Executive Summary This report was commissioned to choose a Malaysia company that are operating in international market in order to conduct a research.
The research draws attention to the fact that a company named Old Town White Coffee has been chosen as the company for our research purpose. In this report, we have find out about their domestic and international marketing environment, strength, weakness, opportunity, threat and market entry strategies. On the surface, Old Tow White Coffee seems like a well-managed company and the international marketing process for both their products and their restaurant chains. However, we have discover some potential threats and opportunity for their marketing process while conducting the research. Regarding about those threats and opportunity, our team have suggested a lot of recommendation that can be used in order to deal with the threat and exploit the opportunities. All the information that we get from the research can be for preparation by the company to deal with those threats and opportunities.
?Background of the companyOld Town White Coffee was first established in 1999 in Ipoh, Perak, Malaysia. It is the largest halal-certified kopi tiam restaurant which provides good quality of white coffee and food services for the Malaysian. The co-founders and Executive Director, Mr. Goh Ching Mun and Mr. Tan Say Yap incorporated White Café by formulating their own blend of 3-in-1 instant white coffee and commenced developing in 1999.
In 2002, White Café attained a HALAL certification from Islamic Religious Department of Perak for the Group’s beverages and successfully extended to retail distribution of 3-in-1 instant coffee mix through the major hypermarkets and supermarkets in East and West Malaysia. OLDTOWN is very definitely operated successfully in local. Therefore, in year 2001, they planned to expand their business into worldwide and globally. OLDTOWN do not want to take risk so they expand their business to Singapore first which they think the citizen there have the most similar culture and habit with Malaysian. OLDTOWN used the opportunity to explore in Singapore and it was successful to build up its reputation in Singapore. Then, they only start to target other market such as Indonesia and China. At first, they manufactured the beverage products and export their OLDTWON 3-in-1 white coffee into Singapore, Indonesia, Hong Kong, United States, Canada and United Kingdom. After that, OLDTOWN entered into the foreign market by opening new café outlet at Taiwan, Indonesia, Thailand and Philippines.
OLDTOWN recently has a total chain of 234 café outlets and the beverages sold in more than 8000 retail stores internationally (MIDF 2017).International expansion allows the OLDTOWN to gain more competitive advantage such as exposure of their products and brand name to worldwide, attract more consumers from different countries and regions and expand their customers based globally as well. In addition, it also helps to gain more profit and increase their market share. OLDTOWN wants to be the Asia Pacific’s leading white coffee brand and always providing the high quality products to their customers globally.We choose OLDTOWN as the company for assignment because we think that it is a company that is well established in both domestic and foreign market.
However, the fact that there are still plenty of opportunities for this company to grow is the real reason why we are interested in it. By conducting research for this company, we can obtain and understand a lot of information about it and we would also know what is possible future for it.Four P of Old Town White CoffeeProductsOLDTWON operate in two segments of food services which are fast moving consumer goods (FMCG) and food and beverage (F&B) (OLDTOWN 2017).
The beverage product is type of convenience goods as it can found at many places such as supermarket or retail stores in different countries and regions. Customers can purchase it immediately and it regards as low price product. Old Town White Coffee has offered different flavor of coffee such as Original, Hazelnut, Mocha and Classic but they are more focus on original flavor because they wanted to maintain the origin of the coffee that come from Ipoh.Other than that, Old Town White Coffee also conducts their business in food and beverage industry. To satisfy their potential patrons, Old Town White Coffee has unveiling a new business model which is focusing on the customer velocity. In fact, Old Town White Coffee has provided their menus in set such as breakfast set and lunch set, this is because some of the customers only have a limited time to enjoy their meal so they have to provide them the food and beverages as soon as possible. In short, they only launched the limited menu offers such as the well-likely foods and beverages so can attract both old and young.
Even though OLDOWN expanded their business internationally but the packaging of the products will remain same for all the countries so that the consumer can recognize their brand and logo. PriceOld Town White Coffee focuses on a wide range of consumer groups and they not only focus on certain group of customers such as high income customers or low income customers. Therefore, the price set by Old Town White Coffee is acceptable and affordable for all consumers such as students, family and normal citizens. Old Town White Coffee has using competition-based Pricing on setting their prices which based on the competitors strategies, prices and market offerings. Therefore, Old Town White Coffee has to create superior value for their customers on the price then gain the competitive advantage and market share of their brand.
