Executive Summary
Over the past few decades, multinational businesses have emerged and have operations in vast geographical locations. Several business corporations have taken advantage of globalization and open business environments to do global business. China and the rest of emerging Asian ‘tiger’ economies present excellent business locations for much multinationals. As these businesses seek massive expansion, several factors come into play. Factor such as government regulation, stiff competition, different marketing strategies, political influences, differentiated human resource management strategies, incoherent consumer behavior and culture have a huge bearing on international expansion . The Coffee Connoisseur (TCC) is a specialized gourmet beverages and foods outlet with a predisposition towards artist quality and artist expression. This research paper reviews the possibility of TCC expanding into China. The research paper will first delve into the background of The Coffee Connoisseur and its operations in Singapore. The research paper will then provide a succinct analysis of the Chinese gourmet market, opportunities and threats that may be presented. The paper will further review strengths and weaknesses of TCC in its effort to explore the Chinese market. Finally, the paper will provide possible entry strategies into the new market.
Introduction
Background of TCC
The Connoisseur Concerto, also referred to as The Coffee Connoisseur (TCC), is a chain of specialized gourmet foods and beverages outlets in Singapore. The concept behind the outlet chain is to provide haute cuisine prepared with cultural ideas and inspired by art. TCC prides itself as being the outlet with the most comprehensive collection of gourmet food and beverages in Singapore. TCC in Singapore began as a gourmet coffee outlet at the heart of Singapore. With time, the outlet has experienced huge success and has since expanded its menu to include a full array of gourmet cuisine and other beverages. Started in 2003, TCC has expanded and now has five outlets within Singapore.
The business of gourmet beverage is based on art whose idea targets clients with an extraordinary taste of art.TCC insists that the heart of their business is including art both in preparation and serving their clients and at the same time providing an artistic environment. In so doing, TCC has been a strong supporter of art by including art exhibition at the comfort of the clients enjoying their food and drinks. TCC allows artist from different locations in the world to exhibit at a gallery located at 51 Circular Road. Guest artists are provided with the opportunity to get closer to their clients while the clients get to experience the lasted in the art world. Therefore TCC has been quite successful in its operation at Singapore. Expansion into other markets may be the right move for the company. China presents a great opportunity for TCC.
Review of gourmet industry
The gourmet industry has registered remarkable growth in different parts of the world . The biggest investors in gourmet drinks have specialized in coffee. Companies such as the American giant Starbucks have dominated the gourmet coffee industry. However, Li, (2010) argues that gourmet business is still expanding. Empirical evidence indicates that middle and upper class consumers represent the target for gourmet business . Therefore, evidence of a growing middle class ensures a stable future for the gourmet business.
Several international businesses have ventured into the Chinese gourmet market. Starbucks is perhaps one of the most formidable competitions for TCC. Starbucks has hugely invested in China opening over 500 coffee stores as of October 2011 . Another competition that exists in the Chinese market is Gloria Jeans. The Australian Coffee house has equally invested in the Chinese Market.
Another company that presents formidable competition in China is Costa. Just like Gloria Jeans, Costa is an international business geared towards specialty coffee. Similarly, Costa has heavily invested in China with several stores in mainland cities and urban centers. However, Costa invested much later than Starbucks though Costa has undertaken massive marketing and advertisement strategies. Therefore TCC faces stiff competition in its endeavor to invest in China.
China: Opportunities and Threats for TCC
The greatest opportunity that TCC will enjoy by expanding into China is the recent rise in China’s middle class. The rise in China’s middles class can be attributed to the monumental economic growth that China has recorded over the past two decades. The Peoples Republic of China has grown both socially and economically at an impressive rate . The rapid growth has seen a burgeoning middle class residing in cities and other urban centers. A wealthy society has also emerged in China rivaling that of other developed economies. Today, world business has aimed its focus at China’s wealthy society and the fast rising middle class. Wei, (2004) asserts that over the next decade, China’s middle class population will be driver of international economy. Experts have since argued that for proper economic growth, there must an empowered middle class with the ability to meet their basic needs and beyond . With consistent economic growth, China’s middle class is poised to shift from meeting basic needs to spending on luxurious products such as gourmet foods and drinks .Capturing the recently emerged luxurious society will be a fortune for TCC.
A second opportunity that China presents is the ease of investment in the country. In an annual World Bank report, China has taken deliberate measures to reduce the protocols and procedures for foreign direct investment (FDI) . China boasts of huge sea ports, big airports and the best road network. For these reasons, China has been absorbing FDI at an immense rate . Several multinational corporations have since taken advantage of such incentives and heavily invested in China.TCC could also take advantage of reduced investment protocols, reduced taxes and a growing economy.
The final opportunity that TCC could enjoy in investing in China is the similarity in cultures between the two nations. China and the most South East Asia have similar culture and artistic preferences.TCC could therefore make the best out of similar cultures.
Threats
Investing in a new location has the inherent threat of language or cultural difference. While, as earlier mention, Singapore and China may have similar cultures, a small diversity in such culture may be the greatest threat to business operation in China. The Chinese society is one of the most reserved cultures in the world, especially when it comes to fashion, art and cuisine . The Chinese population is very concerned about their culture thus several companies have to adhere to these issues. TCC needs to carefully evaluate what the Chinese consider good art.
