Assignment: Boost Juice Company New Franchise: Spain PDF

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ASSIGMENT: BOOST JUICE COMPANY

NEW FRANCHISE: SPAIN

Matriculation number: 40331239

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CONTENTS

1.

INTRODUCTION...........................................................................................2

2.

ENVIRONMENTAL ANALYSIS......................................................................4 2.1 INTERNAL ANALYSIS................................................................................4 2.2 EXTERNAL ANALYSIS...............................................................................4 2.1.1 MICRO-ENVIRONMENTAL................................................................4 2.1.2 MACRO-ENVIRONMENTAL..............................................................6 2.3 SWOT.........................................................................................................6

3.

STRATEGY CONCERNS..............................................................................7

4.

DEDUCTIONS, RECOMMENDATIONS AND CONCLUSION.....................9 4.1 DEDUCTIONS AND RECOMMENDATIONS.............................................9 4.2 CONCLUSION..........................................................................................10

5.

APPENDICES.............................................................................................10 APPENDIX 1...................................................................................................10 APPENDIX 2...................................................................................................10 APPENDIX 3...................................................................................................11 APPENDIX 4...................................................................................................11 APPENDIX 5...................................................................................................12 APPENDIX 6...................................................................................................12

6.

SOURCES...................................................................................................13

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1. INTRODUCTION Boost juice is a company original from Australia. It consists on a store where healthy drinks are sold. Customer can order their drink by its type or by its health benefits. When it concerned its types, there are more than forty flavours available which can be served as a smoothie, blended, juiced and crushed drinks. When talking about its health benefits clients can choose among the number of calories, if it is gluten free, the level of low fat and its source of protein and fibre (Boost Juice, 2018).

It was the idea of a young mother, who was visiting the United States when she realised that in her country the food style was unhealthy. She and her husband decided to start a new business to cover that lack, this is when Boost Juice arise (Boost Juice, 2018). The target market is young people but specially females older than 25 years old who already adopt a healthy life style. To keep the healthy and cool style, the stores are joyful by using colourful and comfortable equipment and well as chill out music. Nowadays Boost Juice has over 450 stores. It can be found in many countries around the world like Australia, United Kingdom, Taiwan or Latvia, among others. In the following map the distribution of the 450 stores can be seen.

Image 1. Map of locations (Boost Juice, 2018).

Boost Juice follows a franchise strategy to expand around the world. There are two different mechanisms depending on which country it is opened. If it is 3

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opened in Australia it is possible to open just one franchise as the market is already developed. If it is opened in another country Boost Juice gives the opportunity to open a few franchises over the years to make sure the market grows.

2. ENVIRONMENTAL ANALYSIS The environmental analysis is fundamental for a company as it will provide the information needed for the strengths, weakness, opportunities and threatens analysis (SWOT), it can be done from two perspectives, internal and external. The information given will concern the chosen country which is Spain.

2.1 INTERNAL ANALYSIS

The internal analysis will be made using Standardisation v Adaptation, ‘they are two extremes of a continuum, i.e., as adaptation increases standardisation decreases and vice versa’ (Morschett, Schramm-Klein, Zentes, 2015) (See Appendix 1). It is necessary somehow to use them together as both have advantages and disadvantages. Standardisation is an attractive way because it brings economies of scale in different areas, due to that save in costs companies can offer lower prices which give the company a better position against the local companies (Boeing, 2013). Boost Juice has an international team to work with their partners. All Boost Juice franchises should follow the same marketing activity, store designs and product offerings. Nevertheless, depending on which country it is settled, adaptation is needed and there can be some variations. Markets are not identical, and these variations are mainly due to culture and social issues. For instance, some fruits may not be consumed in some countries (Boost Juice, 2018).

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2.2 EXTERNAL ANALYSIS

2.1.1 MICRO-ENVIRONMENTAL This section will study the micro-environment of Boost Juice in Spain, to do so Porter’s five force model will be used. ‘The five forces model is an essential tool for understanding the competitive structure of an industry. This simple analytical tool is effective for identifying the competitors of a company. The complete analysis examines five forces: customer bargaining power, supplier power, the threat of substitute products, the threat of new entrants and intra-industry competition.’ (Michaux, 2015). The scheme can be seen in Appendix 2.

The industry competitor refers to the rivalry among current competitors. Companies as Llaollao or Smöoy and single shops as Orgànic, Juicy Jones, Zenzoo or The Juice house offer similar services. Mercado de la Boquería also provides a lot of small stands where people get smoothies and healthy food made of fresh fruit. Others as Starbuck, Costa, 365 café focus on deliver coffee just as bakery products. Finally, McDonald’s, Burger King, The Good Burger among other are also competitors. ‘Substitute products offer alternatives to the existing offer in a sector’ (Michaux, 2015). They meet the needs of the customers in different ways. For instance, water, soft drinks, hot drinks, beers and wine are some of the substitutes of Boost Juice. They become a threat when the price of the substitute is lower and they offer a better quality. In this case, the threat is medium. In order to quality smoothies are better but in order to price they are more expensive than other products such as water and some soft and hot drinks.

