Target customer of milk tea

1.0 Executive Summary

The purpose of this report is to provide a feasibility study for Koi Café in Singapore as a proposal for an entry into Surabaya, Indonesia. Koi Café in Singapore was opened in 2007 as the first overseas branch of a Taiwan’s iconic bubble tea brand from Taipei, Taiwan. Nowadays, Koi has 46 branches globally including in Jakarta, Indonesia. This report will provide the current Surabaya’s environmental analysis and implications for Koi Café from political, economic, cultural, technological, and legal environment sectors. The next parts are SWOT analysis and its implication, marketing objectives, market segmentation, marketing mix strategies such as product, price, place, and promotion that may be utilized by the company, followed by the implementation and evaluation about the marketing mix for the next 12 months and the conclusion in the end of this report. Research for this report are based on credible academic journals, reliable book, some trustworthy and private websites. The depth and breadth of this report is limited to the 25 pages.

The current situations in Surabaya, Indonesia has shown opportunities for Koi Café to open a branch there. This can be seen from the good mayor of Surabaya that makes a stable political situation which benefits Koi Café. Moreover, the situation of economic in Surabaya stands at 7.6%, which shows a higher growth than the National rate. Indonesia has many people residing belonging from various cultures, with a majority of residents belonging from the Islamic Culture and also includes the Hofstede's Culture Dimension table. The technology analysis includes the air flights, Surabaya ports and direct roadways which connects Surabaya and Jakarta. In the Environmental analysis, the temperature of Surabaya is suitable for the customers to consume the Koi Café beverage as well as to grow tea plantations for making the beverage. Legal analysis of Koi Café for Surabaya include the tax rate for foreign companies and the legal system of Indonesia.

Koi Café plays the strength in being a demand product, customisation of drinks, and being halal. The weaknesses include the obligation on collaborating the ownership with local companies in order to venture into the domestic market. The opportunities exhibits the population of potential customers in Surabaya and favourable weather that complements with the product. On the other hand, the threats for Koi Café include a higher tax rate for foreign companies and indirect competitors in Indonesia.

Koi Café’s marketing objectives is to achieve 20% of market share, $850,000 of profits, and 75% of brand awareness by 31 December 2018. The main target market are students and young adults start from 12 years old to 35 years old.

Standardization on the brand name could reduce the advertising cost and exhibits a positive image of Koi Café as a global brand. Elastic product such as Koi Café should not make the price higher than other competitors. Market pricing is suggested to be used along with cost-plus pricing to achieve the profit objective. In the future, relationship pricing can be implemented to bring down the price. International joint ventures with local private limited liability company is needed for international brand to venture into Indonesia. As the main target market are students, social media and internet are become the main promotional media to advertise. Continuous scheduling social media and internets ads in a regular manner throughout the year is done to create demand and to influence customers into buying the products.

In conclusion, the PESTLE and SWOT analysis have shown a favourable results for Koi Café to venture into Surabaya to start its operation where its marketing objectives can be achieved internationally with an appropriate marketing mix.

2.0 Introduction

Koi Café is a brand of Taiwan’s iconic bubble tea. In Taipei, the capital city of Taiwan, bubble tea shop can be found out of every 20 shops especially when it is in the area of the night markets (Daniel Food Diary 2013). In 2006, two stores of Koi Café were opened in Taichung, Taiwan to strengthen the brand name. In 2007, Koi Café expanded their business overseas for the first time to Singapore as an effort to make the brand go internationally (About Us 2012). However, in Taiwan, the original name of Koi Café is 50 Lan. The company decided to change its name to Koi Café as a strategy to attract Singapore local youths by serving contemporary vibes (Daniel Food Diary 2013). As Koi wanted to go internationally, Koi Café expanded to Xiamen, China in 2011. The store was put at the intersection of Hexiang West Road and Hubin Central Road (About Us 2012). In 2013, Koi Café asseverated to not only bring Taiwanese teas to become a global heritage through introducing genuine Taiwanese teas, but also make the pleasant experience by tasting the tea (About Us 2012). According to their website (About Us 2012), they have 46 branches globally in Taiwan, Singapore, Xiamen, Quanzhou, Macau, Indonesia, and Cambodia.

