AMB 210 Assessment Item 2 PDF

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Table of Contents Introduction...........................................................................................................................................................................................................3 Internal Business Analysis (Export Readiness).....................................................................................................................................................3 Company Description:....................................................................................................................................................................................3 Competitive Advantages:................................................................................................................................................................................4 Market Share:............................................................................................................................................................................................4 Brand Awareness and Loyalty:..................................................................................................................................................................4 Packaging Choices:...................................................................................................................................................................................4 Resources and Capabilities:............................................................................................................................................................................5 Established Facilities/Sales Capabilities:..................................................................................................................................................5 Technological Infrastructure:....................................................................................................................................................................5 Clear Objectives and Commitments................................................................................................................................................................5 Strategy/Objective.....................................................................................................................................................................................5 Target Demographic..................................................................................................................................................................................6 Summary...................................................................................................................................................................................................6 Analysis of Japan as Potential Exporting Country................................................................................................................................................7 Country Analysis.............................................................................................................................................................................................7 Gross National Income (Per Capita).........................................................................................................................................................7 Population Access.....................................................................................................................................................................................7 Country Demographics.............................................................................................................................................................................7 Demand.....................................................................................................................................................................................................8 Potential Competition......................................................................................................................................................................................8 Analysis of Competition’s Market Share..................................................................................................................................................8 Conclusion.......................................................................................................................................................................................................9 Export Planning Considerations and Strategies....................................................................................................................................................9 Export Strategies.............................................................................................................................................................................................9 Market Entry.............................................................................................................................................................................................9 Pricing Strategy.......................................................................................................................................................................................10 Logistical Issues............................................................................................................................................................................................10 Regulatory Issues..........................................................................................................................................................................................11 Export Implementation Schedule..................................................................................................................................................................12 Conclusion...........................................................................................................................................................................................................12 Works Cited.........................................................................................................................................................................................................13

Introduction Throughout the world of business, exporting has become of the most valuable and important strategies adopted by companies to promote their own growth. The following report thus evaluates the feasibility of exporting for products by Zarraffa's Coffee, an Australian company offering numerous caffeine-based products. Zarraffa's was established only 22 years ago in 1996 by Kenton and Rachel Campbell.

With only two decades worth of operations and expansions, Zarraffa's Coffee currently (as of 2018) serves customers in over 85 locations across Queensland, Western Australia and New South Wales. Zarraffa's are renowned for their quality service and premium coffee beans, roasting them locally. Zarraffa's currently has no relations with any countries outside of its home country of Australia. This report thus evaluates the export readiness of the firm, while also analysing the suitability of Japan as a destination for exporting, presenting a detailed export strategy as suggested for the firm.

Internal Business Analysis (Export Readiness) The export readiness of a company refers to the ability of a company to be able to use its resources and capabilities for exporting its products to other foreign markets. The three key characteristics that are commonly used to assess the export potential of a firm include its resources/capabilities, competitive advantages, and objectives.

Company Description: Zarraffa’s Coffee is a large-sized enterprise established in 1996, after Kenton Campbell (whom owned and operated a coffee cart in Seattle) made a work trip to Australia, ending up staying and opening Zarraffa’s on the Gold Coast after meeting his soon-to-be wife (his physio) after a car accident [ CITATION SBS16 \l 3081 ]. Zarraffa’s is entirely based in Australia (AU) and sells a range of coffeebased products, mainly specialising in gourmet coffee beans/blends, syrups, sauces (chocolate) and capsules. As of 2018, Zarraffa’s only distributes its products domestically; however, is looking to further expand by means of targeting international markets; specifically Japan.

In order to assess whether Zarraffa’s expansion into international markets by means of exporting is feasibly, Zarraffa’s competitive advantage, resources, objectives and commitment will be evaluated.

Competitive Advantages: Market Share: The Cafes and Coffee Shops industry is highly fragmented, and industry players are often owneroperators that have one establishment. Most cafes are small businesses that employ fewer than 20 people, although the number of franchised operators has grown over the past five years. The industry is characterised by a low level of market share concentration, with no player accounting for more than 5% of revenue. The industry is highly fragmented and dominated by small, individual businesses. Zarraffa’s Coffee have made limited to no reports on their financial positioning within Australia. Thus, it is difficult to properly determine Zarraffa’s Market Share within Australia’s Coffee Market [ CITATION IBI18 \l 3081 ].

