Coffee

Whether a big chain or a tiny kiosk, great gourmet coffee shops get java drinkers juiced. A shop’s success isn’t determined by one specific factor; rather, it’s a combo of the right atmosphere, culture, philosophy and–of course–coffee.

Stumptown Coffee Roasters

First opened: 1999 in Portland, Ore.
Type of shop: Coffee bars (and tasting annexes)
Locations: Nine, with 11 by the end of the year, in Portland, Seattle and New York; scouting for a Chicago spot
Customers: Creative types: musicians, artists, grungers
Biz philosophy: Founder Duane Sorenson’s M.O. is to provide great coffee, educate consumers about it and treat employees well–no matter the cost
Price of a cappuccino: $3 for 5 1/2 oz.
Order this: A cup of Costa Rica Helsar Reserva coffee–a blend of molasses and cherry jam with notes of raspberry, strawberry and lavender
The coffee cherry on top: Employee benefits include health care, a 401(k) and an on-duty massage therapist

Peet’s Coffee & Tea

First opened: 1966 in Berkeley, Calif.

Type of shop: Typical coffee shop: tables and booths, often frequented by seekers of free Wi-Fi
Locations: 193 in California, Colorado, Illinois, Massachusetts, Oregon and Washington
Customers: Early-stage and hard-core do-gooders
Biz philosophy: Quality and freshness (each type of coffee is individually deep-roasted in single-batch roasters), along with partnerships with global nonprofits to better coffee-growing communities
Price of a cappuccino: $3 for 12 oz.
Order this: Dark chocolate mocha Freddo (their signature ice-blended drink) or a handmade three-berry scone
The coffee cherry on top: Twice-monthly guided coffee and tea tastings at local stores

Abraço

First opened: 2007 in New York City
Type of shop: Stand-up espresso bar
Locations: Just one
Customers: East Villagers (aka hipsters)
Biz philosophy: Hole-in-the-wall space, minimal menu and eclectic design put the focus on aroma and taste and create a micro-community. Owner Jamie McCormick greets locals by name
Price of a cappuccino: $3 for 8 oz.
Order this: The olive oil cake is a customer favorite among Abraço’s seasonal, homemade sweets, savories and small bites
The coffee cherry on top: Uses Counter Culture Coffee beans and food items are sourced from the local farmers market

Intelligentsia Coffee & Tea

First opened: 1995 in Chicago
Type of shop: Coffee bars, and one café in Pasadena, Calif.
Locations: Six in Chicago and Los Angeles (along with roasting facilities) and a New York City training lab
Customers: Art-school grads and people who only own Apple products
Biz philosophy: Providing the complete coffee experience–excellent brew, skilled baristas, coffee education and sourcing the best green coffee–in a sleek, minimalist-design atmosphere
Price of a cappuccino: $3.50 for 6 oz.
Order this: A Black Cat Classic Espresso (part of “Black Cat Project” to create the perfect espresso)
The coffee cherry on top: Staff trained to be “the most knowledgeable and skilled in the coffee industry,” offering public tasting and education classes at each retail location

Blue Bottle Coffee

First opened: 2002 in Oakland, Calif.
Type of shop: Varies by location: espresso bar, cafés, espresso carts and a coffee kiosk
Locations: Seven in Oakland, San Francisco and Brooklyn, N.Y., two roasteries and three Northern California farmers market espresso carts
Customers: Unpretentious hippies
Biz philosophy: Founders tired of the “grande eggnog latte and the double-skim pumpkin-pie macchiato” and opened Blue Bottle for those interested in the distinct taste of freshly roasted coffee
Price of a cappuccino: $3.25 for 6 oz.
Order this: New Orleans-style iced coffee with a saffron and vanilla bean Snickerdoodle
The coffee cherry on top: Coffee roasted in vintage roasters, ground and brewed one cup at a time and served in compostable cups; one location has a pricey Japanese siphon bar (see this article)

We will use differentiation as our business strategy. We provide 100% Arabica coffee bean which Imported from Indonesia, Mexico and Kenya. We sell three different sizes of coffee and every sizes only RM 1 different. The prices are RM 14. 90 for 450ML, RW 5. 90 for 550 ML and RM16. 90 for 650ML. We also provide civil cat coffee to our customer but with higher price, RM25 for 50ML. Beside coffee, we also selling some home make sandwich and cake Ilke carrot cake, New York cheese cake, chocolate cake, black forest cake and red velvet cake.

And the cake menu will change every week to ensure our customer wills not getting bored with the menu. During the first day of opening, the first 20 customer will get an Esp©rance cup or tumbler as a free gift and we will reserve a slot for them so when next time they visit, they only need to show their identity card and we will make coffee using their cup or tumbler, and they can enjoy 10% discount. Other customer who want to buy tumbler or cup also available and each of the tumbler or cup cost RM49. 90. 1. 0 Company description Esp©rance Is a French word which means ‘hope’.

The concept of this business Is simple; everyone can choose their own coffee based on their own preference. Esp©rance is a partnership business. This business is owned by Low Chin Yuan, Cha Teng Chian, Queenie Yong Ven Yee and Chan Ching Soon. The initial cost for the business provided by the entire partners, each of them will contribute RM30, 000 into the business for the first five months operation. We plan to open 2 more outlets within 3 years. Our first shop will locate In Publica shopping gallery. We believe that, quality is the best prove for our business.

Therefore we use 100% Arabica coffee hich imported from Indonesia, Kenya and Mexico.To become the best coffee shop and leading the coffee brand in Malaysia.  Deliver high quality coffee to our customer. Everyone have their own preference, let them choose. Basically, Esp©rance is a coffee shop and of course our main selling product is coffee. Our coffee is made by 100% Arabica coffee bean with designed latte arts on the surface of the coffee.

We are also selling homemade cakes and sandwiches to our customer which to ensure they will not feel bored with our menu. The homemade cake menu will be change every week. Just like most of the coffee shop, we also sell our own brand of tumbler or cup. When customer purchase our tumbler or cup will get a free drink and the next time they visit our shop with their tumbler, they can enjoy 10% discount for any drinks that they purchase. Our business strategy is differentiation, as we are selling high quality coffee and all coffee beans are imported from Indonesia, Kenya and Mexico.