Koi Café which specializes in bubble tea, also has another kind of beverages to choose. They offer tea, milk tea, bubble tea, macchiato, handmade Café , and fruit-flavored tea. For those who love the real taste of tea, they have Jasmine Green Tea, Assam Black Tea, Honey Green Tea. For those who like their tea to be milky, Koi has Milk Tea, Chocolate Milk, Honey Milk Tea. Moreover, they have their specialty Bubble Tea, Bubble Milk Tea, Grass Jelly Milk Tea. Koi also offer macchiato such as Ovaltine Macchiato, which is one of their best seller. Macchiato is known for the sweet cream on the top of the drink. For those who do not like tea, there is fruit-flavored such as Fresh Lemon Juice, Honey Lemon Lime Juice, Honey Aloe Vera. In addition, Koi put coffee on their menu for those who prefer coffee over tea such as Café Macchiato, Golden Bubble Koi Café, and Konjac Jelly Koi Café (Our Products 2012). The drinks can be customized by adding toppings such as bubbles, pearls, grass jelly, aloe vera, and konjac jelly. Furthermore, the customers also can choose the sugar level starts from zero sugar, 25%, 50%, 75%, 100%, and 120%. The customization does not stop until there; the customers can choose the ice level such as less ice or more ice on their drinks (Yu 2015).

3.0 Corporate Vision

The heritage of the Taiwan bubble tea has been kept alive by the Koi Café with the quality controlled in a sturdy manner and very high standard of the standardized preparation process (About Us 2012). The Koi Café has very dedicated and service-oriented employees and also the enterprise that has the basic vision of love sharing with the customers, and also its customers (About Us 2012).

4.0 Mission Statement

The Koi Café has not only vowed to make the bubble tea tasting a very pleasant experience, but the Koi Café group has also vouched the teas of the Taiwan heritage into making a global brand by introducing various kind of beverages to everyone. The Koi Group has a mission on travelling around the world, opening up their brand in majority of the places in the world, the mission has inspired the founder of the Koi to bring their outlets in countries like Hawaii, Australia, Tokyo and Singapore, and making it is a taste for the customers for their craving for Taiwanese homemade bubble tea (About Us 2012).

5.0 Corporate Goals

The Koi Group’s corporate goals is to impress people around the world with their joy-filled Taiwanese bubble tea (About Us 2012).

6.0 Environmental Analysis

6.1 Political

Indonesia just held its election in late March, where its current President Joko Widodo approval rating won 66% of the Indonesians heart. But the fall of Ahok has caused some religious opinions in the political world where religion can be part of a strategy to win the election (Coca 2017). Tri Rismaharini, known as Risma, is the current Mayor of Surabaya since 2010, and she has been one of the most influential leader that appears in 2013’s Forbes magazine as the local governments have undergone strict rules and regulations for businesses since her administration. The foreign investors has come to a liking on her honesty and expertise in leading the office as they benefit from the rising cost on their business. Her intention as a leader has won the heart of the citizens of Surabaya as she cares for the people more than her votes where she enhanced on the greenery developments in the city, the health care, the education and the business as well (Hove, McCawley and Baskoro 2014).

The corruption level in Indonesia has steadily decreased since the rise of Jokowi’s election where the improvement on corruption prevention had rose from 22% in 2005 to 37% in 2016 (10 Reasons Why to Invest in Indonesia 2017). Indonesia Corruption Rank (2017) forecasted that the corruption rank in Indonesia will drop from number 80 to 77 by 2020. The Mayor of Surabaya, Risma has won the anti-corruption award for having the initiation in developing a clean city with her e-government application in all government department which allows the people to monitor the process and progress (The Jakarta Post 2015). This is a good sign where there seems to be a transformation in terms of their administrative systems together with a good leader in Surabaya.

Koi Café could operate well in a trusted hand as there will be less regime changes and even coup that makes them prevent uncertainty where they are able to forecast predictability on future events. Koi Café manage to increase its time efficiency by controlling their production line more effectively as lesser time spent on the administration process lowers the business cost due to less interference and more controls in running the business. This enables the Koi Café to apply penetration strategy in the local market in order to strengthen their products in a more competitive advantage by providing more values to the customers.

