International Matrix Agency (IMA) will recommend Café Chocolat to enter the Shanghai market on a short term basis. For the long term perspective, IMA hopes that Café Chocolat can be extended to the Asia pacific region.
IMA will recommend the city of Shanghai to the candidate for Café Chocolat to introduce its dynamic set of cakes and teas. Shanghai being the new international hub and booming in its financial economy and technology creates more opportunity for the vast majority of foreign workers in the ever so changing city. Shanghai trends and lifestyles are slowly developing towards the western side of the world, yet still keeping its originality and culture. Shanghai has just announced plans to open a Disney land, Disney Land will attract more tourists to go to Shanghai.
2.1 Methodology for analysing Asia pacific market environment
IMA will only use Secondary data to understand and analyse the market environment in Shanghai. Online and political journals will be used to explore the economics and financial environment, social class, and different branding global positioning in Shanghai as well as the culture and legal environment of Shanghai. In the beginning stages, IMA will work with AUSTRADE China, to discuss the possible limitations Café Chocolat might possibly face.
2.2 Methodology for analysing Asia pacific market opportunities
Two forms of data would be used by IMA, Secondary data and Primary data. Secondary data involves Media and Internet.
Primary data involves Focus groups and Online surveys.
The following type of marketing research is used to understand the market opportunities in Shanghai.
2.3 Methodology for developing international marketing strategy
· Method of segmenting end user:
IMA will segment the Asian target market by a geographic and demographic factor.
· Method for developing new products and services for the international market:
Secondary data would be used to understand the consumer choice of tea, flavour of cakes and European treats. Due to the major culture barriers, Café Chocolat will incorporate the east meets west elements in its café interior design.
The Primary data (field research) in Shanghai will be conducted to understand the Chinese beliefs and culture of the geographic region.
· Method of communicating products:
IMA will work with the Chinese media to advertise Café Chocolat products through;
1. Word of mouth
2. Public forum
3. Chinese cosmopolitan magazine
IMA will arrange logistics out of Australia by “DHL Australia.” All products will be shipped out from Australia (the possible shipping products may include, flour and baking material).
· International pricing method:
IMA recommends customer based pricing for Café Chocolat. With the image of Café Chocolat being wealthy, price must be set to target its end user and relevant segments.
· Export/ Import maintain method:
IMA will issue legal contractors to address the issues of safety and wellbeing of the product.
IMA will outsource the logistic part of the process to DHL Australia and Shanghai Cansheen Forwarding Co.
3.0 Consumer Belief in Shanghai
With intensive research on the host country for “Café Chocolat”, International Matrix Agency has listed some important element on the consumer mentality in the Shanghai market. The city of Shanghai projects traditional thinking and life style, yet it incorporates the element of the western understanding in life (The Chinese Mentality). Deciding to expand in the Shanghai market means understanding the way of life, and Shanghai citizen's mentality towards western dessert
In the Chinese culture, the belief of the good and evil is also known as “Feng Shiu”(Meaning of Feng Shiu, 1999). Feng Shiu plays a vital part in the everyday action in the Chinese community. If the Chinese believe that certain elements are perceived as unlucky, they will avoid those elements and will not associate with them under any circumstances. Feng Shiu can be translated to clothes, furniture's and even food. In the Chinese Lunar New Year, It is recommended to consume “Red/Gold” food/desert. Red and Gold symbolise fortune and luck (Hery Yansen, 2008).
3.1 Cross culture Scale
In the western culture, colours are symbolised in a decorative way. In China, each colour is represented in its own way and has its own story. White and Black represent the colour of death in the Chinese culture; however the colour white portrays purity and peace in the western culture. (ColourSymbolism, Helen South)
Chinese consumers usually shop in regards to the colour choices. In China, boutiques usually do not store dark colours inventory, because of the traditional belief that dark colour should only be worn in a case of an accident or in a funeral. As mentioned in section 3.0, Chinese will consume “Red” food during the Chinese lunar New Year period. During the Chinese New year period, cafes, restaurant and fast food shops redesign their menus in order to satisfy the consumer needs on this special occasion. In McDonald they usually release “Red Bean Sunday” three weeks prior to the Chinese New Year. Restaurants and cafes will introduce Red cakes (rice Cakes), a month before Chinese New Year.
Signs and symbols representing a brand should be visually simple to understand. In China, all domestic company logos, use simple primary colours while avoiding the colour black. Chinese consumers are very superstitious on what they buy and consume. The Mobile brand “Motorola” is a hit internationally. However in the Chinese market, Motorola translated to mandarin means “Unable to roll”. In the minds of the Chinese businessman this symbolises unable to make profit. Besides the translation, the company logo's primary colour is black with a “Century Gothic” letter “M”. The letter “M” created an image of a bat (Appendix 2), which symbolise death in the Chinese culture (ColourSymbolism, Helen South).
As stated above, Chinese are very particular with what they buy. They perceive brand logos and signs in a very deep way. IMA will make sure that Café Chocolat incorporates the beneficial side of the beliefs of “Feng Shiu” and that the Australian images or culture interpreted in China would not causes any conflict or misunderstanding.
3.3 Country of Origin Effect
Research has shown that that the country of origin has an impact on the willingness to buy a product (Josiassen and Harzing, 2008, European Management Review). In the Business Journal of International Business studied, Shimp and Sharma 1987, explained that consumers may tend to have a relation fondness to a product from their own country or may be likely to have a dislike to certain products that originate from certain countries.
