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Key Success Factors In Korea Marketing Essay

Paper Type: Free Essay Subject: Marketing
Wordcount: 5044 words Published: 1st Jan 2015

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Founded in 2008 by Sun-Kwon Kim, CEO of the company, Caffebene is a specialty coffee shop with some dessert. He launched his first coffee shop in GangNam street, and made it to be the fastest growing franchise chain in Korean market. During his 4 years, in 2012, there are over 800 franchisee shops exceedng the market share of starbucks, and secondly marked as its total sales of 1.7 billion dollar.

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Key Success Factors in Korea [1] 

Firstly, Caffebene defined themselves as chain business rather than direct management and actively extend number of their shops. Unlike direct management done by its major competitor, chain business has a lot of advantages that it extends its shop very rapidly by opening a chain store. With some money, everybody can be a franchise owner after some simple procedure, and it accelerated a lot to be a market leader while starbucks cost more time to open a new house.

Moreover, while opening new shops, they also did some marketing strategy called ‘drawing a dot, line and face’. It means when Caffebene newly open their coffee house, they seek to open two or three shops in one crossroads rather than a huge house. About three shops in main intersection conducted well in advertising by exposed to more people, and this kind of opening strategies raised brand awareness in the early stage of business

Thirdly, they invented new marketing method called ‘special type of star marketing’ and actively conducted it. At that time, in coffee industry, it was unusual to have a TV commercial with superstar because of high cost. Caffebene, however, approached this obstacle in a different way by swapping shares with entertainment company, SidusHQ. SidusHQ shares 5 % of caffebene and supports their advertising with their superstar who was also famous in ‘Hanryu’. Furthermore, through HQ, they signed an exclusive contract with drama and movie productions, and conducted active Product Placement advertisement. For example, in every hit drama, main characters always go to the Caffebene with special interior which was enough to be recognized, and drink their noble beverages and desert. This kind of strategies affected to the public that Caffebene is something special and polished place where celebrities used to been.

Lastly, with that Product PLacement advertising, Caffebene pursue themselves as luxurious coffee shop with European vintage style interior. So they decorate interior with fancy ornament, and also position their beverages and desert with higher price than their competitors, even Starbucks. This kind of drastic measures made special brand image and made consumer satisfied with the feeling that they are also special in the place.

Motivation to expand abroad

In spite of great success in Korea, Caffebene has some difficulties nowadays. The coffee market is saturated with Big 6 firms and their growing has been slowdown together. They operated at a loss of half million dollars in first half of the 2012, and failed to go public due to increasing debt. Therefore, they should make new market where they can extend their business successfully like Korea.

II. Target Industry Analysis

A. Country Analysis

1) Franchise Industry

The most significant feature of Japanese franchisee is that they do their business on a large scale compared to other countries. [2] 69.2% of entire franchised stores are owned by several-store-franchisees. This tendency is stronger in food-franchise-industry than other industries. The financial stability and management ability of Japanese franchisees are stable, which are the critical factors to the durability of revenue of franchiser and securing proper quality of the services or goods.

2) Coffee Industry

(1) Coffee consumption

Japan is the one of the biggest coffee consumption market in the world. Import amount of coffee bean of Japan is 3rd largest in the world. [3] Japanese consumers consumed average 3.40kg of coffee per capita during 2010 [4] , which is the biggest volume in Asia (Singapore 3.28kg, Korea 2.06kg). 67.9% of people drink coffee more than one cup of coffee a day. () 25.6% of people answered that they are drink coffee at coffee-chain-café, and most people are drinking coffee in their house or in the office. (Exhibit )

(2) Café Industry

Traditional style café which is called ‘Kissaten’, enjoyed the age of Japan’s rapid economic growth and bubble economy. These Kissatens were mainly operated by individuals and they provided meals and alcohols in addition to coffee drink, and customers were fully serviced by waiter. But after the collapse of bubble economy, Japanese customers were hesitant to spend their money for the expensive coffee and meals of Kissaten. Doutor was the first coffee shop which introduced the self-serve concept. Since 2000s, with the entry of Starbucks, Seattle-style café chains are growing fast. In 2006, market size was 256 billion yen, and in 2007, it was 266.2 billion yen, which was 4% bigger than previous year. Existing stores are increasing more and more. Especially high price cafés are expanding wider and wider in shopping center, universities and etc. Many experts say that Cafés are required to offer various menus and organize the store creatively.