6.2 Economic

According to XE Currency Converter (2017), Singapore currency has stronger exchange rate than Indonesia currency where one Singapore Dollar is equal to the amount of Rp9,850.96 at 16 September 2017. It has shown that the currency exchange rate for Rupiah to Singapore Dollar has become weaker over the years from Rp9,327 to Rp9,824 per one Singapore Dollar since December 2016 to August 2017. The nominal currency exchange rate of Rupiah in 2016 was 5.3% whereby in February 2017 it was increased to 9.3% (DBS Treasures 2017). According to DBS Treasures(2017), the export growth in Indonesia has reached its peak as Indonesian Central Bank has started to strengthen the IDR in order to increase import rate and the investment flow.

According to Numbeo (2017), Surabaya employees earn 36.69% less than Jakarta employees in terms of their monthly salary and therefore this makes the purchasing power of Surabaya customers weaker than Jakarta customers. Surabaya has a lower cost of living compared to Jakarta where the market price in Surabaya such as restaurants, markets, utilities, sports and leisure, clothing and shoes, rent, and apartment are lower than in Jakarta (Numbeo 2017).

Indonesia growth rate rose from 4.9% to 5% in last quarter of 2016 to first quarter of 2017 due to the increase on government spending and the high demand of the export (The World Bank 2017). The private consumption growth becomes more robust as it involves a more stable Rupiah and inflation, higher investment percentage, and a decline of interest rate. Inflation in Indonesia rises to 3.9% in 2017 due to the increase of electricity price and it was expected to reach 4.3% in the future. Domestic investment in Surabaya from 2013 to 2015 provides great results to the economy as they had increased their service investment in the city (The World Bank 2017). The economy in Surabaya is as stable as other cities in Indonesia whereby the economic growth stands at 7.6%, that shows a higher percentage than the national rate where Mayor Risma promises the increase in growth rate once the city projects started in the future (Move Over Jakarta 2016).

Therefore, the revaluation of currency in the future would influence the import tax rate and the logistic costs on the physical and raw materials of Koi Café . The inflation rate would influence the market price where Koi Café should complement their product’s price with the purchasing power in Surabaya in order to choose the best pricing strategy and their promotion methods.

6.3 Cultural

Indonesia is a big country that has over 300 different ethnicities from the total of more than 17,500 islands which 6,000 of it are inhabited (Indonesia Guide 2017). Indonesians are very respectful to the culture that they believed in. The official language is ‘Bahasa Indonesia’. However, due to the sheer size and fractured archipelago country, most people are speaking their local language according to their ethnic or region. For example, Java people use Javanese and Bali people use Balinese. These local languages are usually spoken at home and friends but in a formal occasion, Bahasa Indonesian is applied (Indonesia Guide 2017).

Indonesia has about 263.590 million citizens where Surabaya is the second most populous city in Indonesia that inhabited with about 2.843 million people just below Jakarta which has about 10.135 million citizens (Indonesia Population 2017). There are six religions that officially recognized by the government of Indonesia. The religions are Islam, Buddhism, Catholicism, Protestantism, Hinduism, and Confucianism. Islam is the major religion that indicates almost 86% of Indonesians are Muslims (Embassy of Indonesia 2010).

According to Moving to Surabaya (2017), most of the Surabaya population embrace Islam and they are known for their religious rules which restrict their adherent, Muslim, to eat pork. However, Koi Café is not affected by any religion needs that restrict the customers in Surabaya to consume certain animals since Koi beverages do not contain any animal extract.

Fasting is one of the most important elements in their traditions that indicates threat to Koi Café. Each Muslim are required to refrained themselves from eating and drinking from sunrise till sunset during the fasting month (Living in Indonesia 2017). Koi Café in the beverages business is predicted to have a lower revenue during the fasting month compared to the other profitable months.

Hofstede’s Cultural Dimensions

Home Country (Singapore)

Host Country (Indonesia)

Implications

Collectivism Vs Individualism

Collectivism (20)

Collectivism (14)

Singapore scores 20 while Indonesia scores 14 that shows that both countries are Collectivist societies. This is because Singaporeans and Indonesians are not only looking after themselves but also their family. With this factor, customers are expected to buy drinks for their loved ones and their friends.