What make our shop different from other is, when customer walks in our shop, we will ask them some uestion about their preference for coffee and determined what the most suitable roasted level of coffee beans for them. We provide high quality coffee with affordable price. Based on our research, pricing level for most of the coffee shop are from the range between RM 16. 90 to RM18. 90. In Esp©rance we believe that, high quality with lower price can attract more customers. Furthermore, our shop also provides the civil cat coffee, but with a higher price.  Core competencies are about the competitive advantage of the business own. The iggest competitive of Esp©rance are the understanding of preferences for customer. In today business environment, we can fgure how to attract customer, we will become the winner. As we know, teenagers nowadays are different from previous; they like something new for example 3D Latte Art . 3D Latte art are one of the famous reason for teenagers visit a coffee shop. One of the competitive advantages for Esp©rance is, we will demonstrate to our customer how 3D Latte Art is made.

We will also design a cartoon face that look alike with our customers’ face or customer can customize Latte Art for themselves. For example, some one love Obama and they can ask us to make an Obama latte art Publica shopping gallery recently had become the spot for teenagers and middle upper level income people to hang out. Esp©rance is located in publica shopping gallery; it is an advantage for us as people will want to find a place for them to sit down and chat along with a cup of coffee. Furthermore, teenagers will walk in order a drink and enjoy their time connecting to our shop’s free Wi-Fi.

Next we had imported Siphon coffee maker (refer to appendix 4) from USA. Siphon coffee maker is one of the most complicated coffee maker machines in the world. Through our research, coffee that make by siphon coffee maker is tastier than other type of coffee maker. Practice make perfect, all our latte art staff has at least 3 years of latte art making work experiences. This ensures the latte arts they make are perfect. As they had ending ideas of latte arts.  The suppliers which our company will choose to collaborate with are from Indonesia which the company named Coffindo.

We choose Coffindo as our main supplier it is ecause their company is the fastest growing company in the coffee industry. Moreover, Coffindo also have the largest coffee plantation in Indonesia which creates advantages towards our caf© because the company can fulfill our caf© coffee demand and provide reasonable price compare to others suppliers. Not only that, Coffindo also imported some Arabica coffee bean from Kenya and Mexico. This had fulfill our supplier requirement, the most important thing is economic of scale, when we order coffee bean with Coffindo, we can get a better price since we order a lot of coffee bean with them.

Next, the plantation also located in a very strategic area which is Takengon and Sidikalang and these two places is the famous Arabica coffee producing area. These places are called strategic because of their volcanic soils which are very fertile and it contains high nutrients when a volcano erupts. So, the quality of the coffee is assured and there are supplying roasted and ground coffee. Besides that, Coffindo also have the rental of the coffee machine services. Coffindo offer various types of package options of the coffee machines.

For example, Coffindo Espresso (single and double group) and vending machines which we can process a asteful and fresh ready to drink coffee. In this case, our caf© can save cost of the coffee machine by renting from the company, because of the innovative of the technology, the coffee machine functions will be upgraded time by time, so our caf© can up-to-date with the coffee machine when we rent it from the company so that our cafe create and brew the best coffee to our customers.  We partner with Fuji bakery shop to enhance our business . 0ur Cakes and pastries will supply by the Fuji Bakery Shop.

The reason why we collaborate with this bakery hop is because this company is the leading manufacturer of bakery and pastries goods in Malaysia which their quality and freshness of the goods are assured. Moreover, Fuji Bakery also provides various types of cakes for example red velvet which is their most popular cakes, Swiss roll and sandwiches. The most important factor why we choose Fuji Bakery is because of their strategic location which is nearby our caf© in Publica. In this case, Fuji Bakery can provide fast delivery service to us when the cakes and parties are out of stock which can avoid the disappointment of our customers.

Besides that, the price of the cakes and pastries are offer with a very reasonable price which our caf© can earn profits from here as well and not depending on the coffee only.  One of the most important parts for a business plan is the market analysis. The market analysis includes market segmentation, 4P, SWOT analysis for own product and competitor analysis. Market segmentation is an effective way which allows us to segment our customer by using demography, geographic, behavioral or psychographic.

The SWOT analysis allows us to analyze the advantages and isadvantages of our products. There is a saying that ‘knows your enemy and you can Our company segments our market based on demography. The components that included in demography are age, income, gender, and life style. Life style and income is the main thing that we need to segment. As we know, people who like to enjoy their life are willing to spend more money in order to get a better quality of goods and also food. Our company provides high quality of food and drinks to those who love to enjoy their “coffee break” in comfortable surroundings.

Next, people who are willing to spend more money usually have a higher salary. Therefore, these people are our target customers.

SWOT Analysis

Strength

Esp©rance company strength is it have their own brand which different from others competitor. For example, the brand image was easy to remember by the public so that the peoples can realize the existing of the company and have a try for the first time. Furthermore, Esp©rance also give option for the customer to choose their Esp©rance and the taste which will give them a good image for Esp©rance company reputation.

Beside that’s, Esp©rance have provide 100% Arabica coffee beam which imported from Indonesia, Mexico and Kenyan. Other than that, When the customer come to the Esp©rance retail shop, it will offer special services for the first 20 customer who visit and consumer our product by giving them discount and give them a tumbler or a Esp©rance coffee cup as free gift. Besides that, Esp©rance also have a coordination and communication between each retailer which it can easily manage to control the information flow and labor forces.

For example, when there is a stock out in certain area, Esp©rance will have a backup plan for each of the retail by storing some product such as coffee bean and cake with the supplier.

Weakness

First of all, the Esp©rance weakness is their financial background, the company does not have large capacity and financial to support the daily operation which involve high cost on handling the advancement of equipment such as coffee maker which needed highly advance to create a quality coffee for the customer and the cost of high quality ingredient also is one of the considerations.

Beside that’s, lack of skilled labor at certain place cause inconvenience to find a suitable bartender to produce a quality coffee for the customer and if there is a skilled labor, the salary will be cost ore than normal worker do because of the lack of skilled worker.

