Report on

Caffebene: Master Brewer of Growth and Global Ambition

Submitted by:Karan pratap-1226114116Naseer khan-1226114117

Lalit Akhil pillala-1226114119Sai surya raghava-1226114120

Malavika issar-1226114121

Summary:-

The case presents a wide range of topics relevant to entrepreneurship and franchising, such as the development of a new concept store, create and maintain a competitive advantage, managing rapid growth, new market entry strategies, including other. The case portrays Sun Kwon Kim, the founder of Caffébene as an entrepreneur, who had already achieved success in various business sectors like home electronics distributorship for Samsung, franchising of video arcade shop, and food service franchising before entering into coffee market. Caffébene was founded by Kim in 2008. It was to achieve remarkable success in a highly competitive South Korean coffee industry dominated by U.S. and conglomerate-founded brands like Starbucks, Angel-in-us, Twosome Palace etc. The case depicts the strategies employed by Caffébene to differentiate itself and achieve an extraordinary rate of growth. When Caffébene overtook Starbucks in South Korea, Kim decided to go head to head with Starbucks in the U.S. in Times Square. However, Kim was faced with a difficult decision making situation, whether to abandon flagship store in USA or not. The case is particularly interesting because (1) has an unusual history of a service concept of Asian business trying to expand internationally and enter the United States (most cases of this type are going on business the opposite) direction, (2) describes the process of development and refinement of a new store concept in a highly competitive market, (3) explains the strategies to stimulate and manage the significant growth in short period of time, and (4) exposes students to Caffebene unorthodox thought processes of management development strategy of international business. In examining the options Caffebene process, students are introduced to several useful frameworks for international marketing and entrepreneurship.

Objectives:-

(1) Examine the development of a focused, differentiation strategy in a highly competitive

industry - coffee retail stores.

(2) identify the sources of competitive advantage (of Caffébene) and assess to what extent

they are transferable to another country, i.e., the U.S. or China.

(3) Understand how an entrepreneurial perspective affects decision making and can

contribute to the success (and missteps) of a company.

(4) Appreciate the entrepreneurial perspective needed to pursue an entrepreneurial career.

Case analysis:-

Caffébene founder Sun Kwon Kim has demonstrated the remarkable success in the coffee

business which seemed as a saturated market where the top class American founded brands

had already dominated the Korean market.

 Personality of the entrepreneur:- 

 Like Kim can play a bigger role in terms of entrepreneurial creativity. It was his determined

entrepreneurial alignment and opportunities he saw in the market that made his outlandish

decisions a phenomenal success in coffee business. An ambitious growth plan in the mind

along with the intention of addressing the fast changing needs of the customer can act a good

foundation to start any business.

Kim possessed an ability to see the prospects from diverse angles. Through this capability, he

was able to develop a new retail concept in a highly competitive market and created a

competitive edge which largely contributed for rapid expansion of business within a short

span. Kim’s extraordinary

Capacity of envisioning big, blended with the ability to articulate the vision within his work

team paved the way for the success of his business. He was never disappointed with his

failure. Instead he learnt from failures and speedily corrected them in the best possible

manner as demonstrated in the early opening phase of Caffébene when the business was not

doing well as expected. Kim always was out of conventional thinking and never gave himself

up to pessimistic thinking and fear of failure. Many business are hesitant being the first

mover as they fear of unexpected disappointment and loss of money.

However, Kim’s leadership was not on the verge of submission to that sort of

Conventional thinking. Caffébene became a first coffeehouse to advertise on TV with

celebrity endorsement and gained vast popularity in the Korean market. Had it been the trend

follower, it never would stand out in the competitive market. As a result, Caffébene is known

as a trendsetter in world coffee industry. We are exposed to numerous examples in the real

world of trendsetting company failing during expansion phase due to their inability .

Manage growth and product quality:-

When they are inside the tornado of explosive growth. Caffébene, however, well-managed

its growth and product quality during this phase. Kim established Berne Cup Coffee College,

which provided a barista training program, coffeehouse start-up education program, and

coffee-making classes for both employees and hobbyists. Employee benefits program was

introduced along with the provision for vacation bonus to ensure employee feel satisfied and

respected. Moreover, for establishing good customer and franchisee relations, open

communication with customers and franchises was conducted. Mystery shopping program

was employed to ensure the service quality. Additionally, the discussion of executives

presented in the case demonstrates the Orientation of the company towards the longer term

success. Hence, we can see that Kim used effectual thinking.