Power Distance

High (74)

Higher (78)

Indonesian and Singaporean employees almost have the same power distance. They heed orders from their boss or superior before doing their job as they respect their superior. Therefore, it does not influence Singaporean manager to teach Indonesian manager.

Uncertainty avoidance

Lower (8)

Low (48)

Indonesians will be more reserved where they hide their anger from others. Thus, it will eventually create a positive environment between the staff of Koi Café in Surabaya and the customers.

Time orientation

Higher (72)

High (62)

With almost the same score, Singaporean and Indonesian adapt pragmatic culture where they save up their asset and knowledge to prepare for the future.

Femininity vs Masculinity

Feminine (48)

Feminine (46)

Based on the findings, Singapore and Indonesia are classified as feminine country. In fact, they are fall under less masculine side because the score is nearly average.

Source: (Geert Hofstede: Singapore in Comparison with Indonesia 2017)

Koi Café should promote their products in a respectful and reserved ways to avoid any offences on their values and morals in order to create a good relationship with the customers. Developing a good relationship by providing quality products with an appropriate advertisement will increase the customer’s trust on their brand. This could reduce the cross cultural risk in Koi Café ventures as Surabaya adapt a cultural exclusive system that are more inflexible and solid on their business systems.

6.4 Technological

Infrastructures in Surabaya are superior where the international airport, Juanda International Airport is the second busiest airport in Indonesia in terms of transit flight between West and East Indonesia (Living in Surabaya 2017). Moreover, Juanda International Airport was ranked as the world’s 10th best in airport service quality by Airport Council International among 79 airports with passenger capacities between 5-15 million a year (Surabaya City Brief 2016). Furthermore, the international port in Surabaya, Tanjung Perak, is considered as one of the busiest ports in Indonesia and Southeast Asia that shows how geographically important and favourable this place is to Surabaya economic growth (Living in Surabaya 2017).

Land transportation is as important as the air and water transportation to ease the import and export of goods in the country. According to Epifany (2017), Jakarta and Surabaya will be connected by toll road in the end of 2018. Mayor Risma also added to build new ports, airport, new roads and even monorails in order to ease the transportation of her people (Move Over Jakarta 2016). The toll road benefits Koi Café as the material supply can be easily distributed from Jakarta to Surabaya or vice versa.

Communication networks in Indonesia are secured and fast nowadays as customers use technology for their everyday needs and problem solving in their daily life. According to Indonesia Investments (2016), approximately 40 percent of Indonesian people access to internet where social media or e-commerce is the highest populated area on the communication platform. Smartphone users in Indonesia are forecasted to grow significantly in 2019 that could lead to a heavy usage of internet and increase in social media involvement (Indonesia Investments 2016).

Nowadays, customers are becoming more passive to step out to grab some food (Gabriel 2017). Thus, food delivery service became a high demand in the market, for example Go-Food – the biggest food delivery service in the market of Indonesia. According to Maulani (2016), 87 percent of food delivery services is dominated by Go-Food. This is because Go-Food charged its service from the customers at around US$0.38 to US$1.14, where it depends whether the restaurant is associating with Go-Food (Freischlad 2016). One restaurant admitted that 40 percent of their sales was contributed by Go-Food (Gabriel 2017).

Koi Café benefits from the strategic and geographical location that could saves the amount of time and money on transport system due to the existence of new built toll road in the future and Surabaya port. Therefore, the customers are able to buy the product in a lower price. High involvement in social media enables Koi Café to promote their products more to the customers due to a higher effectiveness on gaining the attention from customers that increases their brand awareness. Koi Café could partner with Go-Food service by providing premium price to online buyers as to motivate e-commerce purchases.

6.5 Environmental

Surabaya, Indonesia is a city in Indonesia where the average temperature is between 24 to 25 degrees Celsius which used to be considered as one of the hottest temperatures compared to the temperatures of the other months. Currently, Surabaya averages 31 degrees Celsius in the hottest month and 26 degrees as the lowest temperature in November. Surabaya has a wet tropical, dry climate, and also showers with both the wet and dry season, hence, it is usually hot in Surabaya. Therefore, it is a favourable marketable product to sell bubble tea to the customers of that city because the bubble tea is a cold-produce that is favourable for places with high humidity (Halis and Halis 2016, 142).

