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ASSSIGNMENT 1: CASE STUDY

TABLE OF CONTENTS
Company Overview ....................................................................................................................................... 2
Company Profile ........................................................................................................................................ 2
Nature of the business ........................................................................................................................ 2
Vision Statement ................................................................................................................................... 3
Mission...................................................................................................................................................... 3
Objectives ................................................................................................................................................ 3
Franchising ....................................................................................................................................................... 4
What is Franchising ............................................................................................................................. 4
Why is Franchising?............................................................................................................................. 4
Benefits.......................................................................................................................................................... 6
Challenges .................................................................................................................................................... 7
Conclusion......................................................................................................................................................... 8
References .......................................................................................... Error! Bookmark not defined.

COMPANY OVERVIEW
COMPANY PROFILE

Startup Coffee
Address:

64 Nguyen Dinh Chieu, Da Kao Ward, District 1, Ho Chi Minh City

Telephone:

+84 8 3910 4443

Website:

http://www.startupcoffee.vn/

E-mail:

chewyjuniorvn@gmail.com

Founder:

Mr. Mai Truong Giang

Nature of the business


Mr. Mai Truong Giang Founder and CEO of Startup Coffee Vietnam has had
the ambition in providing a coffee chain stores in Vietnam that offers the professional
business environment to help inspiring the new and creative startup ideas from the
young people who come to the coffee shops everyday. Therefore, in order to attract
young customers who still do not have optimistic financial status, Startup Coffee
Vietnam has diversified range of high standard products but charged half price in
comparison with other direct competitors in the same position (Startup Coffee Vietnam,
2014). Moreover, Startup Coffee Vietnam wants to create space for young people in
Vietnam not only to enjoy the hygiene and tasty coffee but also a place to discuss
business and initiate new startup ideas. The products of Startup Coffee Vietnam are
various in food and beverage from the traditional Vietnam black coffee to sandwiches,
rice burger, cakes and so on. The company was established with the registered name of
Khuong Viet Jsc Ltd which focuses in developing the business in franchise models.
Startup Coffee Vietnam is the brandnam for the product of coffee shops.

Vision Statement
Becoming the leading company in offering the modern coffee chain stores for
creating space to develop innovative startup business ideas in Vietnam. According to
Startup Coffee Vietnam (2014), in order to achieve such vision, Startup Coffee Vietnam
needs to achieve the three main aspects:
1. The staffs are trained carefully with high standard in order to directly deliver
the best service.
2. The food and beverage materials are controlled strictly from the value chain
to ensure the standard of food hygiene.
3. Startup Coffee offers high standard products with affordable price for
students and young people, who always come up with new creative startup
ideas.

Mission
Startup Coffee as the name states the mission of this brand was born in order
to bring a new concept of coffee shop into Vietnam (Startup Coffee Vietnam, 2014).
Startup Coffee wants to share the knowledge in business experience to young people
who are looking for startup opportunities through franchising method. Startup Coffee,
therefore, wishes to create more spaces for young people to come and share their
business ideas as well as efficient social networking.

Objectives
The objectives of Startup Coffee include:

Franchised 15 shops in the next three years a mean of 05 shops per year.
After three years, the franchising ratio is hoped to increase 40% per year into
an average of 07 shops being franchised per year.

Increasing the number of loyalty customers of 8% per quarter per year. After
five years, loyalty customers ratio increases 10% per quarter.

Increasing the sale revenue to 9% per year in the next five years.

Ensuring 100% of food and beverage materials are ethically and hygienically
managed after five years.

FRANCHISING
What is Franchising?
According to Robbins & Coulter (2012), franchising is defined as an approach
involving one organisation giving another organisation the rights to use its brand name,
technology or product specification in return for a lump sum payment or a fee usually
based on sale. Franchise holders will take account into specific activities such as
manufacturing, distribution and selling while the franchiser is responsible for the brand
name, marketing and conducts appropriate training to ensure the franchise holders can
deliver the similar quality with the franchiser (Johnson et al., 2007). There are three
types of franchising (Gale, 2009):

Business Format Franchising: franchisors allows someone to market


products or services and using their business name or trademark, in return
for fess and royalties (e.g. McDonalds, Subway, KFC, and so on).

