The Espresso Lane to Global Markets Case

Jessica Boelcke
 Illy is a coffee company that is built on their reputation and the quality of the
products that they produce. This means that they have a reputation to maintain but require
markets that are willing to pay for the quality provided in an environment where cheaper
and better known companies are available. Espressamente is looking into different
international markets to break into so that they can expand their brand globally. The top
three candidates of the countries mentioned in the case, would most likely be India,
Germany, and Japan.
The top country for expansion would probably be India. The coffee market in
India has just recently become big in a society where the top hot beverage has been tea.
This opening market will allow for franchises like Espressamente, with not much
experience, to gain purchase in an international market without extreme levels of
competition. With the franchise sector of the market growing at a high rate it will provide
a clear opening for franchising there.
The population in India has a large middle class that would be prime to advertise
the top level product that Illy produces. The coffee can be sold at a decent rate because
the population there is willing to pay for a higher lifestyle and better quality product. The
flavor of the coffee that Espressamente produces will also appeal to the palette of Indian
food because of the similar taste that is popular in the local cuisine. Even though based
on Hofstedes standards Italy and India have a significant difference in culture, the
opportunities being offered on the business side provide a good international market to
expand into. It would be best to enter this market with a joint venture due to the
differences in culture. That way the local heritage would still be represented and
respected while bringing in the reputation and culture of the Italian franchise.
Germany would be a good second country to consider for expansion because of
its close proximity to Italy and the rising market for specialty coffees. Due to the previous
resistance to coffee buying because of the reputation it gained, there is an opening in
Germany for new coffee companies to enter into the market as the popularity is picking
back up. There is a large population of Germans who now are willing to pay for coffee,
and Illy already has a decent foothold in the sales they currently make in the country.
Germany is also the closest socially to Italy based on cultural dimensions and would have
similar business practices to work with. This makes direct franchising optimal because
the outlines of the franchising will be clear to both business parties, allowing for
Espressamente to expand into a new market and Germany to start serving a brand that is
considered elite by other locations in Europe.
The third country for expansion would optimally be Japan. Japan has an
established coffee market but also has a lot of opportunity in terms of consumers with the
popularity of coffee shops such as Espressamente. Even though the franchising sector is
dropping, the country is one of the largest importers of coffee in the world, which gives
the space for Illy to edge into the massive market. The dynamic between the market share
of Japan and its high market attractiveness, makes it a question mark based on the BCG

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matrix analysis. However, this should be combined with the relatively middle-of-the-road
risk based on the percentage of Illy coffee that is already being consumed by Japan out of
all the coffee available. This would be an ideal market to use a joint venture due to the
different social expectations found in the cultural dimensions and the fact that having the
right connections in Japan goes a long way in business. By partnering an outside
perspective with someone already successful in Japanese business, it would give
Espressamente a good foothold into Japans franchise market.
Any of these markets would be good for Espressamente to enter into because they
allow entry-points into franchising either without coming across a lot of competition or
by appealing to a niche consumer base. The closer the locations are geographically and
socially to Italy allows for more autonomy with the franchising and allowing the people
purchasing the franchise more power. For India and Japan, there needs to be a little
oversight or partnership from someone from Illy/Italy so that neither culture is disturbed
with the entry of the franchise into the market.

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Appendix A CASE Analysis

Brazil
Cultural Specialty coffee growing
Administrative/Political Social programs grow the middle class
Came out of the global economic crisis relatively
unscathed
Geographic Capital (Brasilia) is ~9000 KM or a 12 hour flight away
from Rome
Economic Expected to be 5th largest economy in next five years
(from date of the case)
China
Cultural Tea and coffee are established consumption drink
categories in society
Consumers like to sit and enjoy their food/coffee in
cafes versus taking their items to go
Administrative/Political Increased standards of living and growing middle class
Two-plus-one requirement for prospective franchisors
Foreign franchisors arent allowed to purchase land
except for personal use
Geographic Capital (Beijing) is ~8000KM or a 11 hour flight away
from Rome
Large, widespread population
Economic Overall consumption is on a decline
Germany
Cultural Coffee has been considered unfashionable and
unhealthy
Rise in popularity for freshly prepared specialty coffee
Administrative/Political Membership into the German Franchise Association
holds a great deal of power
Geographic Capital (Berlin) is ~730 KM or a 2 hour flight away
from Rome
Economic Prediction of coffee industry to grow 10.5% from 2011-
2015
Espresso drinks experienced strong growth in times of
economic difficulty
India
Cultural Historically a tea culture
6th largest producer of coffee in the world
Changing lifestyles and rise of high-end coffee shops
has increased coffee consumption
Indian taste revolves around high body, strong flavors,
much like espresso
Administrative/Political 300-350 million middle income earners