Compared with Korean café, there are some differences in Japanese café.

Short business hours compared to Korean café: Most Japanese cafés close before 10pm. So the Japanese use fast food restaurants for a space in night.

‘Free wifi’ is not common: Free wifi is not common in Japanese café. Thereare some wifi networks which are provided by mobile phone carrier like Softbank or NTT Docomo, but most of them are not free to use. Although Starbucks began providing free wifi to the customer, customers are needed to register in advance to use free wifi.

3) Cultural Characteristic – Hanryu (韓流)

(1) Spread of Hanryu

Since 2009, K-POP singers began debut in Japan and Hanryu broadened its range of fans to the younger generations, not only women but also men. [5] This made ‘Hanryu’ as general trend in Japan and those who were not especially interested in Korean culture also began to use Korean restaurant or Korean product. Number of Korean restaurants in Japan increased by 71.10% during 9 years (2002~2011) [6] .

(2) Interest about Korean style restaurant or café

Many of Hanryu fans are interested in Korean café or restaurant chains which appear in Korean movie or drama. Also, the number of people who have experience of studying in Korea, or traveling to Korea is increasing and these populations are quite familiar with Korean café or restaurant chains. And these people are spending amount of money in Korea town of Shin-Okubo area in Tokyo these days. shows the number of annual passengers of Shin-Okubo station is increasing steadily since 2009, when Hanryu broadened its range of fans.

B. Customers

1) Situations of visiting cafés (Exhibit )

Most of the customers are visiting café when they want to take rest (52.4%), and time for chattering with friends and time-consuming pastime (30~40%). 16.7% of people answered that they visit café to take lunch.

2) Customer’s criteria for evaluating café (Exhibit )

The most important criteria for choosing café, was the flavor and the quality of the drinks (35.6%). 13.5% of the customer answered that the quality of the foods is important. Overall, there are 4 criteria for choosing café. (a) quality of drinks, (b) quality of foods, (c) location of the café, (d) comfortable atmosphere and hospitality.

On the other side, many customers evaluated negative about café when (a) price of the coffee is too high (b) depending on the smoking policy (c) accessibility of the café (d) too crowded and noisy atmosphere.

3) Purchasing pattern (Exhibit )

85.9% of the customers buy coffee and more than 14.9% of customers buy drinks not based on coffee. 30.2% of the customers want some bread or sandwiches. The other 25.8% of customers buy sweets such as doughnuts, cookies and cakes. Especially, women under 30 buy those sweets more often than other age and gender groups.

C. Competitor

1) Types of Competitor

Types of Competition



Seattle Style Coffee

High brand awareness

Positive evaluation


Japan origin Coffee

Food menu exists so that people can have a meal.

Brand image of ‘cheap’

Fast food chains

(McDonald’s, MOS)

Cheap Price,

High accessibility.

Doesn’t offer any cozy places to drink coffee and communicate with people

Kissaten (å-«èŒ¶åº-)

Comparatively older age groups, thus have low price elasticity.

Old ambience

Individual business

Coffee cans

Cheap Price

Easy to buy

It doesn’t offer any places to drink coffee.

Cafes in Shin-Okubo

Differentiated menu

Individual business

Group and can be the potential competitors of Cafébene in a sense of targeting age group, ambience, and menu. .

2) Specific Competitor Analysis (Mainly, Kanto area)

(1) Starbucks (American) : Main customers of Starbucks are women who are young.

Advantages: High brand awareness and preference (market leader). It is the most frequently visited café. (Exhibit ) They are good at the quality of drinks, high accessibility and ambient service. Also, the variety of menu and drink size (customized), My-cup accessible, Non-smoking policy are highly evaluated.

