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 Global Marketing Project One16 March, 2015Taylor BunkersBen BieberDaniel GatesJessica MerolaNhu NguyenIntroductionTraditionally, there was a time where going global was a foreign concept as many small businesses tended to remain local. In today’s society, going global is not only an opportunity for a company to expand geographically and financially, but has become a necessity in many market segments in successfully conducting business activities outside a company's home country. Therefore, the international market place provides an array of business opportunities for American companies seeking to sell or source their goods and services worldwide. Any company thinking of expanding their operations internationally has to contain a certain mix of internal ingredients in order to be successful globally. Peet’s Coffee and Tea is a speciality coffee and tea owned and operated in the United States of America. It is not about the market being ready for global expansion but rather Peet’s Coffee being ready as a company for the international market.CapitalCapital is important as it allows Peet’s Coffee to expand its operations, retaliate, cross subsidise international products and attack competitors profit centres worldwide if required. Based upon Peet’s financial standing in 2012, annual revenue growth rate (383 million, up 11.4%) and the companies total assets (230 million) continue to progressively increase (Mergent Online). The merger agreement and acquisition of the company in 2012 by Joh. A Benckiser caused the company to become privately owned (PrivCo). JAB company focuses primarily on investments in companies with premium brands, which is at the forefront of Peet’s Coffee and Tea (Peet’s Coffee and Tea). As the company is continuing to increase their profits, self financing as a form of capital is high, thus creating improved equity returns. ProductPeet’s Coffee and Tea provides a unique beverage experience through its specialty characteristics. It positions its coffee and tea on the commitment to quality, sourcing the best beans and leaves from around the world (Peet’s Coffee and Tea). As a result, the company positions itself as a higher quality brew, an upscale alternative to other coffee and tea competitors such as Starbucks. It is through the freshly roasted component that Peet’s created an advantage through a unique distribution system (Mason Myers Blog). The direct-store-distribution (DSD) network of trucks and drivers was implemented by Peet’s to better control the coffees freshness and quality. This distribution strategy has became a competitive advantage for Peet’s .(Mason Myers Blog)Human Resources and PeopleIn order to go international Peet’s Coffee requires culturally competent people. Employees need to be able to understand the language, people, customs and values contained within the countries the company wishes to sell to. Currently, the current CEO of Peet’s Coffee and many of the directors on the board have a vast array of knowledge of global expenditure (Wall Street Journal). Peet’s Coffee employs over 3642 employees thus the versatility and resourcefulness of the company is extensive. (Mergent Online) Distribution NetworkCurrently, Peet’s Coffee operates through two segments; retail and specialty (EbsoHost). Peet’s teas and beans are sourced from around the globe, thus long-term global connections have been formed with suppliers (Peet’s Coffee and Tea). Peet’s currently uses a proprietary nationwide direct delivery system to grocery stores, mass merchandisers, club stores, retail stores, and online. (Mergent Online) Within the last year, Peet’s has expanded its distribution and retail sales of its single cup products (Peet’s Coffee and Tea). Furthermore, products are now available in Costco, America’s international company. Additionally, JA, the owner of Peet’s Coffee, is an international investment company, thus accessibility to global distribution channels may be easily adaptable into the companies short term and long term strategies. CulturePeet’s focuses its culture on two areas; sustainability and quality. (Peet’s Coffee and Tea) Peet’s aims to forge continue, long term and direct relationships with its coffee suppliers by providing training and education to farmers to improve their coffee quality and sustainable practices. The company enshrines the belief that quality cannot be accomplished without environmental and social