Topic marketing plan for highlands coffee to penetrate the market

TRƯỜNG ĐẠI HỌC KINH TẾ QUỐC DÂN VIỆN ĐÀO TẠO TIÊN TIẾN CHẤT LƯỢNG CAO VÀ POHE _*** _ INTERNATIONAL MARKET SELECTION & ENTRY MODES Topic: Marketing plan for Highlands Coffee to penetrate the market Team members of group : Nguyen Viet Hoa - 11212290 Ngo Quang Phuc - 11214695 Pham Khanh Linh – 11219190 Nguyen Thi Huyen Trang - 11215845 Nguyen Dieu Huong – 11212525 Class : Quản trị Marketing CLC 63B Teacher : Tran Viet An Hanoi, 3/10/2023 Contents About the environment of home country: Viet Nam 1.1 Geographic 1.2 Political 1.3 Economy 1.4 Religion About Highlands Coffee International market selection 3.1 Compare countries: Malaysia, Indonesia, Singapore 3.2 Market attractiveness evaluation 11 3.3 Value chain analysis 13 3.3.1 Product benefits for customer .13 3.3.2 Service benefits for customer 16 3.3.3 Direct (monetary) costs for customer 17 3.3.4 Indirect costs for customers (customer participation in achieving the benefits) .18 Entry modes 19 4.1 Reasons for choosing a franchise business form to enter the Malaysian market: 19 4.1.1 Internal factors .19 4.1.2 External factors 22 4.1.3 Desire mode characteristic 25 4.1.4 Transaction-specific factors 25 4.2 Building a franchise system for Highlands Coffee in the Malaysian market 25 4.2.1 Franchise form: 25 4.2.2 How to find a franchisor for Highlands in Malaysia 26 4.2.3 Franchise agreement content 26 SWOT Analysis of Highlands Coffee in the Malaysian Market .27 5.1 Strengths 27 5.2 Weaknesses 29 5.3 Opportunities 30 5.4 Threats 32 About the environment of home country: Viet Nam 1.1 Geographic Vietnam has a geographical advantage in terms of exporting and trading with ASEAN countries Our country's location at the crossroads of international maritime and air routes, coupled with extensive road and rail networks across Asia, facilitates connectivity with nations in the region and the world Vietnam's strategically favorable geographical position holds significant importance in developing economic sectors, regional territories, and creating conditions for implementing open-door policies, integration, and attracting foreign investment Furthermore, Vietnam's climate, geography, and suitable soil conditions have contributed to the distinctive and unique flavor of Vietnamese coffee Situated in the tropical belt, Vietnam experiences abundant sunshine and rainfall, particularly during the coffee growing months The country has a clear division in climate between the southern region with a hot and humid tropical climate suitable for Robusta coffee and the northern region with a cold winter and misty rain, ideal for Arabica coffee Vietnam's basaltic red soil is well-suited for coffee cultivation, distributed across the country but concentrated in two main regions: the Central Highlands and the Southeast, covering millions of hectares With its geographical advantages, Vietnam produces high-quality coffee beans that are highly regarded Vietnam has consistently maintained its position as the world's second-largest exporter of coffee and the top exporter of robusta coffee According to Vicofa, in recent years, Vietnamese coffee has been exported to over 85 countries and territories worldwide In 2022, coffee exports exceeded $4 billion, accounting for more than 15% of the world's coffee export market 1.2 Political Vietnam has been a member of ASEAN for 28 years (as of 2023) Consequently, its policies and directions for ASEAN cooperation have become a crucial component of Vietnam's new-era foreign policy, representing a strategic focus of Vietnam's multilateral diplomacy Throughout the process of joining and participating in ASEAN, Vietnam has made significant strides in foreign policy innovation, transitioning from the principle of 'more friends, fewer enemies' to diversifying and multilateralizing international relations Vietnam has evolved into an 'active, positive, and responsible member' within ASEAN, embodying the philosophy of 'proactive, positive, and responsible collaboration with ASEAN countries to build a robust community.' In recent years, Vietnam has achieved noteworthy results in foreign affairs Economic integration has deepened across various levels, from regional to global, taking diverse forms with active participation in various international organizations, forums, and multilateral conferences, particularly within ASEAN, the United Nations, and the Asia-Pacific Economic Cooperation (APEC) Vietnam has actively signed numerous new-generation bilateral and multilateral free trade agreements Vietnam's foreign relations and international integration continue to expand and deepen, establishing a framework for stable and sustainable relationships with its partners Vietnam's stable political situation with ASEAN acts as a bridge, and collaborative development policies create favorable conditions for Vietnamese businesses to penetrate foreign markets, particularly in Asia 1.3 Economy Vietnam has a dynamic business sector and a growing start-up ecosystem, which fosters innovation and entrepreneurship and has attracted