Doing Business in the USA - Case Study Example

Doing business in the USA Name Tutor Course Date Introduction Coffee is a beverage that is consumed all over the world. Many consumers attribute their consumption of coffee to a source of relief from any underlying stress. It has, therefore, with time become one of the most consumed beverages all over the world. However, there are different flavors that are added in different coffee products. The analysis below is based on cinnamon coffee in the USA. The study is based on USA due to the factors and characteristics that have already been established. This is because the USA has a continuously growing population. It also has a ready market. Based on the fact that cinnamon spiced coffee will be a new product in the market, the USA is a perfect area of study because the residents have a fairly elastic taste. This implies that they will be able to adjust to the new kind of coffee. The USA also seems to have a ready market and relatively increasing demand. (Dicum and Luttinger 1999) The most important decision for any entrepreneur is being able to identify a gap in the market and coming up with a strategy on how to fill the particular gap. Cinnamon coffee is a new product in the market. Therefore, for any company, it is very crucial that the person in charge identifies the best location for optimal maximization of sales. This implies that a market study must be undertaken. Choosing the location could be done on the basis of the PEST analysis. The analysis is important in ensuring that the location chosen leads to high profits. The analysis also takes into consideration of opportunity and threats in the chosen location. A possible location is the USA. This is because it is stable politically, economically, socially and technologically. Therefore, this implies that the opportunities presented by doing business in USA are more than the threats that the location presents. A close analysis of these factors will indicate the same. A diagram showing PEST analysis PEST analysis refers to the political factors, economic factors, technological factors and social factors that may affect a new business once it is introduced in the market. Political factors Political influences in any country are central to the success or failure of many businesses. However, studies have shown that these influences mainly affect large businesses. This does not completely eliminate any effects and influences on the other small businesses. They are mainly affected in terms of the political stability or instability in a country. The USA is a world power. It is among the most powerful nations of the world. Moreover, it is on e of the most stable countries politically. This is because it has continued to be in peace for the last decade. This implies that it is relatively stable. Therefore, doing business in the country creates the certainty that all would be fine as it has been. This is a positive contribution towards the choice of the USA as the location for the sale of cinnamon coffee. (Ponte 2002 A politically stable country leads to continuous economic growth and development. This is because there is no destructive action s in the case of building the nation. There are no hurdles on the way. This leads to the prosperity of businesses established in these countries. The political stability enjoyed by the USA is a clear indication that doing business in this country would be highly productive. This also means that the market for the products is not tampered with. This is hugely beneficial for the businessmen. The USA, therefore, makes a perfect choice for this kind of business. Economic factors The economic growth rate of the country to establish the business is also largely important. This implies that the management of the incoming company must be able to establish through the careful study of the Gross Domestic Product of the country of concern. A study of the economic growth rate of the USA for the past twenty years indicate that it has gone through tremendous economic growth of between 3% and 6%. This excludes the regression experienced in 1991. It is also important to establish the rate of entry of new entrepreneurs. Studies indicate that great economic growth triggers entrepreneurial activities. This is a clear indication that based on the already established information after the tremendous economic growth in the USA, doing business in this country would be largely beneficial. (Deaton and Laroque 1992) Tremendous economic growth is an indication of certainty when entering the market. It also indicates that there is stability in the market. This implies that macro economic problems resultant from the chosen location are eliminated by choosing the USA. This is because the resultant economic growth is based on the performance of all the economic activities in the country. This, therefore, implies that the performance of each business activity is important in the final analysis made. Therefore, if there is economic growth, businesses in the country are performing well. This would, thus, be attractive to aspiring entrepreneurs. Hence, since the USA has had continuous economic growth, it would be profitable t o start the cinnamon coffee business in this country. The GDP of a country goes down to the purchasing power per head. A country that has a large GDP also has greater purchasing power. This implies that the market for the product will be relatively favorable. Considering the fact that the purchasing power per head in the USA increases with an improvement in the economic growth, it means that the purchasing power in this country is favorable for business in this part of the world. Technological factors It should also be noted that due to the vast technological advancements, there are numerous machinery that have come up in almost all the industries. These machines are used in the production process. This implies that many industries have become capital intensive. This means that the labor cost costs incurred I the entire production process are very minimal. This means that the incurred costs are very small. As a result the realizable profits are huge. It is, therefore, very profitable to start up the business in the USA. The technological advancements being experienced all over the USA is a location economy for all production processes that re mainly capital intensive. Therefore, it would be very beneficial to start up the business in the USA. Social factors Studies carried out in the USA have shown that there is a direct relationship between the population growth rate and the entrepreneurial activity in a country. It has been established that population density has a direct impact on the demand levels of goods and services. This means that establishing the cinnamon coffee business in the USA could be hugely successful. This implies that there would maximization of profits hence, accomplishing the most important goal in any company. This is an indication that social changes in the USA would favor business in the country. The product is acceptable in a rage of cultures. This is because coffee has hugely become addictive. As a result, it means that the market will seem to remain relatively constant. Based on the fact that the USA is highly multicultural and sophisticated, the market is less likely to be negatively affected by the cultures that they practice. However, in case of any constraints presented by some cultural practices, this may be eliminated through lobbying actions. These actions will be such that they lead to the