Report On Highlands Coffee Enterprise Market Expansion In China

Company background information

Highlands Coffee, a famous Vietnamese coffee brand was established by Mr David Thai. Highlands Coffee started as a packaged coffee business in Hanoi in 2000, after 2 years the first coffee shop was opened in Ho Chi Minh city and After over 16 years Highlands Coffee have 227 coffee shops. The main products of Highlands Coffee are Robusta, Arabica and other delicious foods and drinks. Expanding global coffee system and join Vietnamese stock market are Highlands Coffee target. Highlands Coffee coffee beans was purchased from farmers' farms in Gia Lai that’s why the company mission statement is “The brand originates from Vietnamese coffee”. II. Market Analysis In 2018, Highlands Coffee have a plan to expand their coffee global system. As a result of market survey and consideration, Highlands Coffee is decided to enter China coffee market. China is not only has neighborly relations with Vietnam but also has the familiar culture and consumer behavior. Through this report, the company will give you the reasons why they are decided to enter China.

Macro Environment

Political: In the Ranking of economies is benchmarked to June 2017 by The World Bank, China is ranked 78th out of 190 economies of easy doing business. The Government official realized that foreign investment role is very important to China economic so they continued improve China’s economy policies to give better market for foreign investors. Especially, Vietnam is one of China’s ASIAN Bilateral Investment and Free Trade Agreement partners. This is good point for Highlands Coffee to enter China market. But China has some disadvantage about the internet access, Google and Facebook and others social media are limited by the Government. This policy has longer influence on digital marketing activities.

Economic: China is one of the largest economy in the world. According to IMF figure, China is the second country in GDP nominal ranking 2018 which has 14,092.51 billion of dollar with 10,088 dollar per capita. By another figure, National Bureau of Statistics Of China announced that in 2016 GDP annual growth rate of China is 6.7 percent, consumer spending index is 317509.70 CNY hundred million. All the number show us the fact that China is a substantial and fast-growing economy. Moreover, in 2018 the revenue in the Coffee segment amounts to $2.087 billion US dollars. The global power of economic, change of wealthy and living are become conditions for Highlands Coffee to join China market easier.

Social: Social and culture research has an important position to this business. Total population of China including Hong Kong, Macau, Taiwan is 1.38 billion. The highest group is over 1 billion Chinese people, which were aged between 15 and 64 years. This group will be the potential customer because many people in this group come from middle class and middle class in China is step by step tolerating Western standards as an acceptable standard of the bourgeois class. Moreover, this group of people could include students, employees and businessman which are Highlands Coffee potential customer. One thing has effect on the coffee industry in China is coffee culture. In 2015, the total volume of coffee consumed is 67,487 metric tons, 36 percent higher than 2010.

Technological: China reached the first ranked on Top 20 countries with highest number of internet users with 772,000,000 users. The most popular websites is Weibo, Taobao, Alibaba Group and they also use Wechat as a major mobile apps because of the convenient and the internet usage policy of China. The typical signal of internet explosion is the increase quickly of internet market. According to Statista, the revenue of the internet market amounted to about 791 billion yuan. In 2016, revenue in the Digital Advertising market of China amounts to 34,038 million dollar with the highest revenue from search and social media advertising. The explosion of internet market and user is a valuable thing for Highlands Coffee when they make an online campaign to promote brand name and take care of customer.

Target Market Segmentation

Highlands Coffee focus on the group of customer from urban areas from middle class. The first Starbucks store will be in Beijing in order to attract more domestic customer who have financial capability as well as tourist or businessman who come to China to travel or work. Moreover, buying motive for Highlands Coffee is their high quality product and service. Also, the atmosphere in Highlands Coffee will suitable for many type of customer need. Highlands Coffee could be suitable for businessman who comes to the coffee shop to work, for couples, friends and family to meeting and have some good cup of coffee or tea. Highlands Coffee products consumption:

• Vietnamese young generation (15 to 25)
• Office-workers

They are group of people who are imaginative, lively and dynamic, searching for agreeable place with moderate cost.

Brand Consideration

Brand Differentiation

In China, Highlands Coffee biggest competitor is Starbucks. In January 1999, Starbucks entered China market and opening the first coffee shop in the China World Trade Building, Beijing. After 19 years Starbucks have 3,300 stores in more than of 140 cities, and they have more than 45,000 employees. However, Highlands Coffee market segmentation is different with Starbucks, both of them provide high quality coffee and service but the price segmentation are not the same. Highlands Coffee price will be lower than Starbucks.

Standardization Vs Localization

When developing business, an association must tailor things and organizations for another client base, while as yet keeping up brand identity. In spite of the way that Highlands Coffee was a new brand in China market, the organization will keep the signature product. Moreover, they will acquaintance the new item with keep the client to remain with them. On the other hand, Highlands Coffee will focus on their staff which are famous because of their skills and attitude. To be localization, Highlands Coffee should design their coffee shop based on Chinese traditional culture. To achieve the goals to be success in customer service, the HR department will focus more on training their staff because China employees will have different expectation, different way of thinking and evaluating problems. Moreover, the performance requirement and the standard crosswise over nations are not the same. One more thing, Highlands Coffee should offer new products for China market. China marketing platform lbzuo state that "Chinese now consume five times more milk tea than coffee. After the arrival of pearl milk tea to mainland China, coffee has taken a backseat, meaning that milk tea, in 15 years, beat what coffee in China did in 130 years. Bubble tea consumption continues to rise at a high rate each year”. If Highlands Coffee can create good milk tea products, the product will help the company take advantage in Chinese market.