sustainability. Peet’s strives itself on maintaining extraordinary quality by creating small batches, attention to detail and freshness. This can be seen as an issue when expanding internationally, as beliefs and values can be compromised. Domestic MarketIn 2015, Peet’s currently operates stores in 10 states predominantly contained within California (PrivCo). Thus, the domestic market of the product is not yet saturated. Undertaking international expansion may compromise domestic growth of the company and therefore may ignore the impending development in the company's home market.RecommendationsBased upon the internal analysis conducted on Peet’s Coffee and Tea we have decided that going internationally in today’s market is not ideal for the growth and success of the company as the company lacks the right internal ingredients. As previously stated, the domestic market is not currently saturated. Moreover, the issue arises as to whether going international may compromise the culture and values embedded into the business as the manta focuses upon quality and internal and external control of the companies operations. It is therefore very hard to grow a chain globally and preserve the integrity and heritage created by the company’s founders. Peet’s Coffee And Tea has the potential to expand internationally in the future, but at this moment, growing domestically will better serve the company’s growth. External Environmental AnalysisCultureVenezuela has a large coffee culture as coffee is their most common beverage and is offered to guests as a symbol of hospitality. The country is one of the world’s largest coffee producers, and also has one of the highest per capita consumption rates. Venezuela does not export which means that all the coffee they produce is for domestic consumption. They also seem to prefer coffee house chains as 50-60% of the market is dominated by only four companies. Locals believe that tea has many health benefits which has led to increased tea sales that are projected to keep growing.In Singapore, coffee is consumed on a daily basis. An increase in working hours and women in the work field has increased the demand for on-the-go coffee, while young consumers have developed a sophisticated preference and demand premium quality coffee. Singapore does not have a strong tea culture, but tea consumption has increased in recent years because young consumers consider tea a lifestyle and health trend. Consuming tea and coffee is considered a source of relaxation and stress reliever for Singaporeans who seek a moment of peace from their hectic lifestyles.In France, there is a strong café culture because many consumers would rather have a leisure, social gathering when drinking coffee beverages as opposed to taking it on the go. Additionally, french consumers prefer espresso beverages as opposed to flavoured coffee beverages. Tea sales have been increasing because French consumers are becoming more health conscious. The American lifestyle has also become increasingly popular among the younger generation which gives American coffee companies the opportunity to market towards this generation. In South Africa, consumers are shifting their preference in coffee shops from instant coffee to coffee with rich flavors and a unique taste. Additionally, people are also looking for convenient products. City dwellers live busy lifestyles and are looking for products that fit into those lifestyles. This has made the trend of coffee pods popular in South Africa (Euromonitor). Consumers are buying coffee machines and making their own coffee at home rather than going out for coffee. One problem with the hot drink market in South Africa is that it is heavily reliant on the weather (Euromonitor). In the South African culture, people are very unlikely to drink coffee or tea when it is hot outside. CompetitionIn Venezuelan, state-owned companies dominate the coffee market. Cafe Fama de America and Marcelo y Rivero combined for 56% of the retail volume in 2014 (BMI Research). These two companies dominate the market and are now state-owned which allows for a greater allocation of green coffee beans. This gives both companies an advantage over other competitors because they have a much steadier production process.According to market share data from 2013, Singapore’s hot drinks market is concentrated as 75.5% of the market share is dominated by four companies, with Nestle S.A. holding 41.3%. The other 24.5% is comprised of