draft black canyon coffee case study
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Case Study PresentationTRANSCRIPT
Black Canyon Coffee: A Case StudyBy: Marlayna Botello, Grace Charles, Max Teeter, Andrew Ayers, Carnell Emanuel
Presentation Agenda
1. Company Background
2. Situation Analysis•General Analysis, Industry analysis, Competitor analysis, Internal analysis, As-is financial analysis
3. SWOT Analysis
4. Strategy Formulation•Strategic alternative, Alternative evaluation, Alternative choice.
5.Strategic Alternative Implementation•Action items•Action plan
• Differentiation Leadership• Thailand-based coffee shop that has grown to become the largest coffee shop chain in Thailand• Founders were able to create an Old West, American vibe that attracted its newly sought out
target market• Opened its first location in a country with low coffee consumption, through strategic marketing, • BCC is looking at a facing a competitive market with new international/local competitors arriving
in Thailand
1. Company Background
Black Canyon Coffee (BCC)
2. Which type of franchise should BCC focus on in its expansion (kiosks, mini restaurants, full sized restaurants)?
1. Which competitors BCC should focus on?
Black Canyon Coffee needs to consider certain key criteria before expanding globally1. Company
Background
General Analysis
Demographic Segment• Population Size: 67,741,401 in ThailandAge Structure: • Median Age: 36.2 years • Baby boomers would be over 65 years of age, so they could account
anywhere from 5% to 9.5% of the population, leaving it an insignificant figure.
Ethnic Mix: Compared to other countries Thailand has a less diverse ethnic mix. With only 25% of the market that is diverse BCC probably has less experience and familiarity with adjusting their business to other diverse groups.
2. Situation Analysis•General Analysis, Industry analysis, Competitor analysis, Internal analysis, As-is financial analysis
0-14 Years
15-24 Years
25-54 Years
55-64 Years
65 Years & Older
0.00% 10.00% 20.00% 30.00% 40.00% 50.00%
18%
15%
47%
11%
10%
Age Structure
Age Structure
Source: World Population Review
The Economic segment can improve BCC’s standing in the Thai market. Thailand is having relatively positive steady growth, and
with unemployment under 1% of the labor force (one of the lowest in the world), Thailand’s future economic growth looks
fairly certain.
2. Situation Analysis•General Analysis, Industry analysis, Competitor analysis, Internal analysis, As-is financial analysis
General Analysis: Economic SegmentUnemployment Rate • 2.2%
GDP • 387.25 Billion USD
Real GDP Growth Percentage
• 5.2%
Inflation Rate • .70%
Percentage of people below poverty line
• 13.5%
Interest Rates• Interest rates have dropped .25% over the past three years, and
now reside at 2%. Banks are cutting rates to encourage spending after the slowdown of economic growth.
Budget Deficit • -2.5% of GDP
Thailand Trade Deficit
• Current approximation holds it at 1,800,000,000. Although, in September it had a trade positive of 1,140,000,000. Due to Thailand depending heavily on exports, it is susceptible to large fluctuations
Source: Moody’s Analytics Dismal Scientist
2. Situation Analysis•General Analysis, Industry analysis, Competitor analysis, Internal analysis, As-is financial analysis
Thailand’s government, technology, and sociocultural segments may affect the success of any existing or new company that may want to enter into the Thailand market due to:
Government
Constitutional Monarchy
Laissez-faire economy with no government intervention in the
marketplace
Has ability to regulate businesses that possess greater market share &
sales than designated by the Trade Competition
Commission
Productivity reform needed in Thailand due to continually diminishing GDP
growth rate
Technology
The Thailand government supports technology with low tariffs on assembled
imports, and the changes in technology tend to occur
every two to three months
Thai government body, The Ministry of Science and
Technology, is responsible for the increase of science and technology in Thailand and
several other bodies assist in regulation of technology
Culture
Over 90% Buddhist (largest in world)
Approximately 50% of workforce is composed of
women and Thailand women in the workforce
mostly unskilled, low level of education
The work environment is more laid back than
the United States; work and socialization
go hand-in-hand in Thai businesses
Source: Moody’s Analytics Dismal Scientist
Industry Analysis2. Situation Analysis•General Analysis, Industry analysis, Competitor analysis, Internal analysis, As-is financial analysis
Thailand relies heavily on the tourism industry
There is new growth in the industry that Black Canyon
Coffee can capitalize on
Sales in cafes and coffee bars have increased by 4% in 2002, and the market is expected to see 11% value growth within
the year
Source: Moody’s Analytics Dismal Scientist
2. Situation Analysis•General Analysis, Industry analysis, Competitor analysis, Internal analysis, As-is financial analysis
- BCC’s biggest competitor is
Starbucks, which has a solid hold in the
market.- Other competitors in the market do not
hold considerable power, but with an
expected 11% industry growth in
the upcoming years - This could become
an opportunity for both competitors
and BCC to compete for more market
share
Threats from Rivalry among Competitors
- With steady growth in the number of
coffee shops in Thailand, buyers
have more bargaining power.