Opportunity

The opportunity of Esp©rance have is it will get more attention from the competitor which the competitor might request to Join venture together with them which will increase the Esp©rance financial capable to compete and bot of the partner will achieve win-win situation. For example, Esp©rance can provide their idea for the partner and the other parties will be providing investment on the idea.

Threat

One of the biggest threat for Esp©rance is the competitor, like Starbucks which have a ighly reputation and their financial background was stable enough to compete with Esp©rance The competitor might reduce the price in certain amount and will continue in a month or longer time which will cause the demand for Esp©rance decrease and Esp©rance can’t compete if Starbucks continue to compete in the same manner of way, thus, Esp©rance might be in a risk which needed to stop some of the operation.

Starbuck can compete in this method because it can cover the cost from its own strong financial background. In term of pricing, Esp©rance price range are RM 14. 90 to RM 16. 0 each coffee and each 100ml add on will be charge for RM 1 to attract the customer to spend a little more to get more drink. Beside that’s, for the cake pricing range will be each piece is RM8 to RM 15 depend on what type of favorite does customer wants. However, the highest price which is RM 25.

The price will be higher compared with Starbucks but it has provided right quality for the customer at the right price. The price of coffee drink will be increase soon due to the lack of high quality resources and the competitor also might be increase the price due to the coffee industry environment ffect. Esp©rance is new in the Kuala Lumpur area, thus the focus of retail shop location will be in a Publica shopping gallery. Publica shopping gallery had become one of the famous hang out place for teenager, by having a strategic location Esp©rance might gain more customer. In the promotion ways, Esp©rance will have an event in each of the institution area such as Tunku Abdul Rahman Collage University and University Tunku Abdul Rahman for promoting our product by giving coupon and free membership for the students. Besides that, promoting advertisement through online is the most common way now a day, it’s because of the cost of advertising trough online is free and it only take short time to form an advertisement for example: facebook, Instagram and tweeter.

The Esp©rance first product will be the civil cat coffee and brewed coffees, espresso beverages, cold blended beverages and tea. Additionally, it also provide sandwich and cake like carrot cake, New York cheese cake, chocolate cake, black forest cake and red velvet cake. The cake menu will change every 2 week to ensure the customer wills ot getting bored. Not only Just that, Esp©rance also provides games, magazine, comic, novelty for the customer when they are having their drink or breakfast.

Esp©rance not Just only sell beverages but, it also sell coffee beam for the customer to try out their self to have their Esp©rance made in-home.  In Esp©rance we using the strategic of understanding customer taste. In Esperance, we believe everyone has different taste for coffee, we allowed our customer to choose the roasted level of coffee bean, as we know, and different roasted level of coffee will ake the taste of coffee totally different. We will try our best to fulfill our customer satisfaction by providing them with high quality coffee and professional services.

Next, we allowed our customer to customize the latte art on their coffee according to their will. Not only that, we will upload all our latte art making process to Youtube as to share the uniqueness of this special creation. We sell three different sizes of coffee and every sizes only RM 1 different. The prices are RM 14. 90 for 450ML, RW 5. 90 for 550 ML and RM16. 90 for 650ML. combo set had ecome one of the promotion technic to induce customer purchase more of our product. To enhance the inventory turn over time, our company will having a promotion combo set.

With purchase 650ML, customer only needs to add RM5 and they can choose either homemade cake or sandwich. We also provide civil cat coffee to our customer but with higher price, RM25 for 50ML.  Today, there are many coffee shops we can get in the market like Starbuck, coffee bean, Dr Caf©, pacific coffee and etc. Every customer has their own preference for the coffee brand; some of the customer is Just too loyal to the brand. Besides that, the customer may also prefer to other substitutes drink instead of coffee. The threat of substitutes is very high.   There is not easy to run a quality coffee business, because the initial cost is high. The cost of machine, coffee bean cost, equipment cost and renovation cost will cost at least RMIOO, 000. Furthermore, the competitor is too strong such as Starbucks and Coffee bean. This 2 coffee brand had built up a place in consumer heart. When people want to go coffee shop, the first place they think about is Starbucks. Thus, the hreat of new entrants is low. The rivalry among existing firm is high due to there are many different brand of coffee in the market.

Based on our research, coffee selling prince for our competitor from RMI 2. 90 to RMI 8. 90 and they offer a larger size of drinks. The rivalry among existing firms is not only about price but also environment. As we know most of the coffee shop will provide free Wifl to their customer. We will also do in the same way, we provided free 20Mbs Unifi to our customer.  Coffee bean is the soul of a good coffee, without good coffee bean, seller not able to make a good coffee. The coffee bean we will purchases from 5 different suppliers.

As we know , if we can only purchase with one supplier ,than we will have a better negotiation power, but this is very dangerous if the supplier not able to provide the quality of coffee bean that we require or the coffee bean out of stock. Therefore, we decided to purchase with 5 different suppliers, in order to get a better price, we will sign 1 year contract with them. Thus, the bargaining power of supplier is low in coffee industry. Unfortunately, the bargaining power of buyer is high due to that there is many choice of coffee shop in the market.

Consumer can very get a coffee even in seven-eleven. Not only that, due to we are selling 100% Arabica coffee bean and the coffee bean are fully imported from different country this make our cost goes higher compare to other famous brand coffee shop. However, most of the consumer only cares about the price but not the quality of the coffee. To overcome these challenges, we will have promotion to our customer. First of all, when we talk about coffee, Starbucks always come to our mind; therefore, Starbucks is our main competitor.

Starbucks is known as the world’s number one coffee retailer, has over 14,000 coffee shops which more than 37 countries. Starbucks outlets offer not only coffee drinks but also food items, beans, coffee accessories and teas. Starbucks does not compete on price but focus on the experience of customers receives while visiting their coffee shop. Starbucks focuses its retail choice on the “best places in town”. As we know , the firm is focuses on the high-traffic and also the igh-visibility locations.