Product Distribution Franchising: a limited franchise where a manufacturer


grants another party a license to sell goods or products being produced by its
factory (Shell, BP, Coca-Cola, etc.).

Conversion Franchising: a small business independent business is brought


with the chance to affiliate with a franchise organisation. For example, a
successful independent hairdresser joins with Tony & Guy brand name.

Why is Franchising?
According to Bygrave & Zacharakis (2011), franchising is a very strong growth
strategy if business owners have a replicable business model. Therefore, a small startup
business with simple operation details can help augmenting in replicating the business
model. Therefore, in order to enhancing the franchising process, the business model
should be well established and proven in which the franchisor Startup Coffee Vietnam
have to work out the process of how to open and operate business unit (Bygrave &
Zacharakis, 2011). The business model helps to describe the rational of how an
organisation or firm creates, delivers and captures values (Ostawalder & Pigneur,
2010). Also, according to Ostawalder & Pigneur (2010), a business model canvas can be
used in order to generate an appropriate model for an entrepreneur through the

analysis of nine fields: customer segments, value proposition, customer relationship,


channels, key activities, key partners, key resources, cost structure and revenue stream.

Figure 1. Business Model Canvas (Ostawalder & Pigneur, 2010)


Apart from the proper business model generation, the control process also plays
an essential role in franchising. Well-monitored process will help Startup Coffee to
make sure that franchisees are reporting exactly the revenues from franchising
royalties (Bygrave & Zacharakis, 2011).
Additionally, beside the fact that franchising is a strong growth strategy, it is also
very effective if an organisation competes in an industry that is growing and is expected
to grow significantly (David, 2012). The coffee consumption of Vietnamese people
increased more than 60% between 2008 and 2011 (Bloomberg, 2013). Moreover,
according to Canada International Market Bureau (2013), the potential significant
development of coffee shops in Vietnam in 2015 likely reaches US$ 3,053.3 millions and
this value in delivery/takeaway coffee is US$ 34.5 millions. Regarding to customer
segmentation, Business Monitor International (2014) stated that Vietnam has growing
lucrative young population in large cities and those customers are willing to spend
more money for higher standard quality of food and beverage services. Therefore, this
industry in Vietnam is still growing tremendously and creating profitable opportunity
for Startup Coffee to operate the franchising business model.

BENEFITS
According to Gale (2009), one of the most important benefits from franchising is
that it allows the business to expand rapidly beyond its original owners since it offers
mutual advantages to both franchisor in this case, Startup Coffee Vietnam and
franchisees. Startup Coffee can gain fast and well-monitored distribution of companys
products without incurring the high expenses for building, constructing and operating
its own outlets because those costs will be originated from the franchisees capital.
Hence, Startup Coffee may save available capital to spend for products expansion or
enhance the advertising and marketing campaigns (Pride et al., 2012). Moreover, with
the more franchises are being established from the rapid expansion, Startup Coffee can
reach the economies of scale (Gale, 2009). Economies of scale is the property whereby
long-run average total cost falls as the quantity of output increases (Mankiw, 2012).
This is very helpful for Startup Coffee Vietnam to diversify their products range after
years of operation. Not only products diversity, with the franchising model, Startup
Coffee Vietnam can also diversify the revenue from business operation. Two added new
revenue streams would be (Bygrave & Zacharakis, 2011):
1. Royalty fee/franchising fee
2. Additional revenue comes from the materials and supplies purchasing of
franchisees originated from franchisors.
For franchisor, franchising provides an opportunity for a firm to establish a
presence in countries where the population or per capita spending is not sufficient for a
major expansion effort (Wheelen & Hunger, 2012). Startup Coffee Vietnam may find it
would be totally difficult for penetrating developed country such as United States with
the appearance of McDonalds and SUBWAY those organisations have a total of more
than 33,000 stores (Bygrave & Zacharakis, 2011). However, with a developing and
newly-opening country such as Myanmar, Cambodia, Laos; Startup Coffee can be able to
find a potential local franchisee to gain knowledge about those markets.
In another hand, the franchisees will have opportunities to gain the proven
business. In particular, concerning to business format franchising, the franchisees can
get particular technology and business transfer. Moreover, franchisees may gain advice,
solutions and guidances from franchisors for any arising problem. According to Pride et
al. (2012), franchisees are sole proprietorship in most cases; therefore, with such

