A critical question for entrepreneurs starting a business, particularly in a foreign country, is choosing whether or not franchising is the appropriate mode of entry. Franchising offers the entrepreneur instant brand recognition, established business processes and supply chains, regulatory and tax guidance as well as a ready supply of assistance in the early months; however, it deprives the entrepreneur of what many of them crave - the ability to create and grow a business from one's imagination. The two entrepreneurs in this case had regular salaries, but wanted to try their hands at opening a coffee shop - or a chain of coffee shops - in South Korea, which already had many brands with multiple outlets.
Allen H. Kupetz and Gyewan Moon
Harvard Business Review (W10022-PDF-ENG)
March 02, 2011
Case questions answered:
- Evaluate the decision of Kim and Andes to open a coffee shop in Korea using the SWOT framework. Is Korea the right market for yet another coffee shop?
- Given that Kim and Andes seem to be set on opening a coffee shop in Korea, what factors should influence their mode of entry decision?
- What are the trade-offs between franchising and other choices? Which is the best mode for them to enter?
- If Kim and Andes decide to open their own coffee shop (i.e. not a franchise), what can they do to differentiate it from all the existing market entrants?
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Trying to Create a Stir: Opening a Coffee Shop in Korea Case Answers
Q1.) Evaluate the decision of Kim and Andes to open a coffee shop in Korea using the SWOT framework. Is Korea the right market for yet another coffee shop?
Strengths
- Rising buying power of the consumers
- Increase in the number of students looking for alternatives to library
- Access to capital
- Ande’s experience in entrepreneurship
- Kim’s knowledge of the Korean market
- Knowledge of and access to student
Weaknesses
- No experience in managing a coffee shop
- No brand awareness
- Their existing jobs
Opportunities
- The continuous growth of the coffee market
- High consumer loyalty
- Confucian values
- Rising study culture in Korea
Threats
- Lower barriers to entering the market
- The high number of competitors
- Late entry into the market
- High authority and loyalty built by the competitors
- The low spending capacity of the students
- Competitive Pricing
Is Korea the right market?
Yes, Korea is a good place for one more coffee place. Kim and Andes believe a coffee shop is a place where students can spend the entire day without worrying about what to order or eat.
The case study clearly shows that there are still gaps between customer expectations and what’s available in the market. At the same time, their idea will also attract non-coffee drinkers, and they will also fall in love with what the coffee shop has to offer.
Q2.) Given that Kim and Andes seem to be set on opening a coffee shop in Korea, what factors should influence their mode of entry decision?
The factors that Kim and Andes should be considering before making a final decision are…
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