Lesson 5 Koots Tea Case Study

7/21/2019 Lesson 5 Koots Tea Case Study

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Running head: LESSON 5 CASE STUDIES 1

Case on: Koots Green Tea

Submitted by: Bikram prajapati

Kings college

International American University

BUS 590: Business strategy

Kirshna khanal / Giang Biscan

06, 08, 2014


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LESSON 5 CASE STUDIES 2

Abstract

The case Koots Green Tea describe the entrepreneurship experience of Japanese-born and

American trained entrepreneur Kouta Matsuda. The case describe the coffee market in USA Vs.

tea market in japan. The koutasearly entrepreneurial experience helps to negotiated with Tullyscoffee. Kouta started the first Koots Green Tea (KGT) store in 2003. He has just sold his chain

of Tullys Coffee Japan (330 stores in Japan) and KGT (nine stores in Japan) to a large Japanese

tea conglomerate, Ito-en. This case try to explore the specialty of coffee and tea industry, ntra is

the second most popular beverage in the world to bottled water. There are different types of tea

among them green tea was promoted by koutas in the various retail chain in japan. Kouta

currently owns one KGT shop in Seattle and plans to open a second store nearby. Kouta must

decide whether or not now is the time to take the leap and move to America to oversee store

concept development, operations, and eventual expansion. The biggest challenge for him is to

make awareness in the American society about importance of green tea and how market shoul be

develop whether to go through merging, joint venture or through acquisition process in the USA

market.


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Koutas entrepreneurial experience

Kouta 37 year old entrepreneur have to compete with the Tullys coffee retail chain

business. Kouta represent a new breed of entrepreneurship in japan. Kouta is different from other

business man and he is extremely committed to his work. No Japanese food retail has ever madeit outside of japan, no one know it how to do it. There is wide gap between the American and

Japanese food culture and establishing a green tea retail shop in both countries is very tough job

for kouta. Kouta wanted to open 300-400 koots shops in the USA. He had to compete with

Tullys coffee which soldbranded coffee and related products throughout from 4,000 grocery

and retail shop.

An entrepreneur is a business person who is not deterred by risk. Entrepreneurs must

have enough confidence to follow through with a potentially profitable plan, despite therelatively high risk. In my mind, Kouta is definitely an entrepreneur. He overcame the fact that

being entrepreneurial in Japan is very difficult, having much higher consequences for failure than

the United States. At the early age of his life he is used to deliver the newspaper, used to sale

computer peripheral and after graduating from high school in America, he returned to japan to

study further and there he used to work as part time in Japanese restaurant. After graduating to

gain experience he worked for Sanwa bank for two years. One of his college friend named jeff

farris tell about the emerging food trend in USA and suggested to start coffee business in japan.

He worked and settle some issue initially and finally took the leap and negotiated with tullys

coffee a settle based chain to its first store in japan.

Kouta is a model entrepreneur and a force to be reckoned with. His wise business

strategy, such as placing Tullys in high-rise office buildings, has propelled his business career in

the direction many have wished to go. His goal of bringing Japanese culture to America through

Koots Green Tea has fascinated many and may have created a niche, which could far exceed

Starbucks. With a timeframe and a set of goals he could very well convince Ito-en to continue to

pursue the retail green tea market. He have to work in different culture by marinating harmony

between two cultures. kouts are never satisfied on what he achieved he always prefer to take risk

and need to grow. Koutas is self-motivated entrepreneur and continue to expand his business in

japan and America. Kouta had succeeded in winning the into overseas exclusive licensing and

franchises rights for coffee shops. Suga san and kouta Kouta enjoy reputations of integrity and


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wisdom and visionary leadership, and both have worked for large Japanese banks. If you are an

entrepreneur looking for funding outside you really have to develop a personal chemistry or

synergy between yourself and the investor. That is most important. They do research more on

coffee shop prospectus in japan.

Diversification into koots green tea:

Koots Green Tea is relying heavily on Kouta to provide vision and direction for the

company. Kouta needs to develop a management team with the ability to support his vision of

major expansion. Since foreign expansion is the ultimate goal of the company, a diverse

management team with knowledge of penetrating new markets would be ideal. They more

focused on niche market. He believed that simply selling more is not enough connecting

customer is increasing important and the future success of company lies on personal relationshipwith customer. Kouta and Suga-sans cultural background and experiences building a major

coffee chain in Japan. Katousadopted LOHAS strategy as makes people to believe that the

green tea that they are providing is safer for health and lifestyle. And kouta believed that one day

of Americans get familiar with the taste of quality tea they will pay $3 for a cup of tea like

coffee. This is what a kouts vision to establish the tea market in the USA. Green tea is a part of

a Japanese tea culture and most of the human resources believe that promoting green tea will

make their culture alive. Japanese consumer are ready to pay premium for one cup of green tea

and them does not hesitated to be in line for kouts tea shop.

The greatest advantage that Kouta and Koots Green Tea has going for it is its companys

culture. The fact that Koutas goal was to bring Japanese culture to America is the companys

driving force, which needs to be the main focus. Instead of developing such an immense

expansion plan Koots Green Tea needs to focus on the marketing of its companys culture, which

is the green tea itself.