Sometimes, Old Town White Coffee will use promotional pricing strategy in order to increase the short run sales by reducing the prices of product. For example, during yearly season, they will cut off the price of their products around 10% to 20% (OLDTOWN WHITE COFFEE 2017)PlaceFurthermore, the company launched the operations for the Group’s beverage products and expanded its product line and involves different variations of OLDTOWN” brand of 3-in-1 instant coffee mix. They have expanded their business internationally to global market more than 14 countries such as Singapore, China, Australia, Indonesia and so on. They seek to ensure that their products are widely available and looking for the worldwide sole distributors for strong growth in market and Geographic search.PromotionOld Town White Coffee has done some advertising to promote their products. In their café, they are offering the foods and beverage in one single price.
For the coffee, the way they do the promotion is “Buy 3 Free 1” or “Get one or two extra in one big package”. In addition, they also will appoint the salesperson to give out the free drinks as a test drink for their consumers when they have launched a new flavor. This is to grab the attention of the consumers to purchase their products.
When comes to café business, Old Town will prepare set lunch such as when the customer order food, it comes along with the beverage by without extra charging.Analysis of international marketing environment According to the OLDTOWN Company, there have two areas to analyze the international marketing environment which are domestic and foreign environment with the elements of controllable and uncontrollable. For the domestic controllable environment, the marketing manager mix all the price, product, promotion, channels-of-distribution, and research activities to capitalize on satisfy the OLDTOWN’s customer demand. The company’s controllable elements can be adjusted in the short-run and long-run to adapt the changing market conditions, consumer tastes or business goals. They have set different plan and strategy to suit domestic customer taste. For example, their products not only sell the coffee, they sell Asian foods and snack that will cater Malaysian tastes as well. Other than that, they have promoted their product by using non-halal food and drink to attract the most of Malay people to buy in domestic market.
They use a slow infiltration strategy when it goes to public, boosting sales through price and boosting market share through sales in those controllable environment market. They also invest in advertising, promotion and marketing activities to strengthen the brand of “Old Market White Coffee” and enhance its awareness and loyalty.For the uncontrollable environment such as political and legal forces, economic climate, and competition are the elements that have direct effect on the business operating in home country and also the foreign country.
There have positive and negative impact to the company due to changing in country policy and legal forces. For example, China government encourages overseas capitals to invest in Shenzhen’s area (UKESSAYS, 2015). Their government has change the policy in tax rate which is decrease the percentage of corporate income tax rate from 30% to 15% for the foreign-invested company. This change brings advantage to OLDTOWN which help to reduce the cost of resources due to import tariff. Next is about the economic areas. OLDTOWN was targeting Shenzhen to expansion due to the fact that there is strong economy power at there. This is because most of the Shenzhen people have high level of incomes which mean they have strong purchasing power and high consuming ability.
It is a good chance for OLDTOWN to grow their business and gain more revenue from it. On the other hand, the influence of U.S subprime crisis, slow down the China’s growth and causes the inflation. It affects the economy of China and the sales of OLDTOWN white coffee as well. To improve the economy, Chinese government has adopted positive fiscal policy and loose monetary policy. In term of social factor, people are increasingly pursued health awareness and the concept of nutrition. To satisfy society demand, OLDTOWN provided the healthy products.
Most of the young people think that coffee is a sign of maturity as they think drinking it can help to build the image of an adult. Therefore, the coffee’s raw materials, products and equipment were entering into foreign market in large numbers to satisfy the demand of the recent social trend. This makes OLDTOWN able to gain more benefits and also allow their customers to enjoy the various type of coffee.In the culture factor, there have many environment factors that are uncontrollable. For the culture of domestic market, some people not only drink the coffee for refreshing, they also think that drink coffee can make them enjoy their life.
In foreign market such as China, they are provided pure natural health product to meet the recent consumer in the concept of healthy body. Thus, OLDTOWN promote the low caffeine, low calorie and low fat coffee to fulfill the preference of the consumers around the world. In different country, there are different purchasing behaviors. For instance, China’s consumer prefer to sit down and chit-chat with their friends while enjoying comfortably in the café. However, the case is different for Australian as they care more about the taste of coffee so the environment of the café. Thus, in Australia, manager may focus in the quality of the products provide. In such international marketing environment that have been analyze, those controllable and uncontrollable environment elements in domestic and foreign market are the factors that bring positive and negative impact to the business performance.
SWOT AnalysisStrengthsTo compete in the industry, every company must have the competitive advantage itself including OLDTWON. OLDTOWN had many franchises in Malaysia, Singapore and Hong Kong. It has more than 100 outlets compared to Papparich. They offered various types of choices in menu including foods, drinks and dessert to meet their customers taste and the price of the products are reasonable and affordable. OLDTOWN has promoted different set meals or activities to attract their customers. In addition, OLDTOWN provides a comfortable hygienic environment and better to customers. Old Town White Coffee are recognized for providing original taste of “Ipoh White Coffee”. Old Town White Coffee was awarded “best brand of kopitiam” for Asia in 2007.