Disadvantages: Expensive and some customers feel difficult ordering

(2) Doutor (Japanese): Doutor is the first self-serve cafe in Japan.

Advantages: High brand awareness and preference (Second to the Starbucks). Doutor is the second frequently visited café chains in Japan. (Exhibit ) Rather low price, having a meal is possible. (Expecially, they are offering menu which is different from different time.) And they offer T-Point service and coupons. Disadvantages: Due to the low price policy and the atmosphere of the store, Doutor is evaluated ‘not stylish and uncomfortable’ by many people.

(3) Tully’s (American): It is the direct competitor of Starbucks in that they have similar strategies regarding the brand image. What is different from Starbucks is that it targets consumers who are aged above 25 and have obvious tastes.

Advantages: Third in brand awareness and fourth in preference and the third most frequently visited café in Japan. (Exhibit ) They separated smoking area with non-smoking area, which has been evaluated positive. Limited menu for short period time, ice cream, dining menu exist.

According to these researches, we made and attached a chart in the exhibit 8.

â…¢. Market Entry strategy and Implementation

A. Entry mode selection & Strategy

For entry mode, several options are available. For non equity method, exporting and franchising is available. Exporting is the method our major competitor Doutor took when entering in to Korean market with their unique ‘Nell drip coffee’. This is appropriate approach when a company wants to have a test about the preference of their product. Risk level is relatively low since there is no substantial investment. However, this method is not appropriate for Caffebene because their core competency is not solely on the taste of coffee but rather lies on overall atmosphere of the café in the integrated format.

In this context, it seems franchising would be right option for Caffebene. Franchising knowhow is one of the key competencies of Caffebene and we should utilize it to outperform competitors. Luckily, Japan’s franchise market is well developed, having a lot of convenience stores, restaurants, private institutions in the form of franchise. [7] So consumers are used to visiting franchises knowing what to expect. However, franchising can lead to failure when it is not prepared enough or when failing to understand local needs. For example, when Caffebene entered into China making 1st store on Beijing, they were too confident of their experience of franchising industry. They aggressively seek for franchisee expanding rapidly without through analysis and knowledge of local market. As a result, Caffebene in china is losing control over their franchisee suffering from trouble with franchisee that changed the interior and menu of the café arbitrarily without notice. [8] 

To avoid such a problem, we thought that the need for local company who can help out Caffebene establishing the franchise is large. Also, since Japan’s franchising market is dominated by domestic chains. [9] It would be more difficult for foreign franchising company like Caffebene to penetrate into the business by alone. Therefore, it would be time consuming and less effective for Caffebene to take a Greenfield method establishing wholly owned subsidiary when doing franchise business in Japan. Instead, to get support of Japanese local company, Caffebene should choose between two methods available; M&A or Joint venture.

For M&A, it would be perfect if there is appropriate similar sized coffee company that is willing to go through M&A but there is no guarantee in that kind of scenario. Also, still M&As in Japan is not very active, and hostile takeovers are not advisable. [10] So instead of M&A we decided to have Joint Venture to create “Caffebene Japnan”. As a reference, our major competitor Starbuck’s which is non-Japanese company also had used Join Venture as entry mode. Their partner was ‘Sazaby Inc’ which is apparel and food franchising company having knowledge of local customer’s needs and good location for stores. Also, Starbuck successfully entered in to Korean market having Join Venture with Sinsegae which is distribution tycoon in Korea.

Finding right partner is always challenging, based on our research of Japanese industry, we brought up with two possible options; AEON and 7I holdings. They are major distribution company in Japan and are very likely to have excellent distribution systems as well as information on local customers and geographical knowhow for opening stores. Among two companies we thought 7I holdings is more appropriate partner, since they are currently running huge franchise convenient sores ‘seven-eleven’ which is also doing business in Korea while AEON is rather focusing on huge retail shopping Malls. Also, when it comes to business culture, 7I holdings emphasizes innovative approach which is congruent with Caffebene whose history and company culture is fresh, new and full of innovations. So, we expect synergy with 7I holdings is greater and there will be less integrating problems because both company shares similar culture.