Expansion of koots tea

Kouts believed that he need to expand the business and plans to open seventh koots store

in Tokyo and a second store in settle in jan 2007. The lesson learned from his past experience s

that if u want to control your business u have to make minimum 50 % of share in the own name

because ito-en want him to focus on operating tullys coffee japan chain rather that koots tea


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green shop. In some contrast kouts expanding business is disturbedby tullys which is initial

chain partner. He believed he would need to reconcile his business for expanding the koots chain

with his need to be responsive to the goals of ito-en. He responding this situation by creating

koots franchises and sell them to USA franchises or choice they have is to make joint venture

with other company. the partner of kouts mention that making concept is easy but converting

them into reality need so much hard working and strategy. Kouta must make choices: he needs to

revisit his commitment to the Koots Green Tea shops in Japan and possibly delay his U.S.

expansion strategy for that venture concept. He more focused on how tea, green tea are healthy

and their culture of drinking tea is long from 4,000 years.

Opportunity for kouta

Kouta recognized the opportunity to capture at least a share of a rapid growth market for

coffee stores, and try to find coffee retail locations that Starbucks had not yet entered, a hit-em-

where-they-arent approach such that focusing on niche market. It is one of the generic strategy

of koots tea. Koots more focused on international expansion too hence there is an opportunity to

expand and he wants to establish a green tea as culture. Despite the increasing size and scope of

Starbucks operations and the worldwide recognition of its brand, the coffeehouse and teashop

retail industry in 2006 remains highly fragmented.

Koots Green Tea is relying heavily on Kouta to provide vision and direction for the

company. Kouta needs to develop a management team with the ability to support his vision of

major expansion. Since foreign expansion is the ultimate goal of the company, a diverse

management team with knowledge of penetrating new markets would be ideal. The greatest

advantage that Kouta and Koots Green Tea has going for it is its companys culture. The fact that

Koutas goal was to bring Japanese culture to America is the companys driving force, which

needs to be the main focus. Instead of developing such an immense expansion plan Koots GreenTea needs to focus on the marketing of its companys culture, which is the green tea itself.

KGT has the financial resource because Suga has the venture capital for Matsuda. KGT

also has the technological resources such as the way Matsuda experimented with making his

matcha in an espresso machine. He also has the recipe and expertise for an expansion. When


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Matsuda expanded the Tullys in Japan, he learned the organizational resources such as how to

monitor customers and his competition, the finances necessary and how to plan the stores.

KGTs biggest intangible resource is Matsuda. He is the human resource with the experience,

work ethic and drive to make the expansion work in the U.S. In addition, Matsuda has shown his

creativity in finding shop locations in Japan by taking the places Starbucks had passed over.

KGT will have some issues with name recognition in the U.S. however, the health aspects of

green tea are becoming more widely known and Matsuda will need to capitalize on this

The specialty coffee and tea industry:

There is low barriers to entry and a high level of substitute products and competitors, success

may be elusive, especially when going up against an industry giant such as Starbucks. Viral

marketing is an important factor in the specialized industry, as most tea and coffee companies donot directly advertise or promote using tools such as TV or radio media. Starbucks Company

have more than 10,500 locations worldwide as of early 2006. Among them 600 wew located at

japan. Some of major trends that coffee and tea industry hold are:

Consumer opting for gourmet beverages: people perceive the coffee and tea because of

their perception of superior quality and taste. People can make a differentiation between

taste of coffee and teas by bean or leaf type

Coffee and tea consumption as a life style: people take the coffee and tea as like their

daily meal. Furthermore the popularity increase as they can consumed also from outside

the house and it was attached with lifestyle of people.

Demographics distribution in consumption: all ages of people consuming either the

coffee or tea. 31 percent of adult people consume tea or coffee outside from the home.

Japanese tea market Vs. United states tea market:

The most famous tea in the japan is green tea: 54 % respondend prefer to have green tea

in one survey in japan. There are more competitor with green tea like black and herb tea. The

emerging trend diverse the situation. In America the survey indicate that 80 percent people drink

tea and they prefer black tea. The koots have to make a challenging market with black tea. Teas

imported from japan accounted for just 0.53 percent of USA tea market.


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Coffee vs tea industry analysis

Coffee and tea retail industry, rivalry is based on an organizations ability to develop,

produce, brand and sell on a timely basis, new features and services that meet existing and

anticipated demands. KGT should focus on the cultural boundaries, an unknown brand imageand raw material costs in foreign market. KGT is among the smallest among its rivals in terms

of funding and employees, and this adds to the pressure, because it is vulnerable and prospective

customers are less likely to purchase from them. But demand for its product is growing rapidly,

which reduces the pressure. There is high cost associated in the developing the product so the

exit strategy becomes so much tough for any company. KGT have to compete with various

coffee industry with limited resources and competitor is very much high. The main advantage

that they are focusing on niche market that has not been seen by Starbucks and big giant of

coffee industry.