Branding

In China market, Highlands Coffee was a new Vietnamese coffee brand which provide high quality coffee. Moreover, 2018 is the first time Highlands Coffee enter China market so the organization could present new drink which appropriate for the client preferences.I

Marketing Mix

Product

In business, there are three levels of products which is a concept that actually “comes in play when you are finalizing a product for your business or when you want to analyze a product”. First is “core products”, this level providing the experience about drinks which are the strength of Highlands Coffee. In Highlands Coffee, the customer has six types of products to choose: traditional coffee, espresso, freeze, tea, bread and bakery. One more thing about Highlands Coffee product is they also have bottled drinks and their customer can buy this product easily in supermarket or convenience store. The next level is “actual product”, this level is about not only the brand’s name and logo but also the facilities such as menu, paper and plastic cup with logo printed and the facilities such as table, chair which are made from various materials. Last but not least is “augmented product”. In this level, the coffee shop focuses on the customer experience in Highlands Coffee. Overall, the core products are customer service, the atmosphere and the decoration of the coffee shop.

Price

The main competitor of Highlands Coffee in China is Starbucks. In China, Starbucks is the premium brand which cost average 7.18$ per cup of coffee. On the other hand, Highlands coffee will focus on the lower price, Highlands coffee price range will be $1.5 USD to under $4 USD. The company set the price on a simple idea: high value at moderate cost. At the point when individuals feel like they are getting a decent arrangement for their money, they will probably pay a higher cost. Moreover, Highlands Coffee has two pricing strategies which are Competitor-Oriented Pricing and Value Based Pricing. These strategies could contribute to the success of Highlands Coffee in China.

Place

Choosing the right location for the first Highlands Coffee’s coffee shop in China is one of the most important decision. The location of the first coffee shop can affect many aspects of how it operates, such as brand image, total revenue and how costly it is to run. Highlands coffee locations are highly homogenous, all in good locations or at the big office buildings or mall. This helps the customer to clearly and uniquely identify the brand image of the Highlands Coffee. Highlands Coffee place strategy is they usually locate the first coffee shop in crowd place, high visibility location where they have many potential customer whose are middle class. For these reason, the company director strongly believe that the first coffee shop should be located in the big city which have many tourists such as Beijing, Shanghai or Hangzhou. Moreover, this place additionally make a high class environment alongside with the sentiment of having a high quality of product and service, which are a piece of the core things that Highlands Coffee want to deliver to the customer.

Promotion

Promotion is one of most important works in business, from big corporation to Small and Medium Enterprise (SME). In this case, it is especially important because this is the first time Highlands Coffee come to China. First of all, Highlands Coffee should focus on online advertising, with social media we have the new type of marketing called digital marketing and it's extremely valuable in China market. In 2017, China have 772 million internet user. Highlands Coffee should cooperate with some China social network such as Weibo or Tik Tok to create online promotion campaign. Moreover, clients may like to visit company website to find out about the products and services, rather than come to store. Therefore, Highlands Coffee should focus more on online sales. Next, Highlands Coffee could sponsor for famous TV show in China such as “Keep Running” or “The Rap of China” to be more popularity to China people. In 2017, “The Rap of China” is one of the most famous TV show in China with host Kris Wu- one of the most famous singer/ actor in Asia. In addition, Highlands Coffee could sponsor for community activities such as charity, music concert or sports events. On the other hand, HIghlands Coffee is new in China market so the company should making free try campaign or buy 1 get 1 free to introduce their product to potential client and furthermore take feedback to improve the product in the future.

Process

Process stand for the staff performance and the administrations when working. IN the working time, the staffs are required to welcome the client friendly and prepared to help the client when they have issue. Moreover, a feedback system will set up so the client can contact the store manager directly whenever problems arise.

Client is one of the imperative components, which can influence straightforwardly to the success of the business. Moreover, to manufacture client relationship, Highlands Coffee has two kind of cards: VIP card with cost offs, free merchandise, blessings, rewards and so on for VIP clients and the loyalty card with the benefit such as having 1 free drink on his/her birthday, which can be seen that Highlands Coffee really take care every client of the organization.

People

In order to be success, Highlands Coffee should training staff precisely to give the great service and right state of mind to the clients and the staff must have the ability to use English fluently. Moreover, all staff wears uniform which incorporates red shirt and black apron. The staff was youthful, dynamic, respectful and helpful. When entering the store, the customer were welcomed with gentle smile. The staff are all around the stores and very close to the clients to help them if they need. When the customer leave, Highlands Coffee staff always say thank you and see you next time. Moreover good staff will ensure the customer experience about product and service when they come to Highlands Coffee.

Physical Evidence

Oxford College of Marketing state that “The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service”. Highlands Coffee physical evidence represented by the coffee shop design and logo. Highlands Coffee decoration based on two main colors: black and red. The combination of these color is really eye-catching and this help Highlands Coffee be more recognizable with customer. In addition, Highlands Coffee bring Western design to their stores through the wooden tables and seats, vast arm chair. With outdoor stores, they decoration with not only table and chair which made of wooden and glass but they also focus on huge white umbrellas, which will helps the customer remember the outside coffee shop in Italy or France. The coffee shop decoration is an unique point of Highlands Coffee. Customer come to Highlands Coffee not only have drinks and delicious food, they also receive value from the comfortable, luxurious and high class space. One more thing, in Highlands Coffee, the coffee shop have coffee glasses with logo printed, paper napkins, this stuff will help Highlands Coffee be more recognizable. On the other hand, the staff uniform also have logo, this will influence Highlands Coffee image more expert and furthermore help the client discovering staff simpler.

Conclusion

Through this report, China is a potential market for Highlands Coffee to expand. In spite of the fact that entering the new market is a high hazard for any organization but with this report, 2018 can be considered as the most possible time for Highlands Coffee to enter China.