SG5 - Coffee Business - Edit 26aug at 11.50 WIB

Mini Cases on
Coffee Business
Syndicate Group 5
1. Akhmad Kurnia (29320050)

2. Fadhila Nurfida Hanif (29320149)
3. Imam Luqman Hakim (29320073)
4. Monik Umi Sakinah (29320220)
Starbucks
● Since its founding days in the early 1990s, Starbucks has strived to build its brand
identity by offering customers a relaxing and enjoyable experience. From the very
beginning, the experiential aspect of the brand has been consistently and effectively
implemented in all its stores across the world. In addition, Starbucks has also built its
brand on things that tend to be out of the box, by consistently defying conventional
wisdom.
● When companies were aggressively advertising, Starbucks decided not to advertise.

When cost cutting was the dominant paradigm of the industry, Starbucks chose to
emphasize non-routine procedures to create excitement among the baristas instead
of streamlining procedures to minimize cost. Unlike most other companies, Starbucks
made its employees its partners, by offering them stock options and health insurance.
In 2014, it announced that it would pay for its US employees to complete an online
bachelor’s degree at Arizona State University. Although the pros and cons of this
employee benefit and Starbucks’ motivation behind the offer were widely debated, it
again defined the organisation’s intent to go against the norms.
Kopi Kenangan
● Kopi Kenangan was founded by Edward Tirtanata, James Prananto and Cynthia
Chaerunnisa in 2017. The first shop was in the Kuningan area. On the first day of the
opening of Kopi Kenangan, the shop managed to sell only 700 cups of coffee. Two
years later, Kopi Kenangan has opened more than 230 shops throughout Indonesia.
● Kopi Kenangan is considered successful in filling the price gap between expensive
coffee of international retailer standards and packaged instant coffee served in
coffee shops. The prestige of the Kopi Kenangan brand is getting stronger along with
the development of the Kopi Kenangan business, especially since it received an
injection of funds from several venture capitalists, such as Sequoia India, Arrive,
Serena Ventures and Alpha JWC Ventures. Kopi Kenangan plans to expand its market
overseas by introducing the distinctive taste of Indonesian coffee.
Kapal Api
● Kapal Api coffee is produced by PT. Santos Jaya Abadi which is a multinational
company that produces a variety of packaged coffee and packaged drinks. Head
office of PT. Santos Jaya Abadi is located in Panjang, Sidoarjo.
● Since it started operating, PT. Santos Jaya Abadi has innovated and produced a
variety of packaged coffee with guaranteed quality and has a distinctive taste
● Kapal Api coffee has existed since the Dutch colonial era came to Indonesia.
Previously, the Kapal Api coffee company was founded, in 1927, three brothers
namely Go Soe Loet, Go Bi Tjong and Go Soe Bin established a coffee frying factory
in the Customs area, Surabaya and produced a superior product called Kopi Bubuk
Hap Hoo Tjan. Then, the coffee products are sold around the village and around the
Port of Tanjung Perak.
1. What are the similarities and differences among the three
companies (Starbuck, Kopi Kapal Api, and Kopi Kenangan)?
Similiarities: coffee product, focus on quality, advanced equipment, focus on technology,
visionary leadership, continous improvement, adaptative, digital marketing, come
from market demand, scale up ability, sustain competitive advantages
Differences:
Differences Starbucks Kopi Kenangan Kapal Api
Market segment Middle-up Middle Low
Target Socialite Office employees All levels of people
Potitioning Experience & life style Quality with affordable price Authentic Indonesian coffee
Demographic Urban Urban All regions (urban & rural)
Concept Grab and stay Grab and go Everywhere, everytime
Price High Medium Cheaper by dozens
Distribution channel Coffee shop Coffee shop Retailer
Product Ready to drink Ready to drink Coffee powder
Promotion Social media & word of mouth Social media & word of mouth ATL & BTL
Co-creation Yes No Yes
2. How do you explain that the coffee business still attract new
entrance (such as the recent entry by Kopi Kenangan) in the
seemingly a lot of competition?
1. Drinking coffee is a culture of Indonesian people. Indonesia has a huge

market area. The demand is high and market structure is monopolistic
competition. So the coffee business can easily enter the market.
2. Different people have different tastes and purchasing power. So the
coffee business can determine their own market target.
3. Indonesia has high potential local resource (various type of coffee and
the other ingredient like sugar, milk, herbs & spices).
4. Raw material price of coffee product is relatively low and the process is
relatively simple, so it attract new entrance to enter the market.
5. Many success story of coffee business, such as BEP of Kopi Kenangan in 3
months.
3. How would you then explain that Kopi Kenangan
strategy is working for the company?
1. Operation management excellence