The threat of new entrant in coffee and tea market is moderate as we early discuss it

require huge investment and to develop market its very much difficult because people are so

much conscious with their health and once they made their choice preference to health its

difficult to change

Coffee and tea beverages are in close competition with many well-established ready-to-

drink items. They can take as substitute product.

Green tea suppliers have relatively little power, and this can be a key area for KGT to

gain a competitive edge given its ownership by Ito En, the largest green tea manufacturer in

Japan. The developing market in the USA need viral marketing. The material that makes green

tea so special is lies in japan and these should be imported in America for full filling the

emerging demand of koots.

Coffee and tea consumers have low switching costs, which make them willing to

experiment with vendors of these products. There are many buyers now, they can chose what

they want and availability of product also play important role. The location of the shop, the

availability of substitutes and the barriers that rivals would encounter to enter this market should

be addressed. There is a large and growing market for tea especially among the environmentally

conscious consumer.


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Kouta pursuing a strategy to try to differentiate a commodity product green tea via the

application of Japanese culture, store ambiance, related food items, and branding in order to

capture a higher growth segment of a high growth market.

Expansion of koots tea in USA.

Kouta have to decide how he wants to enter in the market. There are various way of

entering into the global market and he need to decide which is best for his business. Whether to

use acquisition or joint business strategy he have to do SWOT environmental analysis and

industrial analysis of USA. It need to define how much Americans do like green tea, how strong

is Koutas dream to bring green tea to the U.S.

There are some challenge that koutas may face during expansion of his business in USA:

Financial resources:it require huge amount of finance to startup company in the foreign

land and to start new green tea business it needs more and more money. Somehow Ito-en and

Tullys company will have him to expand.

Technology resources: the technology that he using are totally different in America and

to build new technology it require more time.. KGT was trying to manage this risk by playing its

proprietary green tea latt technology cards close to its chest,but he was not sure how much

they are going to success.

Humana resources:KGT need a talented and delicate employee in the company and

they are not sure whether the American are ready to work in Japanese company or not? Suga-san

said people are by far most important element in investment in decision so why she was back in

KGT.

Another environmental analysis that KGT need to do is PESTLE analysis among all the

socio-culture factor is most important because KGT trying to change the habit of American and

perception towards the green tea. They want to establish that green tea are useful for health. He

realized to be successful he need more support and continues innovation in core business. His

competitor coffee business are growing fast through merging and acquisition.Kouta needs to put

more money into research and development and into finding cheaper ways to make his products

so that he can still make a profit. Kouta was having a very hard time reaching the breakeven


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point in the Koots Green Tea shops, let alone making a profit. The problem was that to have the

high quality Kouta felt was needed in his products; he needed to spend a lot on high quality

ingredients. KGTs target market in the U.S. will be the current consumers of specialty coffee

drinks and LOHAS consumers. Who drinks tea for healthiness?

Conclusion:

Koutas is a crazy entrepreneur. He is doing the green tea business in japan after his

graduation and he had experience of early entrepreneurship. Kouta has managed his socio culture

value and after expansion in USA he have to educated people. Kouta is a model entrepreneur and

a force to be reckoned with. His wise business strategy, such as placing Tullys in high-rise

office buildings, has propelled his business career in the direction many have wished to go. His

goal of bringing Japanese culture to America through Koots Green Tea has fascinated many andmay have created a niche, which could far exceed Starbucks. With a timeframe and a set of goals

he could very well convince Ito-en to continue to pursue the retail green tea market.

KGT need to do market analysis in America because most of the people drink coffee not

a green tea and this is their habit and changing these habit is so much hard. He need to various

industrial and environmental, SWOT analysis to find the market size and structure without

defining the correct strategy expansion will not be successful. Also he need to define which

resources, they need to be successful in the USA. Suga-san and Tullys,Ito-en helping him for toso business but they will not with him for longer time in USA

KGT must decide which strategy is best for them to enter in the foreign country. There are a lot

of strategy that he can use some of them like

By combining with Ito-en they can do business in America

By establish new venture in America

By establish franchises and selling it

Attempt IPO in USA

By making joint venture

By merging and acquisition process

Whatever he chose he must analysis the pros and cons of each strategy.


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Continuous innovation is needed for KGT to success in the market and they need to

educate. Green tea and coffee may be in similar segments in the beverage industry, but they are

totally different businesses, especially in a foreign country. Americans are used to drinking

coffee every day, but green tea is a new world for Americans. Kouta lacks new ideas for entering

the green tea market; he needs innovation. They are focusing on how they can do it. If Koutas

vision and strategy are correct America will one day become a full-fledged Japanese green tea

drinking nation that how Kouta;s think and he believed he can do it. So why I called him crazy

entrepreneurship.


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Bibliography

Lloyd, T. (2014, Mar 17). Green Tea the Next Big Thing?Retrieved from

http://www.japaninc.com/tt748_green_tea_the_next_big_thing

Robinson, R. B., & Pearce, J. A. (2011). Strategic management: formulation, implementationand control. New york: The McGraw Hill.

Documents

Lesson 5 Koots Tea Case Study