A second challenge that China presents is associated with patent and copyright issues. Several business leaders have termed China as the ‘copy-cats’ of the world . Chinese products have been found to be imitation of other products around the world. Additionally, international laws on patents and copyrights have rather weak conditions and application in China. Thus businesses have the challenge of competing with other products that may have similar branding or product features.TCC may also in find itself in a situation whereby other outlets have adopted their brand name or similar products.
Strength and Weaknesses
TCC boasts of several strengths that could catapult the organization in its foreign investment into China. One of the strengths that the company enjoys is inherent in the product that the business entity is involved in. The concept of gourmet is spreading around the world and Asia is an emerging region thirsty for new products . The art of gourmet food and beverages is a concept that TCC understands well and is also know on the gourmet world.
The second strength that TCC could employ to its advantage is the innovative nature with which the organization has approached the gourmet business. TCC has adopted a tradition of merging art exhibitions with the service of gourmet food and beverages. The idea of inviting guest artists from around the world to exhibit at the art boutiques is a competitive edge that TCC could well use to its advantage. The same idea needs to explored during the marketing process in order to gain maximum advantage from it.
Thirdly, a good strength that TCC could employ in its venture to China is its presence in Asia. Unlike the rest of gourmet outlets, TCC is in Singapore and therefore appreciates much of Asian culture. This will provide TCC with additional knowledge in their foray into China.
Weaknesses
There is one distinct weakness that emerges out of the TCC and the gourmet business. Gourmet business aims at serving specialty, and in most cases exotic, products. This implies that the cost of such service is rather steep and therefore some form of exclusivity is best for business. This hinders the organization from enjoying benefits of scale since the establishment must maintain a lean number of operations.
Modes of entry into the new market
The desire by an international business entity to enter into a new is always bedeviled by the decision on the manner in which to invest in the new market . The decision regarding the method of entry is determined by several factors such as competition, product type and the investment environment as presented by the new market. Additionally, the mode of entry into the new market will have a considerable bearing on marketing strategies that will be employed.
According to Eifert (2007), the modes of entry can be divided into two broad categories. These are equity and non-equity modes. Equity modes of requires the multinational business to directly invest in the new market. A multinational business can either invest through a joint venture or via an independent venture. A joint venture is type investment in which the multinational company involves itself with strategic partners with similar interest. In this mode, the multinational firm usually seeks a local firm in order to have a strategic advantage since one of the partners originates from the target market. A second kind of equity mode, the independent venture, is where the parent international corporation decides to have a subsidiary of the business in which it fully owns the entire operation. Such independent venture may be done either by acquiring an existing business or by a new venture commonly referred to as Greenfield venture .
TCC is a business in the catering sector. Such businesses rule out non equity investment such as export or contractual modes. This is due to the fact that a gourmet business is all about service and therefore non equity entry mode severs the effort to maintain quality services.
For TCC to register success in the gourmet food and beverage industry in China, a Greenfield investment is perhaps the best mode of entry into China. As earlier mentioned, China is a country that is envisaged to maintained fast-lane growth for the foreseeable future. A Greenfield venture gives TCC the opportunity to build a new brand in the gourmet industry in China. The firm has the advantage of starting new marketing campaign based on the products that they offer. Additionally, the firm can foster a marketing strategy that seeks to identify itself as a new and distinct entity in the gourmet business.
Marketing Strategy
There are several marketing strategies that TCC can adopt as it seeks to invest into the Chinese market. According to Hitt, Ireland, & Hoskisson, (2010), delving into a new market first begins by deciding on the strategy the company will adopt regarding the product. One of the marketing strategies that international organizations can adopt is referred to as extension . The extension strategy requires the multinational corporation to simply transfer its home product to the new market devoid of any deviation. This is strategy is associated with product that have a global reputation such as Coca Cola. Hence, in marketing such a product, reference is made to the global success of the product.
A different strategy that can be adopted is adaptation. This strategy appreciates that different markets have different consumer behavior and therefore adjusting the product to suit the taste of the new market is only suitable . A frequent case is where businesses from developed nations are seeking to invest in developing countries. Here, multinational firms are forced to adjust pricing and also other features that may not suite the new frontier.
TCC has the advantage of using both strategies in its expansion into China. This may be so because some of the products, particularly gourmet coffee, have internationally recognized methods of preparation and therefore altering the product may be detrimental to the business. In the same regard, exquisitely identified international cuisine cannot be altered. Therefore, in advertising and promoting such product, TCC should maintain that product is at internationally recognized standards.
On the other hand, TCC can adopt a different strategy with regard to art and some cuisine associated with Asia. Asian art is rather different from the rest of the world. Thus, TCC should consider adapting to Chinese-preferred art in their art boutiques.
Conclusion
The 21st century has experienced enormous improvement in information technology and globalization making the world smaller and smaller. International business conglomerates have taken the advantages of globalization and expanded into diverse geographical locations. The main objective of these multinational businesses is to improve their balance sheets as well as report profits. China presents one of the best locations of doing business. China’s population is now composed of an affluent middle class that could provide the best clientele for such businesses as The Connoisseur Concerto. The government of the Peoples Republic of China has also taken concerted measures towards ensuring a free business environment. However, TCC has the challenge of addressing the patent issue that prevails in China as well as stiff competition from a myriad of gourmet outlets in the Chinese market. Additionally, the firm has to decide on the entry mode into the new market as well as the product promotional strategy as they venture into the new market. A Greenfield venture as well as adapting different product marketing strategies may lead to desirable results for the firm. All in all, China is ripe for business and it will be detrimental for any growth oriented business to overlook China.
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