investment from multinational enterprises, which bring technology and expertise to the local market These factors can help Vietnam increase its innovation output and export competitiveness, as well as create new markets and opportunities for trade Vietnam has increased its attention to environmental and social issues, which require technological solutions Vietnam has faced negative impacts of rapid growth and industrialization, such as greenhouse gas emissions, water pollution, waste management, and marine plastics Vietnam has committed to reducing its emissions to net zero by 2050 at the UN Climate Change Conference in Glasgow in 20213 According to the report of the General Statistics Office, Vietnam’s inflation in 2021 fluctuated from - 2.5%, and in 2022 it could reach 4%1 This is a high increase compared to the average of 1.84% in 20202 High inflation can reduce the value of the currency, increase the cost of living, and weaken the competitiveness of the economy For Highlands Coffee, inflation can increase the cost of raw materials, labor, rent, and advertising In 2022, due to the high pressure of economic inflation, the Highlands Coffee chain announced a 10-15% increase in prices, equivalent to 4,000-10,000 VND per product, with the reason of maintaining product quality, and service “in the situation of market fluctuations” Some products increase up to 18% 1.4 Religion On the morning of March 9, 2023, in Hanoi, the Ministry of Information and Communications and the Government Committee for Religious Affairs officially introduced the White Paper titled 'Religion and Religious Policies in Vietnam.' The White Paper begins by affirming that there is no discrimination or conflict between beliefs and religions in Vietnam Currently, there are 67 concentrated religious activity points for foreigners in Vietnam, primarily located in Ho Chi Minh City and Hanoi, representing various nationalities such as South Korea, the Philippines, Singapore, Malaysia, Russia, the United States, France, and more The White Paper also emphasizes that the State respects and ensures the freedom of belief and religion for legally residing foreigners in Vietnam In conclusion, Vietnam and Vietnamese businesses consistently maintain good cooperative relationships with religions worldwide, providing favorable conditions for religions to access high-quality products and services, including coffee This also contributes to the development of Vietnamese coffee-related products in various religious contexts About Highlands Coffee ● Branding Regarding the message: "Proud of Vietnamese coffee" and recently, Highlands has introduced the message: "Highlands Coffee® Belongs to Us." Highlands Coffee now goes beyond spreading the coffee culture story and aims to strengthen the connection among people, becoming a community hub consistent with the founder's vision since the early days of building the brand With its brand, Highlands Coffee consistently embodies simplicity, modernity, while preserving the Vietnamese identity, reaching international standards yet always focusing on the community ● Space The main color is the brand’s distinctive mark Each outlet within the Highlands Coffee chain will have its own decor style, but the commonality is maintaining the primary color – a warm and familiar shade of red This red tone creates a sense of luxury and coziness for customers, making it an ideal place for work, study, relaxation, or socializing with family and friends In terms of furniture, Highlands Coffee mainly features traditional Vietnamesestyle wooden tables and chairs Some Highlands cafes also decorate with handwoven lights made from materials like rattan and bamboo, providing a rustic feel The soft light from these handwoven lanterns enhances the cozy and relaxed ambiance of the café ● Product Service: Highlands Coffee is consistently praised by its customers for its attentive and friendly service From the moment customers step into the store, they are warmly welcomed by the staff Customers then place their orders at the counter, where the staff introduces the menu and assists customers in making the most suitable choices After ordering and making payment at the counter, the staff provides a receipt and a calling card for customers to collect their drinks when their order is ready During the waiting period, customers can help themselves to chilled, purified water Once an order is placed, the staff promptly receives it and begins the preparation process to serve customers as quickly as possible Drinks: Highlands Coffee, renowned for its unwavering commitment to using clean, high-quality ingredients, has maintained its artisanal approach to coffee bean selection This meticulous process ensures that Highlands Coffee consistently delivers top-notch coffee beans, combined with unique brewing techniques, resulting in a diverse and enticing menu catering to a wide range of customers Highlands Coffee blends the finest Robusta and Arabica coffee beans, cultivated in the lush highlands of Vietnam, using distinctive roasting and grinding techniques This meticulous