Chinese are patriotic people and have a sense of strong belief in the righteousness of its country. China holds a strong belief that imported products are of a higher quality than locally made goods. In other words Chinese would buy overseas product over its own country good. The mentality of acting out on patriotism by purchasing goods that are China made has never come across the citizens minds. However, in Australia there is a set mentality that supporting “Australian made products symbolises patriotism. In Australia advertisement for buying Australian made goods is shown to the public. In China there is no advertisement in support to by the countries products. The behaviour of foreign goods in China has no major judgement when facing to choose a product domestically or internationally.
3.0.4 Brand Personality and Culture Meaning
In China nowadays the Y Generation is exploring unique cafes to dine in, seeking adventures and unique personality brands to fulfil their needs and desires (Kong, Foong, Ling. ). Café Chocolat brand projects uniqueness from the interior design of its cafe, to its product design of small delicate French style pastries.
IMA will segment the Asian target market by a geographic and demographic factor. Geographic factors will include developed towns in which Café Chocolat will be accessible, and demographic factors will include status and income levels. Café Chocolat will be translated as a premium cafe in Shanghai; it will serve top management level as well as young adult segments in Shanghai.
The current perception on the personality of Café Chocolat is fun, playful and has a unique sense in French dessert (Adrian Zumbo). In the Shanghai market, the Chinese dessert is known to be unique and extravagant. However there are limits in which the extravagant level can be played with in the Chinese culture. It is very important that the product developed by Café Chocolat will not offend the Chinese citizens. IMA will need to make sure that prototypes on the product design is tested in the Asian market before finalizing it to be a core item in the menu
4.0 Situation Analysis
In order to enter the Shanghai market without any hick up, it is very important that Café Chocolat knows its internal and external factors. The best way to do this is to conduct a SWOT analysis. IMA has conducted an examination on its internal factors (i.e. identifying its strength and weakness) and its external factors (i.e. identifying its opportunity and threat). In this section of the report IMA uses the “5 C's of Marketing”.
* 4.0.1 Company analysis
* 4.0.2 Customer analysis
* 4.0.3 Competitor analysis
* 4.0.4 Collaborator analysis
* 4.0.5 Climate analysis (PEST framework)
For the 5th C, IMA uses the “PEST framework” to break down Shanghai market macro- structure.
4.0.1 Company analysis
188.8.131.52 Company structure
Café Chocolat is a privately owned company. Adriano Zumbo is the founder and the creator of the café. Currently Café Chocolat has one store in Australia which is located in the heart of Balmain. Café Chocolat is widely known for its use of chocolate in the vast majority of its dishes and uniquely designed treats. Café Chocolat is planning for expansion in the near future (Not Quite Nigella,2009).
Café Chocolat has two goals, short term and long term. The short term goal is to gain brand recognition in the nation, and be one of the promising and well known French patisseries in Australia (Adriano Zumbo). Long term goals are to be an international company (Not Quite Nigella,2009), catering to the east and west of the world and to be internationally recognized, and open more stores around the Balmain district (Life style,2008)
The main focus of Café Chocolat is using chocolate to all its dessert in the cafe. However the desserts must reflect elegance deemed in French patisseries yet still be innovative and creative.
Café Chocolat is an Australian company, however the culture theme in the cafe resembles early Hollywood meet classic French style. Using vintage wood as its wall and having the Hollywood vintage music juke box. Café Chocolat captures the fantasy on how a vintage cafe would have felt like.
Café Chocolat is associated with Adriano Zumbo. Adriano Zumbo is a very well respected culinary chef, Adriano Zumbo has been compared to, Pierre Hermé of Australia (Not Quite Nigella,2009).
Café Chocolat is not just a cafe; at night it caters to the culinary enthusiast students to teach them how to bake unique western patisseries.
Café Chocolat only holds two weaknesses. The weakness includes the location of the store convinces and the selection of hot food and seating arrangement.
Balmain is a very classy area however for city people to travel it will take around 10 mins by bus. Due to the inconvenient location, consumers are able to substitute Café Chocolat products with other cafe goods.
* Menu and seating arrangement
The hot food selection of the cafe menu is very generic (selection of sandwich, brownie and lamington) these products can be easily replaced by substitute goods.
The interior design of Café Chocolat is unique and classy. However the cafe seating arrangement is slightly uncomfortable to sit on and the air-condition is located in the far end of the cafe.
4.0.2 Customer analysis
184.108.40.206 Numbers of customers
IMA has conducted a field investigation in Café Chocolat, the investigation took part for two days. During the two days from the time span of 9am -5pm around 28 different customers enter Café Chocolat (a time span of 40 mins per customer group). In conclusion it can be said that roughly around 28 customers per day visit Café Chocolat.
220.127.116.11 Type of customers in Australia
Café Chocolat attracts two different segments, a mature and a family segment. The mature segment and family segment category is created by IMA (Please refer to section 8, for more details into segmentation).
18.104.22.168 Type of customer in Shanghai
IMA will recommend Café Chocolat to attract “office workers” and “young adult” segment in the Shanghai market. Enjoying western pastries is only seen in the eyes of the intellectual Chinese. Not a lot of Chinese will want to explore the western side of dessert, however the educated and above average class will want to learn, understand and explore the western side of food. (Please refer to section 8 for a more detail explanation on “Target Market and Shanghai”
22.214.171.124 Value drivers
Café Chocolat has several value drivers. Below in table 4.1, it illustrates the factors that gives Café Chocolat competitive advantage.
