union (Ingenbleek and Reinders 2013).
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