Starbucks locates stores in shopping malls, and focus on places that provide convenient access for pedestrians and drivers such as the drive thru system. Next, Coffee Bean & Tea Leaf was based in year 1963. In 2005 the Bean use is to “Keep Innovating”. Coffee Bean is known for its depth choice of coffees and teas. Besides that, it is also have a good reputation for its innovation. For example, the ice-blended coffee drink and chai latte. Moreover, Coffee Bean has also get into the overseas market, finding niches in Starbucks-free markets, for example

Israel which almost all of their drinks had certified as kosher. Besides that, San Francisco Coffee also our competitor as the shop is located in Publica and same floor with our shop. This coffee company is founded in year 1997 with a noble mission who is save good people from bad coffee. This company dare to admit that the standard of their coffee is in high quality which they serve only fresh brew coffee from the best coffee farms in the earth. Furthermore, San Francisco Coffee emphasize in their timing which they will never break the rule when it comes to the taste and the reshness of their coffee.

Not only that , but they will never use the roasted beans which are more than one month to ensure the freshness and the quality of the beans. However, strong competition within this industry for the new customers and consumers which our caf© will provide special offers which create more choices of the coffee flavour. and new strategic location which located near the retail store or university campuses. Moreover , the service and environment also one of the factor to compete with our competitors is that our caf© will have the music , comfortable eating areas and short waiting queues to ensure the comfort of our customers. Furthermore, our caf© also will have the loyalty programs which are the bonus cards to ensure the frequency of visits of the customers.

Conclusion

In conclusion, business plan above that we provide included the estimated of cost, potential customer, potential competitor and our potential supplier. We understand every business has risk, and we understand there is a possibility we will losing money or not earning money in the first few month. But we believe our business plan eventually can bring us high profit.

Calculate the cost of capital (show calculations) for Starbucks using the following:

• Weighted average cost of capital;
• Capital-asset pricing model (beta).

 Weighted average cost of capital

• Cost of equity: Re = Rf + Beta (Rm-Rf).

Where:

• Rf= risk free rate
• Rm-Rf =equity risk premium

Using the latest date from Yahoo finance:

• Risk free rate=5%;
• Equity risk premium=4.5%
• Beta=0.557
• Re=5%+0.557*(4.5%)
• Re=7.5%
• Rd=2%
• E/V=0.77
• D/V=0.23

Where:

• Re = cost of equity
• Rd = cost of debt
• E = the market value of the firm’s equity
• D = the market value of the firm’s debt
• V = E + D
• E/V = percentage of financing that is equity
• D/V = percentage of financing that is debt
• Tc = the corporate tax rate
• Re=7.5%
• Rd=2%
• E/V=0.77
• D/V=0.23
• Tc =22%
• WACC=0.77*7.5%+0.23*2%(1-22%)
• WACC=15.9%
• Capital-asset pricing model (beta)
• Kc   = Rf   + beta x (Km – Rf)

Discuss the relative strengths and weaknesses of the methods above as to the appropriate discount rate for the firm.

The usage of weighted average cost of capital method may look more complex because it requires a lot of calculations and data that has to be available to make exact calculations. Still it seems to be more reliable by many economists because it gives the most approximated value of the discount rate.

 The usage of capital-asset pricing model seems to be an easier one, because it doesn’t require that many data set for the calculations, but just return of “risk-free” investment, beta and return rate of market benchmark.

You may also be interested in “Starbucks pricing strategy”

Still the results of the both methods may be different if different people calculate them. It depends on the objectivism of risk factors calculations that depend upon different financial indexes and conditions.

In the case with weighted average cost of capital method it may appear tricky to calculate cost of equity that doesn’t really exist in a difference to the cost of debt.

The cost of equity is primary based on what it really costs the company to achieve a share price that will theoretically satisfy the investors. Moreover it’s rather complicated and difficult to make an exact calculation of the tax rate. It adds additional risks of under or over estimating tax liabilities for the businesses.

• Describe why these two methodologies may produce different results

Because two methodologies use different techniques in calculation methods of capital costs, the results can differ to some extend. WACC is calculated on the base of data set that gives information about company’s debt and its equity in the capital structure. As it was mentioned about it’s not easy to calculate the cost of the equity because this cost is not fixated, but still the formulas used give a clear approximation.

Another method – capital-asset pricing model is primary based on calculation of more abstract values as risks. Because the risks are calculated on the base of statistical facts there can always be errors in the finals calculations that mostly depend on the amount of the initial data available. If the set of data is not big enough the errors will be quite considerable.

• Identify specific reasons why the cost of capital may differ among the selected companies. What does this say about their past financial performances and future prospects?

There are many reasons for difference of the capital cost for companies who work in the same business. These reasons include the financial situation of the company, the amount of its debt, the amounts of profits, etc. Because every company his its own financial, marketing and other policies, the risks that should been taken into the consideration will differ.

And as the planning of the capital costs is a very important aspect in business planning their strategies for capital costs are made individually by each company to make equilibrium between the possibilities and risks in business.

Capital costs are model on the experience of previous indexes and experiences so that the development of the company will look stable and will not give any background to possible anxiety about its reliability.

 Fort example a company with big debt will not make a small capital cost because it will look suspicious to the investors, who will possible start to returning stocks when they find out that there financial issues with that business.

• How would you recommend that the firm lower its cost of capital?

 The modeling of the capital costs for businesses gives quite objective costs of capital, but nowadays the role of the information and the role of informational influence on the investors is suggested to be a good tool to make the capital costs lower. It’s well known that risks that are taken into consideration when modeling and calculating the capital costs mostly include the processes of the stock market that depend on different factors, but the human factor is not always included. If to include and manipulate the human factor that it would be possible a better way for the capital regulations.

It means that if the stock owners will be better informed about the strategies of the company, its policy for future and its priorities of the development there will be a smaller risk that they’ll start to sell the stocks, and that will reduce the possible risks of human factor. It means that traders who are better informed about the stocks are more likely to hold them, that will result in the increases of price and as the result the capital costs will fall.

So as it’s proposed by modern economists, the availability of private information about accounting and marketing strategies to the investors can teach the companies how to manage with informative functions of the company to regulate its financial climate.

