Introduction
The Korean market continues to experience positive trends and opportunities for foreign and local investors. This country’s expanding economy, favorable conditions, and availability of disposable income are critical aspects that support any business organization’s performance and growth. Detailed analyses of the existing competitors and the changing tastes and preferences of Koreans will amount to evidence-based approaches for starting a new business. The insights gained from such a study will support the formulation of the best procedures for entry, continuous improvement, and customer satisfaction. To open their coffee shop successfully, Kevin Andes and Min-Guk “MG” Kim should consider a differentiation strategy to offer the best coffee product, shop design, comfort, and experience to the targeted university students.
Analysis of the Case
The article “Trying to Create a Stir: Opening a Coffee Shop in Korea”, describes the conversation that Andes and Kim had in an effort to launch a coffee shop in Korea. These academicians possessed adequate competencies in the fields of business operations and management. Such attributes were desirable and critical for any entrepreneur. Their deliberations revealed that most of Korean citizens were becoming wealthier and willing to spend more money on different products, services, and even coffee (Moon & Kupetz, 2011). The country’s booming economy was encouraging more people to focus on the quality of the available education, better lifestyles, and improved conditions. Most of the citizens in Korea referred to coffee shops “as the third place” (Moon & Kupetz, 2011, p. 4). The nature of such realities compelled the duo to consider the best approaches to invest in the country and achieve their potential.
Unfortunately, a number of challenges existed that were capable of affecting the move to launch a new business in the selected country. For instance, the dynamics recorded in the coffee market remained diverse and worth analyzing. The majority of the people had developed a unique relationship between the desire for education and coffee shops. Individuals would select the available options based on a wide range of factors, including comfort, access to books and magazine, and the ability to meet friends (Moon & Kupetz, 2011). Cost of coffee, duration allowed in the shop, quality of services, and location were critical aspects that most of the customers took into consideration. Thabit and Raewf (2018) indicate that the 4P marketing model is critical whenever selecting and pursuing a business idea. Consequently, investors need to select the best place, competitive prices, offer quality, and use appropriate promotional attributes. This theory could guide Andes and Kim to make the most appropriate decision if they were to succeed in the selected market.
To have successful business operations, most of the companies in the coffee sector had to consider numerous factors. For instance, Moon and Kupetz (2011) indicate that franchisees had to pay huge amounts of royalties to their respective parent foreign corporations. Nonetheless, the U.S. Commercial Service (2002) revealed that more Koreans demanded high-quality coffee associated with American companies (Moon & Kupetz, 2011). Young Koreans were willing to spend around 4,000 won on coffee if they met their friends for more hours (Moon & Kupetz, 2011). Some of the successful brands owned by local conglomerates, such as Angel-in-Us, would be unwilling to have their business models changed. Franchisors would only allow businesses to make minimum changes on a number of business attributes. Agency theory remains a powerful framework that explains why firms engaging in franchising do not encourage changes in the original business model (Wu et al., 2018). The ultimate aim is for the parent companies to maintain their business image while ensuring that the intended clients receive high-quality products or services.
With this kind of background information, Andes and Kim were unable to decide whether to franchise or start their own business. Despite this conundrum, the Korean market continued to record a number of positive attributes, including population growth, desire for quality, and consumers’ willingness to dispose of more financial resources (Moon & Kupetz, 2011). The mode of entry concept in international business theory guides companies in determining how to start a new business venture (Moon & Kupetz, 2011). The organizational theory was another critical model for Andes and Kim to consider if they were to achieve their objectives in a timely manner. Having settled on the best decision, the duo would be required to consider how to pursue operations, develop strategy, and focus on continuous improvement. With all these questions and concerns in mind, the two realized that the journey towards having their successful coffee shop venture was yet to begin.
Key Issues
The above section has outlined several concerns that Andes and Kim had to address if they were to make their dream of having a coffee shop in the growing Korean market a reality. Based on such aspects, the first outstanding issue was how to launch the intended business in accordance with the prevailing conditions, opportunities, and challenges. These two possible options are evident from the studied case: differentiation and brand (Moon & Kupetz, 2011). The choice to focus primarily on the best brand meant that the partners had to take the idea of franchising seriously. However, a number of challenges would affect such a choice and even have significant implications on the financial outcomes. The move to differentiate their proposed business was still a viable business idea at the time.
The second notable issue was how to redesign the intended coffee shop irrespective of the selected mode of entry. While franchising could have addressed most of the predicaments many startups face in different markets; the option could have detrimental impacts on continuous profitability due to the requirements of the parent company. Such a choice would limit the options of improving their brands, including the addition of new features and the consideration of additional facilities for the intended customers (Wu et al., 2018). These issues would make the franchising option less favorable and incapable of delivering most of the anticipated results.