B. Implementation

1) Human Resource Management

For some companies, CaffeBene in our case, that use franchising strategy to increase numbers of their chain stores it is essential to emphasize the importance of hiring and training employees. Since the success of each franchised unit depends on the quality and behavior of its employees. [11] There are several strategies to transfer “CoffeBene culture and experience” effectively.

Giving high incentives to staff members: For employees who perform well or have made effective business plans for Cafebene to follow, Cafebene should reward them. Not being afraid of giving more than the mean value of industry wage is the key. Plus, accepting their opinion in welcoming attitude will make people feel respected. Also, methods such as health care, stock options, training programs, career counseling and product discounts for all workers, full-time and part-time, employees in return will work harder to create customers’ satisfaction and loyalty.

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Double-supervision: ‘Select few’ of Caffebene that specializes in teaching its collaborative sub-parties is called Education Squad [12] and is currently being dispatched once a month to every parties in Korea. This entity consists of about 40 people and is separate from supervisors and teaches how to deal with everyday practice. ‘Education Squad in Japan’ should be established once Caffebene business stabilizes in Japan. The sooner, the better.

Hiring Japanese managers: regarding the overall atmosphere in Japan, how Japanese think and what they want, the entities who should have access to these information should be Japanese themselves. Although Cafebene launched from Korea, they should not limit their personnel to Korean as they are doing business in Japan.

2) 4P Strategy

What menus to make

13’Korean-style’ bingsu in Japan has a high probability to capture Japanese customers’ taste. Compared to Japanese bingsu which consists of only ice and syrup, Korean bingsu have ice creams, jellies, yogurts, syrups, cereals, cookies and mini rice cakes inside them.

14Applying misu powder latte(New York) into bingsu [15] or soy latte(Doutor) bingsu can be other options for well-being trend. [16] Blueberry latte can also appeal by anti-aging properties. [17] 

18About 30.2% of people who visit the café want to have sandwiches/breads and 25.8% prefer sweets such as cookies and cake. Waffle is an ambiguous entity which can both fit in both the sandwiches/breads section and cookies/cakes section. Therefore it can appeal to wider range of customers and differentiate from Starbucks’ cake side menu strategy.

Asking customers for help with side menu development via internet has several benefits. Customers’ needs can be assessed both directly and indirectly. What menus customers want and the trend of consumer needs, respectively. The goal of this strategy includes making customers have the feeling of affection and participation.

Interior strategy and operational policies

19In Japan, the main reasons why people visit café is to rest(52.4%) and chat with friends(30~40%). They both require an atmosphere where they can acquire relaxing, comfortable space for a long time. Therefore large, comfy chairs should be used.

20Cafebene’s interior style is modern vintage. Modern vintage style tries adopt ‘openness’ and ‘comfort’ in addition to the ‘stylish’ image ‘modernness’ has. Having wide windows at one side of the building, ‘open’ door and avoiding excessive flamboyant exterior that hinder natural atmosphere are its traits.

This modern vintage style was popular because it emotionally struck female Koreans in their 20s especially. As women in their 20s tend to be the main customers in coffee industry in Japan as well, this will be an effective interior strategy by high chance.

21Free wi-fi strategy will be effective in Japan because there aren’t many places in Japan that have free wi-fi access. [22] Install electric plugs so that they are accessible from every seat, provide free wi-fi and have in-store computers for free access to PCs

23According to a survey, some reasons why people don’t visit café is because the smoking and non-smoking zone are not effectively divided. Division between the two zones via transparent partition and additional air conditioner service should be applied.