The next force is the customer bargaining power which is high. Since there are many alternatives, buyers can decide whether to buy a boost juice smoothie or one from a different shop, the flavour will be similar and the switching cost will not be significant.

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Suppliers’ bargaining power is low because in Spain and in other countries there are a lot of quality fruit retailer hence Boost Juice can change easily in case some arise their prices or change their quality. The threat of potential entrance in this industry is very high because it is ease to access the input, the capital requirements are affordable and there are not legal facts that limit the industry to a certain number of shops.

2.1.2 MACRO-ENVIRONMENTAL To study the macro environmental of Boost Juice Pestel framework will be used (see appendix 3). After some time of political instability some companies have decided to leave the country and move their factories to some different countries. Added the Catalonian problem some factories have been moving around the country and others abroad it. However, economic performance is getting better over the last years and the government have taken different policy measures to encourage business. There is also a recent law that result in a new tax to sugary drinks (ABC, 2017). These factors lead to a good juncture to open Boost Juice in Spain.

Social thoughts are changing over the last years. Population is getting to high levels of obesity and a healthy movement is running around the world, not only Spain. Due to tourism, the most important cities in Spain adopt worldwide trends and nowadays smoothies play an important role in beverage industry. However, there has always been an interest in fresh and healthy food.

At first, smoothies were treated as a workout compliment but now they are starting to be used as a quick on-the-go meal. There have been technological innovations in the receipts which include ingredients such as powders, proteins, heathy fats, sugar alternatives, culinary herbs even alcohol (Fast casual, 2016).

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In respect of environment, Boost Juice is a green company worried about their impact in our planet. There are some tips to follow in their website that will help to protect the environment.

2.3 SWOT To sum up the environmental analysis the main ideas will be given as a SWOT analysis.



Strengths: It is a strong company in some countries of the world and along its quality it will attract customers.



Weakness: The brand is not global known and in winter periods the amount of sells can drop.

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Opportunities: The smoothie and juice market is emerging and it is the time to get a good position in it.



Threats: There is an intense competition which will reduce their market share.

3. STRATEGY CONCERNS Spain has some strategy concerns that should be studied before taking the decision whether to invest in this new market or not. Some of these have been partially discussed in the environmental analysis. There are some economical concerns that have to be taken into account. After the deep international financial crisis suffered during the last years, Spain have been selected as one of the main vocational destinations. This have led into a situation where services have acquired a very important place in the economy. It is the main source of income as it is reflected in the Gross Domestic Product, it represented an average of 68% last year (INE, 2018) (See appendix 4). In addition, because of this activity, Spanish Gross Domestic Product has been growing since 2012 which means that is recovering and developing its economy (See appendix 5). As a result, foreign investment returned to the country. 7

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However, the financial crisis also adversely affected the economy. The following years of the beginning of the crisis, Spain started experiencing an economic downturn. Some issues as employment loss appeared and nowadays, the bad labour market situation still remains and it is not favourable. The government has made changes in the employments contracts conditions to encourage recruitments, but it has not been enough. In addition, when the real estate bubble started deflating a lot of people who asked for mortgage could not afford it, which lead into a risk of default for banks. Subsequently, Spain suffered from a banking crisis and the government had to use taxpayers’ money to come to the financial rescue of some Spanish Banks. All this, carried out to difficulties in banks loans over the last years in Spain.

With respect to business and companies, there have been some bad years due to different reasons. The political instability suffered one year and a half ago without a solid government to rule the country had consequences in the investments of the country. A lot of companies decided not to invest in the country and some of the ones which was already settled in Spain left the country. In addition, over the last months there have been instability with the Catalonian independence and some companies have decided to leave that province of Spain to move to a different one.

Notwithstanding the difficulties, Spain has managed to evolve with time and adapt itself to the current demands. The ranking ‘Doing business’ measure the facility to open a business in 190 different countries. Last year Spain got better and was placed 28th in this ranking (Expansión, 2018). The government gives facilities to young and entrepreneur people who wants to be freelancer and start a company on their own. Furthermore, these businesses are growing well as the Overall Business Confidence Index from last trimester is 134,9 which means that informers are favourable with their future prospects (INE, 2018). Taxes should be considered before deciding whether to open or not. ‘Corporate income tax in Spain is 30%. The rates can be less for enterprises of reduced size. You can transfer capital, dividends, proceeds of sale abroad without any limitations or taxes if you are a holder of registered foreign investments. You 8

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only need to complete certain minor bank formalities for statistical information’ (GOV. UK, 2015). In addition, Boost Juice is a beverage shop ans its VAT is reduced at a 10%. Demography is another important aspect. The target market to Boost Juice is young women who lives a healthy style. In Spain, the women population is higher than the men one, as it can be seen in appendix 6. This makes Spain an interesting country to open a franchise as there are more opportunities to cover the target market. Some others strategy concerns about Spain are that English is accepted as a business language which will make easier the communication with Boost Juice. The size of the market is considerable and it already has familiarity with the smoothies and juices and its opened to them. Spain is famous because of the highly efficient transport systems and the quality and availability of qualified suppliers (GOV.UK, 2015).

