XGBBMM5312

PRINCIPLES OF
INTERNATIONAL BUSINESS

ASSESSMENT

Student name: Ion-Florin Apetroaie

Student ID: 2019477
 Table of Contents

Introduction................................................................................................................................3
Tucano Coffee Background.......................................................................................................4
Internationalization ...................................................................................................................4
Market Entry Strategy................................................................................................................5
France Coffee Market................................................................................................................6
United Kingdom Coffee Market................................................................................................7
SWOT Analyses.........................................................................................................................8
Porter’s five forces analyses.......................................................................................................9
PestleAnalyses .........................................................................................................................10
Conclusion................................................................................................................................12
References................................................................................................................................13
Introduction
 Tucano Coffee Background

Tucano Coffee is a franchise coffee concept, originating from the Republic of Moldova.
Tucano Coffee opened its first coffee shop in Chisinau in 2011, succeeding in time to become
an international chain of coffee shops.
Love. Peace. Coffee. is the slogan of Tucano coffee inspired by rock'n'roll and hippie culture,
suggesting people's tendency to return to nature, love, and freethinking. Thus, a brand was
created that resonates with most people, regardless of religion, skin color, or nationality, that
is, an international brand, currently consisting of 30 cafes located in 9 countries of the world.
Tucano Coffee promotes the culture of high-quality Arabica coffee beans roasted in its
factories, offering various drinks from classic coffee to specialty coffee such as Cannabis
coffee, Cocos Raf, or Crème-Brule coffee. In addition to coffee, Tucano Coffee's main
specialties are cheesecakes, made in its laboratory, from natural ingredients.

Internationalization of the company

Regardless of the size of a business, internationalization is a condition of existence for

companies. Businesses are looking for international expansion due to the opportunities to
minimize costs, increase market share, and maximize profit.
According to several types of specialized literature, in addition to the reasons mentioned
above, companies internationalize to acquire new technologies and knowledge, but also to
improve organizational practices (Kumar and Snavely, 2004).
The reasons behind the decision to enter the UK and France coffee market are as follows:
 Expanding into new and big markets, offers opportunities to increase revenues and
implicitly for the long-term growth of the company.
 Reducing business risk
Expanding a company to other markets also involves reducing business risk, therefore
a company can overcome an economic downturn by benefiting from its sales
elsewhere (Ietto-Gillies, 2012). Tucano Coffee manages its business risk by
penetrating emerging markets that offer excellent growth opportunities, such as the
United Kingdom and France.
 Favourable business environment
 According to the Sustainable Economic Development Assessment 2020 (SEDA) report.
SEDA’s overall score of 75.7 for the UK and 75.2 for France denotes a favorable
environment for the initiation and development of a business as well as higher incomes of
the population. The scores for the Republic of Moldova and Romania, the country of
origin of the Tucano brand and the country with the most Tucano cafes, are much lower
than those for France and the United Kingdom.

Market Entry Strategy

When a firm is going to explore a foreign market, the choice of the best way of entry will be
reflected in the firm's expansion strategy. Until now, Tucano Coffee has used two entry
models in its international process, Wholly Owned Subsidiary and Franchise respectively.
Wholly Owned Subsidiary used in 2014 to enter the Romanian market, being used quite a bit
by Tucano Coffee as a model to enter other markets. The main entry mode used by Tucano
Coffee is Franchising, allowing the expansion of the brand wherever there is demand for it or
those wishing to promote it. Thus, Tucano Coffee has 38 locations, of which 33 are outside
the territory of the Republic of Moldova (Table 1). Franchising is the main reason for Tucano
Coffee’s success in the international market.

Table 1. Number of locations by country

Country Number of locations
Cyprus 1
Netherlands 1
Kazakhstan 1
Germany 1
Belgium 1
Ireland 1
 Romania 23
Moldova 5
United Arab Emirates 1
Source: www.tucanocoffee.com

Franchising gives the owner the advantage of retaining more control over the operation of the
business while utilizing the franchisees' resources (Rosado-Serrano and Navarro-García,
2023). The franchise will also be the model used by Tucano Coffee to enter the United
Kingdom and France markets, due to the success of Tucano Coffee using this model, but also
due to the minimal risks for both the franchisor and the franchisee.

