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Chatime is a Taiwanese tea chain that has set up roots in the Chinese ethnic areas of Australia. Chatime has 29 outlets so far. Chatime wishes to expand into the mainstream market and evolve into the ‘Starbucks of Tea’ in Australia and cater to the mature tea-drinking crowd of Australia. The strategic goal of Chatime is difficult to achieve because Chatime has already placed itself in public consciousness as a brand catering to ethnic Chinese localities. Chatime’s menu is not in sync with mature Australian tea drinker’s palates. Chatime’s franchisees are afraid of expanding to the mainstream market, moving on from the profitable ethnic areas. Chatime would meet these challenges through a marketing campaign to educate its intended audience, a change in menu and décor of its outlets, and a sound business plan to take its franchisees of board as it begins its journey to expand into the Australian mainstream market.
Executive Summary. ii
Chatime is a Taiwanese tea chain that has set up roots in the Chinese ethnic areas of Australia. Chatime has 29 outlets so far. Chatime wishes to expand into the mainstream market and evolve into the ‘Starbucks of Tea’ in Australia and cater to the mature tea-drinking crowd of Australia.
Chatime’s strategic goal is to become ‘the Starbucks of Tea’ in Australia. Towards this end, Chatime envisages a profusion of stores all over Australia, serving tea to the mainstream market. Chatime wants to cater to the mature, well-educated tea drinking audience in Australia, leaving out the younger population to competitors (Gardener, 2012).
The strategic goal of Chatime is difficult to achieve because Chatime has already placed itself in public consciousness as a brand catering to ethnic Chinese localities. When Chatime entered Australia, it targeted ethnic Chinese majority areas and did its marketing in Mandarin language media. Chatime had also sponsored Chinese pop stars to spread awareness of the brand. As a result, Chatime’s current 29 outlets are concentrated in Chinese majority ethnic localities and are doing brisk business there. Thus, Chatime’s marketing messaging and current positioning would stand against its efforts to go mainstream at this stage as popular imagination holds Chatime as an ethnic brand catering to an ethnic market.
Chatime also would have to overcome the challenge of its menu not being in sync with local mainstream palates. Australian palates require relatively bland products that are low in sugar content. Chatime’s current tea menu needs to be modified to suit the mainstream palate.
Besides, Chatime faces resistance from its franchisees, who are well ensconced in ethnic areas, and who would be reluctant to open new outlets in mainstream markets based on the fear that the ethnic brand would not be acceptable to the mainstream market.
Sustainable Competitive Advantage
Competitive advantage refers to the essence that a company carries into the marketplace that makes its products competitive against its peers. There are two basic types of competitive advantage – cost and differentiation advantage (Jurevicius, 2013).
Chatime has the sustainable competitive advantage of differentiation. It is an authentic tea brand from Taiwan, and hence different from all other tea-selling chains in Australia. The menu served by Chatime would not be questioned for authenticity, as Chatime is originally based in Taiwan and its array of tea menus originate from China.
When Chatime modifies its menu to suit the Australian palate, it would not be accused of diluting its authenticity. Rather, it would be extending its authenticity and merging its unique selling proposition to the Australian palate. Therefore, no other local tea-vending chain could compete with Chatime as it expands into the mainstream market on the grounds of authenticity.
While Chatime has authenticity on its side, it would, nevertheless, have to cater to the challenges of image, menu and franchisee-concerns in its expansion plans.
Challenges in Implementing Expansion Strategy
Chatime’s expansion strategy would have to overcome the challenges inherent in the expansion – a problem of image, the limitation of an existing menu that is not palatable to mainstream, and reluctance of franchisees to open outlets in mainstream areas (Gardener, 2012).
The change of image for Chatime would need to begin with a sustained marketing campaign. The mainstream market would need to be given the message that Chatime is an authentic Chinese brand that would be serving healthy tea menus to the market. The marketing would need to target the mature tea-drinking crowd and give the message that Chatime is the chain that would serve their palates and sensitivities well (Moderanti, 2013).
Chatime would have to overhaul the menu of tea to be served to the mainstream market. The Australian market is mature and is oriented towards health consciousness. Flavors of Chatime’s tea that are effervescent and youthful may not work in a mature market. Chatime would need to orient the menu towards the health consciousness in Australia by regulating the amount of sugar. Chatime would involve focus groups to ascertain the tastes of its target audience, the mature and well-educated tea drinkers, and incorporate the required tastes in its menu (Moderanti, 2013).
Chatime would also need to change the décor of its outlets. It would need to replace its original purple walls to green in order to buttress the message that the menu served is healthy.
Even if Chatime is successful in convincing the overall population of Australia about the aptness of its tea for local mainstream tastes and health consciousness and is successful in designing suitable designs of tea outlets that can draw in the customers, Chatime would need to convince its franchisees to open outlets in the mainstream markets. Chatime’s franchisees are happy in the niche created for themselves in the ethnic areas of Australia. Their existing outlets are profitable. For the franchisees, moving out of traditional Chinese dominated ethnic areas to the mainstream markets would be risky. The outlets might not be profitable. Chatime would need to convince the franchisees on the soundness of its business strategy and about the profitability of its expansion plans so that franchisees can adopt the plan and be part of the expansion drive of Chatime. To this end, a sound business plan outlining a win-win situation for Chatime and its franchisees would need to be prepared and shared with the franchisees.
Internal Capabilities to Develop Strategic Objectives
Chatime has internal capabilities of authenticity, local knowledge and a loyal, established franchisee network. These internal capabilities would help Chatime as it plans to expand.
Chatime has the experience of tea brewing. Its authenticity is its biggest internal capability. Chatime has the capability of modifying its menu to suit the local palate.
Chatime has been in the Australian market for some time, albeit in ethnic majority areas. So, it would be safe to assume that Chatime is aware of the existing business climate, rules and regulations to prepare the necessary groundwork for expansion.
Chatime has a group of loyal franchisees that have grown with it. These franchisees share the Chinese traits of loyalty and group solidarity. The franchisee network would prove to be a strength to Chatime as it puts in place its expansion plans. While the franchisees have reservations about the expansion, once they are on board, they would obviate Chatime from the trouble of having to find new partners in its bid for expansion.
While Chatime was able to easily enter the Australian market initially by targeting the ethnic communities, its initial success is likely to be its liability as it initiates plans to expand into the mature mainstream market. Chatime would have to reinvent itself in terms of its menu and décor, sell its message to the broader market, and convince its franchisees about its expansion plans in order to succeed in its bid to expand into the mainstream market.
Gardener, J., 2012. A taste for rapid growth. Case Study. BRW. [Online] Available at <www.bru.com.au>
Jurevicius, O., 2013. Competitive advantage. [Online] Available at < http://www.strategicmanagementinsight.com/topics/competitive-advantage.html> Retrieved March 22, 2015.
Moderanti, 2013. The strategic marketing process. Ebook. [Online] Available at < http://www.marketingmo.com/wp-content/uploads/2013/12/The-Strategic-Marketing-Process-eBook.pdf> Retrieved March 22, 2015.
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