process guarantees the delivery of exceptional coffee products to customers This commitment to quality begins with the careful selection of coffee beans, as Highlands Coffee exclusively collaborates with reputable suppliers to source the finest coffee beans Additionally, their other beverages, such as Freezes and teas, are steeped in Vietnamese culture, using locally sourced ingredients that showcase the distinctive flavors of Vietnam Document continues below Discover more from: International Marketing Đại học Kinh tế Quốc dân 70 documents Go to course 18 De cuong on tap hoc ki lop global success nam hoc 2022 International Marketing 100% (5) [123doc] - bo-cau-hoi-trac-nghiem-marketing-co-dap-an 15 International Marketing 100% (5) UK Pestle Analysis 68 International Marketing 100% (2) MKT asm - Individual assignment for Fentimans case 11 International Marketing 100% (2) Discuss the market segmentation of Samsung 18 120 International Marketing 100% (2) 123doc xay dung chien luoc tham nhap thi truong eu cho cong ty hai san 404 pdf International Marketing 100% (2) International market selection 3.1 Compare countries: Malaysia, Indonesia, Singapore Malaysia Indonesia Singapore Market share Revenue in the Coffee market amounts to US$210.6m in 2023 Revenue in the Coffee market amounts to US$2.7bn in 2023 Revenue in the Coffee market amounts to US$160.6m in 2023 Market growth A statistical analysis on coffee consumption in Malaysia shows that coffee consumption has increased from 20.69 million kg in 2020 to 35.82 million kg in 2021 and 2022 (Statista, 2021) Indonesia’s 2022/23 coffee production is forecast to increase by percent from the previous year to 11.35 million (60 kilogram) bags on favorable weather in southern Sumatra Improved demand following the easing of pandemic-related Singapore's coffee sales are set to increase steadily by 3.2% value compound annual growth rate (CAGR) over 2022–27, according to GlobalData In 2022, the retail sales value of cafes and bars in Malaysia amounted to around 1.25 billion U.S dollars, an increase compared to the previous year restrictions is expected to raise domestic coffee consumption to 4.8 million bags in 2022/23 Prices According to data from 2020, the average price of a cup of coffee in Malaysia is approximately $1.20 1.70 The average price of a cup of coffee in Indonesia varies depending on the location and type of establishment In major cities like Jakarta and Surabaya, a cup of coffee at a café or restaurant can cost approximately $1.40 - 2.10 At a street vendor or small café, a cup of coffee may only cost approximately $0.70 1.05 The average price of a Coffee/Tea Without Milk (Per Cup) was reported at approximately $0.9/Cup in July 2023 Buying power Purchasing power of Malaysia is 65.7 in 2023 Purchasing power of Indonesia is 27.5 in 2023 Purchasing power of Singapore is 95.6 in 2023 In 2022, the sales value of independent cafés and bars in Indonesia amounted to approximately 1.3 billion U.S dollars Cost of living in Indonesia is, on average, 10.3% lower than in Vietnam Kopitiam is a type of coffee shop mostly found in parts of Indonesia, Malaysia, Competitive Singapore In Malaysia, Singapore and Indonesia, Kopitiams are found almost intensity everywhere There are no less than 100 brand names of modern kopitiam operating in various part of Malaysia As of 2021, Kopi Janji Jiwa has the largest number of outlets among other coffee shops in Indonesia, with 920 outlets spread across Indonesia Kopitiam in Singapore are commonly found in almost all residential areas as well as some industrial and business districts in the country, numbering about 2,000 in total The expansive popularity of tea is currently posing a challenge to the coffee market's growth Highlands Coffee not only competes with specialty coffee shops in Malaysia but also faces competition from Vietnamese counterparts such as Cộng Cà Phê,Trung Nguyên and Kee Nguyễn, a coffee startup in Malaysia that has now expanded to 40 outlets Additionally Market access The number of Vietnamese residents living and working in Malaysia is significant, and the opening of Vietnamese restaurants and eateries has become an effective channel for promoting culture and cuisine in the host country Malaysia is a diverse, multi-ethnic Muslim nation, with approximately 30% of its population being of Chinese and Indian descent As a result, the overall food market and specifically the coffee market are highly varied and rich With a Muslim-majority population, coffee shops became the go-to hangout spot instead of bars In the past few years, local coffee chains have overtaken global brands in terms of market presence In 2021, there were approximately eight thousand cafés and bars in Indonesia, an increase compared to the previous year The number of cafés and bars in the country continued to increase over the observed period The Vietnamese community in Indonesia currently consists of approximately 500 individuals, including around 150 permanent residents who live and work long-term Despite its modest population size, there is a significant number