Through its strong global brand representing the American culture, Starbucks appeared in many countries around the world through the company’s aggressive expansion strategy. While the company has proven its resilience amidst the challenges it faced in different locales, it also felt the strong pressure from the global economic crisis. Now, Starbucks needs to heighten its global expansion strategy amidst the impact of the downsizing in the United States on its global expansion especially in China.

Starbucks considers a number of factors in deciding its expansion. One factor is the size of the potential market (Clark, 2008). As an aggressive player, Starbucks seeks not only to enter new markets but also to dominate these markets. Starbucks first expanded into huge markets such as the UK and France in Western Europe to India and Indonesia in Asia. Just recently, Starbucks also expanded into China because of its large potential market. Another factor is barriers to entry relative to the expected returns (Clark, 2008).

As a strong American brand, Starbucks considers how it can introduce and integrate this brand into the local culture. The company is flexible in its ownership or operating structures for different markets to achieve acceptance by consumers (Haoting, 2009). Starbucks needs to provide products and services as served in the United States and patronized by the local culture while at the same time accommodating cultural norms.

In China, expansion into the country also necessitated consideration of the means to introduce a high-end or premium American brand into this culturally solid country that is just starting to learn about other cultures. Starbucks established a coffeehouse in Beijing in 1999 and since then the number of branches in main cities is increasing (Haoting, 2009) mainly due to the company’s efforts to integrate its brand into the local culture.

In the expansion of Starbucks into China, the Chinese government plays an important role. Government regulation is strong (Adamy, 2006; “Starbucks and China”, 2007) that Starbucks needs to obtain government approval in implementing an in-store payment card or in importing certain flavoring such as white-chocolate or flavoring.

These restrictions limit the flexibility of Starbucks in operating in China. To mediate this problem, Starbucks hired locals as executives for its operations in China to help the company navigate through the intricacies of the Chinese bureaucracy (Adamy, 2006). By doing so, Starbucks can focus on the market. Read about Starbucks HR strategy

Starbucks engages in a number of entry strategies to suit the market. In China, Starbucks needed to be creative. One of its entry strategies is to as a premium brand (Clark, 2008) to differentiate it from direct competitors in the coffee industry and local competitors. As such, Starbucks has drawn young people as its primary market in China. Another strategy is to adapt to the local culture to an extent that does not significantly alter the brand that Starbucks maintains globally.

Instead of focusing on the coffee, the thrust of Starbucks marketing in China is to highlight the coffeehouse as a location for gatherings since food and beverage shops in China address this purpose (Adamy, 2006). Still another strategy is the engagement in local causes to gain the acceptance of the local communities such as by sponsoring educational programs as part of its corporate social responsibility (Starbucks, 2009). Overall, the entry strategy to Starbucks in China is to negotiate the acceptance of its brand by winning the local community and coming in strong by distinguishing its brand.

The strategic choice of Starbucks has always been balancing the integrity of its global brand and accommodating local contexts. In China, Starbucks succeeded in gaining government approval to establish a branch in the Forbidden City and in the great wall.

However, Starbucks closed its branch in the Forbidden City following a change in policy requiring all shops within the city to fall under the management of city administrators (“Starbucks and China”, 2007). Starbucks objected because the company wants direct management of its branches in China, in recognition of the growth potential of the market and its key role in global expansion.

Following the downsizing in the United States (Waite, 2008) Starbucks is relying on global expansion more than ever to offset this setback. With the market saturation in the United States and the recession, Starbucks needs to boost its international growth, which means it has to develop its foreign markets. Moreover, Starbucks also needs to continue finding cost-effective sources of coffee beans and other raw products.

Now, Starbucks is building China not only as a market but also as a source of coffee beans. The company is working to find locations and means of expanding branches in China as well as overseeing the production of raw coffee beans in China to ensure that this can meet a volume needed for its international operations (‘Starbucks in China”, 2007). Many executives from the United States moved to China to manage its expansion.

The global economic crisis and the downsizing of the company in the United States heightened the importance of its global expansion, especially in China. Starbucks has concentrated its efforts in developing China not only as a market but also as a source of raw products needed in its global operations. With too much at stake, Starbucks needs to master or perfect its expansion strategy in China to achieve its goal of making the market possibly a new base for its global operations.

References

Adamy, J. (2006). Starbucks bets on China’s new social mobility. Pittsburgh Post-Gazette. Retrieved August 4, 2009, from http://www.post-gazette.com/pg/06333/742121-82.stm#ixzz0NCRqpiGO

Clark, T. (2008). How Starbucks colonized the world. Times Online. Retrieved August 4, 2009, from http://business.timesonline.co.uk/tol/business/industry_sectors/leisure/article3381092.ece.

Haoting, L. (2009). Starbucks pushes China sales with local brew. China Daily. Retrieved August 4, 2009, from http://www.chinadaily.com.cn/bizchina/2009-02/05/content_7447136.htm.

Starbucks. (2009) China education project. Retrieved August 4, 2009, from            http://www.starbucks.com/aboutus/chinaeducationproject.asp.

Starbucks and China. (2007). Economist.com. Retrieved August 4, 2009, from           http://www.economist.com/displaystory.cfm?story_id=9498776.

Starbucks in China. (2007). New York Post. Retrieved August 4, 2009, from            http://www.nypost.com/seven/09052007/business/starbucks_in_china.htm.

Waite, A. (2008). Starbucks to lay off 12,000 workers. Retrieved August 4, 2009, from http://www.internalcommshub.com/open/news/starbucks08.us.shtml.

Executive Summary

Tiger Energy Drink offers their consumers “a unique product endowed with different usage alternatives” providing a beverage focused on positive effects of an energy drink and guarana with an amazing sweet taste. Tiger Energy Drink is an alternative to tea and coffee and can be consumed cold or hot depending on the preference. It has a very sweet taste -not too much intense- and can be consumed as a regular beverage.

Tiger has positioned itself as an alternative to coffee since it offers a great variety of caffeine (guarana) and other energy drink since it offers different flavors. Guarana, the main ingredient of the Tiger energy drink, has a cognitive effect. A 2007 human pilot study assessed acute behavioral effects to four doses (37. 5 mg, 75 mg, 150 mg and 300 mg) of guarana extract. Memory, alertness and mood were increased by the two lower doses, confirming previous results of cognitive improvement following 75 mg guarana.

