BUSINESS PLAN FOR A EUROPEAN
STYLE COFFEE SHOP IN HO CHI MINH
CITY
Case: AT Ltd. Company
LAHTI UNIVERSITY OF APPLIED
SCIENCES
Degree Programme in International
Business
Thesis
Spring 2013
Tran Vu Ai
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BUSINESS PLAN FOR A EUROPEAN
STYLE COFFEE SHOP IN HO CHI MINH
CITY
Case: AT Ltd. Company
LAHTI UNIVERSITY OF APPLIED
SCIENCES
Degree Programme in International Business Thesis Spring 2013 Tran Vu Ai
Lahti University of Applied Sciences Degree Programme in International Business
TRAN VU AI Business Plan For A European Style Coffee Shop In Ho Chi Minh City Case: ATC
Bachelor’s Thesis in International Business, 72 pages, 7 pages of appendices
Spring 2013
ABSTRACT
This thesis is aimed to assist AT Company in its venture of running a European style coffee shop in Ho Chi Minh City. Hence, based on an analysis of the potential of the Vietnamese coffee industry with a focus on the Ho Chi Minh City market, its creative business idea is formulated together with new concepts. Correspondingly, a business plan is generated to describe an appropriate direction for the venture. In the sphere of the thesis, the author only concentrates on the process of implementing the business plan and formulating a completed plan would demand further studies in future.
The theoretical framework of this research includes three analytic tools applied when dealing with business idea establishment. In addition, PESTEL analysis and Porter’s five forces analysis are used in order to provide a better understanding about the target market where the venture is operated. SWOT analysis and SWOT Matrix is also conducted to help the case company be aware of their internal strengths and weaknesses to react effectively to the external environment. A preliminary business plan, then, namely Business Model Canvas, is introduced as the base of the business.
The research method applied in the research is qualitative method in a deductive approach. In that, data is obtained from numerous sources, from publications to unpublished sources such as interview with an entrepreneur in the coffee industry, survey and the author’s own observations.
It is finally concluded that Ho Chi Minh City is a highly potential market for coffee and AT European style coffee shop is believed to operate profitably there. Obviously, the business might take time and money with several challenges ahead but it is necessary for the case company to get it off the ground to actually implement and exploit the prospective market.
Key words: business idea, business planning, coffee shop, European style, Vietnam, Ho Chi Minh City
LISTS OF FIGURES
REFERENCES
- FIGURE 1. Research Methodology.........................................................................
- FIGURE 2. Deductive and Inductive Approaches (modified from Hyde 2000)
- FIGURE 3. Porter’s Five Forces Analysis (modified from Porter 2008, 4)
- FIGURE 4. SWOT Analysis (modified from Glaister and Falshaw 1999)
- FIGURE 5. Thesis structure
- FIGURE 6. The Six Utility Levers (modified from Kim & Mauborgne, 2000)
- FIGURE 7. Buyer Experience Cycle (modified from Kim & Mauborgne, 2000)
- FIGURE 8. The price corridor of the mass (modified from Kim & Mauborgne
- FIGURE 9. The Business Model Guide (Kim & Mauborgne 2000)
- FIGURE 10. Business concept (modified from Marion 2008)..............................
- FIGURE 11. Strategic Planning Process (modified from Weihrich 1982)
- & Colson 2011) FIGURE 12. Understanding business model concept (Sinfield, Calder,McConnell
- FIGURE 13. Business Model Canvas (Osterwalder & Pigneur 2010)
- FIGURE 14. World coffee demand 2012 (in million bags) (Neumann 2012)
- FIGURE 15. Green Coffee Suppliers of European countries (Neumann 2012)....
- FIGURE 16. A typical coffee shop in Paris (Pasa's Paris, 2011)
- FIGURE 17. A Robert's Coffee shop (Robert's Coffee 2013)
- FIGURE 18. Costa Coffee's product range. (Costa Coffee 2013)
- FIGURE 19. Lavazza and Aida logos (Lavazza 2013 & Prousek 2012)
- Trade 2011) FIGURE 20. Map of Vietnam (New Zealand Ministry of Foreign Affairs and
- FIGURE 21. Economy structure of Vietnam
- Nguyen & Tran 2012) FIGURE 22. Vietnam's coffee growing area and production (modified from
- nine months of 2012 (Nguyen & Tran 2012) FIGURE 23. Vietnam’s coffee products export structure by market in the first
- FIGURE 24. Buyer Utility Map of ATC coffee shop
- FIGURE 25. The price corridor of the mass of ATC Coffee Shop
- FIGURE 26. The Business Model Canvas applied for ATC coffee shop
- FIGURE 27. Channels of ATC coffee shop
- FIGURE 28. Key activities of ATC Coffee shop
- FIGURE 29. Three main partners of ATC coffee shop.
