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The Espresso Lane To Global Markets- RUTGERS MBA

Illy Espressamente Case
by

S.R. Schimmel

on 15 October 2013

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Transcript of The Espresso Lane To Global Markets- RUTGERS MBA

Brazil
Opportunities in China
United States
#1 Consumer 25% of world's coffee
Ranked 4/183 in ease of doing business
"Third-place" phenomenon
Highest income with affluent clients
Lowest potential for growth
Saturation
Customers want:
retail experience, wifi, product innovation, health trends

The Espresso Lane to Global Markets:
WHERE DO WE GO NEXT?

India
Emerging economy
Sixth Largest producer of coffee
Franchisee success-but young
Coffee consumption increased 6% over 5 years
Espresso consistent with Indian tastes
300M-350M middle-income earners
Overly bureaucratic
Market segmentation is important

Opportunities in Japan
Ease of Doing Business: Highest rank
China
Challenges in Japan
Government regulations for franchising
Mode of entry: Strong local forces
Socio-cultural: Food with beverages
Challenges in China
Timing into expansion. Consider other asian countries with emerging markets.

Growth only in aging population, rural

Declining Growth Rate(down 2%)

It’s even hard to pronounce for Japanese
Japan
United Kingdom
Recent growth of 6%
Shift from tea culture to coffee culture
Affluent clientele
High projected growth
High concentration of current coffee bars
One of the easiest places to franchise

Germany
15% Per-capita decline in consumption
Interest in fresh preparation of specialty coffee
Interest in espresso and specialty drinks
Ranked highly on ease of doing business
Projected growth of 10.5% between 2011-2015
Fierce competition
High concentration


Espressamente
Illy "...a miracle of chemistry in a cup"
Largest global coffee producer
Urban-coffee culture
#2 in coffee consumption
[potential to be #1]
Successful in FDI
Expected growth of 30% in coffee shop industry
High-interaction Relationships
Low per capita consumption
Growing franchise sector
Strong local brands
quigley
schimmel
&yan
Espressamente
THE MUST HAVE COFFEE

REPUTATION:
QUALITY
WORLD'S FINEST TASTING COFFEE


The Global Coffee Industry
#2 in commodities trading
Growing demand-predicated growth potential
Correlation between consumption and disposable income
-Highly Competitive-
Espressamente, McDonald's, Costa Coffee, Lavazza, Tchibo, Segafredo, Starbucks, Coffe Bean & Tea Leaf

Coffee consumption
Coffee shop concentration
Income per capia of top 10% of population
Urbanization rate
GDP per capita
Ease of doing business rank
Most attractive segments
Coffee sales
Key Success Factors
Espressamente - Illy's own franchised coffee bar:
200 LOCATIONS
More than 20 COUNTRIES

GOAL: Be recognized as the only authentic Italian bar chain delivering superior customer satisfaction to premium transit coffee lovers

HOW TO DO IT: Focus on premium transit, retail and service partners; also, adding luxury stores.


Mode of Market Entry
Direct Franchising
Master Franchising
Area Franchising
Sequential Franchising
Multi-Unit Franchising
Joint Venture
Wholly Owned Subsidiary
Projected growth of 10.7% through 2015
Saturated market
Fastest growth
Minimal to-go sales
Coffee an established product category
Franchising popular-but difficult
Urbanization transition
Target Segmentation: growth middle class, higher disposable income
#3 Coffee importer
Expected 5.4% compound growth through 2015
Innovation [product and packaging] seen as key to
growth
Coffee shops influence preferences
"Off-trade" sales potential
Necessary novelty in terms of health, taste, addition
of traditional ingredients
Not good for franchising

CAGE ANALYSIS
-for each country-
GE Analysis Matrix
Market Attractiveness
Copetetive Strength
UNITED STATES
BRAZIL
GERMANY
UNITED KINGDOM
CHINA
JAPAN
INDIA
BOSTON CONSULTING GROUP MATRIX
BRAZIL

CHINA
UNITED STATES
INDIA
JAPAN
GERMANY
UNITED KINGDOM
OTHER FACTORS
PACE
RHYTHM
SCOPE
BRAZIL
CHINA
GERMANY
INDIA
JAPAN
UNITED KINGDOM
UNITED STATES
CHINA
Prioritize five-star/up-market hotels and upscale restaurants
Joint venture with established brands
Focus on marketing and brand

Illy is a specialized high-end coffee producer
Commitment to deliver quality and experience
INDIA
Identify a like-minded company to serve as master franchise
Partner should have expertise in up-market/high-end beverage distribution
Work to strengthen coffee culture

BRAZIL
Develop relationships with non-competing businesses
Identify a suitable master franchise
Maintain brand image as high-end
UNITED STATES
Must penetrate Starbucks market segment
Massive marketing campaign to promote brand
Direct franchise most appropriate
GERMANY
Direct franchising
Utilize the proximity to Italy

JAPAN
Sequential franchising
Joint venture

UNITED KINGDOM
Area franchising

2013
ILLY-Espressamente Analysis
Great brand image
Quality product
Expensive
High-end product
Lots of competition
Product differentiation difficult
Coffee bean price fluctuation
Relies on disposable income
Affected by economy
Viewed as authentic
Growth in espresso culture
Global expansion
Growth in coffee culture in developing countries
Viewed as an Italian brand
Relies on an urban customer base
Italy is centrally located
Already global
Italy without colonial empire
Full transcript