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Geographic Capital (New Delhi) is ~6000 KM or a 8 hour flight
away from Rome
Economic Experienced unprecendented growth during the global
economic downturn
Franchising is the second fastest growing industry
Japan
Cultural rd
3 largest coffee importer
Popularity of coffee shops due to convenience
Possible niche market for healthier and weight-
conscious beverage alternatives
Administrative/Political Business partners are key to getting a foot into the
franchising door
Geographic Capital (Tokyo) is ~6000 KM or a 13 hour flight away
from Rome
Economic Poor economic conditions lately
UK
Cultural Historically a tea drinking country
Coffee shops are a new form of socialization
Administrative/Political Not many franchising restrictions
UK Trade and Investment Agency helps foreign
businesses invest and locate in the UK
Geographic Capital (London) is ~900 KM or a 2 hour flight away
from Rome
Economic Coffee market is growing at a much faster rate than
other sectors
Poised for significant further growth in next 3-5 years
Premium locations are available for low prices
US
Cultural Global leader in coffee
High consumption, high saturation and concentration,
and diverse demography
Students, businesspeople, and friends enjoy socializing
at coffee shops
Administrative/Political Not many limitations on franchises
Geographic Capital (Washington DC) is ~4500 KM or a 9 hour
flight away from Rome
Economic Strong coffee market due to high consumption
Stable number of consumers willing to pay higher prices
for coffee

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Appendix B Espressamente SWOT Analysis
Strengths
Strong brand
High quality product
Opportunities Expand into new
Emerging markets emerging markets that
Increased demand in are needing a brand that
developed markets has superior quality at
decent prices.
Increase presence in
developed markets.
Threats Use brand as weight to
Competition that is come out on top of
cheaper and has more cheaper competition
experience Ensure the quality of the
Possible decrease in product without
coffee production unnecessarily excluding
possible good materials
Weaknesses
Limited Franchise
experience
Higher end product with
higher prices that
exclude groups of
consumers
economically
Target middle income
consumers so that it is
more attainable for them
Use these new markets
to increase franchise
experience and build a
presence where there
isnt a ton of
competition already
Ensure that prices for
products are in line for
the quality of the
product. People will pay
for quality.
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Appendix C Country Hofstede Analysis
Italy Brazil Italy China Italy Germany

PDI 50 69 +19 50 80 +30 50 35 -15

IDV 76 38 -38 76 20 -56 76 67 -9

MAS 70 49 -21 70 66 -4 70 66 -4

UAI 75 76 +1 75 40 -35 75 65 -10

LTO 34 65 +31 34 118 +84 34 31 -3

LANG Italian Portugese Italian Mandarin Italian German

Ease of
Doing 87 126 87 91 87 19
Business
Italy I India Italy Japan Italy UK

PDI 50 77 +27 50 54 +4 50 35 -15

IDV 76 48 -28 76 46 -30 76 89 +13

MAS 70 56 -14 70 95 +25 70 66 -4

UAI 75 40 -35 75 92 +17 75 35 -40

LTO 34 61 +27 34 80 +46 34 25 -9

LANG Italian Hindi Italian Japanese Italian English

Ease of
Doing 87 132 87 20 87 7
Business

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 Italy US

PDI 50 40 -10

IDV 76 91 +15

MAS 70 62 -8

UAI 75 46 -29

LTO 34 29 -5

LANG Italian English

Ease of
Doing 87 4
Business

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 Appendix D Country GE Matrix

Invest or Grow Earn Selectively Harvest or Divest

High

US
Total Coffee Sales in US$ Millions

Germany
Market Attractiveness

UK

Medium
Japan
Brazil

Low
India

China 0
High Medium Low
Competitive Position
Illy Sales per Country / Total Coffee Sales per Country (US$)

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 Appendix E Country BCG Matrix

High

Japan

China
Potential Market Growth
Market Attractiveness

Brazil

Low
UK
India
US
Germany

High Low
Market Share

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 References

Alon, I., & Lohwasser, M. (2012) The Expresso Lane to Global Markets. Ontario,
Canada: The University of Western Ontario, Richard Ivey School of Business

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