Star marketing

Even though CaffeBene is quite young company it could not only become successful domestically, but also build global operations. Therefore, our team thinks that CaffeBene has no reasons of not entering Japanese market. Entering Japanese market CaffeBene has to remember that Japan is one of the largest consumers of coffee in the world and has greater variety of coffee shops than anywhere else in the world, and it would be quite hard to impress Japanese consumers. However, one of the strong advantages is the fact that CaffeBene is from South Korea, a country whose culture and entertainment gaining more international exposure. This actually how we are going grab Japanese customers’ attention: through heavy-celebrity promotion, since Japanese people are big fans of Korean TV dramas and K-pop. Through this kind of K-pop star-marketing strategy we can differentiate our brand from any other Japanese or International coffee brands.

Product Placement advertising

One of the traditional ways of promotion could be placing an advertisement on TVs, newspapers, internet banners, ad networks, and so on. However, we think that for CaffeBene it would be more effective to place its brand in context of movies, dramas, music videos, television shows, etc. This kind of strategy actually helped CaffeBene become recognizable among Korean customers. [24] 

Volunteering Programs/Contests

In 2009 CaffeBene began to organize overseas volunteering programs among Korean youth. [25] By organizing these kinds of programs CaffeBene can not only contribute to the society but also promote itself as a socially responsible enterprise. Another way to promote CaffeBene could be setting up various contests for instance, for people in Japan who are found of creating new coffee flavors. Through these kinds of contests CaffeBene once again can grab attention from the public and also enrich its coffee house with new and extraordinary coffee flavors.

Since we are intended to serve coffee at CaffeBene for 24 hours, one of the locations for CaffeBene where its business will thrive would be a mixed-use residential area. It could be a good idea to look for areas where homes and business are interspersed with other retail locations. Choose an area that has good foot traffic during all the hours of operating. [26] 

Moreover, it could be an option to open an outlet in business districts, since business people consume quite large amounts of coffee. In order to draw a broader mix of customers, CaffeBene could set up a coffee shop in very crowded places of Japan. Even though it can be difficult and costly to get a spot there, it would be one of the best locations for CaffeBene to attract larger number of customers.

In terms of price if we set a low price for our offerings there is a risk of appealing as a low-quality coffee brand. Initially we decided to target high-end market customers hence our prices shouldn’t be too low. Therefore, it would be better to adjust prices for CaffeBene’s services to the level of major competitors in Japan (e.g. Starbucks: 360 yen [27] , Tully’s: 340 yen), so price for CaffeBene’s coffee is going to be around 320-360 yen. Moreover, high price for CoffeeBene’s coffee in Japan could be due to the fact that operating costs, like rent and labor, in Japan are extremely high and CaffeBene will also have to pay for coffee shipment from its roasting facility in Brazil to Japan. Retail space in downtown Tokyo is very pricy too. So, in order to justify their high price for coffee, CaffeBene has to create superior values following our comments above.

IV. References

카페베네 1등 성공 신화(이상훈, 2011.4),

社団法人中小企業診æ-­å”会東京支部フランチャイズ研究会, 2008, <法人・複数加盟者にé-¢ã™ã‚‹èª¿æŸ»å ±å‘Šæ›¸>

å…¨æ-¥æœ¬ã‚³ãƒ¼ãƒ’ー協会, 2010, <æ-¥æœ¬ã®ã‚³ãƒ¼ãƒ’ーの輸入量の推ç»>

å…¨æ-¥æœ¬ã‚³ãƒ¼ãƒ’ー協会, 2010, <ä¸-界の一人当たりコーヒー消費量>

磯 ゆかり, 2010, <韓流ãƒ-ームの変åŒ-とæ-¥æœ¬ã«ãŠã‘る韓国芸能æ-‡åŒ-戦略>

タウンページデータベース, <第12回 昔に比べて韓国æ-™ç†åº-の登録はå¢-えているの¼Ÿ>

Prof. Martin hemmert, Area studies-Japan Lecture note 10,11

<중국 프랜차이즈 시장, 앞서가는 파리바게트와 í-ˆë•ì´ëŠ” 카페베네>,DuDuchina,2012 http://duduchina.co.kr/?p=44891

Eddy Golberg, Training Franchise Employees: Essential ingredients for unit success http://www.franchising.com/