smaller companies (Business Source Premier). In a concentrated market such as Singapore’s, well known brands who can offer lower prices and variety have an advantage.France has a competitive landscape in the coffee sector because there are many franchise competitors and small privately owned cafés. Currently, Nestle has a lead in the coffee sector with 32% of trade value share (Euromonitor). Two of the more competitive brands active in France have decided to merge into one company called Jacobs Douwe Egberts. The combination of these two brands could open the door for a foreign coffee player not present in France to emerge. Competition in the coffee and tea market in South Africa includes three main players and other smaller brands in the mix. The South African hot drinks market is controlled by coffee and therefore Nestle holds 27.4% of the market share. Other key players include Unilever and National Brands Ltd (BMI Research). The trend towards making coffee at home is affecting the coffee market as Nestle’s Nespresso and their new Nescafe Dolce Gusto are growing rapidly in South Africa. Politics The political relationship between the USA and Venezuela is currently worsening. Venezuela is beginning to become closer to many countries that the US does not recognize as allies. Even with this current controversy, the united states is still Venezuela’s leading trading partner. Venezuelan approval of the US has declined in recent years, from 82% in 2002 to 62% in 2012. Singapore supports trade liberalization and was the first Asian nation to sign the bilateral free-trade agreement (FTA) with the United States in 2003. Singapore is one of the most stable countries as it has been ruled by the same party, People's Action Party (PAP), since 1965. The government established the economic review committee (ERC) to form a program that encourages liberalization and entrepreneurship through the use of tax and legislative reforms, as well as by increasing investment in education. According to , the US/French relationship is one of the United States’ oldest and closest bilateral alliances. These two nations have a long co-operative history with vibrant and substantial trade and investment activity. The government dedicates its resources to attracting foreign investment through “policy incentives, marketing, its overseas trade promotion offices, and investor support mechanisms” (). France is a member of the G-8, the World Trade Organization, and the Organization for Economic Co-operation and Development (BMI Research).South Africa and the United states have a sturdy bilateral relationship. They are strategic partners and work together in the areas of: trade, security and health. Issues that threaten the stability of South Africa in the long run include: legacy of apartheid, poverty and joblessness, and differing levels of government (BMI Research). South Africa struggles with corruption and bribery throughout the central government, although there has been labor freedom improvements which has helped balance out the harmful practices present in the government.MacroeconomicsVenezuela has the second highest GDP of the four countries analysed at 438.28 billion US dollars (BMI Research). They have a large surplus of agricultural resources. Their population is slowly growing and this is shown in 2013 when their population increased by 1.5%. The unemployment rate in Venezuela is 7.90%. They have the highest inflation rate in Latin America at 68.5% (TradingEconomics), as well as the highest of the countries analyzed (See Appendix A). Singapore’s average annual economic growth is estimated to decrease from 6.8% in 1980–2013 to 3.3% in 2015–44 (Business Source Premier). Their GDP was 297.94 billion US dollars in 2013. Singapore has a low unemployment rate at 1.9% as of November 2014, and an even lower inflation rate at -.40% as of January 2015 (Trading Economics). The country struggles with an aging population and their population growth has also decreased from 2.1% in 2009 to 1.6% in 2013 (Business Source Premier), which will limit the country’s long-term growth. Out of the four countries, France is the world’s fifth largest economy with a GDP of 2734.95 billion US dollars in 2013 (See Appendix A). This nation has substantial agricultural resources as well as a highly skilled workforce. According to , France is struggling to revitalize its economy while at the same time reducing its national debt. After Germany, France is the second