The Espresso Lane to Global Markets_ Illy's Case Analysis

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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
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Despite the fact that the American market is highly competitive with big brands, Illy can leverage its competitive advantage to differentiate its high-quality products from others. US GDP per capita ($48,100) is the highest among all the countries considered. This indicates huge potential for premium coffee market. Moreover, US is ranked 4th in terms of ease of doing business. With its core competitive advantages, Illy is likely to do well in the US market.

Brazil should come as a third target due to the fact that it’s the second largest consumer coffee market in the world, and its high projected percentage market growth 36% (Exhibit 3). The case mentions that, “ … Brazil would overtake the United States in terms of overall coffee consumption sometime in the next few years as increased wealth in Brazil drove a rise in locals’ thirst for espressos and cappuccinos.” However, the main challenge facing Illy is how to localize its products in Brazil without losing its core competency of authentic Italian Style. Moreover, due to the relative low GDP per capita ($11,600), Illy’s high-end coffee may not receive popularity from a significant portion of the population. In addition, franchising in Brazil is difficult, which raises further questions that if Illy can effectively transfer and capture the value of its capabilities in Brazil.

India can be a good choice given its coffee-drinking culture and growing wealth. Illy can also