Analysis of Illy Coffé Company Expansion in International Countries

Introduction

Firms exist with the purpose of create and deliver economic value (Bensaco et al 2010, p. 365); therefore, business that create better economic value than its competitors will attain an advantage position in market place. Companies might try to improve its sales (profit) through domestic expansion, product diversification or by internationalisation; this report will focus on the reasons of espressamente Illy to expand internationally; additionally, its sources of competitive advantage and, the analysis of three markets in which company want to participate.

Reasons for international expansion

The core business of “Illy Coffé” group is in the food industry, specifically in the coffee sector (detailed profile information can be found in the appendix). The major part of sales 88% (Prospectus, 2012) are concentrated on products based on coffee; furthermore, this sector is characterized for a strong dependence on price, strong competition, dependence of customer´s preferences and, economic factors (GDP, inflation, etc.); in fact, these characteristics denote a high risk of reduction of sales or profitability due to changes in customer demands, preferences or volatility of production costs.

There are several reasons or motivations that managers can argue to expand Illy overseas, first due to continuous need of looking for new sources of profit, second in order to reduce the impact if for example one of the previously mentioned risks come true. Regardless of the reason for expansion, it is important that the strategy adopted for the company will be aligned with their identity (Values); it is important to remember that Espresamente Illy was created with the purpose of providing a service based on the ...

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...incipal risk is related with level and number of competitors, the most important are in order: Starbucks, McDonalds and The coffee bean and Tea leaf. To face competition Illy should keep in mind “differentiation through innovation”.

In the case of Brazil, nowadays this is one of the most attractive markets in the world, recently Brazil has experienced strong economic growth; analysts argue with Russia, China and India (BRIC) Brazil will be the largest and most influential economies in near future. Notwithstanding, the promissory economic future, investment in Brazil has some threats and risks that should be taking into account: exist some grade of cultural difference between both countries that could affect the profitability of investment; however this will be a good option to invest in brazil, the suggestion is focus in most important cities ( Rio and Sao Paulo).