- Locations such as Bangkok have the
highest buyer power because of the high population density.
- Although buyers can switch products
relatively easily, only two coffee shops
hold nearly 60% of the market.
Threats from Bargaining Power of Buyers
- Due to government regulation, it is fairly
easy to open new businesses, coffee
shops included. - Coffee
consumption in Thailand is
dependent on instant coffee, with Nestle holding the
largest retail share.
Threat of New Entrants
- Threats from outside the coffee shop industry are
very high, with most buyers still buying
instant coffee from stores.
- Instant coffee, on average, is still
cheaper than coffee from a coffee shop, giving consumers ta
cheaper alternative. - Other products
such as energy drinks are another viable
substitute.
Threats from Substitute Products
- Rate of substitute products is very high
in Thailand, while there are a large
amount of private or local coffee shops
- BCC owns aprox. 13% of market,
Starbucks holds a staggering 45%
- Low bargaining power of suppliers
due to wide range of coffee imports,
although Thailand itself has decent
exports
Threats from Bargaining Power of Suppliers
Industry Analysis
Competitor Analysis2. Situation Analysis•General Analysis, Industry analysis, Competitor analysis, Internal analysis, As-is financial analysis
• Other competitors in the market do not hold considerable power, but with an expected 11% industry growth in the upcoming years
• This could become an opportunity for both competitors and BCC to compete for more market share. Even though there is high product differentiation between competitors, switching costs between products are relatively low, due to the nature of the industry
BCC Coffee World Starbucks Au Bon Pain Gloria Jeans0
10
20
30
40
50
60
70
80
90
Major Chains in Thailand 2003
Source: Thailand Country Review
Competitor Analysis
Starbucks • Starbucks has more than 21,000 locations in over 65 countries
worldwide • This heavy reliance on the US market can be a either a weakness or an
opportunity for more global expansion. • Starbucks maintains a global strategy for its international involvement. • Unable to tailor its products to specific regional markets• Starbucks has a clear disadvantage with its product standardization and
lack of flexibility in multiple international markets.• A clear competitive advantage is its global name brand recognition for
the high quality coffee products it provides to its customers.
2. Situation Analysis•General Analysis, Industry analysis, Competitor analysis, Internal analysis, As-is financial analysis
Source: Starbucks Company
Competitor Analysis
Au Bon Pain (ABP)• ABP holds more than 300 café bakeries
throughout the world, including India and Thailand.
• Locations are strategically set up near high traffic areas that are able to access a large number of customers.
• ABP brings a contemporary, colorful, and comfortable environment at its coffee shops, and it offers fresh baked goods and different types of beverages.
• Using a focused differentiation strategy, ABP provides many choices for its customers by using chef-inspired, bold and unique flavors on its menu.
2. Situation Analysis•General Analysis, Industry analysis, Competitor analysis, Internal analysis, As-is financial analysis
Source: Au Bon Pain
Competitor Analysis
• Coffee World (CW)• Coffee World has more than 100
stores in 7 countries: Bangladesh, China, Indonesia, Sudan, Thailand, Vietnam, and the US. Similar to Starbucks
• Has highly trained baristas that can provide consistent quality in the products it offers.
• Implements a multi-domestic international strategy by tailoring its products specifically to each location to best satisfy local customer tastes.
• Some standardized menu items include waffles, sandwiches, signature cakes, muffins and cookies
2. Situation Analysis•General Analysis, Industry analysis, Competitor analysis, Internal analysis, As-is financial analysis
Source: Coffee World
Internal AnalysisBCC has the opportunity to expand its locations on a more global scale
• Thailand allows BCC to make its major decisions in one central location
• All procurement of raw materials, menu design, restaurant design and support, and employee development are all performed at the headquarters
• The potential for growth is limited to available English-speaking employees in the company
• BCC has experienced slower than desired growth abroad due to the struggle of finding English speaking employees that are necessary for new location startups.
2. Situation Analysis•General Analysis, Industry analysis, Competitor analysis, Internal analysis, As-is financial analysis
Source: Black Canyon Coffee
Internal AnalysisResources
2. Situation Analysis•General Analysis, Industry analysis, Competitor analysis, Internal analysis, As-is financial analysis
VRIOFRAMEWORK
VALUABLE? RARE? Costly To Imitate? Nonsubstitutable? Competitive Consequences
Performance Implications
FINANCES YES NO NO NO Competitiveparity
BELOW AVERAGE RETURNS
HUMAN RESOURCEMANAGEMENT
YES YES YES YES Sustainablecompetitiveadvantage
ABOVE AVERAGE RETURNS
PROCUREMENT YES NO NO NO Competitiveparity
AVERAGE RETURNS
MARKETING YES YES YES YES SustainableCompetitiveadvantage
ABOVE AVERAGE RETURNS
SALES/RETAILLOCATIONS
YES NO YES NO TemporaryCompetitiveadvantage
AVERAGE TO ABOVE AVERAGE RETURNS
Source: Black Canyon Coffee
Internal AnalysisBCC is set apart from its competitors with the type of locations it operates. Depending on the type of location, customers can either have a full restaurant experience with a highly sophisticated menu, or grab a quick snack or beverage at a conveniently placed kiosk.
