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Thanks to the growing popularity for Korean pop and Korean dramas, they are the main influences in recent years. To benefit from the trend, Hollys Coffee, being the largest coffee chain in Korea will venture into Singapore through master franchising to gain market share in the Food and Beverage industry. Hollys Coffee will distinguish itself from the rest of the coffee chain in Singapore by bringing their uniqueness and culture to Singapore. Hollys Coffee will emphasize on its brand promotion and advertisement to allow Singaporeans to be aware of the brand.
This report will further introduce how Hollys Coffee set its global strategy, the opportunities and the challenges faced.
Hollys Coffee is a specialty coffee company head headquartered in Korea. The company was established in 1998 and opened Korea’s first espresso shop that year. Its shops offer espresso, coffee, tea, coffee- and tea-based cold and hot specialty drinks, a variety of pastries and other snacks, and coffee supplies. By 2008, there were more than 100 Hollys Coffee shops in Korea, and the franchise had expanded with additional stores in Japan, China and Malaysia. It has a barista academy called the Hollys Coffee Academy
South Korea has a market economy which ranks 15th in the world by nominal GDP and 12th by purchasing power parity (PPP), identifying it as one of the G-20 major economies. It is a high-income developed country, with a developed market, and is a member of OECD (Organization for the Economic Co-operation and Development). On top of that, it is a country filled with rich culture and heritage. Korea’s population is one of the most ethnically and linguistically homogenous in the world. Virtually all Koreans share a common cultural and linguistic heritage. With 48.7 million people inhabiting an area roughly the size of Indiana, South Korea has one of the world’s highest population densities.
Other financial organizations like the World Bank describe Korea as one of the fastest-growing major economies of the next generation along with BRIC and Indonesia. South Korea was one of the few developed countries that were able to avoid a recession during the global financial crisis and its economic growth rate will reach 6.1% in 2010, a sharp recovery from economic growth rates of 2.3% in 2008 and 0.2% in 2009 when the global financial crisis hit.
Hollys Coffee will enter Singapore through ‘master franchising’ method that allows individuals or corporations to buy the rights to sub-franchise within some specific countries. This is to minimize risk when it enters the country where its brand is seldom familiar to the local community as well as it is difficult to attract investments.
It is essential to motivate franchisee to serve more people. Franchising can provide high motivation to franchisees as they just need to pay fixed royalty. It means that more customers they serve customers, the more profit they can expect.
The most popular franchises are those with widely recognized brand names. In fact, the brand name or trademark of a company is normally the single important item desired by the franchisee. Having K-pop influences all over the round, the Korean fans must have heard of Hollys coffee since it is the largest coffee chain in Korea and on top of that, there were dramas and variety shows that were screened in the cafes as well.
Franchising is an entry mode that allows for rapid geographic expansion. Company often gains competitive advantage by being first in seizing a market opportunity. Franchisers can benefit from the cultural knowledge and know-how of local mangers. This helps lower the risk of the business failure in unfamiliar markets and can create a competitive advantage.
Marketing and R&D Strategies
There are two entry strategies of Hollys Coffee – one is to introduce products that have Korean own characteristic, another is to differentiate with other coffee brands by focusing on side menus like waffle or patisserie.
However, there are a lot of its own domestic coffee retailers in Singapore and Hollys Coffee is still not well-known to local people. Thus, it is very important to make Singaporeans aware of its brand and Hollys Coffee might be exposed to the financial risk linked with heavy marketing expenditure such as brand promotion and advertisement in the course of spreading its brand.
Another key point of marketing approach would be unique selling point. There are a lot of coffee shop with varies target groups with their own brand all over the world, however, only few big brands have gained majority of market shares. Gaining public awareness by promoting a unique selling point as advertisement would be a good strategy.
A global marketing strategy can also be successful if the firm has managed to change local preferences. A new product entering a local market will usually change preferences to some degree, whether by new features, promotion, or price.
One of the good selling points to stand on the market share of cafe business in Singapore could be either theme, or products. At the end of the day, it depends on whether the products or the theme of the cafe house attracts the customers, and subsequently the business sustains. To coffee lovers, they are looking for good coffee for sure; to non-coffee lovers, perhaps they are looking out for a place to rest with a drink and at the same time to enjoy the ambient of the cafe house. “Uniqueness” of the products as mentioned above, whereby to bring in the sweet potato latte definitely catches attention of the locals. By bringing in local product to overseas stands chance in penetrating overseas market, ultimately the overseas acceptance will also be the significant factor whether it helps to boost up sales.
With Korean trends being so popular, Hollys coffee may consider to implement with things that may relate to the Korean dramas or song.
Opportunities and Challenges
In Singapore, It is quite challenging to stand for market share in Singapore for cafe Food & Beverage sector, especially there are a lot of its own domestic coffee retailers or popular brands already well known in the market, i.e. Coffee Bean, Starbucks which makes Hollys Coffee rarely known to local people. Thus, it is very important to make Singaporeans aware of its brand and bring out the uniqueness of this Korean cafe especially the sweet potato latte that that is not available in Singapore. By bringing in Korea characters as a theme of cafe could be a good selling point and marketing strategy. As for business strategy, international strategy could be the appropriate strategy since it’s going to maintain Korea theme cafe. Therefore, Hollys Coffee might be exposed to the financial risk linked with heavy marketing expenditure such as brand promotion and advertisement in the course of spreading its brand.
It is important to come up with the marketing and promotions to introduce to the locals about Holly’s coffee, as it is not easy to change the taste and preference when they are used to the existing brands. On top of that, it is expensive to start up a café in Singapore, therefore it is important to have a detailed breakdown of the startup cost like registration and licensing, and other operating expenses as well.
Evaluation and Conclusion
All thanks to the influences of Korean pop to all over the world, there are more people getting more interested in Korean culture and heritage. There is an average of 20,000 Koreans residing in Singapore. Many Koreans will start to patronize Hollys coffee when it opens in Singapore.
Singapore has been a popular choice for foreign talents internationally, as mentioned above there are about 20,000 Koreans in Singapore. It remains one of the popular places for relocation for its reputation as a safe and orderly country to educated children in. For a business, we will like it to be set up in a politically safe developed country in comparison to a developing country with bad political situation. Government policies and regulations may change from time to time based on political stability and poses a risk for its foreign entities.
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