Varity of patisseries
Café Chocolat focuses on working on chocolate as the base dish. The style and technique used is one of a kind and can only be found in Café Chocolat. Café Chocolat can use this as a differentiation weapon and gain competitive advantage as being a cafe that incorporates chocolate in all of its patisseries. (E.g. warm chocolate soup, chocolate banana cake). The use of chocolate creates extraordinary flavour and the generic taste of chocolate cannot be tasted in some of his cakes. Adriano Zumbo re defines the flavour of chocolate. However there is still a selection in the menu that caters to non chocolate lovers.
Café Chocolat is located in a half indoor/outdoor arena. This location gives customers a sense of relaxation where they can enjoy the summer breeze with shelter, or they can enjoy an art deco design interior while enjoying an Adriano Zumbo cake. The environment is not like the other cafes in Australia. It has a resemblance of the early Hollywood and classy French era.
Adriano Zumbo gained fame from “Master chef”. Adriano Zumbo is considered in the same category as “Neil perry” and “Ramon Morato”. With Adriano Zumbo name associated with Café Chocolat, many audiences in the show will want to try his infamous creation.
126.96.36.199 Decision process
Decision process on buying goods in the mind set of consumer is followed and illustrated in many attitude models. The most basic and well known model is called the “TRA Model” the TRA model is developed by Martin Fishbein and Icek Ajzen. The model breakdown consumer needs and wants into three categories.
4.0.3 Competitor analysis
188.8.131.52 Market position
There are many competitors, both in Australia and in China. In table 4.3 there is a breakdown on Australia and Shanghai major competitors. In both market places the competitors position themselves according to their differentiation attributes.
Table 4.3 (competition in Australia and Shanghai)
Pacific coffee house
Grand Hyatt Bakery
Local own company
The six Australian competitors companies are indirect and direct competitor's competition with cafe chocolate. All six company above use price leadership as a weapon to gain competitive advantage.
The six companies above use differentiation to position themselves. Starbuck uses its Variety of coffee beans, while Pacific coffee house uses it interior design and its wide range of coffees to gain competitive advantage.
Sources: adapted from, Bread & Dessert in Shanghai
In Shanghai the international company already has captured large amount of market share. The big giant in the cafe industry in China has mass capital to increase their promotion and advertisement (Market Trends Global, 2007). Although Café Chocolat is a well known cafe, there is a budget on how much it can spend on advertising and promotion.
The owners of Mitchell Patisserie and Starbuck are not well known culinary artist. However Café Chocolat is linked with Adriano Zumbo, Adriano Zumbo is very famous in Australia and in the States for his unique design in western dessert.
4.0.4 Collaborator analysis
184.108.40.206 Joint venture
Café Chocolat is not working with any company currently. It does work with charity organisations to bring awareness to certain causes, on September 2009, Café Chocolat hosted a pink ribbon breakfast. (Adriano Zumbo)
The distribution channel of Café Chocolat is very limited and small. Adriano Zumbo orders its raw goods (i.e. flour and butter and eggs) from Sydney market.
The distribution flow of Café Chocolat in Sydney is;
Ø Manufactures (the farmers who supply the raw material)-
Ø The wholesaler is (Sydney market)
Ø The retailer is (Café Chocolat, who creates the raw material into the product)
Ø Converted good will be distributed to the end-user
Café Chocolat distributes its own products when customers order the patisserie in bulk. Currently Café Chocolat has two” Toyota Previa” for distribution.
A weekly order for the raw goods comes every Monday morning from Sydney market. The imported goods come every fortnight.
5.0 Porter's Five Forces Industry Analysis
IMA has created a comparison model on the Shanghai market and the Australian Market for the cafe industry. The model that was used to do the comparison is called “Porter Five Forces Model”. The Five forces model look at the industry in five different perspectives. The five forces are;
1. Power of Suppliers
2. Power of buyers
3. Threat of existing competitors
4. Threat of new entrants
5. Threat of substitutes
Shanghai is a big city with complex stores and innovative entrepreneurs to produces the next best things. The five forces model shows as to which part of the industry Café Chocolat can excel in and in which to be more attentive to.
5.1 Supplier Power in China
From a ten point scale, supplier power in China would be rated 4.
The supplier power is consider a low threat. In China there are many different suppliers. If Café Chocolat faces trouble in a situation where the supplier is taking advantage of the company payment or fluctuating prices, IMA would recommend and find another supplier to receive raw goods from. The switching costs of one supplier to another are not high.
5.2 Buyer Power:
From a ten point scale, supplier power in China would be rated 4.
5.3 Competitive Rivalry:
Shanghai is grooming itself to become the next international hub. Shanghai is currently giving its main town and villages major makeover to accommodate its new foreign guest, yet still keeping its oriental element. If compared to 10 years ago, Shanghai now has a wide range of oriental cuisine to western cuisine.
Cafe chocolate will face a number of rivalry, ranging from small privately own cafes to mass chain cafes. Café Chocolat is a unique cafe in the sense of it products and atmosphere. The possibility of mimicking its products will be very low.
Café Chocolat, major competition in Australian made patisseries is “Michel patisseries”. In Shanghai the international company already has captured large amount of market share. The big giant in the cafe industry in China has mass capital to increase their promotion and advertisement (Market Trends Global, 2007). Although Café Chocolat is a well known cafe, there is a budget on how much it can spend on advertising and promotion.
5.4 Threat of Substitution:
From a ten point scale, threat of substitution in China would be rated 6.