The high humidity in Surabaya often helps the tea plantations in the city to grow at a much faster rate. Even though the tea plantations of the Koi Café are from the main tea plantation places such as Darjeeling and Assam, the Koi Café can save up a lot of money by setting up their shops and tea plantation materials in Surabaya and distribute it among all the outlets in Indonesia, thus, saving up with a lot of amount of money and saving up on transportation as they have to import all the tea packets from around the world to make one of the finest bubble teas. The temperature in Surabaya, is henceforth, just perfect for the growth of Taiwanese Tea plantations and providing the outlets in Indonesia some of the finest bubble tea (Halis and Halis 2016, 146).

Surabaya is Indonesia’s second largest city with their main revenue coming from trades and other businesses, also, the city has a variety of places that tourist can visit, more than 100 places such as museums, art gallery, amusement parks. If Koi Café establish their business in Surabaya, Koi can flourish a lot as tourist will visit these spots all year long. As Indonesia is one of the most high earning city in the country, there are customers from other places working in Surabaya as well, who are also familiar with the product, so they prefer to purchase the bubble tea from the Koi Café. As mostly customers from the Asian countries prefer to work in Indonesia, they would be familiar with the bubble tea concepts from the customers belonging from Singapore, Hong Kong, Taiwan, etc., so selling would not be a major issue.

Due to the high growing population in the city, even the purchases of motor vehicles are growing and customers are suffering from various kinds of pollution due to the hazardous smoke emitted out from the heavy machineries and the motor vehicles. So, the customers in Surabaya have become more health conscious on what they consume because of the harmful environment around them, so customers would go ahead and prefer some product which is healthy and does not affect their body or health in any way possible. Koi Café provides all that because it uses Taiwanese tea which is one of the most popular with healthy tea products in the world. Unlike other products, Koi Café does not have any harmful preservations added inside its bubble tea plus it is an economical purchase for the customers. Koi Café prioritizes for its customers to have a healthy, economical and taste filling drink, and Koi has aimed right at the spot for the customers who are mainly health conscious and prefer to have drink, which is delicious, as well as, healthy for them.

Koi Café also offers a lot of flavours and choices for its customers from different tea plantation places, which certain customers choose and prefer that kind of tea. Mainly, Koi Café aims at the customers who hated the humidity and the heat, and goes with the majority of the places whose customers prefer tea over coffee. Hence, it is a preferable product for the customers living in that city (Chandra 2016, 136).

6.6 Legal

The tax rate in Indonesia for foreign companies stands at 25% since 2010 and the economist had forecast that the tax rate will remain the same until 2020 (Trading Economics 2017). According to Doing Business (2016), the total tax rate for a foreign company in 2015 is 30.6% compare to Singapore which is at, 19.1%. The authorities has started keeping a strict rule on foreign companies to report their tax once they received their tax card. The foreign companies must report its investment operation to the authorities in whichever stage the business is currently placed, and therefore an authority is needed to make a report as per BKPM. Besides, the administration for tax reporting is simple and easy to outsource if there’s absence of accountant on the payroll system (Emerhub 2017).

The Surabaya city has shown a low percentage, 36.11% on the problem of property crime and 21.05% on violent crimes in the report. The last updated report in June 2017 has shown that the crime index in Surabaya is 30%, which indicates a low percentage and a high percentage of 70% in safety index (Numbeo 2017). Singapore has an overall lower crime index by 13% compare to Surabaya and a safety index of 83% which is much more safer than Surabaya (Numbeo 2017).

The legal system in Indonesia is based on civil law which consists of codes and statutes to be applied in all cases while Singapore uses common law instead. Business agreements in civil law countries would be the summary of the facts by using broader terms while in Common law countries, the counterparts are more clear and lengthy where intentions and legal definitions are taken in a more expressive manner (Stec 2017). Consequently, The World Justice Project has shown that Indonesia was ranked number 61 for its effectiveness of rule of law compare to Singapore that ranked, 9 in the whole world (Guide Me Singapore 2017). The law in Indonesia shows that foreign companies are not allowed to operate in Indonesia without any share ownership with a limited liability company – Perseroan Terbatas (PT) – that resides in Indonesia. This is because other trust institutions are only conducted by banks. Therefore, PT is the only choice to conduct any foreign direct investment that is under International Law (Saraswati, Engel, and Tisnadisastra 2017).