compatibility with the organizational model of the company in question. The diversity in culture in the USA is an added advantage because the market is not largely constrained by the cultural activities of the people. This implies that the market of the product is largely based on individual preferences. Therefore, in the beginning the markets will be niche market as the market becomes aware of the new cinnamon coffee. Eventually, the market ought to be a mass market. Considering the fact that coffee is addictive, the market will be established in the end and will continuously grow. (Ponte and Giovannucci 2005) There are also other factors such as the age structure. Coffee consumption is largely associated with the mature aged people. A study of the USA reveals that the most dominant people in the nation are in the mature age bracket. This is important in terms of the overall scope of business. This also implies that upon the introduction of the product, the market will be readily available. It can also be established that the location of a cinnamon coffee e shop is highly determined by the market. For this case, the locations would probably be at the ports, airports, malls, offices among other locations. This will be largely influenced by the fact that most of the consumers, who are in the mature bracket age, are likely to found within such locations. It is an added advantage that the USA population and age structure is favorable for this kind of business. This implies that the goals of the company will be met to the larger extent. Micro and macro environment Ready market The buyers of the product who will be addicted to the product are largely likely to practice loyalty. This implies a constantly ready market at all times. The addicted consumers are less likely to switch usage of the beverage even in the presence of almost perfect substitutes. This is an indication that business would pick up well based on the fact that there would be loyalty in the end. The availability of a ready market is a huge advantage of establishing business in the USA. The cinnamon coffee business involves the sale of foods. The sale of such products is, therefore, under the rules and regulations that govern the sale of any foods. This means that the company must comply with these rules. This will in turn lead to quality production of goods and services. It also implies that it will be hugely possible for the company to produce quality products. The sale of quality products will lead to creation of a good reputation for the company and hence, increase sales of the products. This will also lead to large volumes of sales. Eventually, the firm will be a huge beneficiary due to compliance with the rules and regulations governing the industry. The fact that the USA has such regulations under control implies that it is a contributory factor towards the success of any business in the country. Doing business in the USA would, therefore, be a good location choice based on this very vital contribution. Location The production of cinnamon coffee must be done near the consumers. Therefore, this implies that the location of the coffee shops could be driven by such a factor. It would be impossible to capture a large market if such factors are not taken into consideration. Considering the fact the USA is a fast developing country, it implies that the people at the work place continue to increase. It also implies that technological advancements are many in the country. Competition However, it should be noted that there are threats much as there are opportunities. The largest threat is competition. In order to overcome this threat, there needs to be intense market research and strategies. These strategies s could include marketing strategies and quality service provision. This is because there are competitors who have been in the industry for a long time, and one such beverage is tea and chocolate. As a result, there should be strategies on how to gain the products own market. The competitors are international dealers and multinational corporations. However this should not be a basis to decline from joining the industry. The most important thing is to ensure that their advertisements and quality of products and services that they provide are of high standard. This will ensure that they their own share of the market in the end. There also exists competition from other flavors of coffee. For instance, there is Boca Java which is a leading retailer in the sale of gourmet coffee and other brands of coffee. Garraway coffee house in London is also a leading coffee supplier and the company should emulate the policies of such market leaders. This is because they are pacesetters. This means that the company should research greatly to ensure that the best policies are implemented so as to deal with the threat of competition. It is important for the company to go beyond the borders to ensure that the company prospers. Competitors like Starbucks and Espresso have been in the industry for a long time. However, it is possible to draw consumers towards ones products due to the introduction of cinnamon flavor. The marketing manager should, therefore, ensure that the advertisements show the emphasis. This will be very important in gaining a huge share of the market. Another major strategy could be the provision of extremely high quality products. This is what would differentiate the company from the competitors and hence, drawing them towards the company’s products. This will ensure that despite the fact that this constraint exist, it is well taken care of. In any country, there exists some level of competition. Therefore, the existent of this constraint is no reason not to establish the company in the USA. This implies that USA still remains one of the best locations to establish the business. It is important that all factors are considered and weighed so as to ensure that the best location is chosen. The USA is a location that seems very beneficial towards the success of the business. (Peattie and Golding 2005) When setting up a business, the core factor that is always considered is the availability of a ready market. This leads to the demand and hence sales. Eventually, profits are realized. Profit maximization is the main goal of any business. From the above analysis, it has been established that USA makes the best location for the establishment of the cinnamon coffee business. It would be a huge success and any entrepreneur would take up the opportunity. . References Clarke, S. Davis, P. Dobson, and M. Waterson (2002) Buyer Power and Competition in European Food Retailing. Edward Elgar Publishing. Cheltenham Deaton, A., and Laroque, G. (1992) On the behavior of commodity prices. Review of Economic Studies. Vol. 59, pp. 1–24. Dicum, G. and N. Luttinger. (1999) The Coffee Book: Anatomy of an Industry from Crop to the Last Drop. New York: New Press Fitter, R. and Kaplinsky, R (2001) “Who Gaines from Product Rents as the Coffee Market Becomes More Differentiated? A Value Chain Analysis.” IDS Bulletin Vol. 32(3), pp. 69-82 Peattie, K. and Golding, K. (2005) "In Search of a Global Blend: Perspectives on the Marketing of Fair-trade Coffee." Sustainable Development. Vol. 12, pp. 154-165. Ponte, S and Giovannucci, D. (2005) "Standards as a new form of social contract? Sustainability initiatives in the coffee industry." Food Policy. Vol. 30, pp. 284-301 Ponte, S. (2002) "The 'Latte Revolution'? Regulation, markets and consumption in the global coffee chain." World Development. Vol. 30(7): 1099-1122. Read More