The threat of substitution is classified as medium high. In all countries the food industry substitution is always considered as a high. There is a large amount of western dessert cafe/ shops in China (Austrade 2008).
The threat of substitute for all food/drink consuming product are high because they all have no switching costs, and it really depends on the consumer if they enjoy the product itself or not.
Potential substitute product
Level of substitute
Starbuck coffee, cupcakes and pastries can be viewed as a possible threat to Café Chocolat products. However a starbuck product uses powder base coffee and flavour to create their products. Café Chocolat uses top quality Australian made product to create its product, making its taste and aroma, giving Café Chocolat much more quality than Starbucks.
The possibility of consumer replacing the Cafe Chocolate product may be caused mainly due to pricing and possibly the location of the shop.
Local small breads and cakes outlet
Due to the financial crisis, consumers are more aware on what they spend their money on. The local small stores in the city of Shanghai provide customers with readymade cake and pre package coffee. Customer may see the stores more convenient than Café Chocolat.
However the segment of the local stores is not relevant to cafe chocolate segment.
The possibility of consumers replacing the Cafe Chocolate products may be cause mainly due to prices and possible the location of the shop.
Local Super making generic brand
City Supermarket is becoming one of the hot spot for all consumers. The western culture of going to the superstore to buy all goods is becoming a sensational hit in Shanghai. Just a few years back in Shanghai if customers wanted to buy goods they used to travel to the local market and buy their goods.
City supermarket shows a big leap in the Shanghai market, in westernising its culture. City Supermarket, stores readymade bakery and European style partiers. This may be considered a threat to Café Chocolat, as it produces goods from its area of speciality.
5.5 Threat of New Entry:
6.0 SWOT Analysis and SWOT Matrix
The analysis contains the examination of 4 components which distinguish between competitive advantage and disadvantage to position the business in both local and foreign market.
Café Chocolat is associated with Adriano Zumbo.
Adriano Zumbo is a well known pastries chef
Adriano Zumbo's Participation in the ‘Master Chef' allowed him to position his reputation in foreign market
Café Chocolat, creates unique pantries and consistently gets praised in food reviews.
Strong brand recognition in Australia
Café Chocolat has become a food blog sensation, which attracts the Australian Asian community.
Most of Asian region is dominated and heavily influenced by US goods
There is no standard model where Australian products have successfully penetrated the Asian market
The quality of its product highly depends on fresh ingredient shipped to China (Temperature control is critical)
Café Chocolat is a small company. Café Chocolat does not have the experience to expand to the Shanghai market.
Does not have any basic Chinese element
Café Chocolat can charge a premium price in Shanghai, because the product is different
Café Chocolat can focus associate its brand with different charities in China.
Australian food exports to China have doubled in the past five years.
By 2010, Adriano Zumbo will publish cookery book and pastry class available for public ( the cook book can be translated into Chinese)
Shanghai is in the work for building a Disney land, this will double the amount of tourist in the city.
Shanghai is the new international hub of Asia.
Manufactured goods distributed through diverse channel
Arise of several substitute, ie. Cupcakes on Pitt, Starbucks and Michel Patisserie
Chinese consumers have developed sophisticated tastes and needs
Without appropriate allies with local distribution, the channel to end user can be limited
Limited capital on advertising
Possibility of material fluctuation.
6.0.1 SWOT Matrix with 4Ps (Moving “Weakness” into “Strength”)
6.0.2 SWOT Matrix with 4Ps (Moving “Threat” into “Opportunity”)
IMA has broken down the objectives into two different part, short term and long term. Short term is between the first three years of operation. Long term is the fourth year onwards to the tenth year.
7.1 Short term Objectives
* Breakeven within two years of operation
Expanding Café Chocolat to Shanghai will require a large amount of capital. It is important that Café Chocolat, get back its money in the first two years of operating in China. This is an important goal, because if Café Chocolat is unable to breakeven, the long term perspective will face difficulties.
* Brand awareness (ongoing long and short term)
Café Chocolat will need to be recognized by the Asian consumers in a positive way. Once the Café Chocolat is recognized in the eyes of the Chinese consumer, it will be easy for Café Chocolat to introduce or create franchises.
Café Chocolat only produces high quality dessert. It is different from other companies with the variety it offers and its interior of the café in China. It is very important that Café Chocolat is perceived as a high quality brand. Café Chocolat will need to associate itself with top end hotel and distribute it product to exclusive parties.
8.2 Long Term Objectives
Café Chocolat long term objective is to open a few stores in Shanghai. The location of the first store will be in Pu Dong, the recommended second and third store will be around the district of shanghai financial center.
* Expand the market
Working in Shanghai will bring opportunity and recognition for Café Chocolat. However it is still necessary to expand the Café Chocolat to other markets. Once the Shanghai base is set up and running for a few years. Café Chocolat will use the “Ansoff Matrix Grid” guide and expand in a new market, while keeping the same design and concept (Appendix 8.2)
* New “brother company”
If Café Chocolat is able to succeed its entire short term goal, than a “brother” company may be considered into expanding the market even more. Currently Café Chocolat is only focusing on the ingredient, chocolate. The new café can focus on another main ingredient, and tap a niche market. (Example “Café vanilla” focuses on vanilla beans in all its dessert). If Café Chocolat is successful then the brother store would be successful too.