Some research also shows that Guarana has antioxidant and antibacterial effects, and also fat cell reduction. The target audience is working class and is primarily males and females between 25 – 40 ages. The majority consumer group of Tiger Energy Drink includes white-collar workers who spend long hours in office, working parents and young adults.

Situation Analysis

Tiger, founded 6 months ago by 2 entrepreneurs, is about to enter the competitive energy drinks market in Turkey.

Although Energy Drinks market is considerably small, its annual growth rate is around 30% and the market is the most profitable segment of the non-alcoholic beverages market. The existence of big players and many cheaper outlier products will make it difficult for Tiger to establish a strong brand and market share in the short term. In order to do that, Tiger will differenciate in product flavors, hot or cold use opportunities and varied serving sizes.

Of course, careful targeting of specific segments and supporting marketing activities will be the key to success.

Market Summary

Energy Drink market in Turkey consists of 0,35% of the whole non-alcoholic beverage market in terms of the market volume. The total volume of non-alcoholic beverages in Turkey is 7,2 billion liters, whereas Energy Drink’s volume is 25,5 million liters. On the other hand, when the market value is taken into consideration, Energy Drink market gets 3,5% of the whole non-alcoholic beverages market.

The value of the whole non-alcoholic drinks market is 8,5 billion TL, and Energy Drinks’ share is 298 million TL. While the average value per liter in non-alcoholic beverages market is 1,18 TL, The same ratio becomes 11,66 TL in case of Energy Drinks. Therefore, it can clearly be seen that this segment is quite lucrative and profitable. The sub-markets, from the biggest to smallest, are water, tea, carbonated drinks, non-carbonated drinks (e. g. ice tea) and coffee markets. Although, its size is small, Energy Drink market has a steady 30% annual growth rate.

Energy Drink consumers are usually in the 25-40 age range, upper income level white collar people. However, cheaper products were able to penetrate low and mid income level segments too. These include truck drivers and blue collar workers. Energy Drinks are consumed in many different occasions. The need of concentration and productivity defines their daytime use whereas the need of fun and high energy defines their nighttime use. The table below shows how Tiger addresses the basic needs of its targeted segments.

SWOT Analysis

Tiger has several strengths which do not exist in Turkish market. However, lack of brand awareness and image is the most important weakness.

The fact that the competition is well established could be identified as the strongest threat. Finally, the fast growing and profitable structure of the energy drink market would be the biggest opportunity.

Strengths

Tiger has a number of important strengths

• Innovative Product: The product has 3 different and well liked flavors which can be consumed without mixing with any other beverage. Alternatively, those flavors of Melon, Orange and Tropical Mix are suited to mix with many different alcoholic beverages. Finally the tea flavored, hot or cold consumption optioned, 4th variation is the revolutionary energy drink product. With its unmatched and tailor-made for Turkish taste tea flavor; this energy drink can be consumed even in breakfast. Its ability to be consumed as a hot drink is also revolutionary.
• Pricing: Tiger offers excellent quality with better pricing than its 2 major competitors, Red Bull and Burn 3. Product Ingredients: Tiger’s excellent combination of Guarana and Ginseng causes great focus, improved memory and higher productivity. Furthermore, the Thein in tea-flavored variation invokes additional alertness, especially required in the morning.
• Serving Sizes: Unlike its competitors, Tiger will have 350 ml cans for Orange, Melon & Tropical Mix flavors and 75 ml cans for tea flavored variation as well as the conventional 250 ml cans.

Weaknesses

• Lack of Brand Awareness: Tiger does not have an established brand awareness and image. On the other side, Red Bull, Burn and other competitors have strong brand images. This issue will be dealt with aggressive promotion activities.

Opportunities

• Growing and Profitable Market: The Energy Drink market grows around 30% annually. Furthermore, that sub category of the non-alcoholic beverages market has the highest profitability.
• Demographics: Turkey’s population is younger compared with European and U. S markets. Therefore, target market size is lucratively big.

Threats

• Competition: The competition in Turkey is well established. Red Bull and Burn share the upper segment of the market with almost 65% of the market value in total. With the addition of smaller and cheaper products, there are around 40 different brands in Turkey. In sum, Turkish Energy Drink market is highly competitive.
• Energy Drinks’ image: Energy drinks are still seen as unhealthy and unnatural. In 2001, Red Bull was banned in Turkish market due to excessive caffeine content. Red Bull’s caffeine content is 400 mg per liter, whereas Turkish regulations did not permit higher than 150 mg at that time. However in 2004, Turkish Food Codex has been updated according to European Union standards and Red Bull’s ban had been revoked. Additionally, some fatalities occurred after excessive alcohol consumption and it was said that energy drinks were also involved and they would cause death when mixed with alcohol.

These incidents along with the banning history of Red Bull strengthened the “unnatural and unhealthy” image of the Energy Drinks.

Marketing Strategy

The main marketing strategy is to emphasize Tiger’s distinctive taste, different usage opportunities and size can. The taste is not too intense but very enjoyable with three different flavor. The product has 3 different and well liked flavors which can be consumed without mixing with any other beverage. Alternatively, those flavors of Melon, Orange and Tropical Mix are suited to mix with many different alcoholic beverages.

The tea flavored, hot or cold consumption optioned will be an innovative energy drink. The size also provides a longer lasting boost of energy and cognition and production capability which led to the brand “Stay focused” slogan.

Marketing Objectives

Since we are completely a new brand we have set realist but achievable objectives for the for the first and second years of market entry First year objectives: In 2012, the total volume of energy drink will be theoretically 33 million liter if we take the consideration of the growth rate and last year wasted volume.

We are planning to get a 5 percent share of the Turkish energy drink market through unit sales volume of approximately 5. 000. 000. We have to achieve a steady increase in market penetration. The primary goal is to build and increase both awareness and brand loyalty for Voltro among upper-income professional age 25 – 40. Second year objectives: In second year the main objective is to increase market share from 5 to 8 percent. We are planning to achieve break-even and start to get profit on our third year in business.