It also located at strategic location which has many parking spaces for customers. Every franchise provides free wifi for internet access and some outlets are 24 hours operated due to high demands. Old Town White Coffee has earn high profit compared to others coffee shops. (UK essays, 2015) It also produces new products and exported them to others countries.
Old Town White Coffee increases their efficiency by using computer order system. All record and data are in computer order system and this allow employee can save time and avoid order mistake.WeaknessThe first weakness of OLDTOWN is they putting too much attention for Asian market, thus, people in Europe and other country might not know about OLDTOWN. Customer might not feel confident with the product. Old Town White Coffee too focuses on expansion of business rather in internal focus such as management, improvement of services and products innovation. It also needs to control the quality of its products because it has too many items on menu that using different materials and ingredients. Besides that, Old Town White Coffee needs a long time to prepare the food and deliver the food. Another weaknesses is Old Town White Coffee employed foreign worker who cannot communicate properly either to manager or customers due to language barriers.
There are also some customers complaint the service such as provides wrong order and impolite manners. Old Town White Coffee has low innovation and product diversification as it only depends on one product which is white coffee. (Mr Eng, 2016)OpportunitiesOld Town White Coffee can do more Corporate Social Responsibility (CSR) and campaign activities to gain brand awareness and customer trust. Old Town White Coffee should expand their business to global market because it has high potential either in Malaysia or overseas. For example, China and Indonesia.
Old Town White Coffee should cooperate with others company to attract the customer’s attention. It also provides training to employee to increase their performance efficiency. Besides that, it provide delivery service to customers who unable to go outside. Old Town White Coffee can provide more food kiosks in high traffic areas to avoid long queue. It able to compete with other company by using same material. Coffee demand in market rising due to special taste produces from Old Town White Coffee. Next, Old Town White Coffee offers the business opportunities to be agents for exporting their products.
Old Town White Coffee keep looking for new markets and they are currently exported their product to more than 10 countries. (Maybank IB Research, 2011)ThreatsOld Town White Coffee has several threats in market. There are many competitors such as Starbucks in the coffee market. Starbucks brand is famous in all over the world. There is few copycat brands cause threat to Old Town White Coffee. Consumers are more likely to choose packaged instant white coffee because it is convenient such as Nescafe.
Not only are those, consumers nowadays concern of healthy lifestyle. They are more preferred fruit juices, organic and health drink because coffees contain caffeine. Increasing of materials and food price also affect the business due to economic crisis such as coffee and dairy products. The risk of substitute also is a threat for Old Town White Coffee as other type of drink can easily replace coffee.
(Alvin Lee, 2009)Market Entry StrategiesThere are many types of market entry strategies available for a company and the company would have to consider their choice by knowing all the factors that would affect their expansion to international market beforehand. First and foremost, the company have used the strategy of exporting and they have managed to export their product to more than 13 foreign country’s market. Old Town White Coffee, have a total of 238 outlet in Malaysia, Singapore, Indonesia and China as of 2014. Out of 89 of the outlet are fully-owned by the company, 20 are partially-owned, 108 of them are franchised and the rest are all licensed. This have shown that franchising is the most preferred expansion method of our company, followed by direct-control. There are reasons why the company choose to franchise their store and use licensing instead of direct-control every single one of them and now we will list some of them out.
First of all, the definition of franchising is a franchisor will grant the license to operate the business with their mark to a franchisee and the franchisees will also receive support like operating system and business model from the franchiser. Franchising has been chosen as this strategy provides three main benefit to the company. To begin with, franchising can ensure a fast expansion as the franchisor does not have to spend a lot in order to grow their business and they can earn more profit in the process while not exposing to any expansion risk. The second reason is that franchising allow gain of a loyal and efficient management team as franchisee often invest most of their money into the business. This will motivate them more than a manager as they would not want to incur lost after investing so much. The next reason why OLDTOWN choose franchising is that it allow the brand name to develop without needing a lot of capital from the company.
This is because the franchisee will be the one who invest their capital and the brand name will benefit as a result.However, franchising also has it fair share of disadvantages. The first one being the initial cost of franchising as a lot of monetary investment is needed to establish a standard franchise model.
The investment includes the needs of legal documents, recruitment of potential franchisee and the preparation of materials for the marketing purpose. All these initial investment is a must if the franchisor wants to have stable future growth from the franchisee. The second disadvantage is the requirement of time investment when the franchisor just started to develop their franchise model.