France Coffee Market

With a long tradition of coffee consumption, France has one of the highest coffee
consumption in Europe. Considering this and the importance of cafes in French society, it is
not at all surprising that a large amount of coffee is consumed in France. In 2020, the number
of coffee shops in France amounted to almost 15,000 units, generating over 80 percent of the
total revenues of the coffee market in France (Statista, 2022). The specialty market has grown
steadily over the years in France, reaching from 1-2% in 2017, to 4% in 2020 of the French
coffee market. This is due to the growing interest in high-quality coffee, but also due to the
culture of drinking coffee outside the home, it is well embedded in French culture.
Branded coffee shops are a significant part of the French coffee market, but not as significant
as the UK branded coffee shop market. According to Allegra, in 2020, the number of branded
coffee shops reached 3,639 coffee shops. The biggest branded cafes on the French market are
McCafé, Starbucks, and Columbus Café & Co.

Top branded coffee shop 2021 by number of outlets

240
190 170
250
200
150
100
50
0
McCafe Starbucks Columbus Café &
Co

Source: Statista, 2022

 United Kingdom Coffee Market

The United Kingdom is one of Europe's largest markets for coffee consumption. In terms of
household consumption in the United Kingdom, it is still dominated by instant coffee, but
ground coffee and premium coffee capsules have gained popularity in recent years.
The cafe market in the United Kingdom, although it is a huge one, it is in continuous growth,
with the number of cafes increasing from year to year. In 2019, there were 10,604 non-
specialty stores in the UK, 292 more than in 2018. The number of branded coffee chains and
independent operators increased to 8,222 stores and 7,066 respectively in 2019 (Statista,
2022).
The data shows that the UK is the biggest market for branded coffee shops in Europe. The
branded coffee shop sector is considered one of the most resilient in the country. Strongly
affected by the coronavirus pandemic, it recorded an 87% increase in 2021 compared to
2020, with a value of 4.4 billion pounds.

Branded Coffee Shops in the UK Market

2019 2020 2021

£5.00 10000

£4.50 £4.50 £4.40

£4.00 9560 9500

£3.50
9159
£3.00 £3.00 9000

£2.50

£2.00 8500

£1.50 8222
£1.00 8000

£0.50

£0.00 Value of the branded coffee shop market (Billions) Total branded coffee shops outlets7500
2019 2020 2021

Source: www.worldcoffeeportal.com
The competition is huge in the cafe market in the UK, in 2021, the leaders of the brand cafes
were Costa Coffee, with 2,791 stores, followed by Greggs with 2,176 stores, and Starbucks
with 1,089 stores (Statista, 2022).
SWOT analysis

The SWOT analysis offers the possibility for Tucano Coffee to identify the favorable and
unfavorable factors to enter the market in the United Kingdom and France. The SWOT
analysis will help Tucano Coffee to identify and prioritize the company's objectives, but also
to further identify the strategies to achieve them (Singh and Kosi–Katarmal, 2009).
Strengths

 High-quality products
Tucano Coffee attaches great importance to the quality of its products, using premium quality
Arabica coffee beans roasted in its own factories.

 Wide variety of products

In addition to the wide range of coffee and specialty coffee, Tucano Coffee has a diversified
range of cheesecakes, tarts, smoothies, teas, and fresh juices.

 Customer base loyalty

Tucano coffee has implemented loyalty programs to stimulate loyalty through customer
cards, these programs help to increase the number of customers.

 Member Specialty Coffee Association

The most important benefit for Specialty Coffee Association members is networking. Thus,
the connection with potential partners, investors, and buyers from outside the borders of the
Republic of Moldova becomes easier

Weaknesses

 The high price of the products

The price of Tucano Coffee products is high, being higher than the average price of coffee
shops in the coffee market in the United Kingdom and France.

 Overdependence on the Romania market

More than 60% of Tucano cafes are located in Romania, which generates a high business
risk.
  Unknown brand in the United Kingdom and French cafe market
The promotion of the brand outside the borders of Romania and the Republic of Moldova
is done only through social media platforms, which are insufficient for markets as large as
those in France and the United Kingdom.