4. DEDUCTIONS, RECOMMENDATIONS AND CONCLUSION

4.1 DEDUCTIONS AND RECOMMENDATIONS Following the study undertaken in the strategy concerns and after the external analysis made before about the chosen country, Spain, the recommendation made is to open a franchise in this new market because it has a lot of opportunities to offer. Entry in Spain as a new market will involve the opening of several shops over a number of years, with this strategy Boost Juice makes sure the success in new markets. In Spain, there are many options to follow that instruction. The recommendation is to open the first Boost Juice in Barcelona which is the second most populated city of the country. It is a global city because of the 9

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different events that have welcomed as well as its cultural and financial importance. Due to this, Barcelona perfect meets the need of the first Boost Juice as international people, who may already know the company, will be able to get to this shop, as well as national people. This first shop will drive the brand forward in Spain to open the following shops. It is important to think about the rest of the cities before getting in the market because they will condition the success of it. Some other important cities that will be a good location to Boos Juice are Madrid, which is the capital of the country and the most important city, and the Valencia, Seville, Malaga, San Sebastian, among others, are also cities that fits with

4.2 CONCLUSION To sum up, the most important ideas of the report will be brought up. Boost Juice is an international company with a healthy style. It offers smoothies and juice for young people, especially women, concern about following a healthy style. After doing the internal and external analysis we can conclude that Boost Juice offers and innovative product and service which tries to keep in all their stores around the world. The company employ a franchise system that expand the brand easily.

In terms of the chosen country, we can conclude that Spain is a good country to invest in. As Boost Juice is a service company and opening a franchise is considering as starting a business on your own, Spain offers good opportunities, for example, facilities to recruit staff and financial aid. This economic sector has a reduced VAT which also reduces the final price. Spain is experiencing an economic recovery, this means that the market now has lower prices than it would have in some years, which is an opportunity to invest and benefit from it within the years.

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5. APPENDICES

APPENDIX 1 ‘The global corporation operates with resolute constancy-at low relative cost- as if the entire word (or major regions of it) were a single entity; it sells the same things in the same way everywhere’ (Levitt, 1983).

APPENDIX 2 In the following scheme, there is a summary of the model.

Potential entrants

Suppliers

Industry competitors

Buyers

Susbstitutes

APPENDIX 3 Pestel framework is the first one which 'provides a comprehensive list of influences on the possible success or failure of particular strategies. Pestel

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stands for Political, Economic, Social, Technological, Environmental and Legal' (Johnson, Scholes and Whittington 2008, p. 55).

APPENDIX 4

Image 2. Percentage distribution of actives by economics sectors This graph represents the service sector activity during the previous year (2017) nationality. (INE, 2017)

APPENDIX 5

Image 3. Development of GDP.

(Yearly/ Quarterly)

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APPENDIX 6 MEN 2017 TOTAL

22.832.861

WOMEN 2016 22.843.610

2015 22.890.383

Image 4. Population divided by gender of Spain.

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2017 23.739.271

2016 23.713.398

2015 23.733.999

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6. SOURCES  Boost Juice, 2018. About us: A bit about Australia's favourite juice and smoothie bar. Retrieved from: https://www.boostjuice.com.au/drinks/wildberry-blend/

 Doole, I., Lowe, R. & Kenyon, A. (2016) International Marketing Strategy: Analysis, Development and Implementation.

7 th Edition.

Hampshire:

CENGAGE Learning. p.250-252

 Michaux, S. (2015) Porter’s five forces. Namur: 50 minutes.  Johnson G., Scholes K. & Whittington R. (2008). Exploring corporate strategy, (8th ed.). Harlow: Pearson education

 Fast casual, (2016). Now trending: 10 ways the smoothie is evolving in 2016. Retrieved from: https://www.fastcasual.com/articles/now-trending-10ways-the-smoothie-is-evolving-in-2016/  Instituto Nacional de

Estadística (2018). Inebase. Retrieved from:

http://www.ine.es/dyngs/INEbase/listaoperaciones.htm  Expansión: datos macro, (2018). España: Economía y demogrfía. Retrieved from: https://www.datosmacro.com/paises/espana.  Levitt, T. (1983) Globalization of markets, Harvard Business Review, MayJune

 ABC (2017). El Gobierno espera recaudar 200 millones de euros con el impuesto

a

las

bebidas

azucaradas.

Retrieved

from:

http://www.abc.es/sociedad/abci-gobierno-espera-recaudar-200-milloneseuros-impuesto-bebidas-azucaradas-201703272212_noticia.html