proper and proven business transfer and guidance, they are highly motivated to do the
business and to succeed. As a result, the franchisor can gain significant benefit from
such high motivation.
Another advantage from business format franchising for franchisees is that
franchisees do not have to spend for advertising and promotional programs since they
are usually sponsored by franchisors.

CHALLENGES
The franchisees cannot have complete independence from franchisors although
they can operate their business on their own (Czinkotta & Ronkainen, 2007).
Franchisees are restricted to the common business procedures which are set forth by
the franchise holder concerning to the contract and agreement. The procedures and
restriction would limit the franchisee to a range of offered products or services with
certain pricing and geographic strategy. Particularly, this can seriously put a
tremendous effect toward the innovation of franchisees and the products cannot be
diversified to adapt with different markets. For franchisor, this could be also a big
disadvantage since they cannot make prompt implementation toward particular market
if franchisees cannot conduct products experiment to research the customers taste.
Beside the brand purchasing fee, franchisees also have to pay the royalties fees
and other advertising or promotional fees if needed. Therefore, this could cause
franchisees a big problem in a very first day of operation if they cannot balance between
the expenses and the generated revenues.
Another significant risk could be originated from communication crisis of the
brand. Since the franchise is used globally; therefore, if there is a bad conduct of other
store in some place around the world and it becomes a communication scandal or crisis,
other franchisees would be affected as well.

CONCLUSION
In conclusion, although there may be some minor disadvantages existed, the
business format franchising is still the best approach for Startup Coffee Vietnam in
planning and implementing growth strategy. The organisation can have the rapid
expansion because franchisees capital help to fund new business development. From
that point, it is undoubtedly that business owner can gain the economies of scale. The
franchising is also a good business approach in case Startup Coffee Vietnam may want
to go oversea for penetrating international market. In another hand, franchisees also
have mutual benefits from the appropriate growth of franchisor to be highly motivated
in pursuing business success.

REFERENCES
1. Bloomberg, 2013. Starbucks Vietnam Debut Challenged by Light Coffee Image.
[Online]

Available

at:

http://www.bloomberg.com/news/2013-01-

13/starbucks-vietnam-debut-challenged-by-light-coffee-image.html

[Accessed

18 October 2014].
2. Bygrave, W.D. & Zacharakis, A., 2011. Entrepreneurship 2nd Edition. New Jersey:
John Wiley & Sons, Inc.
3. Canada International Market Bureau, 2013. Market Analysis Report 2012 Foodservice: Vietnam. Agriculture and Agri-Food Canada.
4. Czinkotta, M.R. & Ronkainen, I.A., 2007. International Marketing. 8th ed.
Thomson South-Western.
5. Daft, R.L., 2010. Management. 9th ed. Mason: South-Western Cengage Learning.
6. David, F.R., 2012. Strategic Management: Concepts and Cases (13th Edition). New
Jersey: Pearson Prentice Hall.
7. Gale, 2009. Encyclopedia of Management. 6th ed. Cengage Learning.
8. Johnson, G., Scholes, K. & Whittington, R., 2007. Exploring Corporate Strategy. 8th
ed. Prentice Hall.
9. Kotler, P. & Keller, K.L., 2012. Marketing Management. 14th ed. New Jersey:
Pearson Education Inc.
10. Mankiw, N.G., 2012. Principles of Microeconomics. Mason: South-Western
Cengage Learning.
11. Ostawalder, A. & Pigneur, Y., 2010. Business Model Generation. John Wiley & Sons
Inc.
12. Pride, W.M., Hughes, R.J. & Kapoor, J.R., 2012. Foundations of Business. 3rd ed.
Cengage Learning.
13. Robbins, S.P. & Coulter, M., 2012. Management. 11th ed. New Jersey: Prentice
Hall.
14. Startup Coffee Vietnam, 2014. Startup Coffee Vietnam: An Introduction. [Online]
Available at: http://www.startupcoffee.vn/ [Accessed 19 October 2014].