of Vietnamese restaurants in major cities across Indonesia These Vietnamese eateries attract considerable attention, owing to the rising trend of consuming healthy food Coffee consumption in Indonesia, especially Sumatran Arabica coffee The coffee market in Singapore is poised for increased competition as Luckin Coffee and Tim Hortons announce plans for outlet expansion In Singapore there are an estimated 322 coffee shops and hundreds of them are found in the HDB estates In Singapore, the competitor of Highlands Coffee, Trung Nguyen Coffee, is expanding and gaining popularity As of now, Trung Nguyen Coffee has successfully established branches in Singapore In Singapore, there's a community of around 10,000 Vietnamese individuals who both work and reside in the country This community is primarily composed of young people, many of whom are highly educated and involved in labor activities With 38% of the population being foreigners, Singapore's culture is incredibly diverse and vibrant Vietnamese culture is warmly welcomed here, and it's now quite easy to locate Vietnamese restaurants throughout the country Highlands Coffee focuses on the “customer-centric” working style so the company is ready to answer and support customers for free Indirect costs for the customers Bad Good Conversion/ negotiation with the supplier (transaction costs) ● Internal costs ● Long lead time ● Service costs Total ● 16 CPV = ⇒ CPV is more than 1, the better the perceived value for the customer and the better the competitiveness Entry modes 4.1 Reasons for choosing a franchise business form to enter the Malaysian market: 4.1.1 Internal factors ● Supported by Jollibee JC Highlands coffee is owned by Jollibee JC Group (51% shares) and Viet Thai International (49% shares) Jollibee JC owns a fast food restaurant chain called Jollibee covering 24 countries and territories As of the end of January 2023, Jollibee Foods Corp said its network was 6,481 stores globally In fiscal 2022, Jollibee Foods Corp recorded revenue growth of 38% year-on-year, reaching 211.9 billion Philippine pesos ($3.8 billion) According to Forbes, JFC is one of the fastest growing Asian restaurant chains in the world 19 According to VNExpress, JFC's revenue and profits increase at a rate of 15% each year Overcoming two years of poor business due to the pandemic, Jollibee Foods said that so far all brands have registered double-digit growth After buying Highlands Coffee, Jollibee also brought Highlands Coffee into its restaurant chain outside the Vietnamese market and more or less impressed customers Jollibee said that in addition to continuing to develop this coffee chain in Vietnam, they will bring Highlands Coffee products to other Jollibee restaurant systems throughout Asia This will be a significant added value for Jollibee, because currently Vietnamese coffee is recognized by the world as top quality Highlands coffee: ● Domestic business activities: In 2020, Highlands Coffee continued to maintain its position as the largest coffee chain in Vietnam, with the gap compared to the other group not changing much Total revenue reached nearly 2,140 billion VND, only slightly decreasing According to estimates, the revenue that the Vietnamese coffee chain 2022 achieved was around 3,700 billion VND This is a record level for Highlands Coffee, growing strongly compared to 2021 affected by the Covid pandemic Highlands Coffee continues to strengthen its position as the largest coffee chain in Vietnam According to cafebiz 20 With a positive domestic business situation, Highlands Coffee is fully capable of expanding to the world to strengthen its position as well as bring pure Vietnamese coffee to international friends In 2020, the Highlands Coffee chain achieved impressive revenues exceeding 2.139 trillion Vietnamese dong, with a post-tax profit of 112.5 billion dong However, in 2021, under the significant impact of the Covid-19 pandemic, economies in many places faced complete shutdowns due to strict social distancing measures, especially in major cities The service sector encountered numerous challenges, and Highlands Coffee was not immune to these effects The company's revenue decreased to 1.729 21 billion VND, representing a 19% decline, and the company reported a historic loss of 19 billion dong after several years of profitable operations In June 2022, Highlands Coffee garnered attention by announcing substantial price increases for their products This decision yielded unexpected results for the brand In 2022, Highlands Coffee's revenue doubled to 3.569 billion VND, and posttax profits also surged to over 265 billion VND, reversing the losses recorded in 2021 As of December 31, 2022, the company had short-term financial debts amounting to 228 billion VND and long-term financial debts of 285 billion VND ● Franchise experience in the Philippines The Manila-based fast food group's full-year 2022 results show it opened 73 new Highlands Coffee outlets last year to reach 605, of which 52 are in the Philippines, Highlands Coffee’s only international market.This is also a Southeast Asian