It takes time for the franchisor to determine what kind of franchise model is the best for them and choosing the right candidate as franchisee also will take some time to do so. The last disadvantage is that the franchisor needs to develop a set of procedure and a system in order to provide support to their franchisee. This is because the franchisee would be able to run the business much more successfully when there are a set of systems ready to support and copy by the franchisee.The next most chosen market entry strategy other than direct-control is licensing and it means OLDTOWN as a licensor gives licensee the permission to use its property while subjected to specific conditions. Licensing also provide some benefit to the licensor and the first benefit of using licensing is it allow the licensor to enter into foreign market easily as all the licensor have to do is to grant the licensee permission and this would allow the licensor’s product or businesses to flow into a new foreign market. The second benefit is licensing will bring less risk to the licensor and this is because the products is already proven so the licensor will take fewer legal and monetary risk in the process.
On the downside, licensing can also bring some serious problem to the licensor if they are not managed carefully. The first one being creating potential competition for the licensor as the licensee is using the same business processes as the licensor. This will create some strong competitors for the licensor but the competition can be controlled if the licensor set some limit to the scope of licensing beforehand. The next potential disadvantages is the risk of leaking confidential information like intellectual property or production process as the more licensing, the higher the risk. This is because the licensor does not have any direct control over the licensee’s employees and this aloe them to breach the confidentiality easily.
RecommendationDue to the family-oriented and old fashioned concept, OLDTOWN struggled to target on young generation only. Thus, it means that OLDTOWN has not created awareness from the people of all walks of life around the world. Therefore, we strongly recommend that they should change their demographic segmentation strategy whereby they can focus a broader demographic to appeal more broad group of potential customers according to age. As we know that the range of ages for the coffee shop is around 25 to 50 and I think that they can involve on children as potential customers too. This is because the children today have major influence over family purchases. Marketing specialists assumed as “nag factor” which means the ability to get children to nag their parents to buy certain product or take them to a specific restaurant. Therefore, it is strongly agree that OLDTOWN need to include more kids’ preference dishes such as kid meal set with toys as well as some facilities that can attract their attention such as old fashion playground to maintain its traditional culture or style in the restaurant. As a result, it enables Old Town White Coffee to reach out larger segment of consumers and eventually boost up their sales and earn more profit.
It is obvious that the restaurant only focuses on a product which is coffee and this causes drawback for the company as the price of the raw materials increases, their production cost also be affected. Therefore, product diversification can be considered by OLDTOWN to increase its sales as well as enhance its business opportunities. I think that they can change to new and unique products for every special occasion or festival. For instance, OLDTOWN can serve dishes like moon cake in coffee or durian flavor during Chinese Mid-Autumn festival. This can involve more loyal customers as they have trust OLDTOWN White Coffee and they are willing to try new things that developed by the restaurant.
If the existing customers are satisfy with the products and services offered by OLDTOWN, they will introduce more people to enjoy and spend more in the restaurant. With this strategy, it can increase their income sources and able to compete with their competitors.In addition, OLDTOWN should plan to open more new outlet at different locations. It will be better for the company to think of implementing other marketing strategy in this competitive industry. Therefore, we recommend that OLDTOWN can explore its business opportunity by implementing Kiosk Marketing strategy such as kiosk business or business chart while conducting the business. It will be more saving cost and able to reduce the risk compares to launch a new store such as kiosk or chart business are more easy to get a place and does not involving too much of expenses. Nowadays, most of the consumers are prefer everything to be convenient and they want to save time.
Hence, OLDTOWN can choose to launch the cart or kiosk at different locations especially the crowded places like airport, shopping mall, college or working places. Therefore, Old Town White Coffee can provides several flavors of coffee with the choice of cold or hot, the level of sugar, level of ice or even offer other type of drinks. Old town white coffee can appoints a worker to check and monitor the performance of the kiosk and chart twice a month in order to make sure that the machine is always in regular operation.Last but not least, we highly recommend that OLDTOWN can implement Multichannel Distribution System which means Old Town White Coffee sets up two or more marketing channels in order to reach more segments of customers.
Hence, Old Town White Coffee can carry out drive thru or delivery services. For example, Old Town White Coffee can choose to allow what kind of foods can be delivered like breakfast set or lunch sets. This allows alternative choices for the consumers who do not like to walk in to the restaurant or café to enjoy their foods. This strategy enables them to expand their sales or revenue and market coverage. It also helps to tailor their products and services to specific needs of diverse customers.