Brand Awareness and Loyalty: Through their use of targeting specific demographics, Zarraffa’s Coffee have developed a strong brand awareness, as well as extremely loyal customers, through their use of the Zarraffa’s Z-Card [ CITATION Zar17 \l 3081 ].

Zarraffa’s have been rewarded with numerous awards, including, but not limited to: 

Gold Coast Business Excellence Awards – Gold Coast Business of the Year



BRW Fast Franchises – Ranked 17th/19th fastest growing franchise by Outlets/Revenue



2011 Australian Business Award for ‘Enterprise’

Due to the intense/high competitive nature of this industry, this has placed Zarraffa’s Coffee in a superior position compared to some of its competitors [ CITATION Zar171 \l 3081 ].

Packaging Choices: Zarraffa’s Coffee take pride in their packaging and product delivery, implementing packaging that protects from any adverse properties that may exist in the surrounding environment, as coffee beans are sensitive to light, air and moisture. However, their coffee production and packaging techniques are often criticised for being uneconomical. As Japan are very eco-friendly, Zarraffa’s may need to alter their packaging [ CITATION Zar172 \l 3081 ].

Resources and Capabilities: Established Facilities/Sales Capabilities: Zarraffa’s currently has no pre-established facilities in any countries apart from Australia. However, their current local facilities are extremely capable of exporting to other countries. The company lacks experience when exporting to other countries, which may be considered a hindrance, however, Kenton Campbell (CEO of Zarraffa’s) has experience operating in foreign countries, as Australia was a foreign country for him in the first place. He also operated a successful Coffee Cart in the heart of Coffee-culture, Seattle [ CITATION SBS16 \l 3081 ].

Technological Infrastructure: Zarraffa’s has a well-designed website, allowing for international-expansion, which will allow sell them to sell their products online to global consumers. The website contains a large amount of information about the company, including info on their franchises, loyalty programs and each individual product (detailing the types of beans and syrups they have on offer), as well as information regarding the company itself, and a News page. Zaraffa’s also make use of “gas-fired roasters”, which are designed to deliver perfectly roasted coffee beans consistently [ CITATION Zar173 \l 3081 ].

Clear Objectives and Commitments Strategy/Objective Zarraffa’s Coffee is currently (and has been for a while) the growth stage of its product life cycle, as their current main objective is to increase not only their sales, but their number of franchised stores across Queensland, NSW, Western Australia and to expand into Victoria, in order to further increase profit, market share and brand awareness. They aim to be Australia and New Zealand’s premier coffee specialty chain by 2020 [ CITATION Bus12 \l 3081 ]. Zarraffa’s already has a strong presence within QLD, NSW and WA, and are thus focusing on these regions due to this; they are also looking to promote growth throughout Victoria as it’s a tourism hot-spot, and will promote the brand even further. Zarraffa’s Coffee are also looking to implement their drive-thru store concept in more locations, including transferring existing franchisees to such concept [ CITATION Whe17 \l 3081 ]. Zarraffa’s are aiming to implement more drive-thru franchises as they provide customers with quality coffee, as well as added convenience [ CITATION Zar16 \l 3081 ].

Target Demographic According to the Australian Bureau of Statistics, the largest demographic of coffee drinkers is within the age range if 51-70, closely followed by 31-50 and 71+ (shown in Figure 1). Zarraffa’s would also appeal to the demographics of the food-service industry, as they sell a significant amount of their Coffee Beans, syrups

and

capsules

[ CITATION Aus141 \l 3081 ]

to

small-businesses

and

local

Cafe’s.

Summary From the provided analysis, it is safe to say that Zarraffa’s Coffee has clear and effective strategies in place to achieve their short-term goals. Zarraffa’s have the desired skills and capabilities when it comes to the exporting of their products to other, new countries/markets (such as Japan). Further discussions will present an analysis of the target country to evaluate the feasibility of exporting to said country.

Analysis of Japan as Potential Exporting Country Country Analysis Gross National Income (Per Capita) Lower Figure

Upper Figure

Low Income Bracket (LI Country)

$12,476

[ CITATION The181 \l 3081 ] As of 2017, the Japanese GNI figure was $38,550 [ CITATION The182 \l 3081 ]. With this exceeding the High-Income bracket, it is indicative that the Japan’s annual earnings are fairly high, with them ranking at 22nd in the world.

Population Access As of 2018, Japan has an Urban Population of 91.6% of the total population (116 Million - over 4 times Australia’s own population) - [ CITATION Cen18 \l 3081 ]. Because of this, 91.6% of the population would have close access to large supermarkets and retail store and, in turn; Zarraffa’s Products.