country, above all the Philippines has close cultural ties with Malaysia The people of the island group that includes Malaysia, Indonesia and the Philippines are ethnically similar, most speaking closely related Malayo-Polynesian languages Both countries also have large populations that often maintain close cross-border relations 4.1.2 External factors Franchise activities in the Asian market: According to the International Franchise Association (IFA), franchising in Asia generates more than 500 billion USD in revenue each year In 2021, franchising grew the strongest in Korea with a contribution to GDP of 7.8%, Malaysia 6.3%, Philippines 5%, Singapore 3% ● Malaysia Market: Interest in Malaysian franchising Franchising in Malaysia is governed by the Franchise Act 1998, which came into force on October 1999 The FA 1998 provides a legal definition of franchising and regulates business models business falls within the legal definition of franchising According to FA (1998), every franchising business in Malaysia is required to be registered with the ROF, the Registrar of Franchises, authorized by the Franchise Act 1998 Failure to Compliance is considered an offense The Malaysian Franchise Association was established in 1994 to support the implementation of the Government's program to promote entrepreneurship through franchising The formation of MFA is indeed timely to promote the growth of 22 franchising in Malaysia MFA serves as a resource center for both current and prospective franchisors and franchisees, as well as for the media and the public Food and beverage franchising in Malaysia Major contributor to the Malaysian economy since its establishment in the 1940s Since the 1940s when franchising first emerged in Malaysia, the Malaysian government has established a number of rules and laws to promote and encourage franchise investors (franchisees) to start franchising and licensing Currently, in Kuala Lumpur there are about two or more franchised restaurants or beverage outlets in each small town Additionally, every month, new restaurant outlets are opened around Kuala Lumpur and other parts of Malaysia Most of these restaurants and beverage outlets earn huge profits every year as stated in their annual reports Making profits each year shows the positive response of Malaysians towards these brands, where most of them have many customers from morning to night every day Therefore, food and beverage franchising in Malaysia plays a huge role in boosting the economy and serving the needs of the people in Malaysia Trends of investors in Malaysia Nowadays, franchising is not only becoming popular but also one of the preferred ways of doing business that is growing stronger and stronger, most Malaysian investors now prefer to invest in international franchises where the business's brand is stronger in the market Supporting and promoting activities for franchising Many events related to the franchising sector take place every year in Malaysia, such as the Malaysia Franchise Awards These prestigious awards provide a valuable opportunity for franchise entrepreneurs to be recognized as the best franchise of the year The most important franchise exhibition is Franchise International Malaysia (FIM), organized by the Ministry of Entrepreneurship and Cooperative Development and the Malaysian Franchise Association ● Social cultural distance Malaysia's socio-cultural environment is a vibrant tapestry of diversity and harmony, where various ethnic and religious groups coexist with a sense of unity With its rich multicultural heritage, Malaysia is a captivating blend of traditions, languages, and beliefs that shape the nation's unique identity Language plays a crucial role in Malaysia's cultural mosaic Malay, the national language, is the primary medium of instruction in public schools and is 23 spoken by the majority of Malaysians English, as a widely used second language, facilitates communication in business, science, and technology Additionally, a multitude of other languages, including various Chinese dialects, Tamil, Punjabi, Arabic, and indigenous languages, contribute to the country's linguistic diversity Religion is another fundamental aspect of Malaysia's sociocultural landscape While Malaysia is a secular state that upholds freedom of religion, Islam holds the status of the official religion, with the majority of the population identifying as Muslims Alongside Islam, Buddhism, Christianity, Hinduism, and Sikhism are practiced by various communities, reflecting the nation's religious pluralism A small segment of the population also includes atheists, agnostics, and individuals with diverse beliefs Ethnicity plays a pivotal role in shaping Malaysia's cultural tapestry The three primary ethnic groups, Malays, Chinese, and Indians, each contribute their unique customs and traditions Malays, the largest group, predominantly follow Islam and speak Malay Chinese Malaysians, the second-largest group, practice Buddhism, Taoism, or Christianity, and speak a range of Chinese dialects Indians in Malaysia, the third-largest ethnic group, primarily