Opportunities
 Expansion into Emerging Markets
Taking into account the number and incomes of the population in the two countries as well as
the increase in specialty coffee consumption, the company's income should increase
considerably in the coming years.

 Changing Consumer tastes and lifestyle choices

The movement of consumers towards healthier and quality products, this trend is mainly
driven by the younger generations, who are increasingly interested in organic and quality
coffee, this is a great opportunity for Tucano Coffee to become a well-known brand on the
market in France and the United Kingdom.

Threats

 Competitive markets
The coffee shop market in France and the United Kingdom is already at a mature stage and
the pressure is huge from competition such as branded and specialty coffee shops, the latter
of which are booming.

 Price Volatility
Over time, there have been significant fluctuations in the prices of high-quality coffee beans,
which Tucano Coffee cannot control. Also, the recent increase in the price of energy or dairy
products represents other reasons for concern for Tucano Coffee.

 Increasing labor costs

Both the salary market in the United Kingdom and France in the cafe industry is higher than
that in Moldova and Romania, this implies higher salary expenses, especially since the
quality of services is an extremely important aspect of the culture of Cafe Tucano.
 Porter’s Five Forces Analyses

Rivalry Among Competitors

Rivalry is very high in the United Kingdom coffee shop market as big names in the coffee
industry dominate the market. As for the specialty coffee market, it is also intensely
competitive in terms of product quality, price, service, and innovation. On the other hand, in
France, the coffee industry is mainly dominated by specialty coffee. It will be difficult for
Tucano Coffee to simultaneously offer better service and innovative ideas in its products
(Saura et al. 2020).

The threat of new entrants

The coffee industry in the two countries is constantly growing and there is an opportunity for
new companies to enter the industry, whether they are from the domestic or international
market. So, for Tucano Coffee, the threat of new entrants is quite obvious, especially as the
United Kingdom is a booming specialty coffee market.

The threat of substitutes

There are many substitutes for coffee from tea to soft drinks, natural juices, energy drinks,
etc., but Tucano Coffee offers a wide range of drink options such as teas, fruit juices,
lemonades, and milkshakes. Soft drinks, energy drinks, and instant coffee are the main
potential threat to Tucano Coffee branded drinks.

Power of suppliers

The main suppliers of Tucano coffee are the suppliers of coffee beans. The bargaining power
of its suppliers is relatively low. Being a member of the Specialty Coffee Association (SCA),
it contracts directly with farmers, buying coffee beans according to their quality from
different regions in Brazil, Costa Rica, Kenya, and Indonesia (Tucano Coffee).

Bargaining power of buyers

The bargaining power of Tucano coffee buyers is medium-high to high. Customers are strong
given the size of the coffee market in the two countries, as there are a multitude of different
options to choose from. Only loyalty to the quality of Tucano Coffee products can reduce this
power.

PESTLE Analyses

Political factors

The United Kingdom and France have a stable environment, which is favorable for new
businesses. As a coffee shop, there are considered: trade agreements (from where we intend
to source raw materials), terrorism (no risk for these countries), the stability of the political
environment, taxes, and policies on the economy.

Economic factors

The good news for a new coffee shop is that the United Kingdom and French economies are
quite strong, and more consumers with disposable income are willing to spend money on
coffee. The stabilization and unemployment rate in these countries convinced Tucano Coffee
to bring the business to the two countries and grow as well.

Social factors

The United Kingdom but also France has a high level of coffee consumption that will easily
allow Tucano Coffee to integrate into the community and connect a relationship between the
value chain (suppliers, partners, customers) and the coffee community.

Technological factors

The two countries are very technologically advanced, which is beneficial for a new start-up,
we will contribute by using point-of-sale systems and mobile applications to improve
efficiency and customer service (Adomako, 2020).

Environmental factors

Tucano Coffee will do a commitment to being environmentally friendly, by using recycling

(composting of ground coffee), reducing energy consumption, and reducing water
consumption by including water-saving technology in our equipment.
Legal factors

There are several regulations that companies must comply with in both the United Kingdom
and France, such as employment law and health and safety law. Tucano will consider relevant
legislation for good standing in this area and ensure consumer protection by settling
consumer protection cases for gift card violations.
Conclusion
References