In terms of salary, there is no minimum wage set by government in Singapore where it is independently discussed between the employee and the employer. However, the lowest amount that can be legally paid to the employee must be the same with a minimum remuneration for a cleaner and a security jobs which are S$1,000 and S$1,100 per month respectively (Singapore Minimum Wage Rate 2017). On the other hand, Indonesia’s government regulated the minimum wages for each region where in Surabaya, including in Eastern Java is Rp1,388,000 or S$142.2 per month (Wage Indicator 2016). This regulation of minimum wages is valid for the year of 2017.

Koi Café that has established in Jakarta are crowded especially on weekends and this results in long queue for customers to wait (Fat Influence 2014). Koi Café could hire more employees to reduce waiting time for the customers where this can show how considerate Koi Café is onto customer’s time. Koi Café would have to apply higher fees on their safety measure, insurance coverage and salary on their business operations, and along with a higher tax will lead to a higher expense. Besides, Koi Café could apply online advertising strategy to attain the attention of target market in order to cover the expenses on a higher tax and there are less restriction in terms of legal laws through online media compare to others.

7.0 SWOT Analysis

7.1 Strengths

In Singapore, Koi Café has stand out in the F&B market since the year 2007. In the capital city of Indonesia, Jakarta, the Koi Café turns into a demand product for the customers as most the them prefer to drink bubble tea over coffee or frappe from Starbucks or any other coffee shops presented in that area. Koi Café is also a well-established division of the marketing team, which focuses on the customers that prefer to taste a variety of bubble tea flavors. Koi Café advertised themselves in all social media platform, which is used in Singapore and Indonesia, hence spreading the brand awareness amongst as many customers as possible.

Taiwanese bubble tea has been a fast growing concept that causes customers to prefer Koi Café’s product more. Koi Café provides the genuine Taiwanese tea, which is a popular form of tea and also amongst the top produced tea around the world. Koi Café has a lot of different kind of beverages to choose which are provided on the menu. Koi Café does not only serves bubble tea which is their specialty, but also milk tea, macchiato, fruit base and coffee so that customers can choose what to drink under their preference. Therefore, the menu carries a lot of advantage for the Koi Café as they provides choices for customers to suit their fondness.

Koi Café also allows customers to customize their own sugar level and amount of ice in their own drink as customers nowadays are more health conscious and prefer to have less sweetness in their drinks. Koi Café also does not contain any kind of animal such as pork which restricted in Islamic culture. In addition, since Koi Café has ventured to Jakarta, the management practices in Jakarta can be used as a reference by the Koi Cafe in Surabaya.

7.2 Weaknesses

In a developing country like Indonesia, the government has applied various rules and regulations in order to increase the process even at an expeditious rate. As Indonesian government wants more local companies to grow and contribute to the economy, foreign companies such as Koi Café are obliged to share their ownership with one of the local companies in Surabaya in order to open their outlet in Surabaya. In Jakarta, Koi Café has already agreed to open their outlet with the help of a local company; hence, they have to do the same thing in Surabaya, which means that, all the profits and losses are shared between Koi and the local company.

In addition, Indonesian customers prefer to purchase the product which has more attributes by comparing one product to another (Yosini 2011, 36). So, if customers compare a local brand with an imported brand like Koi Café and the customers find out that the local brand is better than Koi Café, they would go with the local product as it suits their preferences and needs.

7.3 Opportunities

As the world’s fourth most populous nation, Indonesia has given a chance for Koi Café because of its number of potential customers. Surabaya is the second most populated city in Indonesia which has about 2.843 million people that offers a large number of potential customers. The potential customers are not only the local people, but also the tourist that visit Surabaya for its tourist places. Customers in Indonesia can experience hot weather for a full year. The weather creates an opportunity for Koi Café that sells cold beverages. It is believed that customers prefer cold beverages over hot beverages while the temperature is hot because cold beverages can relieve thirst. Moreover, Indonesia is a collectivist country, the customers are expected to also buy the drink for their friends or family. Thus, the sales of Koi will be estimated to be high.