adhere to Hinduism or Sikhism and communicate in Tamil or Punjabi Additionally, indigenous communities in Sabah and Sarawak bring their distinct cultural elements, languages, and belief systems to the nation Values in Malaysian society are rooted in collectivism, emphasizing group harmony, loyalty, and consensus Politeness, respect, and hospitality are deeply ingrained in Malaysian culture, particularly when interacting with elders, superiors, or guests The significance of family, religion, and tradition is highly regarded, and sensitive topics like politics, sex, and race are generally approached with caution to avoid causing offense or controversy => Malaysia is one of the largest consumers of coffee in Southeast Asia, with an average annual per capita consumption of 2.4 kilograms The demand for coffee in Malaysia is driven by its urban lifestyle, young population, and growing middle class Malaysia also has a strong coffee culture, with various types of coffee such as kopi (traditional Malaysian coffee), white coffee (coffee with condensed milk), and kopi tarik (pulled coffee) Vietnamese coffee, especially the Robusta variety, is popular among Malaysian consumers for its strong flavor and aroma Vietnamese coffee also appeals to the Muslim market, as it is halal-certified and does not contain alcohol or pork products ● Country risk/ Demand uncertainty Vietnam has three coffee chains with stable growth in Malaysia, as Malaysia is considered an open market where the government welcomes international products to enrich the country's economy Vietnam is an official strategic partner of Malaysia, and the good and favorable diplomatic relations between the two countries will create a 24 stepping stone for Vietnamese businesses to invest and operate in the Malaysian market ● Competition: significant competition from well-established big countries brands and developing Vietnamese coffee brands in Malaysia ● Direct and indirect barrier: lower trade restriction and liberalize its oversea trading system 4.1.3 Desire mode characteristic Highlands Coffee is a company with a medium level of willingness to bear risks, resources with high commitment and ownership of the enterprise Businesses want to integrate their own - managed stores in terms of product, human resources, training, window-dressing, interior design, logistical optimization and so on This ensures uniformity in store management criteria and a cohesive image in the eyes of customers 4.1.4 Transaction-specific factors ● Tacit know- how The nature of the firm-specific know-how transferred is not highly tacit, and Highlands Coffee can use the franchising method to introduce products/services to the Malaysian customers Based on research and analytical models to assess the business environment in the Malaysian coffee market, we then choose a franchising method to enter the market Highlands Coffee’s franchising development begins as a response to the local opportunity, and an adaptation of a franchising concept already operating in another foreign market In addition, the local market provides a better environment for testing and developing the franchising format Feedback from the marketplace and franchisees can be obtained more readily because of the ease of communication Adjustments can be made more quickly because of the close local contact By using highly motivated business contacts with money, local market knowledge and experience, Highlands Coffee can reduce risks and cost to enter the market and at the same time, have greater degree of control However, this method can bring some risk to the organization since they need to invest more money, time, and resources to market the brand internationally and have higher potential of facing local legislation if they are not careful 25 4.2 Building a franchise system for Highlands Coffee in the Malaysian market 4.2.1 Franchise form: The group aims at Business format "package" franchising with direct franchising for the following reasons: Malaysia is a new market with much potential Other Vietnamese coffee brands such as Trung Nguyen Legend or Cộng Cà Phê have also brought their coffee model as well as the taste of Vietnamese coffee to local people in Malaysia Currently, Trung Nguyen Legend and Cộng Cà Phê establishments are both maintaining sales Notably, Cộng Cà Phê has facilities in Malaysia despite the time of entering the market being greatly affected by the covid 19 epidemic This is an opportunity as well as a quite positive situation for Vietnamese coffee in the Malaysian market With direct franchising, Highlands Coffee can directly cooperate with the franchisee in Malaysia as well as best control the business operations of the facility Bringing the spirit of Highlands Coffee as well as Vietnamese coffee style to Malaysia This is also an opportunity for Highlands Coffee to access local resources, learn a lot of experience and have greater adaptation to the market in Malaysia Through direct franchising, this is also an opportunity for Highlands Coffee to choose a suitable franchisee to become a sub-franchisee, capable