8.0 Target Market
IMA will recommend the city of Shanghai to Café Chocolat to introduce its dynamic set of cakes and teas. Shanghai being the new international hub and booming in its financial economy and technology. This creates more opportunity for the vast majority of foreign workers in the ever so changing city. Shanghai trends and lifestyles are slowly developing towards the western side of the world, yet still keeping its originality and culture.
IMA will segment Café Chocolat's target market according to the geographical location and psychographics of potential consumers.
IMA estimates that there will be large demand for high quality patisserie and coffee in Pudong district. According to the trade area analysis (Appendix, Chart 1), Pudong district has the highest educated population and highest consumer purchasing power. (Eng, 2009) Since there are great numbers of international firms located in Pudong district, most of the employees are well educated and influenced by western culture. Some of them went overseas for their studies. Therefore, it is easier for them to accept western café culture. In addition, there are several popular travelling spots in Pudong district such as the Pearl Tower and Jin Mao Tower. There are domestic and international tourists who will be potential consumers of Café Chocolat.
The estimated target market for Café Chocolat will be analysed on consumers' psychographics. Young and fashionable people (Age between 20-40) who love western culture will be one of the target consumers. Businessmen who use café's as a meeting place and couples who are looking for a great place to impress a date are all potential consumers. Café Chocolat will be a great place for friends to meet and to learn how to make patisseries and coffee.
8.0.1 Market Positioning
ADRIANO ZUMBO Café Chocolat is a chic and fashionable little café. The skilful work of Adriano Zumbo gives a new name to contemporary French patisseries. Famous for their endless flavours and colour, Adriano Zumbo products are known to be little cakes of heaven. Café Chocolat offers customers a wide range of aroma tea and tender yet delicate bite size cakes.
The main benefit which Café Chocolat will offer its client is “high quality” and “differentiated patisseries”. The sub benefit will include relaxing atmosphere and convenient location. Café Chocolat will be located in the heart of busy Pu dong District. In diagram 8.1 it shows the mufti dimensions of the perceptual map of Café Chocolat.
8.0.2 Market Entry Strategy
IMA will choose the market entry strategy as “Wholly Owned Subsidiary” for Café Chocolat. The benefits of Wholly Owned Subsidiary are full control of organisation's operations. Café Chocolat does not need to worry about all the risks and anxieties associated with partnerships or joint ventures. It is important to get full control of organisation for the first shop in Shanghai. It will be easier and more efficient for Café Chocolat to manage Shanghai's subsidiary. Alternations of products and services will be made to match with local market needs. Considering all the factors of operation and management, wholly owned subsidiary will be the most suitable entry mode for Café Chocolat in Shanghai
IMA recommend Café Chocolat to enter Shanghai in the early 2011. This will give Café Chocolat time to collect efficient funds for the Shanghai project. Moreover, Shanghai is now generating more buzz about tourist attraction sight and Disney land. So entering in 2011 will be a suitable idea for two main reason. The first reason is, give time to shanghai to recover from the financial crisis. The second reason is, in 2011 will be a busy tourism year for Shanghai.
9.0 Marketing Tactics and Strategy
IMA recommends three strategies for Café Chocolat to use. Each strategy is tested and used in a new market place. The three strategies can be considered a piggy back strategy for one another. The three strategies are;
* 9.1 Ansoff Matrix (Growth Strategy)
* 9.2 Blue Ocean Strategy (Value Innovation)
* 9.3 Porter Generic Strategy (differentiation)
Beside using the three strategies, Café Chocolat will work with four hotel in China (Le Royal Méridien Shanghai, Four Points by Sheraton Shanghai, Pudong, The St. Regis Shanghai and Sheraton Shanghai Hongqiao Hotel). The four hotels are all well known and sophisticated hotel in China, Which caters to the same target market as Café Chocolat.
9.1 Ansoff Matrix Growth Strategies (Market Development)
The Ansoff Matrix was first published in the Harvard Business Review in 1957, and has given generations of marketers and small business leaders a quick and simple way to develop a strategic approach to growth (Appendix 10.1) .
Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets.
There are many possible ways of approaching this strategy, including:
• New geographical markets; for example exporting the product to a new country.
• New product dimensions or packaging:
• New distribution channels
• Different pricing policies to attract different customers or create new market segments
9.2 Blue ocean Strategy (Value Innovation)
The value innovation is recommended to use in the same time as Porter generic strategy (differentiation).
The “Blue Ocean Value Innovation” talks about reducing or eliminating unnecessary cost (i.e. intensive advertising, unnecessary distribution cost and many more aspect that may add cost to a company.), and gain market value or buyer experiences (i.e. one of a kind environment, unique packaging and consistent differentiation). In diagram 10.2 illustrates the basic principle of Value Innovation. In section 10.2.1 and 10.2.2 explains possible cost that could be eliminated and possible benefit that can be increase to master buyer's experience.
9.2.1 Factors that could be eliminated:
1. Advertising expenses
Advertising cost can never be eliminated, however it could be reduced. IMA will recommend Café Chocolat, to advertise in a social way. This means creating a facebook account, a QQ account (Chinese version of facebook) and be part of a food blog group (e.g. Open Rice China). Social communication advertising does not cost money, and it can help reduce advertising expense. However visual advertisement in the cosmopolitan area will still be needed to attract the relevant target market.
Reducing the amount of waiter
Café Chocolat, will not hire more than three waiters in Café Chocolat Shop. The waiters will be replaced with computer screen that is moulded into the table. This idea is inspired by the restaurant “Taiwan” in Sydney, Australia, China Town. Customers are able to order they item on the computer screen, and the order will automatically be transferred to the kitchen or pastries counter.