The sales of Koi Café can also be escalated by partnering with the biggest food delivery service in Indonesia called Go-Food. Koi will not need to add more management or staff to handle the order via Go-Food. This is because Go-Food acts as the third party whereby their agents who take orders from direct customers will queue just like the normal customer. The infrastructure in Surabaya is also advantageous to Koi Café. Import materials can be accessed easily from its international airport and port. In addition, there will be a toll road that connects Jakarta and Surabaya in the end of 2018. The toll can help Koi reduce logistic costs if Koi Café in Surabaya takes the materials from Koi Café Jakarta rather than importing from other country.

Koi Café in Jakarta is usually crowded especially on weekend. Jakarta, as the capital city of Indonesia, has the highest monthly wages compared to other regions in Indonesia. For the year of 2017, Jakarta monthly minimum wages is Rp3,335,750 or S$341.7 while Surabaya monthly minimum wages is S$142.2. This lower wage can be used by Koi Café in Surabaya to hire more employee to reduce long queues especially on weekends experienced at Koi Café Jakarta.

Business sustainability is as important as high sales revenue. Now, Indonesia and Surabaya has stable political situations that can make Koi Café sustain for long. Coup that can make Koi Café to close down does not seem to happen in the future. Moreover, Indonesian tend to not show their anger in front of others. In other words, Koi Café staff will rarely get angry with customers. Therefore, this can make a good business image.

7.4 Threats

There are some threats that needs to be investigate by Koi Café when venturing their business to Surabaya, Indonesia. First, majority of Indonesian and Surabaya citizens embrace Islam. One of the duties of Islam adherent, Muslim, is to fast for 30 days continuously during the fasting month. While fasting, they refrain from eating and drinking during the day. Therefore, Muslim customers will refrain from purchasing Koi drinks as to comply with their religion. As a consequence, Koi’s sales revenue will be predicted to fall during this period.

Second, the threat from direct and indirect competitors. From direct competitors, there are two bubble tea brands that are popular in the Surabaya market such as Calais and Chatime. Calais’ co-founder, Billy Kurniawan, stated that even Calais despite being a local bubble tea brand, they only import Taiwan’s highest quality teas which is AA grade. Calais believes that speed service is essential to customer’s satisfaction. Therefore, Calais assures customers that customers only take a minute to order a drink (Tea Calais 2013). Local brand is not always at a disadvantageous position. According to Oxford Business Group (2017), 9 out of ten most popular brands in the country were made in Indonesia. This is because Indonesian are becoming more nationalistic in their shopping habits.

On the other hand, Chatime is also a Taiwanese based bubble tea company. Basically, Chatime and Koi is quite similar in term of menu. Chatime offer not only bubble tea, but also traditional tea, fruit based tea, smoothies, coffee, and chocolate blends (Chatime 2015). The price of Calais’ bubble tea and Chatime’s bubble tea in Surabaya is almost the same with Koi’s bubble tea in Jakarta which around Rp24,000 to Rp25.000. Therefore, the price is not a threat for Koi, but the similarities in the menu is a threat for Koi that can affect Koi Café because the taste between Koi Café and Chatime is definitely different and customers have their own preference in terms of taste, sweetness level or other factors.

From indirect competitors, there are 63.24 percent of Indonesian respondents declared that they consume tea regularly, 58.77 percent on coffee, 43.71 percent on juice, 33.51 percent on mineral bottled water, and 25.33% on regular soda drinks (The Statistics Portal 2016). In the tea market, Teh Botol Sosro dominate the market with 60 percent market shares (Suzuki 2015).

Thirdly, for foreign companies who wants to open up their business in Indonesia, there is 25% of tax rate imposed to these companies, which will run till the year of 2020. Comparatively to Singapore, the difference of tax rate implied to the foreign companies is 11%, which is quite significant. Hence, the huge tax rate slapped on these foreign companies also becomes a threat for Koi Café.