The third predicament revolved around the move to differentiate their first coffee shop and ensure that it was capable of providing unique experiences to the customers. The partners were not sure how they could select the best location due to financial constraints. They continued to wrestle with the option of providing both and wine in their outlets. The relationship between English education and coffee emerged as an issue if they wanted to target and attract the expanding student market in the country (Moon & Kupetz, 2011). The two individuals were keen on the best coffee product or option that had the potential to deliver an unforgettable experience to the customer. Without concrete answers to most of these issues, the duo had to think deeper if they were to define, develop, and implement the most practical strategy for their coffee business venture.
Addressing Key Issues
The studied case study reveals that Andes and Kim had succeeded to analyze the opportunities and challenges that had the potential to impact the success of a new coffee shop in Korea. The presented insights show conclusively that the selected market was becoming viable and capable of supporting such a business. The presence of numerous franchisees and existing local coffee shops did not affect the competitiveness and success of such a venture. Moon and Kupetz (2011) observed that such businesses were on the rise since the government has reduced most of the existing barriers to entry. Additionally, coffee businesses and shop would need minimum startup costs. These prevailing conditions were, therefore, favorable and capable of guiding the duo to launch the intended business ideas successfully.
With this kind of understanding, Andes and Kim needed to consider the most appropriate mode of entry that was capable of promoting sustainability, competitiveness, and profitability in the long run. After analyzing the existing issues and opportunities, the business partners could achieve the intended primary goal by pursuing the differentiation strategy. The case begins by revealing that Andes, a retiree in the field of entrepreneurship, had adequate capital to fund the proposed company (Moon & Kupetz, 2011). This step would guide the two to identify specific locations in the country where they could launch their business idea successfully. The approach would guide them to consider the best menu, theme for different outlets, and areas with an increasing number of campus students.
The academic credentials of these individuals could be helpful in guiding their decision-making processes, developing proper marketing strategies, and identifying new approaches to target more customers. The option to partner with one of the institutions could make it easier for them to start the business with less than 100,000 US dollars (Moon & Kupetz, 2011). Such an approach would result in reduced expenses while supporting the business to expand in accordance with the developed timeframe (Shen et al., 2017). The decision to focus on differentiation would allow the partners to include magazines and games, thereby supporting the learning objectives of more students. They would consider what to include in their shops based on the preferences, tastes, and expectations of more customers in each specific location.
After launching the first shop, Andes and Kim would find a strong reason to personalize most of the available services and coffee. They would consider the importance of having adequate space while allowing the targeted students to study and meet their friends. The new venture would introduce kimchi, the staple food of the Koreans, in an effort to maximize sales and fulfill the notion that coffee shops are the third place after workplace and home (Moon & Kupetz, 2011). These approaches are evidence-based in nature, informed by the prevailing conditions in the studied market, and capable of supporting a startup without encountering numerous challenges. The idea of continuous improvement would be appropriate for the partners if the new venture was to overcome the challenge of competition (Moon & Kupetz, 2011). Such initiatives would eventually support the delivery of profits within the shortest time possible.
Conclusion
Andes and Kim are staring at a unique business opportunity since Korea is one of the growing destinations with a wide range of opportunities for startups. Unfortunately, some key problems capable of affecting their shared dream of having a coffee shop exist. The leading ones include the inability to select the best mode of entry, issues revolving around franchising, and the most appropriate approach for customizing their products. Most of the dynamics recorded in Korea present additional concerns before launching a new business successfully, such as the demand for comfort, the coffee-English language relationship, increasing preference for foreign brands, and uniqueness of the people’s culture. After considering all these factors, the partners should settle on differentiation since the choice is plausible, reduces barriers to entry, requires reduced costs, and provides numerous options for customizing their services and products.
References
Moon, G., & Kupetz, A. H. (2011). Trying to create a stir: Opening a coffee shop in Korea. Ivey ID: 9B15C002. Ivey Publishing.
Shen, Z., Puig, F., & Paul, J. (2017). Foreign market entry mode research: A review and research agenda.The International Trade Journal, 31(5), 429-456.
Thabit, T. H., & Raewf, M. B. (2018). The evaluation of marketing mix elements: A case study.International Journal of Social Sciences & Educational Studies, 4(4), 100-109.
Wu, C., Huang, F., Huang, C., & Zhang, H. (2018). Entry mode, market selection, and innovation performance. Sustainability, 10(11), 4222-4245.