- FIGURE 30. Business concepts of ATC Coffee shop
- FIGURE 31. Typical coffee in ATC product range.
- FIGURE 32. AT coffee shop design......................................................................
- FIGURE 33.Three-year goals and objectives of ATC Coffee Shop.
- FIGURE 34. Porter's Five Forces of the coffee market of Ho Chi Minh City
- FIGURE 35. Competitors of ATC Coffee Shop in Ho Chi Minh Market
- FIGURE 36. SWOT Analysis of ATC
- FIGURE 37. SWOT Matrix of ATC
- FIGURE 38.Further required research topics for this thesis.
- 1 INTRODUCTION CONTENTS
- 1.1 Background
- 1.2 Objectives and Research Questions
- 1.3 Research Methodology
- 1.4 Scope and Limitations
- 1.5 Theoretical Framework
- 1.6 Thesis Structure
- PLANNING 2 BUSINESS IDEA, BUSINESS CONCEPT AND BUSINESS
- 2.1 Business idea
- 2.1.1 The buyer utility map
- 2.1.2 The price corridor of the mass
- 2.1.3 The Business Model Guide
- 2.2 Business Concept
- 2.3 Business Planning
- 2.3.1 Strategic Planning Process
- 2.3.2 Business Planning Model
- 3 EUROPEAN AND VIETNAMESE COFFEE INDUSTRY
- 3.1 European Coffee Industry Preview
- 3.2 European Coffee Shops Concepts
- 3.3 Vietnam Overview
- 3.4 PESTEL Analysis of Vietnam
- 3.5 Coffee Industry in Vietnam
- 3.5.1 Coffee production
- 3.5.2 Domestic market
- 3.5.3 International market
- MINH CITY 4 ATC COMPANY AND THE COFFEE SHOP BUSINESS IN HO CHI
- 4.1 ATC Coffee Shop Business Idea
- 4.1.1 The utility map of ATC Coffee Shop
- 4.1.2 The price corridor of the mass of ATC Coffee Shop
- 4.2 Business Model Canvas
- 4.3 ATC Coffee Shop Business Concept
- 4.4 Company Aims and Objectives
- 4.5 Market Analysis
- 4.5.1 Porter’s Five Forces Analysis
- 4.5.2 Competitors Analysis
- 4.6 SWOT Analysis
- 4.7 SWOT Matrix
- 4.8 Financial Plan
- 4.9 Risk Assessment
- 5 FINDINGS AND CONCLUSION
- 5.1 Findings
- 5.2 Suggestions for Future Research
- 5.3 Reliability and Validity Assessment
- 6 SUMMARY
GLOSSARY
APEC Asia-Pacific Economic Cooperation
ASEAN The Association of South-East Asian Nations
FDI Foreign Direct Investment
GDP Gross Domestic Product
GOV Government of Vietnam
IMF The International Monetary Fund
MARD Ministry of Agriculture and Rural Development of Vietnam
PPP Purchasing Power Parity
RFA Rainforest Alliance Certificate
VAT Value Added Tax
VND Vietnam Dong
European style so as to turn it into a competitive advantage for the venture of the case company. The thesis is conducted by combining the two mentioned elements and concentrated on the most significant related factors. They are business idea formulation, business model, business concepts, market research, financing and risk management.
1.2 Objectives and Research Questions
This thesis studies about the coffee market in Ho Chi Minh City so as to run a new creative coffee shop and satisfy an unfulfilled need of customers there. For that, the main objectives of the study are to research on target market and provide a foundation for a detailed business plan for ATC later on. Thus, together with a collection and analysis of market information, this thesis will emphasize on a viable plan with its most essential aspects.
Research questions: Is Ho Chi Minh City regarded as a potential market for coffee? What business concepts could ATC successfully operate in Ho Chi Minh market?
