Consider the factors that encouraged and enabled Fresko Psomi to expand into different geographical areas : An introduction to business and management, Assignment, OU, UK

Question 3

This question asks you to consider the factors that encouraged and enabled Fresko Psomi to expand into different geographical areas. In your answer, you should consider both sales and sourcing activities.

Part (a) asks you to explain the concept of ‘drivers of globalisation’. You should start your answer with a brief explanation of what is meant by ‘drivers of globalisation’, followed by a short explanation of what each driver is and how it works. Make sure you use your own words for these explanations.

Part (b) requires you to consider which drivers of globalisation seem present in the case study and how they encouraged and enabled Fresko Psomi to expand beyond Greece. You need to provide examples – drawn from the case study – of how each of the four drivers act in this particular case. If you think that a particular driver is not relevant in this case, say so. The more specific your answer is to the situation of Fresko Psomi (as far as you can tell from the case), the better.

Part (c) required you to consider whether there are any barriers that seem to discourage further international expansion of Fresko Psomi. From the information provided in the case study, explain what these barriers are and how they seem to have affected the business. Explain how this would seem to affect the future success of the business.

Case study

Fresko Psomi Bakeries

Fresko Psomi Bakeries was founded in Athens (Greece) in early 2009, by Savvas and Maria Vasilakis. Following the 2008 global financial crash both Savvas and Maria found themselves unemployed after successful careers in their respective industries. Savvas had worked in hospitality as a chef for a leading US hotel chain. While Maria had worked as a supply-chain expert for a Greek shipping company based in Piraeus, the main port of Athens. However, the financial crash hit Greece very hard, leading to significant unemployment, especially in the 18-to-25-year age group.

By early 2009, Savvas and Maria had decided to create a business that would utilise both of their skillsets, while at the same time offering first-time employment to some of the young unemployed. They identified a gap in the market for good quality, yet affordable bakery products, with an initial focus on bread production. They managed to secure a start-up loan from the Athens Chamber of Commerce, as well as some funding from the European Union Regional Development Fund to buy equipment and machinery. The chamber of commerce helped them locate a disused workspace in central Athens to set up their operations. They also secured the workspace at a favourable rent for the first five years. The location was central enough to be able to sell a variety of fresh bread direct to passing consumers and to the many tourist cafes in the neighbourhood.

Initially, the business took on five apprentices, all paid in accordance with Greek minimum wage and working hours legislation, as well as routine inspections for occupational health and safety standards. The apprenticeship program had a rigorous training and development programme designed by Savvas in conjunction with Athens Technical College.

Successful apprentices would be awarded an internationally recognised Catering Specialist Certificate. As the business steadily grew, this allowed them to take on five new apprentices each year, while offering full time roles to those that completed their training. Understandably they developed a reputation as a good employer in the city. In addition, the company decided it wanted to make a long-lasting contribution to its local community by donating a portion of its sales to a local hunger charity. It also introduced an employee volunteer program to provide paid time off for volunteering with a local non-profit organisation that taught healthy eating and home cooking skills in schools.

There is limited scope for large-scale farming in Greece and only about 4% of GDP comes from agriculture. This means that Greece needs to import significantly more food than it exports. Given the geography and limited transport links in the north of the country, it is often faster to bring goods into the country by sea (Marshall, 2021; pp. 144–145). This is where Maria’s supply-chain experience has proved vital to sustaining the business. Between 2009 and 2012, she built up a reliable supply network for the different grades of wheat that the business needed, making frequent trips to Ukraine. Ukraine is the major wheat exporting nation in the region and accounts for 10% of the world wheat market. In building up good relations with wheat producers and shipping agents she ensured a consistent supply throughout the year.

The business continued to grow incrementally by word of mouth and Savvas was encouraged to expand into producing specialist pastries, such as Bougatsa (Greek milk pie), Karydópita (walnut cake) and the best known traditional Greek pastry, Baklava. Because these products had a longer shelf life than bread, as well as better profit margins, the business was encouraged to export small batches. They soon built up a healthy customer base in Cyprus, Crete and several of the smaller Greek islands within a 24-hour shipping period.

2014 saw the lease on the workspace run out. Savvas and Maria looked for new premises in central Athens, but only two locations would be able to accommodate a bakery, and both would be three times their previous rent. In order to keep their overheads down, they found a much bigger premises closer to Piraeus, that was affordable. This put them closer to their overseas customers but meant they would need to find a reliable way of delivering their products to central Athens. The move to the bigger premises pushed them to embark on an ambitious expansion plan. Not only did they increase the number of products they made, but they also actively developed markets further afield by running a social media marketing campaign aimed at the Greek diaspora. By 2016, they had build up strong customer bases in London, Munich and several major cities in Australia where there are large numbers of people of Greek descent. To solve their delivery problems within Athens they purchased two electric delivery vans and also subcontracted smaller deliveries to a bicycle delivery service. This also helped the business to start developing a more sustainable approach.

However, from 2020 onwards, Fresko Psomi has been badly affected by a series of global events that have badly impacted their ability to generate a profit. First, the Covid pandemic struck and along with much of the rest of the world went into lockdown. While the swift and effective response from the Greek government undoubtedly saved many lives and protected vital healthcare services, it also meant that all of the cafes, shops and hotels that Fresko Psomi supplied were shut and the country saw a dramatic 50% reduction in visitor numbers. Many workers in the tourist industry were made unemployed. Through the worst of the pandemic, Savvas and Maria managed to provide food packages to support tourist workers in their neighbourhood.

The exit of the UK from the European Single Market added considerable shipping costs, delivery delays and administrative red tape, so much so that it has become unprofitable to supply any of the customers in London.

Answer

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