largest trading nation in Western Europe. South Africa ranks second in Africa with a GDP of 350.6 billion US dollars as of 2013 (TradingEconomics). The gross national index (GNI) per capita as of 2013 is $7,190 dollars (TheWorldBank). South Africa has a relatively high unemployment rate at 24.3% (TradingEconomics), which poses a major threat to the country’s economic outlook (See Appendix B). The inflation rate in South Africa is 4.4% (TradingEconomics) as of January 2015. (See Appendix A). Microeconomics In Venezuela, the per capita consumption of coffee is approximately 3 kg per year (BMI Research). Every year there is close to 440,000 acres of coffee plants harvested. That translates to an output of around 660,000, 60 kg bags per year. (BMI Research). The market for coffee and tea is expected to grow steadily and become even larger in the near future.The coffee and tea market in Singapore are saturated but growth rate is expected to increase in the long-term as more consumers adopt an urbanized lifestyle and incomes increase. The Singaporean hot drinks market is forecasted to have a value of $237.1 million by 2018, an increase of 21.5% since 2013. Coffee holds 79.8% of the hot drinks market, while tea accounts for 10.7% of the market (Business Source Premier). In other words, there is already a large market for coffee, but the tea market in Singapore still has room for growth.Although the tea and coffee sectors in France are mature and near saturation, forecasts suggest that the coffee value sales per capita expect to rise. “Coffee and tea sales are expected to increase by CARG of 3.2% and 4.4%, respectively, between 2013-2018” (BMI Research). This could be due to the fact that luxury coffee companies are seen as offering premium goods that are very desirable to the French.In South Africa, coffee sales are predicted to increase by 37.5% between 2013 and 2018 (Euromonitor). The economic downturn has lowered South Africans disposal incomes and therefore created tighter consumer spending. This in turn has made purchasing well-known and trusted brands more favorable than purchasing new products. This could pose a huge threat for Peet’s Coffee and Tea if they were to try and launch their products in South Africa. The coffee and tea market in South Africa is not saturated and there is a lot of room for growth within the industry. ConclusionFrom the results of the country analysis, South Africa is the best choice for Peet's Coffee & Tea to expand to internationally. Singapore has a small population, is suffering from a slow population growth, and has a saturated coffee and tea market. The market in Venezuela will be difficult for Peet’s to penetrate because the two biggest competitors are state-owned companies that have a chokehold on the supply chain. Meanwhile, the coffee and tea market in South Africa is fairly fragmented which is perfect conditions for a new player to come into the industry. Coffee sales are predicted to increase by 35.7% which shows the great potential for the South African coffee market. South Africa also has a good relationship with the United States which will aid in Peet’s Coffee moving to this international market. Although South Africa has corruption and bribery in their government, it is not a huge threat and thus it is the best choice for Peet’s to expand to internationally. Summary Country CultureCompetitionMacroMicroPoliticsVenezuela- Coffee is a common beverage- Believes tea to be healthy - Two main State-Owned Coffee companies- GDP in 2013 was 438.28 billion US dollars- Slowly growing population - Coffee & Tea market are expected to grow -Worsening political tension between the US and Venezuela because of Venezuela's support of countries not allied to the USSingapore- Tea is considered a health and lifestyle trend - Coffee and tea is a source of relaxation from hectic lifestyle- Concentrated market; 75.5% of market share owned by four companies- Well known brands that offer lower prices have an advantage- GDP in 2013 was 297.94 billion US dollars- Economic growth expected to slow- Lowest inflation and unemployment rate- Aging population- Coffee & tea market are saturated- Hot drinks market valued at $237.1M in 2018- Large coffee market, small tea market- Supports trade liberalization - One of the most stable countriesFrance- Traditional café’s are socially popular- Younger generation attracted to American products- Nestle has 32% of market share- Opportunities for foreign entrants because major players have merged- GDP in 2013 was 2.8 trillion Euros- Second largest trading nation in Western Europe- Skilled workforce-Decreasing inflation rate - Coffee and tea products are predicted to increase in the coming years.