of franchising to other potential local franchisees 4.2.2 How to find a franchisor for Highlands in Malaysia Highlands Coffee, as a brand of Jollibee group Jollibee has experience in this market and is also one of the world's famous fast food restaurant chains At the time of entering the Malaysian market, Highlands Coffee will look for potential franchisees through the image of a Vietnamese coffee chain and with the help of Jollibee Through Jollibee and its franchisee partners, seek franchise opportunities in the Malaysian market In addition, Highlands can also contact and work with the Malaysia Franchise Association to be approved and licensed for franchising activities and a bridge between Highlands and franchisees in Malaysia 4.2.3 Franchise agreement content Highlands Coffee will franchise the brand to franchisees with the following contents: ● Trademark/ Trade name 26 ● ● ● ● ● Copyright Designs Patents Trade secrets Design of the store Rights of the franchisee: ● Highland Coffee is enthusiastically supported in many aspects: finding a business location that is easy to reach customers, completing business procedures according to legal regulations, instructing the brewing process and how to operate the store ● The store space design is large, comfortable, unique, with a combination of modernity and tradition In particular, the decoration style of all Highland Coffee branches has a very beautiful view ● With reasonable prices and delicious drinks, that's what sets it apart from other drinks on the market Requirements for franchisees: ● Have a large enough initial investment capital ● Accept quarterly and annual franchise fees (after negotiation between the two parties) ● Store management and product management costs (after negotiation) ● Has a good location and easy access to customers ● Ensure appropriate staffing ● Comply with the regulations proposed by the franchisor ● Cooperate with Highlands in the process of operating, serving and conveying coffee drinking culture to customers SWOT Analysis of Highlands Coffee in the Malaysian Market 5.1 Strengths 5.1.1 Strong brand equity Entering the last years of the 20th century, from a starting point of selling instant coffee turned into a coffee shop, and since then Highlands Coffee gradually became widely known in Vietnam And after just over 10 years of development, the Highlands Coffee brand was transferred to Jollibee and has grown strongly and Highlands has become the "big brother" in the coffee and tea brand chains in Vietnam in recent years 27 To inspire and spread the Viet’s pride of each valued customer group further even in foreign markets (Philippines), Highlands Coffee set the slogan “Take the Vietnamese coffee home” attached at the coffee shops 5.1.2 Big coffee and tea market share After selling 49% shares to Jollibee Foods, Highlands Coffee automatically enjoys the quintessence of Jollibee By 1995, this company was available in many parts of the world such as Guam, Dubai, Kuwait and Saudi Arabia Jollibee entered the US market in 1998 and recently also appeared in Qatar, Singapore, Bahrain, Italy and the UK, which root a fundamental for Highlands Coffee to enter the global market, specifically the EU, in the future Highlands Coffee's market expansion is increasing rapidly, starting from 299 stores at the end of 2019, to 2022, they have nearly 700 stores (not including 39 stores in Philippines) Thanks to franchise expansion, Highlands Coffee is currently the strongest unit in terms of nationwide coverage 5.1.3 Brand offerings Highlands Coffee products range from world famous coffees to traditional Vietnamese coffee and the issue of quality homogeneity of the whole system is undeniably crucial Highlands Coffee creates a modern and dynamic impression but still close and memorable to customers The main jazz background in Highlands Coffee shops creates a feeling of relaxation and luxury, suitable for the primary customers segment: the businessman and the average-to-high income person 5.1.4 Franchising experience in the Philippines In the years 2011 and 2012, Highlands Coffee granted its brand rights to Digital Paradise, a company associated with Netopia Internet Cafe chain, and IP Ventures in the Philippines Digital Paradise and IP Ventures had a close relationship After over 10 years of franchising, Highlands Coffee currently has 39 outlets, mainly kiosks, located in busy streets and shopping centers in the capital city Manila and Visayas city of the Philippines As of the end of 2021, the chain has a total of 483 stores in both Vietnam and the Philippines Highlands Coffee is now one of the largest coffee chains in Vietnam, second only to Trung Nguyen Coffee 5.1.5 The success of franchise stores in Vietnam As of February 2019, Highlands Coffee had surpassed 211 coffee shops nationwide, generating impressive revenue of around 1628 billion VND Highlands Coffee is the most successful brand with a franchising business model in Vietnam 28 Despite the significant investment required (typically ranging from 2.5 to billion VND) to open a Highlands Coffee shop, it is