To achieve the mentioned objectives and answer research questions, the following sub questions are addressed: Who are current players in coffee market at the moment? Who are potential customers? Who are target customers of the shop? Who are reliable suppliers? What are European style coffee shop’s concepts? How large is the required investment?
1.3 Research Methodology
The below figure displays an overview of research methodology applied in this study.
FIGURE 1. Research Methodology
Two main methods of reasoning in the research approach which may result in an acquisition of the knowledge are deduction and induction (Burney 2008). They are differentiated based on the direction of reasoning. Deductive reasoning is considered as a “theory testing process” when beginning with a certain theory and then turning into specifying it in particular instances. On the contrary, inductive reasoning is established by building a generalized theory from observations of certain instances. (Hyde 2000)
FIGURE 2. Deductive and Inductive Approaches (modified from Hyde 2000)
RESEARCH APPROACH
- DEDUCTIVE
RESEARCH METHOD
- QUALITATIVE
DATA COLLECTION METHOD
- PRIMARY: INTERVIEW, OBSERVATIONS, SURVEYS
- SECONDARY: BOOKS, JOURNAL, ARTICLES, REPORTS
Theory
Hypothesis
Observation
Confirmation Observation
TentativeHypothesis
Pattern
Theory
DEDUCTIVE INDUCTIVE
comprehensive business plan used for future performance, the case company is highly advised to do further researches.
Secondly, because the study is processed in 2013, some information, especially about price or location might be irrelevant in the year of 2014. As a consequence, it is compulsory for the case company to carefully check, update and make any adjustment if needed during the process of preparation.
Lastly, another limitation is that within certain time and conditions, the author was not able to approach as many coffee shops as expected in Vietnam and in Europe to have a more comprehensive view of the unique idea in this thesis. Instead, the online sources are made use as much as possible. It is considered lack of actual experiences of the author. The study is thus highly recommended to be replicated before implementing in which all participants would develop more real valuable experiences.
1.5 Theoretical Framework
It is undeniable that though a good business plan could not ensure the success of the business, it would at least reduce the possible failures. Hence, creating a thorough business plan is considered the first vital step to start up a business. Correspondingly, the theory foundation in the business plan must be emphasized. It is stated by Lee and Lings (2008, 5-6) that the researchers find it difficult to perceive the relationships among the phenomena and why they are structured in this way without theory framework. Thus, in the theoretical part, the author demonstrates three systematic tools, including utility map, price corridor of the mass and business model guide, to present a business idea. Accordingly, business model Canvas which is optimized for the business plan formulation is introduced.
As the venture is established in Vietnam, Politics, Economy, Society, Technology, Environment and Legislation of the home country must be studied in advance. Although the author and ATC are Vietnamese, it is needed to apply this tool to analyze the working environment better to prevent any possible failure and make
the right informative decisions. Furthermore, to provide the case company with a deep understanding about the market and the current situation, the author uses Porter’s Five Forces Analysis which is crucial to the entire planning process’s outcome. Accordingly, several techniques and tools are designed to assist the company in viewing clearly the external environment of the business (Arons & Waalewijn 1999).
FIGURE 3. Porter’s Five Forces Analysis (modified from Porter 2008, 4)
To deal with internal and external factors, SWOT (strengths, weaknesses, opportunities, and threats) is considered one of the most prevalent methodologies for strategic planning (Glaister &Falshaw 1999). This helps the case company perceive its internal strengths and weaknesses and external opportunities and threats as well. Then, SWOT Matrix is also examined to measure the case company's competencies as well as identify opportunities the business management in the near future based on the combination of specific internal and external factors. ( Lee & Ko 2000)
Threats of New Entrants
Bargaining Power of Suppliers
Bargaining Power of Buyers
Threats of Substitute
Rivalry Among Existing Competitors
FIGURE 5. Thesis structure
The theoretical framework is conducted in chapter 2, and chapters 3, 4 and 5 focus on the empirical sections. To be more specific, chapter 2 illustrates all essential theory applied in later parts of the plan about business idea and business planning formulation. Then, the next two chapters make a broad analysis of European coffee industry, target market and the case company together with its unique venture. In chapter 5, the author quickly reviews what he has figured out from the whole process of the study and answers the research questions as well. Furthermore, the author does not forget to provide his recommendations for ATC. Finally, chapter 5 will summarize the key points of the thesis.