Café Chocolat will reduce the wage expenses if the implementation of the computer system waiter is installed. (find the company who creates them)
Café Chocolat will not hold any inventory. This will help Café Chocolat save in terms of storage. Café Chocolat will be a “made to order” Company. This means that all goods will be book a day advances. This will give the chef time to prepare all the goods.
3. Complicated names of patisseries
English is considered the second or third language in the China. Café Chocolat will need to rename certain pastries to make it easy for Chinese people to order. Café Chocolat needs to make sure it does not turn off end user by the products name. For example, American are turnoff drinking red wine because of all it complex name it has (Kim and Mauborgne 2005).
Outsourcing will be use for the distribution process. IMA recommend the company “Shanghai Cansheen Forwarding Co., Ltd” to do all the logistic movement in China. Outsourcing will help Café Chocolat reduce the cost of owning a motor vehicle and help reduces unnecessary distribution expense.
9.2.2 Factor that will benefit buyer's experiences
1. Chinese culture
To make customer remember Café Chocolat uniqueness, Café Chocolat will need to incorporate the elements of China, Australia and France in the cafe. It is very important that the retail shop of Café Chocolat is attractive and one of a kind. Café Chocolat will step away from the traditional architect of how a Café is perceived.
2. Computer waiters
Waiters will be replaces with computers. In section 10.2.1, IMA explains how computer waiter is a cheaper than hiring a waiter. And how it is much more efficient in the ordering process. In appendix 10.2.2 illustrates how the user interface will look like in Café Chocolat.
3. Patisseries Story
To give customer a sense of attachment to Café Chocolat products, Café Chocolat will create a story for each of the pastries it serves. The story will incorporate the elements of the Chinese and Western culture in it. It we made in a style of a doggy badge and will be placed on the box or plate when served. Below in table 10.2 is an example on how the story will be like.
4. Patisseries School
To make customer appreciate the art of western dessert, Café Chocolat will create a Patisseries school in the Café Chocolat retail shop. The school will run every two months by Adriano Zumbo himself. The advantage of the Patisseries School, is it will gain brand awareness to customers, and the possibility of attracting a niche segment.
9.3 Porter Generic Strategies (Differentiation)
IMA Suggest Porter generic Strategy (Differentiation) for Café Chocolat, because the aim and objective of this strategy is to be a firm to be unique in its industry, along some dimension that are widely value by buyers. This strategy will work together with the Blue Ocean Strategy (Value Innovation), to gain competitive advantage.
However the generic Strategy did state “recommended to be lower than the cost premium” (Porter, M. E. 1980). In the generic strategy, IMA will only use the differentiation drivers, on how to make a company unique. In the pricing aspect IMA will not follow the concept of the differentiation strategy. IMA has listed down the uniqueness driver for differentiation. The driver includes;
9.3.1 Pricing Differentiation:
Café Chocolat will use the “Adaptive Approach” this is where Café Chocolat, sets the price according to the market conditions. Whiles using the Adaptive approach Café Chocolat will be using the “customer base pricing” to set the prices for its products. Section 10.2, explains pricing in more detail.
9.3.2 Promotional Differentiation
The selected approach for promotions includes:
* Food blogs
* Creating fan clubs in the Chinese version of Facebook “QQ”
* Support certain charity
* Membership and Create a coupon system
Section 10.4, explains promotion in more detail.
9.3.3 Distribution Differentiation
All distribution decision, we be out sourced to DHL Australia, for importing goods to China. Shanghai Cansheen Forwarding Co, will be in charge for all the logistic in China. Section 10.3, explains pricing in more detail.
9.3.4 Brand Differentiation:
To achieve Brand Differentiation, Café Chocolat needs to make sure it follows and answer he following seven factors.
1. Café Chocolat stands for something important to the customer
2. Café Chocolat values align with the customer's values
3. Café Chocolat reinforces the customer's self image or how the customer aspires to be perceived
4. Café Chocolat possesses admirable qualities
5. Café Chocolat provides unique or superior customer service
6. Café Chocolat delivers a unique product purchase or usage experience
7. Café Chocolat is entertaining
If Café Chocolat is able to follow the eight factors, then it can gain brand differentiation.
9.4 Strategic alliances
To gain instant brand recognition, IMA recommends the following four hotels to hold Café Chocolat patisseries. It is recommended that Café Chocolat create a dessert selection or menu for the four hotels to hold. Table 9.4 illustrates the four hotels Café Chocolat will work with:
Table 9.4 ( the four hotel Café Chocolat will work with)
Le Royal Méridien Shanghai
Allure Fine French Cuisine Restaurant
Four Points by Sheraton Shanghai
The St. Regis Shanghai
Saints International Restaurant
Sheraton Shanghai Hongqiao Hotel
*All four hotels are located in Pudong District.
The strategic alliance, Café Chocolat hold with the following four hotels will be “Non-equity strategic alliance”. Nonequity strategic alliance is an alliance in which two or more firms develop a contractual-relationship to share some of their unique resources and capabilities to create a competitive advantage. In other words Café Chocolat will only offer limited products to the following four hotels. The hotel will help Café Chocolat advertise its product in all the tourist brochure, official hotel website and room service menu. In return Café Chocolat will not sell the pastries that are being distributed to the hotels. Café Chocolat will also advertise the four hotels thought, it electronic waiter screen saver and name four pastries after the hotel.
