Xyz : Solving Business Solutions Using Science

Situation Analysis

Coffee shops have become an important part of the Korean culture nowadays. Coffee shops are usually referred as the 'third place' in Korea, where you go to escape from the pressure from the first two: Home and Work. The coffee shop is . Thus coffee business has taken off in a big way in South Korea with major brands like Starbucks, Angel In US, Hollys, Sleepless in Seattle etc. selling their coffee in numerous outlets across the country.

However coffee business in South Korea is crowded. To grow in this market independently product differentiation is required which can be in terms of the menu offered, the coffee served or the ambience provided. Moreover differentiation can also be based on the terms of the segment of market one caters to which consists of coffee drinkers, students, non students or those simply looking for a good coffee experience in a comfortable environment. Moreover South Korea is a country with a sizeable university going student population with over 400 colleges and universities and 3.5 million students. These students like the experience of sitting in coffee shops taking a break from their studies, spending time socializing with their friends or studying over a cup of coffee in a comfortable environment. Thus having a coffee shop integrated with a university will do good business.

One more method of entry into this market is through franchise, i.e., selling branded coffee. It doesn't give much scope for differentiation in terms of the coffee being served, but it being a proven model requires only operational execution to be successful.

Thus the mode of entry in South Korean market would be determined upon weighing the pros and cons of both the aforementioned ways. Comparisons on the basis of risks involved, cost of setup, freedom to operate the coffee shop, the offerings provided in terms of menu and coffee served, customer loyalty to coffee brands, marketing strategy based on loyalty cards and profits involved will provide an appropriate answer to it.

Problem Statement

Kim and Kevin Andes are planning to enter into the coffee business, but this industry being crowded with competitors, the appropriate method of entry, either through franchise or as an independent coffee shop, has to be decided to be successful.

Options

* Open up coffee shop independently.

* Open up coffee shop as a franchise for branded coffee.

Criteria for Evaluation

* Risks involved in terms of profitability.

* Product/offering including ambience

* Cost of setup

* Freedom of operation

Evaluation