Starting a New Venture

Issues and challenges of new business startup

 How Kim started video game business but duet financial crisis had to close the business.

Despite realizing how Starbucks and other companies were not catering to the needs of the

Korean market, despite realizing how Korean tastes were fast changing, despite providing the

more wholesome menu that would go well with the coffee and despite designing the café to

be more socializing-

Friendly, there weren’t significant repeat

Customers as they did not see anything special about Caffébene.

Generating new ideas:-

Kim saw how the coffee industry in Korea was very homogenous and decided to provide new

offerings like a menu (healthy drinks) that went well with coffee, designing of the café to be

more socializing-friendly, providing books and tabs to be used in the café, giving that 30

wish list gifts (Mystery Shopping Program Hearing aid), Not following the status quo (TV

advertising in times of recession when others like Starbucks Weren’t), employee benefit

Programs. Making drinking coffee an experience and not just a transaction

Sources of Innovation:-

Demographics (Starbucks was providing standardized service while not considering the

preference of the Korean Market) and Changes in Perception (Something about changes in

tastes)

Stakeholder Analysis:-

Kim played a big hand in giving franchises as he did not give companies who were only

willing to use big money to get the franchise as that could mean those companies.

Competitive Analysis:-

Kim always went about making Caffébene operate in a way that was unique to other

coffeehouses. In fact, the operations were so unique that other companies started to follow

Caffébene’s strategies. Seeing this, Kim wanted to go international and had the ability to do

so too with their main targets being China and the US. In the end, Kim never really followed

the market leaders (like Starbucks) but always did this differently from the start. Kim also

focused on the process aspect to be more competitive by purchasing the big coffee machine

which made the cost of producing coffee much cheaper. This meant that Caffébene were

providing high quality coffee at more affordable prices.

Competitor Analysis:-

Despite being a global brand, Starbucks made their service standardized which made Kim

see an opportunity to exploit as the service given by the competitors was not matching the

services that the customers wanted/were looking for.

Socio-demographic Analysis:-

Kim managed to identify the dynamics of the coffee consumers were changing, at least in

Korea. While others, only saw their café as a place to consume coffee, Kim saw that the

customers wanted more than that, they wanted an experience. So, Kim designed the café’s

layout in such a way that the customers were left in an environment were they could sit Back

and converse more privately in public. Also, Kim saw how the Korean market wanted more

than only coffee for which he provided a well-researched healthy menu and also added items

that went well with coffee like ice-creams for the female-customers.

Problems:-

The core issues of this case are as follows:

1. What accounts for Caffébene's remarkable success?

2. Is Caffébene really No. 1 brand in Korea?

3. To what extend did personal qualities of the founder contribute to Caffébene's success?

4. To what extend does Kim display "effectual reasoning"? How has his reasoning helped so

far and how will it help Caffébene's success going forward?

5. What did Caffébene do to manage and control product and service quality during a period

of such remarkable growth?

6. What is the financial significance of the NYC store decision?

7. Is Kim's global ambition realistic given his company's financial position?

8. What should Kim do now with the lease/permit situation in NYC?

9. Should Kim try to get out of the lease, find a new location and perhaps abandon the US

entry altogether?

Conclusion:-

Failure is always the learning point in any business. Instead of dwelling over the

disappointment of failure, an entrepreneur should quickly move towards better strategy

learning from it at the cost of not repeating it. A high degree passion, patience, sense of

value, integrity, proposes and flexibleness are some of the major traits to be a successful

entrepreneur. Further, one should bearing mind that risk is an inherent business characteristic

in any profitable venture. Thus, well-informed decisions should be made by analyzing every

possible sort of pros and cons. Expansion is also a one of the most critical stage in business

where tendency of compromising on quality and mismanagement are higher. In this stage,

cautious handling of customers and related stakeholders is very critical in order to sustain and

remain competitive in the market for the longer-term. Also Entrepreneurs need to cautiously

concerned for the continuous growth and longer-term success of their business ventures.