Café Chocolat will be schedule to delivery around 30 pastries to each of the hotel cafe/ restaurant and another 30 for room service order. This means daily a batch of 120 pastries will be delivered to the four hotels. It is estimated that every month the four hotel will pay Café Chocolat CNY 55,800 each which is equivalent to 7971 AUD (exchange rate of 7AUD to 1 CNY). This price is calculated thought the format of approximate price of pastries (roughly around $30) (x) 31 days in a month.
9.4.1 Contract negotiation
Legal document will be drawn before any business transaction is to be conducted. In the business contract of each of the four hotels, will clearly state the terms and condition. The contract should only last for 2 years. If a renewal of the contract is anticipated. Café Chocolat can discuss the matter with its local lawyer in Shanghai. The head office in Australia will be in charge of all the decision making process for Café Chocolat Shanghai.
IMA will recommend a meeting with the four hotels, to discuss the terms and condition before signing any contract.
9.5 Risk Prevention
All products that will be exported out of Australia will be all insured. It is very important that the goods being imported to China all have the quality control stamp.
In China, IMA will appoint a local law firm to over look all legal aspect of the Chinese distribution system, making sure that the raw material is delivered in a optimum condition.
Café Chocolat headquarter in Shanghai (Kuiyuanzhai Food Factory) will need to be equip with proper food storage to make sure that the imported goods is still useable.
DHL Australia and Shanghai Cansheen Forwarding Co., Ltd, will sign a legal document stating and insuring that any damages on good will be under there liability. Café Chocolat, will monitor the goods before letting it be distributed.
10.0 Marketing Mix
Packaging design for take out
The product design of Café Chocolat is a simple card board white box with Café Chocolat name printed at the side. In the Shanghai market, Café Chocolat take out box will be redesigned in an artistic way. The take out box will be packaged with the colours red and gold. Red and gold symbolise luck and fortune in the Chinese tradition. The new packaging will include a small descriptive story of each dessert. The story will give each dessert its own personality. This will make create an attachment between the consumers and the product.
Flavours of tea
Café Chocolat offers different flavour of herbal tea. At the present time Café Chocolat is holding up to 7 different flavours of tea. It is recommended that Café Chocolat expands its product offerings in respect to Chinese herbal tea instead of the western European tea. In appendix 10.1 clarifies the existing and new flavours that will be introduced in Shanghai.
The original logo of Café Chocolat is pink, white and black. Both the colour in the current logo represents death (white and Black) in the Chinese culture. It is recommended that Café Chocolat changes its logo and use light colours. In section 3.0 it states that “if the consumer has a perception of the company to be unlucky than the consumer would not want to be associated with it”. Appendix 10.1 shows the three selections on how the propose logo should look like.
Café Chocolat will introduce a new flavour of chocolate dessert ever month to rejuvenate the company selection in pastier. The new product will follow the theme of the Chinese lunar calendar.
Product prices differ from one country to another, mainly due to the cost associated such as tariffs or taxes imposed by the country the product is being sold in (Harvard Business School, 1988).
Café Chocolat will place its product price in the premium category. Café Chocolat target market is segmented through geographic region and behavioural factors. The targeted geographic region is usually where all the wealthy Chinese are located.
Café Chocolat will use the “Adaptive Approach” this is where Café Chocolat, sets the price according to the market conditions. Whiles using the Adaptive approach Café Chocolat will be using the “customer base pricing” to set prices of its products.
Table 1 shows the differences in sales prices from the Australia and Shanghai market.
The price set in China would be considered high in the market, however when comparing back to AUD the price will be consider average. Currently the AUD is standing around 1 to 6.5 Yuan (9.00 am; 10th January 2010). Café Chocolat will price its tea at 25 CNY. Dessert (average size) will cost 35 CNY and for a sandwich 30CNY.
Table 2 shows the differences in price in the competitor stand point.
Starting price of,
Pacific coffee house
Grand Hyatt Bakery
Café Chocolat is targeting the “rich segment” therefore Café Chocolat is going to price its products in the premium category. Café Chocolat will not give any form of discounts in any of its product.
10 .0.3 Place
Café Chocolat will be located in Shanghai's new finance and trade zone, Pudong district. Several of Shanghai's signature skyline buildings are located in the area. For instance, Jin Mao Tower, Shanghai Tower and Shanghai World Financial Center are all located in Pudong. ‘The Pudong district of Shanghai contains contemporary architecture and "modern"-feeling districts, in close proximity to major international trade and hospitality zones.' (Chinatourdesign, 2009)
Shanghai Cansheen Forwarding Co., Ltd is appointed the main distributor for Café Chocolat. All the distribution in Shanghai will be conducted by Shanghai Cansheen Forwarding Co., Ltd.
In Shanghai, Café Chocolat will lease a factory space in Kuiyuanzhai Food Factory. Kuiyuanzhai Food Factory will be the main headquarter for Café Chocolat in China. All products will be created in the food factory and then it will be distributed to the retail shop, online customer, hotels and bulk buyers.
Raw materials used to make the pastries will be imported to Shanghai by DHL Australia. Fresh fruits will be purchased by the Shanghai Meihuiyuan Fruit Wholesaler market. Diagram 9.3, illustrates the connection line in the distribution channel.
Before all items are shipped out of Australia, a quality control team will make sure that the raw materials are safe for consumption and then they are certify by the food committee of Australia.