Financial Objectives

Energy drinks are most profitable beverage among all non-alcoholic beverages. The energy drink market is very small compared to other beverages market but it is growing 30 percent per year. Our financial objective is to maintain and increase this grow rate for our business. For the first year specially we would like to maintain a significant advertising budget to execute and utilize different media vehicles: magazine, internet, prime-time television, ambient and billboards. These media vehicles will allow Tiger to reach the desired reach and frequencies while keeping within the budget.

Target Markets

Tiger’s strategy is based on a positioning of different and exotic flavors, hot or cold use opportunities and varied serving sizes. Our main consumer target of Tiger is upper income level white collar people, working parents and young adults between 25 and 40 age who want healthy, natural, tasty and a high quality an energy drink with an affordable price. Tiger energy drink has ability to strengthen memory, increase focus and overcome exhaustion and insufficient energy.

Our secondary consumer target is low and mid income level which include truck drivers and blue collar workers who seek to stay alert during driving, working, etc… These type of consumers are only looking to pay less for an energy drink since they consume for a purpose: “stay focused and alert”.

Positioning

Kaplan’s strategy is to be an innovative energy drink by product differentiation based on size, taste and hot or cold usage. Using product differentiation, we are positioning Tiger Energy Drink as the most revolutionary, tasty and healthy energy drink.

Tiger is the brand of energy drinks that gives you the need of concentration and productivity in day time and need of fun and high energy in night to allow you to do everything you want in a full day of work and play. The fruity and tropical fresh taste leaves you asking for more and the bigger size contain more healthy ingredients than their competitors. Our marketing will focus on the value-priced equilibrium, reflecting the positive side of a big size and product taste and usage alternatives.

My results and the graph indicate that as you add the caffeine to the daphnia, the eart rate of the daphnia increases for example the daphnia’s heartbeat is 120 without caffeine, however when caffeine is added it is increased to 168. My graph shows a positive correlation and the error bars are also very small which shows that the results have a small range which suggests that my results are accurate and reliable. I think that the experiment was conducted well however there may be some ethical issues surrounding the fact that daphnias are also living species.

Therefore, by using daphnias in these experiments may cause a risk for them as there would be little quantities of the species left. This would also affect other living organisms that feed on daphnias for their dietary needs therefore in the experiment we diluted the caffeine solution with distilled water to prevent the daphnia from dying and afterwards, we could put them back in their natural habitats. On the other hand, by doing this experiments it could potentially help us in the future.

Also, another problem is that I may have miscounted the daphnias heartbeat due to human errors. However, as I repeated the experiment 3 times, it ensures me that the data is quite accurate. However, if I was to do the experiment again I would do more repeats to make sure the results are reliable and there would be less chance of human error. Also, I would use different concentrations of caffeine to get more accurate comparisons and to see how different concentrations may affect the daphnias heartbeat also. Overall, I think that my results are precise and distinct.

Definition Essay Coffee Coffee is a dark brown/black naturally caffeinated drink made from passing water through ground roasted coffee beans. Coffee is used as a great medicine to help patients, and it can be taken as a popular drink all over the world. Caffeinated coffee drinks are largely consumed by people around the world regularly. It has become an internationally popular drink in almost every country. Coffee is so important to our daily lives that some people cannot live a day without drinking it. The word coffee was derived from the Ottoman Turkish kahve, via the Italian caffe.

The Turkish word was derived from the Arabian word qahwah. Arab lexicographers report that qahawah originally referred to wine. Since this beverage was thought to dull one’s hunger the word, qaha which signifies “to have no appetite” was given to it. Other etymologies also indicate that the Arab form was a loanword from an Ethiopian source word Kaffe, which refers to the highland in the southwestern Ethiopia where the plant grows indigenous. However, the word that is used in that area is bunn, the native Shoa name bun meaning a native plant.

Today coffee has different names all over the world, like caffe in French, Kaffee in Germany, kahvi in Finland etc. No matter what it is called, the Ethiopian people were the first to recognize the stimulating effect of the coffee beans that grow as a coffee plant. No one knows who among the natives earlier than 17th century grew coffee in Africa or used it as a stimulant. It is believed that a 9th century goat herder discovered coffee, but that his discovery was not revealed until 1671. Another story holds that Sheik Omar discovered the coffee.

It is said that he was exiled from Mocha, Arab to a desert cave near Ousab, Arab. He was starving, so he chewed local berries, but found them bitter. To get a better taste, he roasted tem. But, they were too hard to eat. He then boiled them to soften the roasted beans, which resulted in a brown liquid with a strong fragrance. After drinking the liquid, he sustained himself on it for days. As this story reached Mocha, Omar was asked to return home. Coffee was brought from Ethiopia to Arab. Sufi Baba Budan smuggled coffee from Yeman to India. He smuggled beans by strapping them on to his chest.

The first smuggled plant was grown at Mysore, India. Coffee drinking then spread to Europe and America. In the United States, September 29 is celebrated as National Coffee day. Coffee is grown in tropical grassland mixed with patches of forest at the altitude of 16-24 degrees. It is grown in different types of soil. But, it is especially grown in volcanic soil. Coffee is produced in a large quantity in rainy season. It is grown in a slope less than fifteen percent. It is not cultivated in a steeper slope because it presents major erosion risk and requires terracing and special management such as counter furrows.

Coffee comes from topical African shrubs or trees of genus coffea, which is widely cultivated in the tropics. These beans picked at peak ripen, then dried, roasted and grounded to prepare a stimulating aromatic drink. Coffee is a brewed beverage with a distinct aroma and flavor. The beans are found in coffee “berries”, which grows on tree. Coffee is one of the most traded agricultural commodities in the world. Coffee is slightly acidic (5. 0-5. 1 pH) and can have stimulating effect on humans because of its caffeine content. It is one of the most consumed beverages in the world.

All the coffee plants are classified in the large family rubiaceae. Different species of coffee are cultivated all over the world, among which the two main commercially cultivated coffee plants are coffea canephora, mostly known as robusta, and coffea arabic, arabica, which is the most highly regarded species and which is the native of southwestern highlands of Ethiopia. Coffees are evergreen plants which may grow up to five meter tall. The flowers of coffee plants are auxiliary. Flowers bloom simultaneously and are followed by oval berries.

