The Espresso Lane to Global Markets_ Illy's Case Analysis
Illy’s Case
Based on the case “ The Espresso Lane to Global Markets”, this memo will look into Illy's core capabilities and analyze its international strategy in light of CAGE distance, RAT, CAT, and foreign market entry mode.
Illy’s core capabilities lie in its Italian-style, focus on design and aesthetics, high quality, espresso culture. The increasing demand for coffee worldwide represents a huge opportunity for Illy to venture into global markets. I believe Illy has competitive advantages based on “VIRO” analysis. Illy is capable of creating value overseas with its unique, high quality Espresso. Its high-end restaurants and unique culture and customer experience are rare and hard to imitate. Given the success in its home market Italy, it is evident that Illy’s management is capable of employing those capabilities effectively.
Success of global ventures not only depends on competitive advantage, but also liability of foreignness. By using CAGE distance framework, we can determine which foreign market will incur the least liability of foreignness. First of all, Coffee is in the consumer discretionary industry, and consumers’ taste varies in different cultures. For example, coffee is a traditional drink in western culture, but foreign to Asian culture. As such, Illy may want to avoid venturing into a market with big cultural distance. Secondly, Illy high-end player in the market, and its target consumers are high-income consumers. Hence, when venture oversea, Illy should choose a country with high-income level—economic distance matters. Thirdly, long geographic distance would increase risks linked to the long-distance shipping, such as risks of mould, condensation and unwanted odors. Therefore Illy would prefer countries with low geographic distance. Finally, Illy should choose a country with low administrative distance, a market where is business friendly. Among all the countries that Reale considered, I would recommend Illy to
Based on the case “ The Espresso Lane to Global Markets”, this memo will look into Illy's core capabilities and analyze its international strategy in light of CAGE distance, RAT, CAT, and foreign market entry mode.
Illy’s core capabilities lie in its Italian-style, focus on design and aesthetics, high quality, espresso culture. The increasing demand for coffee worldwide represents a huge opportunity for Illy to venture into global markets. I believe Illy has competitive advantages based on “VIRO” analysis. Illy is capable of creating value overseas with its unique, high quality Espresso. Its high-end restaurants and unique culture and customer experience are rare and hard to imitate. Given the success in its home market Italy, it is evident that Illy’s management is capable of employing those capabilities effectively.
Success of global ventures not only depends on competitive advantage, but also liability of foreignness. By using CAGE distance framework, we can determine which foreign market will incur the least liability of foreignness. First of all, Coffee is in the consumer discretionary industry, and consumers’ taste varies in different cultures. For example, coffee is a traditional drink in western culture, but foreign to Asian culture. As such, Illy may want to avoid venturing into a market with big cultural distance. Secondly, Illy high-end player in the market, and its target consumers are high-income consumers. Hence, when venture oversea, Illy should choose a country with high-income level—economic distance matters. Thirdly, long geographic distance would increase risks linked to the long-distance shipping, such as risks of mould, condensation and unwanted odors. Therefore Illy would prefer countries with low geographic distance. Finally, Illy should choose a country with low administrative distance, a market where is business friendly. Among all the countries that Reale considered, I would recommend Illy to