[International Entrepreneurship Management]
Introduction:
Café Du Monde is U.S based coffee shop. It is renowned in the United States for its traditional Coffee taste. The café was established in 1862 in Louisiana Café Du Monde official website, 2014). Its unique menu consists of dark roasted Coffee and Chicory, Beignets, white and chocolate milk. In order to be in competitive market and increase their market share in the coffee market Café Du Monde is now considering opening their café’s in new geographical locations. The report presents an analysis of how Café Du Monde can open its new store in the UK. The reports will study the market expansion of Café Du Monde from HR perspective and will discuss its biggest HR concerns for this new company.
Rational for business Expansion:
The company has recently decided to move into the international market. At initial stage of the international expansion, Café Du Monde has decided to open their 10 outlets in UK coffee markets. Below are some of the major reasons for opening café into the new market;
- Café Du Monde have gained enough market share in the U.S coffee market. Management wants to increase their share in international coffee market. So company is planning to open their café in U.K.
- The Hurricane Katrina of 2005 devastated many of retail outlets of the Café Du Monde. The café suffered losses due to shut down of outlets. Owing to this sudden shutdown business get financial losses. This was due tom concentration of business to single location. After this shock, management decided for geographical diversification. The first target of the company is to open café in United Kingdom major areas. After wards it will expanded into further areas.
- There is greater scope for coffee business in UK due to its expanding markets. This will give Café Du monde more revenue and growth.
- Coffee sector in UK is one of the major contributors of UK economy and this growth continues. This will give new market an interesting opportunity to invest in this sector (Reinecke et al., 2014).
- There is increased in the coffee consumption in Europe. This will increase the consumers per coffee shop in nearby future. This will bring new customers for newly opened café shops.
- Café du Monde has rich flavors of costa coffee. This will provide them an opportunity to work better in the UK. Because this coffee is consumer highly in U.K markets. Below figure presents the analysis of major contributors of UK coffee shop market by share.
(Source: Allegra Strategies)
Methods for expanding operations internationally:
Below analysis presents some of the important methods for Café Du Monde for opening business into the United Kingdom (Zahra et al., 2000).
- Exporting: This method involves selling goods or services to foreign countries. Café Du Monde can think of this option as business expansion as it involves less financial risk and less cost of investment. The business is in developing stage. So at this stage selling some products to U.K markets can be preferable. After it gained enough customer base, it can start its franchise in U.K. Methods of exporting includes direct as well indirect exports.
- Foreign direct Investment: It is an investment that gains control over business assets through transfer of money, technology and HR. The different methods of foreign direct investment involve strategic alliances and joint ventures.
- Joint Venture: A joint venture is type of business expansion method in which separate business is created through combining two or more businesses. Controlling and other systems of operations are shared between newly created businesses (Sakarya et al., 2007).
- Strategic Alliance: Strategic alliance between two or more businesses with common goals. Each of the business part of the alliance has some interests in success f the business. Café Du Monde can establish strategic alliance with already occurring café shops in U.K which are working well in the country. The strategic alliance can be done with competitive companies like Starbucks. This company is working well in the U.K coffee shops (Sakarya et al., 2007).
- Relocation of production: Relocation of production can be considered as a favorable option. It has to consider the economic development and political stability. U.K coffee market is showing enough growth in the future days and. Cafe Du Monde can consider production relocation via reducing labor costs, get trade barriers and it will reduce their competition in the global market.
- Management contracts: In management contracts, Café Du Monde, can establish contracts with management of the U.K companies. They will provide him assistance and technological expertise for certain period of time. This is good option for working into the international market as British consumers and their preferences are strictly different from American customers. Café Du Monde will get enough assistance about the British culture and this will also help them to acquire range of HR technicalities by making agreements with any British organization (Deresky, 1997).
- Franchising: It is the method in which franchiser allows the franchisee to use the trademark or brand or reputation. The method is low cost and maintains product consistency in the international markets. This method also gets advantage in form of getting cultural knowledge of local managers. Café Du Monde can adopt this option as it will get enough HR capabilities, and company will get HR skills to handle the local manager (Alon 2006).
Analyzing the feasibility of best approaches:
The above analysis indicates that two better options for expanding Café Du Monde into the international market is to either through FDI or Strategic Alliance. Major concerns are related to Human resource and their management. Because there are wide variations in the business cultures of America and British. Cafe Du Monde have to come across various challenges in managing his HR effectively and efficiently. Below Table indicates the strengths and weaknesses of both the methods employed with respect to the managing HR efficiently.
Risk management approach:
Every business planning to expand internationally has come across with five different types of risks. These include political, economic, growth, marketing and financial risks. It is necessary for business to identify these risks and make appropriate techniques for mitigating these risks. Rugman and Collinson (2009) presented five step approach to manage the risk of performing in international markets (see figure below).
These steps can be elaborated as;
References
Alon, I. (2006). Market conditions favoring master international franchising. Multinational Business Review, 14(2), 67-82.
Blowfield, M. (2003). Ethical supply chains in the cocoa, coffee and tea industries. Greener Management International, 2003(43), 14-24.
Deresky, H. (1994). International management: Managing across borders and cultures. Pearson Education India.
Harris, H., & Brewster, C. (1999). The coffee-machine system: how international selection really works. International Journal of Human Resource Management, 10(3), 488-500.
Reinecke, J., Manning, S., & Von Hagen, O. (2012). The emergence of a standards market: Multiplicity of sustainability standards in the global coffee industry. Organization Studies, 33(5-6), 791-814.
Rugman, A. M., & Collinson, S. (2009). International business. Pearson Education.
Sakarya, S., Eckman, M., & Hyllegard, K. H. (2007). Market selection for international expansion: Assessing opportunities in emerging markets. International Marketing Review, 24(2), 208-238.
Zahra, S. A., Ireland, R. D., & Hitt, M. A. (2000). International expansion by new venture firms: International diversity, mode of market entry, technological learning, and performance. Academy of Management journal, 43(5), 925-950.
http://shop.cafedumonde.com/coffeeClub.html. Retrieved on 13-12-2014