The berries are green when immature; they ripen to yellow then red and black on drying on the bush. Black berries produce the best tasting coffee. The berries usually contain two seeds, but some contain only one. These coffee berries are called pea berries. They take five to nine month to ripen. The leaves of the coffee plant are dark green and glossy which has a spear shape. The leaves cannot be eaten. Coffee beans undergo several processes before they become roasted coffee. Coffee beans have traditionally been selectively picked by hand.

After picking, the berries are processed in two methods – dry process method and wet process method. The other method, dry process, is also known as unwashed or natural method and it is the oldest method of processing coffee. After picking, the entire berries are placed on tables or in thin layer on patios in the sunny day to dry. The berries are dried to remove moisture present in it. The berries take ten days to dry completely. The berries need to be rotated regularly to prevent mildew while they dry. After the berries dry, the skin, pulp and parchment are removed from the bean. Then they are sorted and graded.

The wet process is another processing method. This method is common among premium coffees. After picking green berries, they are sorted by immersion in water. The bad ones will float while the good ones will sink. The skin of the berry is removed by pressing the berries inside the water. Formation is used if machine is not used. The objective of the fermentation process is to dissolve any remaining fruit flesh and to remove the sticky film surrounding the coffee beans, which are not water soluble. The berries are fermented for twenty to forty-six hours during which the pulp will naturally fall off.

The pulp is removed by breaking down the cellulose by fermenting the beans with microbes and then washing them with large amount of water. The berries without pulp are cleaned with water and then dried in a machine or the sun. In most cases they are dried in the sun to twelve to thirteen percent moisture content and bought down to ten percent by machine. Some coffee is dried on large raised tables where the coffee is turned by hand. This method increases cost. But, drying coffee this way has the advantage of allowing air to circulate better around the berries, helping to dry them more.

After drying, the thin shell around the berries, called the parchment, is removed from the bean and green coffee bean is produced. The coffee berries have now been processed and are prepared to undergo roasting. Coffee is usually sold in a roasted state. The roasting process is a complex process because the beans should be roasted evenly and at a very high temperature. The actual roasting begins when the temperature inside the beans reaches two hundred degree Celsius. The roasting of the berries depends on the moisture and the density of the beans. During roasting, caramelization occurs as an intense heat breaks down the pulp.

Caramelization is the browning of sugars; a process used extensively in cooking to create nutty flavor and brown color. Sucrose is rapidly lost during the roasting process and may disappear altogether. The aromatic oils and acids weaken, which changes the flavor. Oils start to develop. At two hundred degree Celsius, oil called caffeol is created. This oil is responsible for coffee’s aroma and flavor. Depending on the color of the roasted beans as observed by human eye, they will be labeled as light, medium light, medium, medium dark, dark or very dark.

Discerning the degree of roast involves measuring the reflected the light from the roasted beans. Different roasts create different flavors. Coffee is used for various purposes such as plant food, insect repellant, dye, furniture scratch cover-up etc. But the main purpose of coffee is it is used as an energy source. For the human body the caffeine in the coffee causes faster neuron connections in our brains. This is useful for fast response situations, but not to recall memories. After drinking coffee regularly people get addicted to it and for going, drinking coffee will make unable to do anything.

These people are caffeine addicts, and they become lethargic without caffeine. Coffee can cause a great health problem if it is consumed regularly. Coffee prepared using paper filters removes oily components called diterpenes that are present in unfiltered coffee. Two types of diterpenes are present in coffee: kahweol and cafestol, both of which have been associated with increased risk of coronary heart disease. The Harvard School of Public Health states that the overall balance of risks and benefits of coffee consumption are on the side of benefits.

For example, men who drank six or more cups of coffee per day were found to have a twenty percent reduction in developing prostate cancer. Other studies suggest coffee consumption reduces the risk of being affected by Alzheimer’s disease, Parkinson’s disease, heart disease, diabetes mellitus type 2, cirrhosis of the liver and gout. Drinking decaffeinated coffee is better than drinking caffeinated coffee. Decaffeinated coffee has ninety seven percent of the caffeine removed. Decaffeinated coffee increases resting metabolism rate and protects against diabetes.

It decreases C-peptide levels, which are an indicator of insulin resistance. It also avoids rapid heart rate, upset stomach and sleep disturbance. There are different types of coffee beverages, such as Affogato, Baltimore, Black eye, Black tie and many others. The main types of coffee that are produced are coffee and Espresso. They are the same, but Espresso is roasted a bit darker and produces stronger drink than ground coffee. The beans are roasted until they are dark and oily-looking. The main differences between coffee and espresso are the fineness of the grind and the brewing time.

The brewing time for espresso is much shorter and is made in an espresso machines that generate up to fifteen atmospheres of pressure to force hot water through the ground coffee. When the espresso is placed into a small basket; it is tightly packed with about 40lbs of pressure. Coffee is loose grinds deposited in to a basket and not packed at all. When the espresso liquid comes out, it is dark brown in color and slightly thick with a small amount of foam on top. The purpose of drinking coffee is to enjoy the flavor and the taste. Most of the people don’t drink coffee just to stay alert or awake.

Most of the people end up buying decaffeinated coffee, to enjoy the coffee and to avoid all the side effect of caffeinated coffee. Sometime people also drink caffeinated coffee to boost themselves for different purposes like to be active, to stay alert and many others. There are plenty of issues for us to think about when deciding if we should drink coffee or not. Drinking it offers both risks and offers benefits to a human body. Coffee affects each person differently. We cannot deny that coffee does play an essential role in daily lives. However, over-consuming offee is harmful. But some people think that drinking coffee is beneficial because some research has shown that it helps to sure diseases. I think that drinking coffee was one of the best experiences that have ever happened because of its taste and its strong smell. Many people feel this way. Coffee has also helped countries to improve their economies. If people think that it is harmful to drink caffeinated coffee then they can drink decaffeinated coffee and enjoy the same taste. Though coffee has a bitter taste it is one of the most pleasant, aromatic beverages ever made.