Café Chocolat will hire food critics to translate previous food blogs into Chinese. IMA recommends Café Chocolat to use a form of persuasion called “Social Proof”. Social proof is where company creates testimonial and blogs for consumer to have an insight on. If the remarks made by the critics are positive, there may be a high chance that consumer may try Café Chocolat products.
Creating fan clubs in the Chinese version of Facebook “QQ”
QQ is a popular social site in China. QQ is the Facebook of all Chinese, all youngster and teen enjoy going through it. Café Chocolat will create a fan club page and it will put 500 fans in it. Usually if people see their friends support it, they will support it too. This is a good way to build brand awareness.
The reason why 500 fans are already in the fan club is to give a mental belief that Café Chocolat is famous. This may drive customer on trying out Café Chocolat products.
Support certain charity
In Australia, Café Chocolat supports the breast cancer foundation (Adriano Zumbo). In Shanghai, Café Chocolat will work with supporting fresh food and water to the underprivileged provinces in China. Donation box will be place around the store to attract the cause of the charity, and build a connection between charities and Café Chocolat
Create a coupon system
Café Chocolat will sell 100CNY vouchers to be used in Café Chocolat. This can be used as a gift giving gesture. Voucher would only start circulation during Christmas time, and Chinese lunar New Year.
In Shanghai, Café Chocolat will create a membership card for regular customers. This will have special features like buy five teas and get a free special dessert. The membership card will also help Café Chocolat to tally how many customers enter Café Chocolat daily, and what food and drinks they prefer and purchase on regular basis.
The implementation of strategy will be broken down into three parts. Each part take completion period will be base on time. The three phases of implementing the strategy are shown in table 13.0.
Table 13.0 (the phases of Implementation)
· Draw up all legal contract ( Distribution, Insurance, Rent space)
* Create Social Advertisement
· Renovation on HQ shanghai and Café Chocolat Retail shop
· Conduct a meeting with the four hotels for alliance
* Print work begins for (major advertisement in Pudong , Print hotel Menu)
* Distribution trail out (exporting small amount to China)
* All cafe furniture installed
* Computer waiter installed
* Start up operation online
* Start up distribution in China
* Start up Shop
The implementation process will take two months of preparation and negotiation before opening the store in Shanghai. The implementation stage will be managed mainly by IMA. IMA will make sure all staff in this project is up-to-date with any changes. IMA will use “Internal marketing” to motivate staff and outsourcing company to work together as a team, and uses appropriate management skills to fix any problem. IMA will work with AUSTRAD China to manage the beginning stages of operation for the first couple of months. After six months, IMA will train workers from Café Chocolat on how to manage the distribution and marketing strategies in China. Every six months IMA will check up on Café Chocolat
13.1 Exit Strategy
Entering to a new market is considered very risky. However in today's proposal, IMA has listed down the Situation Analysis (internal and external) factor of China and the consumer behaviour mentality in China. With the information presented, it will give Café Chocolat a big insight and understanding of China.
However there is always the possibility of Café Chocolat not reaching it short term objectives. It is very important that Café Chocolat Shanghai does not affect the business in Australia. When this happens Café Chocolat will need to have an exit Strategy.
IMA recommends closing down the retail branch. Café Chocolat is a private company, therefore no shares can be bought so the only thing possible option to close the retail shop in Pudong and only have the factory. This will make Café Chocolat an online delivery company. If Café Chocolat is unable to solve the financial problem Café Chocolat will need to liquidate its assets.
13.2 Contingency Plan
IMA needs to make sure that Café Chocolat will have a safety blanket when issues happen to arise. The possibility of a distributor or the possibility of an alliances breaking contract can happen, even when there is a legal commitment. IMA created a marketing mix in case if something happens. The marketing mix presented below will affect the pricing, promotion and distribution aspect in the marketing mix. Table 13.1 illustrates “Plan B Marketing Mix”. This marketing mix should only come in affect if the following scenario happens.
Table 13.2 “Plan B Marketing Mix”
Plan B Strategy
From customer base pricing, Café Chocolat can change it pricing strategy to cost base pricing (Profit Planned Pricing). The advantage of cost base pricing is this method will ensure Café Chocolat will earn a profit. This type of pricing method is well suited in manufacturing companies.
Café Chocolat will give discount on mass purchase product, and will give discount seasonally. This promotion strategy will be considered the option if any promotional campaign online doesn't work.
If the logistic companies are unreliable, Café Chocolat will purchase a vehicle. The vehicle will be the main distributor from Shanghai Fruit market to HQ. The vehicle will rented by an outsourcing company, and the driver will be personally hired by Café Chocolat.
Depending on the scenario, Café Chocolat cab choice the following three options from Plan B strategy, to help improve the situation.
Table 13.2.3 “The possible disasters in Shanghai, and Contingency Plan”
The computer waiter is all software bases. Café Chocolat will keep three software copies in China. The first copy will be located with AUSTRADE; the second copy will be located in the HQ (Kuiyuanzhai Food Factory). The final software copy will be located in the safe of Café Chocolat Shop. The software main version is located in Sydney, Balmain Shop.
Café Chocolat will install the latest alarm system and have four security camera located in each end of the shop. All cash register will be locked in a moulded concert wall. In a case of a robbery, and Café Chocolat cash as been stolen. IMA recommends Café Chocolat HQ to hold some emergency cash.
Café Chocolat will need to have inventory storage of Café equipment in the Café Chocolat HQ. In case any equipment has been damage.
Café Chocolat will have a battery run motor for its alarm system and security purpose.
Café Chocolat un-tapping the Shanghai Market Page 25