15. Wheelen, T.L. & Hunger, J.D., 2012. Strategic Management and Business Policy:
Toward Global Sustainability. 13th ed. New Jersey: Prentice Hall.

BIBLIOGRAPHY
1. Bloomberg, 2013. Starbucks Vietnam Debut Challenged by Light Coffee Image.
[Online]

Available

at:

http://www.bloomberg.com/news/2013-01-

13/starbucks-vietnam-debut-challenged-by-light-coffee-image.html

[Accessed

18 October 2014].
2. Bygrave, W.D. & Zacharakis, A., 2011. Entrepreneurship 2nd Edition. New Jersey:
John Wiley & Sons, Inc.
3. Canada International Market Bureau, 2013. Market Analysis Report 2012 Foodservice: Vietnam. Agriculture and Agri-Food Canada.
4. Cateora, P.R., Gilly, M.C. & Graham, J.L., 2011. International Marketing. 15th ed.
New York: The McGraw-Hill.
5. Czinkotta, M.R. & Ronkainen, I.A., 2007. International Marketing. 8th ed.
Thomson South-Western.
6. Czinkotta, M.R., Ronkainen, I.A. & Moffett, M.H., 2011. International Business. 8th
ed. John Wiley & Sons, Inc.
7. Daft, R.L., 2010. Management. 9th ed. Mason: South-Western Cengage Learning.
8. David, F.R., 2012. Strategic Management: Concepts and Cases (13th Edition). New
Jersey: Pearson Prentice Hall.
9. Gale, 2009. Encyclopedia of Management. 6th ed. Cengage Learning.
10. Johnson, G., Scholes, K. & Whittington, R., 2007. Exploring Corporate Strategy. 8th
ed. Prentice Hall.
11. Kotler, P. & Keller, K.L., 2012. Marketing Management. 14th ed. New Jersey:
Pearson Education Inc.
12. Mankiw, N.G., 2012. Principles of Microeconomics. Mason: South-Western
Cengage Learning.

13. Meyer, K.E., Tran, Y.T.T. & Nguyen, H.V., 2005. Doing Business in Vietnam. Center
for East European Studies.
14. Ostawalder, A. & Pigneur, Y., 2010. Business Model Generation. John Wiley & Sons
Inc.
15. Pride, W.M., Hughes, R.J. & Kapoor, J.R., 2012. Foundations of Business. 3rd ed.
Cengage Learning.
16. Robbins, S.P. & Coulter, M., 2012. Management. 11th ed. New Jersey: Prentice
Hall.
17. Startup Coffee Vietnam, 2014. Startup Coffee Vietnam: An Introduction. [Online]
Available at: http://www.startupcoffee.vn/ [Accessed 19 October 2014].
18. Ward, M. & Huong, N.T., 2014. Vietnam Coffeee Annual - May 2014. USDA Foreign
Agricultural Service.
19. Wheelen, T.L. & Hunger, J.D., 2012. Strategic Management and Business Policy:
Toward Global Sustainability. 13th ed. New Jersey: Prentice Hall.