INTRODUCTION
EUROPEAN AND
VIETNAMESE
COFFEE INDUSTRY
CONCLUSION
BUSINESS IDEA
BUSINESS CONCEPT
BUSINESS PLANNING
CASE COMPANYAND
ITS VENTURE
SUMMARY
2 BUSINESS IDEA, BUSINESS CONCEPT AND BUSINESS PLANNING
This chapter firstly describes three building tools to formulate a certain persuasive business idea. Then, based on the idea, relevant theories of business concept and business planning will be introduced to explore the original business idea. In the later part, theory of Business Model Canvas is examined in details to apply to the business planning process of ATC coffee shop.
2.1 Business idea
There is no doubt that an initial business idea is the beginning of the entire business establishment process. An innovative business idea encourages the company to explore visible opportunities and nurture the ability to start up the business profitably as well ( Jack, Anderson & Alistair 1999). Hence, in this study, the business idea is established based on three analytic tools: buyer utility map, price corridor of the mass and business model guide. To be specific, the buyer utility map displays how customers are attracted by the new idea; the price corridor of the mass identifies the most suitable price for the majority and the third tool offers a precise framework of how the company could make profit from the idea with the targeted price ( Kim & Mauborgne 2000). In the sphere of this section, the author ignores the third tool to emphasize it more carefully in the business planning model section.
2.1.1 The buyer utility map
The buyer utility map is designed by Kim and Mauborgne (2000) with six stages of the utility levers and buyer experience cycle and to get planners thinking from the right perspective. The tool, on one side, identifies all levers that the company delivers its utilities and diverse experiences of its products and services to clients. In addition, it efficiently verifies whether the service values align with or differ from competitors’ offerings in the same markets.
Meanwhile, in parallel with the levers, buyer experience cycle is taken into consideration. As can be seen, buyer experience is usually broken into six basic stages from purchase, delivery, use, supplements, maintenance to disposal. In each stage, managers or planners must address and answer all related questions which are displayed on figure 7. By these stages, the company will make an assessment of clients’ experiences quality in order to adjust its current strategy.
2.1.2 The price corridor of the mass
Setting a strategic price is fundamental to ensure that the mass of target consumers are willing to purchase and able to achieve it (Blue Ocean Strategy 2013). The price corridor of the mass is created to discover an appropriate price to attract mass of buyers. This task is operated throughout the following two-step process:
FIGURE 8. The price corridor of the mass (modified from Kim & Mauborgne
Upper-levelpricing
Mid-levelpricing
Lower-levelpricing
legal and resource protection^ High degree of Difficult to imitate legal and resource protection^ Some degree of Relatively easy to imitate legal and resource protection^ Low degree of Easy to imitate
Same form form, same^ Different function
Different form and function, same objective
Three producttypes
Step 1: Identify price corridor of mass Step 2: Specify a price level within the price corridor
Size of circle is proportional to number of buyers that product/service attracts
In the first step, the company is required to understand the price sensitivities of current customers who definitely compare a new product or service with others offered by traditional group in the same form. To approach a price corridor of the mass, products and services should be categorized as two groups: different form, same function and different form and function, same objective. Then, in the second step, the company has to determine how high its price is based on the legal protection, brand name and company capitals.
2.1.3 The Business Model Guide
According to Kim and Mabourgne (2000), both utility and price are just parts of the process while the company still needs a business model to help them turn to profits. Two authors also developed a systematic way which includes numerous questions regarding production, distribution, company and product in order for the company to consider carefully about their business idea. Figure 9 illustrates how the systematic business model guide works.
FIGURE 9. The Business Model Guide (Kim & Mauborgne 2000)
What is cost target?
- Does the strategic price set cost target?
- Can raw materials be replaced by less expensive ones?
- Are high- cost, low-value- added activities reduced or outsourced in value chain?
- Does digitizing assets or activities reduce costs?
Who can we partner?
- What capabilities required to achieve the value proposition?
- Which companies miss those capabilities?
- Should the company make partnership with others based on cost, quality and speed?
Which price model should we use?
- Is the industry’s pricing model a barrier to the venture’s success?
- What pricing model creates a greater profit pool?