Country Demographics As detailed previously, Australia’s biggest consumers of coffee, and, in turn; Zarraffa’s products, falls within the age range of 51-70 and 70+. This makes Japan an incredibly viable export location - as Japan is (as of 2018) currently the world’s oldest country. The number of elderly people aged 65 or older accounts for 26.7% of the 127 million total population, which is up by 3.7% from five years ago. By 2050, it’s estimated that 40% of Japan’s total population will be over the age of 65 [ CITATION Wor18 \l 3081 ].

Demand In recent years, Australia’s cultural influence has found its way to Japan in the form of Coffee. An article has quoted that “you can enjoy a latte that might have come straight out of Bondi thanks to the country’s thriving specialty coffee scene” [ CITATION Hol17 \l 3081 ]. This increases the feasibility of Japan as an export location for Zarraffa’s, as they provide a wide range of specialised coffee-products, and with Japanese coffee culture adapting the style of Australian culture, Zarraffa’s may be able to appeal to new consumers by way of advertising that their coffee is Australian.

Potential Competition Analysis Share

of

Competition’s

Market

It is also important to take into consideration the potential competitors that may already be in Japan. Both Figures 2 and 3 (as shown below) compare the share of market value amongst the most competitive - and top companies/brands within the industry [ CITATION Eur18 \l 3081 ]. As is highlighted, despite the competitive dominance of Nestle Japan and Starbucks Co., there is very little difference in the percentage share of market value between most brands, which Figure 1

suggests a very even playing field when it comes to competition; McDonald’s Corp. only holds a 0.8% Share Market Value, which proves very promising for Zarraffa’s.

Figure 2

Conclusion Despite Zarraffa’s strong brand awareness, loyalty and technological advantages (as indicated - and explored upon in the Export Readiness section), consumers within Japan seem to be especially loyal to Nestle Japan more than any other brand. This can prove both beneficial and detrimental to Zarraffa’s Coffee, as Nestle typically offers more instant-coffee oriented products, as opposed to the gourmet products on offer within Zarraffa’s. Due to this brand/company loyalty, Zarraffa’s may need to differentiate their products, in order to encourage adoption. If this is put into place, then Japan and the Industry within Japan will provide a suitable export destination for Zarraffa’s products.

Export Planning Considerations and Strategies This section (with the application of AusTrade’s Export Readiness/Planning Checklist) will run-over, and highlight all the relevant considerations that Zarraffa’s would have to put into place prior to, and when commencing, exporting to Japan, which includes: export strategies, market entry choice, regulations, free trade agreements & logistics management. This section will also provide an export implementation schedule.

Export Strategies Market Entry It is highly recommended that Zarraffa’s implement both a direct and proactive exporting. These will allow Zarraffa’s to gain further profits from external markets, while also indirectly growing their brand and increasing their market share. A direct approach may maximise any inherent risk involved, however, Zarraffa’s will also have complete control over their pricing, branding and marketing, as well as a complete understanding of buyer and consumer behaviour and the identification of new opportunities, while also minimising their potential costs, as they won’t have to make any payments to an intermediary agent; all features of which are limited within an indirect approach.

Pricing Strategy Zarraffa’s products are currently below the average Japanese retail price for Bags of Gourmet Coffee beans (see Appendix) - [ CITATION Sta18 \l 3081 ][ CITATION Zar18 \l 3081 ]. Therefore, Zarraffa’s will not need to deviate too far from their current pricing strategy, even despite the inherent competition and threats involved within the industry. However, it is still suggested that, in order to differentiate their products ever so slightly, they cut their prices marginally, potentially operating at a loss to gather a following.

Logistical Issues As Zarraffa’s are not implementing an indirect exporting strategy, they may run into trouble when it comes to the logistical and transportation side of things. HOWEVER, as detailed previously, Japan has a highly developed physical infrastructure of roads, highways, railways, subways, airports, harbours, warehouses and telecommunications for distribution of all types of goods and services. This strong, preestablished infrastructure system will make exporting to Japan extremely easy and efficient. Despite the extremely high population of Japan (and, most importantly, Tokyo), traffic congestion is reasonably low in high population-density areas [ CITATION Jen17 \l 3081 ]. Within Tokyo, for example, the traffic problem was solved through the implementation of the Tokyo express system and introduction of bullet trains. As the Tokyo Express System, and road tolls are so...