8.0 Marketing Objectives

1) To achieve 20% of the market share by 31 December 2018

2) To achieve $850,000 of profits by 31 December 2018

3) To achieve 75 % of brand awareness by 31 December 2018

9.0 Market Segmentation

Demographics:

Age Range

12 to 35

Gender

Female

Education Level

Secondary and above

Psychographics:

AIO

Community, Food, Products (Kotler et al. 2009, 171).

Roy Morgan

Real Conservatism, refers to a pattern of responses from people who are cautious towards new things and ideas and attracted to established brands (Kotler et al. 2009, 171).

VALS

Believers, family and community oriented people, modest means, and brand loyal (Kotler et al. 2009, 171).

Koi Café as a beverages company which specialised in bubble tea should target young age customers between 12 to 35 years old. Bubble tea sometimes takes longer time to consume because of the chewiness of the tapioca-based bubble. Young customers that Koi Café should specifically target are students starting from junior high school to university students and young adults. This is because they can enjoy the drink while they are doing their assignments or tasks. In addition, young customers are typically act as early adopters who are willing to try the new products in the early stage of product life cycle (On Digital Marketing 2017).

This is suitable for the target market who are cautious towards new things and ideas and attracted to established brand. By targeting early adopters, Koi Café can stabilize their cash flow in the introduction stage and continuing to the growth stage. This statement is supported by the findings of Carnrite (2017) which said that early adopters are able to influence other customers to purchase the product because they tend to advertise new products.

Koi Café’s target market can be both male and female, but female seems to like bubble tea more than male because bubble teas are perceived to be a more feminine trait. Moreover, female uses social media to share their activities, interests, and opinions whereas males use social media for business purposes (Vermeren 2015). This can be linked to the target market’s AIO because when female customers are interested in food, they will share their experiences.

10.0 Marketing Mix Strategies

10.1 Product

Since Koi Café has expanded its business operations and ventures around Southeast Asia, it has been deemed as an international brand. The product life cycle of Koi Café is Indonesia is considered to be in the growth stage.

According to Fletcher and Crawford (2013), characteristics like taste and the style of the product need necessary modifications for Koi Café to increase its sales and popularize their market overseas. In Surabaya, making adjustments with the sugar level, such as, increasing the amount level for sugar options to add on with the drinks and increasing the amount of ice as Surabaya goes through some humid months in a year, and introducing local tea leaves in the drinks of Koi Café among the Indonesian customers will increase the marketability of Koi Café in Surabaya.

As majority of the people in Indonesia belong from the Islamic culture, there are restrictions in terms of food and drinks selections, but this factor does not affect Koi Café as there are no animal extract present in their beverages. According to the Hofstede Cultural dimension, there is almost same similarity between the people of Indonesia and Singapore, as both of the countries exists in multicultural societies where Halal is considered to be legal, so there is no major adaption strategy to be implemented for the production modification level of Koi Café to be established in Surabaya.

The products that are highly coerced culturally do not have an advantage from the high scale economies and are more complex to standardize (Quelch and Hoff 1986, quoted in Omar and Porter 2011, 387). Furthermore, within a country, that is comparatively analogous, differences in the subculture usually persist and will have an influence on the international firms, and will be influenced by the culture in which the firm operates. These kind of issues remain consequential, despite the fact that the world is becoming more conscious of becoming more parallel as evidenced by a few international or standardized “products and brand names”, that enables firms to gravitate expanding towards a standardization strategy. There will be a lower degree of standardization when there are great cultural differences between the home country and the host country.

In Indonesia, the government focuses on the top 10 priority groups, with the food and beverage industry being one of the main priority for the customers in Indonesia. Over the recent years, the expenditure on the food and beverage industry has been almost tripled since the year of 2013 (Global Business Guide Indonesia 2014). Due to such redefinition, the predicted growth of the food and beverage in Indonesia is deemed to grow by at least 11% for the next few years. This would outperform the overall economy and this trend is expected to be lasted for a long period of time by the analysts. The overall sales for beverages and drinks are going to be even stronger which is being expected to grow by 9% between the years of 2014 to 2018. The beverage industry of Indonesia is expected to see a significant consolidation over the coming years, hence, Koi Café can have a better establishment when they have stores in the Surabaya opened up.