MyVoice, 2012, <コーヒーチã‚ーンåº-の利用にé-¢ã™ã‚‹ã‚¢ãƒ³ã‚±ãƒ¼ãƒˆèª¿æŸ»¼ˆç¬¬¼“回¼‰>

MyVoice, 2012, <コーヒーチã‚ーンåº-の利用にé-¢ã™ã‚‹ã‚¢ãƒ³ã‚±ãƒ¼ãƒˆèª¿æŸ»¼ˆç¬¬¼“回¼‰>

MyVoice, 2012, <コーヒーチã‚ーンåº-の利用にé-¢ã™ã‚‹ã‚¢ãƒ³ã‚±ãƒ¼ãƒˆèª¿æŸ»¼ˆç¬¬¼“回¼‰>


최민욱/남서울대학교 광고홍보학과 교수. 카페베네 사례ì-°êµ¬

카페베네 천년봉사단 www.benebong.co.kr

How to Find a Good Location for a Coffee Shop http://www.ehow.com

Starbuck’s homepage http://store.starbucks.co.jp/

â…¤. Appendix

Exhibit Frequency of drinking coffee

Exhibit Place of drinking coffee


Exhibit Number of annual passengers of Shin-Okubo station

(JR East, Tokyo metropolitan Government)

Exhibit Situations for visiting Cafe


Exhibit Coffee chains visited during the previous year


Exhibit Criteria of selecting cafe


Exhibit Items of purchasing


Exhibit 8 Position of the competitors

To visualize the position of the competitors, we marked the position of the each competitor on the graph. X-axis indicates the ambience of the café. (Casual vs. Posh). Y-axis means the composition of the menu. (Mainly consisted with sides menu vs. Mainly consisted with coffee menu) These positions are determined based on the internet survey. (n=32)

æ-¥æœ¬ãƒ•ãƒ©ãƒ³ãƒãƒ£ã‚¤ã‚ºãƒã‚ーン協会, 2012, <¼’¼¼‘¼‘年度「¼ª¼¦¼¡ãƒ•ãƒ©ãƒ³ãƒãƒ£ã‚¤ã‚ºãƒã‚ーン統計調査」報告>

社団法人中小企業診æ-­å”会東京支部フランチャイズ研究会, 2008, <法人・複数加盟者にé-¢ã™ã‚‹èª¿æŸ»å ±å‘Šæ›¸>

MyVoice, 2012, <コーヒーチã‚ーンåº-の利用にé-¢ã™ã‚‹ã‚¢ãƒ³ã‚±ãƒ¼ãƒˆèª¿æŸ»¼ˆç¬¬¼“回¼‰>

MyVoice, 2011, <コーヒーチã‚ーンåº-の利用にé-¢ã™ã‚‹ã‚¢ãƒ³ã‚±ãƒ¼ãƒˆèª¿æŸ»¼ˆç¬¬¼’回¼‰>

MyVoice, 2012, <æ-¥å¸¸ç”Ÿæ´»ã¨ã‚³ãƒ¼ãƒ’ーにé-¢ã™ã‚‹ã‚¢ãƒ³ã‚±ãƒ¼ãƒˆèª¿æŸ»¼ˆç¬¬3回¼‰>

å…¨æ-¥æœ¬ã‚³ãƒ¼ãƒ’ー協会, 2010, <ä¸-界の一人当たりコーヒー消費量>

東京都統計局, 2004~2010, <東京都統計年鑑 ¼ª¼²ã®é…別ä¹-車人員>

東æ-¥æœ¬æ-…客鉄道株式会社, 2012, <各é…のä¹-車人員>

ORICON, 2011,

磯 ゆかり, 2010, <韓流ãƒ-ームの変åŒ-とæ-¥æœ¬ã«ãŠã‘る韓国芸能æ-‡åŒ-戦略>

タウンページデータベース, <第12回 昔に比べて韓国æ-™ç†åº-の登録はå¢-えているの¼Ÿ>, http://tpdb.jp/townpage/order?nid=TP01&gid=TP01&scrid=TPDB_GD01


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