- Good relationship with U.S.- Elimination of corporate solidarity taxSouth Africa - Interested in high quality coffee beverages- Less inclined to purchase hot beverages when the weather is warm - Nestle dominates coffee market while National Brands Ltd, is the hot drinks market leader overall - Ranks #2 for GDP in Africa- 24.3% unemployment rate- 4.4% inflation rate - Coffee sales predicted to increase by 37.5%- Tighter consumer spending- Coffee and tea market are not saturated - Good relationship with U.S.- Labor Freedom improvements- Bribery and corruption present in governmentReference List "Business Corruption in South Africa." BUSINESS ANTI-CORRUPTION PORTAL. N.p., n.d. Web. 11 Mar.2015. <;. Brown, Chris. "Coffee culture grows in South Africa." BizCommunity. N.p., 24 Jan. 2013. Web. 11 Mar.2015. <;. "Coffee in France." Euromonitor. N.p., n.d. Web. 11 Mar. 2015. <;. "Coffee in South Africa." Euromonitor. N.p., n.d. Web. 11 Mar. 2015. <;. "Competitive Advantage Through Unique Distribution Channels." Mason Myers Blog. Mason Myers Blog, 2015. Web. 8 Mar. 2015. <;. "Country Reports - Singapore." Singapore Country Monitor (2015): 1-21. Business Source Premier. Web. 11 Mar. 2015.<, Charles. "The SA coffee revolution." Food 24. N.p., n.d. Web. 11 Mar. 2015.<;. "Doing Business In France." . N.p., n.d. Web. 11 Mar. 2015. < Relations." Amba France. N.p., n.d. Web. 11 Mar. 2015. < Drinks In Singapore." Hot Drinks Industry Profile: Singapore (2014): 1-38. Business Source Premier. Web. 4 Mar. 2015.< Drinks In South Africa." Euromonitor. N.p., n.d. Web. 11 Mar. 2015.< to Take Your Company Global." Entrepreneur. N.p., 04 Dec. 2005. Web. 7 Mar. 2015. <;. "Industry Forecast - Drink - France - Q1 2015." BMI Research. N.p., n.d. Web. 11 Mar. 2015.<;. "Industry Forecast - Drink - South Africa - Q1 2015." BMI Research. N.p., n.d. Web. 11 Mar. 2015.< All Began on Vine Street." Our History. Peet's Coffee and Tea, 2015. Web. 5 Mar. 2015. < Green Mountain and Peet's Coffee & Tea Announce Partnership." Peet's Coffee & Tea, Inc. -. Peet's Coffee and Tea, 14 Mar. 2014. Web. 9 Mar. 2015. < Overview - Drink - South Africa - Q1 2015." BMI Research. N.p., n.d. Web. 11 Mar. 2015<; The World Bank. N.p., n.d. Web. 11 Mar. 2015. <;. "Our Experts." Our People. Peet's Coffee and Tea, n.d. Web. 3 Mar. 2015. <'s Coffee and Tea Inc." Mergent Online. Mergent Online, n.d. Web. 1 Mar. 2015. "Peet's Coffee and Tea, Inc." PrivCO. PrivCo, n.d. Web. 5 Mar. 2015. <'s Coffee Hires New CEO." WSJ. Wall Street Journal, 12 Nov. 2012. Web. 11 Mar. 2015. <;. "Political Outlook - Q2 2015." BMI Research. N.p., n.d. Web. 11 Mar. 2015. <;. “South Africa”. The World Bank. N.p., n.d. Web. 11 Mar. 2015. < Africa Consumer Price Index (CPI)." Trading Economics. N.p., n.d. Web. 11 Mar.2015,<;. "South Africa Unemployment Rate." Trading Economics. N.p., n.d. Web. 11 Mar. 2015. < Peet's: Reduce, Reuse, Rethink." Sustainability. Peet's Coffee and Tea, 2015.Web.5Mar. 2015. < - Infrastructure - Q2 2015." BMI Research. N.p., n.d. Web. 11 Mar. 2015. <;. SWOT - South Africa - Q1 2015." BMI Research. N.p., n.d. Web. 11 Mar. 2015.<;. "Ten Steps to a Global Human Resources Strategy." Strategy+business. N.p., n.d. Web. 7 Mar. 2015. < Economics. N.p., 2015. Web. 11 Mar. 2015. <. Relations With South Africa." U.S. Department of State. N.p., n.d. Web. 11 Mar. 2015.<;. Weber, Rebecca L. "Coffee comes home: How the cappuccino conquered South Africa." CNN.N.p., 21 Mar 2013. Web. 11 Mar. 2015. < Has Become Important for Companies to Become Competitive in the Global Business Environment?" Small Business. Demand Media, 2015. Web. 1 Mar. 2015 Starbucks Is Not Acquiring Peet's Coffee, But a German Conglomerate Is." Forbes. Forbes Magazine, 2015. Web. 5 Mar. 2015. <;. Appendix AFigure 1 shows the GDP of the four countries analyzed from December 2013. Venezuela, Singapore, and South Africa have GDPs in close range, while France’s GDP is 6-9 times higher. Figure 2 shows the inflation rate for Venezuela, Singapore, France, and South Africa as of January 2015.Appendix BFigure 3 shows the unemployment rate of Venezuela, Singapore, France, and South Africa as reported on November 2014. ................
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