2. Situation Analysis•General Analysis, Industry analysis, Competitor analysis, Internal analysis, As-is financial analysis
10
5
80
Breakdown of BCC Outlets
KiosksMini-restaurantsFull restaurants
Source: Black Canyon Coffee
As-is Financial Analysis
Black Canyon Coffee is in a strong financial position in comparison to its competitors:• In 2002, revenue was $318,000,000 and its profit
margin was at 10%• BCC has little debt in its 10 years of continuous
business operations. • Since the company has seen annual growth of 15-
20% each year, a similar trend can be expected in the upcoming financial period.
• In 2002 the company received an investment of Baht 18 Million from the Thai Government “small and medium enterprises” venture capital fund, managed by one Asset Management plc.
2. Situation Analysis•General Analysis, Industry analysis, Competitor analysis, Internal analysis, As-is financial analysis
Source: Fiscal 2003 Annual Report
Threats
• Incoming competition
• Substitutes: energy drinks, juice, soy beverages
• Growing sophistication of coffee consumers
• Competition from big chains
Opportunity
• Coffee demand is growing in Thailand
• Growing sophistication of coffee consumers in Thailand
• Product expansion• Geographic
expansion• Strong government
ties with Asian countries
Weakness
• Not as Knowledgeable about the existing market or how to run a company like BCC
• Challenge of overseas expansion due to supply chain complexity
• Foreign relations• Culture (language
barriers)• Limited Expansion
Strengths
• Low coffee prices: Competitive Advantage
• Extensive variety of coffee and foods
• First coffee shop of its kind created in Thailand
• Is well known in Thailand and has a firm customer base
• Constantly growing and is opening chains worldwide
SWOT Analysis
Strategic alternatives Black Canyon Coffee has three options if it wishes to expand internationally:
4. Strategy Formulation•Strategic alternative, Alternative evaluation, Alternative choice.
Continue expansion of the company through kiosks
throughout Asia
Sell branded premiere Black Canyon coffee beans in
supermarkets and other retail outlets
Expand into the niche of high end restaurant business
throughout America and Europe
Alternative evaluation4. Strategy Formulation•Strategic alternative, Alternative evaluation, Alternative choice
Kiosks•Provide the company the highest profit margin•If multiple kiosks are implemented this could continue to increase the company’s growth potential•Productivity was double for a kiosk versus a restaurant; however, rent was typically four times higher for a kiosk
Branded Coffee
•Selling branded coffee would allow BCC to enter into a new market•BCC could provide a product for customers to consume in the comfort of their homes•Could increase revenue for the company while avoiding high costs associated with operating a kiosk or restaurant
Western Market Expansion
•Need to expand marketing efforts to implement •Since BCC offers both Western items and other Asian specialties, in order to reach success in western markets, it would need to let potential customers know it offers a variety of items since BCC is an unknown establishment in a new market
Alternative choiceBlack Canyon Coffee will benefit the most if its strategic implementation consists of franchising opportunities coupled with selling branded BCC coffee beans in supermarkets and other retail outlets.
4. Strategy Formulation•Strategic alternative, Alternative evaluation, Alternative choice
BCC headquarters will have the
ability to control the location of new franchises
and provide adequate training for new franchise
owners
Creating locally owned and managed
franchises allows each location to
add specific menu items that are
appropriate for each region they
are serving
BCC can continue its reliance on its
Bangkok headquarters as a
distribution warehouse which provides quality control of all the offered products
Strategic Alternative Implementation
Plan:
Sell pre-packaged in current franchises and
company owned locations. (0 - 12 months)
Expand into supermarkets in Bangkok (corporate
home). (Year 1 – Year 2)
Expand to rest of Thailand. (Year 2 – Year 5)
5.Strategic Alternative Implementation•Action items•Action plan
Strategic Alternative Implementation
5.Strategic Alternative Implementation•Action items•Action plan
- Previously implemented and sufficient supply chain- Current resource contracts, only minor increase necessary (at first)- Increased revenue- Market for instant coffee is huge in Thailand- High profit potential due to low costs associated with instant coffee production- Highly recognizable brand, potentially easy assimilation into new market
- Established market composed of current instant coffee producers- New contract with packaging company; difficult to back out if failed- Increased plant capacity/new plant possibly necessary for increased processing needs- Increased production costs
Bene
fits
Risks
Strategic Alternative ImplementationFeasibility:
5.Strategic Alternative Implementation•Action items•Action plan
Due to BCC’s highly recognizable and
positive brand image, assimilation into the
instant coffee market is associated with the
lowest risk.
With an established supply chain and a
contract with a large supplier, expansion
should be fairly easy and only require a revised contract.
BCC is incapable of self-packaging on a large scale
level, it will ally with a packaging company in
Bangkok for near future production. The low cost associated with instant
coffee production and BCC’ s high brand recognition and perceived quality make for a
smooth and highly profitable expansion.