2. Strategy on uniqeness:
a. segmenting customers (middle customers between Stackbucks and
Kapal Api)
b. Branding: low price but high quality, easy to remember the name
c. Innovation of new recipes of product
3. Trade off:
a. Cost efficiently by open many outlets with minimal space to stay &
drink coffee
b. 1% marketing budget  marketing by social media & word of
mouth
4. Aggresive partnering to gain funds (get funds from overseas such as
India, Jay Z, Serena William, etc)
4. Related to no.1 above, can you be more specific on the sense of purposes
of the founders/main leaders of the three companies that have or may have
contributed to the success of those three companies?
Starbucks Kopi Kenangan Kopi Kapal Api
 Leader’s Vision:  Leader vision: want to bring  Leader vision: wants to create
- wants to create a unique coffee with a branded product coffee with authentic
customer experience over around the world Indonesian flavors
the world  Strategic leaders level: 4  Strategic leaders level: 5
- To create a third place  Strategic management  Strategic management
between home and work planning: top down planning: top down
where people would want
to visit, ideally daily and
enjoy a sofisticated cup of
coffee
 Strategic leaders level: 5
 Strategic management
planning: top down combine
with bottom up emergence
strategy
5. How did Starbucks create its uniqueness in the
first place? Why was this uniqueness so
successful?
Starbucks’ core competency is to create a unique consumer experience the
world over. The trademark of any Starbucks location is its ambience—the
music and comfortable chairs and sofas draw customers in to sit and visit
with friends while enjoying their beverages (and in some locations wine),
food (a more recent addition), and complimentary WiFi.
6. To be a source of competitive advantage over time, core
competencies need to be continuously honed and upgraded. Why and
how did Starbucks lose its uniqueness and struggle in the mid-2000s?
What strategic initiatives did Howard Schultz, following his return as
CEO in 2008, put in place to recreate Starbucks’ uniqueness?
 In trying to keep up with its explosive growth in both stores and diverse product offerings, Starbucks began to
forget its core competency. It lost the appeal that made it special and its unique culture became diluted.
 Strategic innitiatives :rolled out new customer service guidelines: Baristas would no longer make multiple
drinks at the same time, but, rather, concentrate on no more than two drinks at a time, starting a second one
while finishing the first. Schultz also focused on readjusting store managers’ goals.
 goal to increase store traffic beyond the regular morning hours, when customers typically visited for their daily
shots of caffeine. Schultz started by adding baked goods, sandwiches, and other small food items to the menu.
To invite an even later crowd, he then introduced fresh vegetable plates, flatbread pizza, cheese plates, and
desserts. Eventually, he added alcoholic beverages such as wine and beer (to be served after 4 p.m. only) as part
of Starbucks’ “Evenings” program.
 introducing new luxury items, catering to the wealthier customers within its existing customer base.
7. What is your assessment of Howard Schultz as a strategic
leader? Where on the Level-5 pyramid of strategic leadership
(see Exhibit 2.2) would you place Schultz? Why? Explain.
We believe Howard Schultz is an excellent strategic

leader and would rank him at level 5 (executive) on
the strategic leadership pyramid. When he returned
to Starbucks in 2008, he could see the big picture
and devise ways to deal with the crisis and in the
long run. Schultz ordered that more than 7,000
Starbucks locations in the United States close for
one day so that baristas could retrain how to make
the ideal cup of coffee. Despite the fact that the firm
lost over $6 million in revenue that day, Schultz
understood it was the key to ensuring the brand's
longevity.
8. Howard Schultz, as the creator of the Starbucks brand
that we know today, is a larger than life figure in the
company and business community. Do you think it is
difficult to follow such an iconic leader? Why, or why not?
Yes, it is to difficult to follow an iconic leader like Schultz

because he has excellent charisma and management
skills. In our opinion, it is difficult to imitate someone's
leadership character identically, considering that
character is influenced by various things and is shaped
over the years as we age.
Schultz could reassure investors' anxiety regarding the loss
of the program to restore Starbucks' core competencies.
Also he could maintain its core competencies but
continue to innovate and grow over time.
9. How is Kevin Johnson as CEO different from Howard Schultz? What
leadership style is Johnson pursuing? Do you think he will be
successful? Why, or why not?
 Johnson is taking a more rational and data-driven
approach, cutting-edge management and operational
practices (system 2).
Meanwhile, Howard Schultz leads Starbucks with
intuition, emotion, and creativity (system 1).
 Leadership style: Transformational Leadership
(make big changes and motivate and inspire
employees)*)
 Yes, we think Kevin Johnson will be a good CEO
because his leadership style is suited to the present
problems that Starbucks confronts. Kevin Johnson's
rigorous approach can assist Starbucks in maintaining
its existing core strengths, while his rational and
analytical approach can assist Starbucks in identifying
new opportunities for development.
*) https://www.verywellmind.com/leadership-styles-2795312
Input for Kopi Kenangan
 Building co-creation with customers so that they can innovate

products and services according to customer needs.

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Mini Cases on

1. Akhmad Kurnia (29320050)

● When companies were aggressively advertising, Starbucks decided not to advertise.

1. Drinking coffee is a culture of Indonesian people. Indonesia has a huge

1. Operation management excellence

Starbucks Kopi Kenangan Kopi Kapal Api

We believe Howard Schultz is an excellent strategic

Yes, it is to difficult to follow an iconic leader like Schultz

 Building co-creation with customers so that they can innovate

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