considered reasonable given the brand's reputation built over nearly two decades Thanks to the established brand name and customer trust, franchisees can quickly recover their investment The key to Highlands Coffee's success lies in building an excellent franchise system under the Highlands Coffee brand, along with attentive customer service, diverse products, and reasonable pricing 5.1.6 Synergy between Highlands Coffee and Jollibee Group In 2012, the Philippines-based Jollibee Group invested $25 million to acquire 49% of the Vietnam business division and 60% of the Hong Kong business division of the VTI Group, owned by Mr David Thai, according to Jollibee Foods' annual report At that time, Highlands Coffee had approximately 50 stores Additionally, Jollibee agreed to provide VTI with an additional $35 million loan at a 5% interest rate, to be repaid by 2016, for future investments Under the ownership of the Philippine conglomerate, Highlands Coffee witnessed positive revenue growth and expansion, especially in the post-COVID-19 period In 2022, Highlands Coffee generated revenues of 1.82 trillion dong, marking a 6.9% increase compared to 2021 Post-tax profits were recorded at a positive 12.5 billion dong, reversing years of losses It is estimated that in 2023, Highlands Coffee's revenue will increase by 7.1% compared to the previous year, with post-tax profits reaching a positive 15 billion dong, a 20% increase over 2022 5.2 Weaknesses 5.2.1 High product cost compared to the general market in Vietnam The current price range of Highlands Coffee products is between 30,000 and 60,000 VND This price level is considered relatively high in the Vietnamese market, which ranks fifth globally in coffee exports Compared to the general market, these prices are on the higher side In June 2022, Highlands Coffee officially adjusted its beverage prices, increasing them by 10-15%, with some types even seeing an 18% increase (10,000 VND) compared to the old prices Immediately after the announcement, many Highlands Coffee enthusiasts expressed dissatisfaction, and some even spoke of "breaking up" with the brand Considering the increasingly volatile economic market and Highlands' economic situation still not ensuring stability after recent events, the prices of Highlands Coffee products are predicted to be at risk of further increases in the future if Highlands Coffee does not implement appropriate price stabilization strategies 29 5.2.2 Lack of experience in the Malaysian Market Although Vietnamese coffee brand chains in the Malaysian market, including Trung Nguyen Coffee and Cong Caphe, have established certain positions and built awareness among Malaysians about the distinctive taste of Vietnamese coffee, entering a completely new market remains a challenge for Highlands Coffee Highlands Coffee lacks prior experience in operating coffee products/services in Malaysia 5.3 Opportunities 5.3.1 The average income per capita in Malaysia is high Malaysia's economy continues to experience robust growth and is on track to achieve high-income status The average per capita income in Malaysia stands at $36,846 USD per year, ranking third in Southeast Asia Since the 1980s, the industrial sector has been at the forefront of Malaysia's growth trajectory With investments from Japan, heavy industries have seen significant development, and in just a few years, Malaysia's exports became a key driver of the nation's economic expansion The production and export of primary industries such as crude oil, palm oil, tin, and rubber have played a significant role in the socio-economic development of the country 5.3.2 The population of Malaysia is large, and the demographic structure is relatively young Malaysia's current population stands at 32.37 million people, and it is a relatively young nation, with over 65.4% of the population falling within the 15-64 age group and 29.6% in the 0-14 age category Changes in perception and preferences within this youthful consumer group can significantly influence coffee consumption in Malaysia Older individuals often enjoy coffee at kopitiams or neighborhood coffee shops To this day, the habit of consuming coffee has become an integral part of the daily diet for the majority of Malaysians 5.3.3 Top most attractive markets in the world in 2023 The renowned consulting organization A.T Kearney has released a ranking of the retail markets in the leading countries in the world today The higher the position, the more investors will seek ways to penetrate that market as quickly as possible With a population of 30.74 million and a per capita GDP of 9,766 USD, Malaysia is considered a relatively developed country in the Southeast Asian region 5.3.4 The coffee market in Malaysia has been growing strongly in recent years 30 Malaysia's popular beverage has always been tea; however, current trends show an increase in coffee consumption among its population The introduction of international coffee chains and the adoption of the coffee culture among the overseas educated has led to an increase in coffee consumption in Malaysia Today, the coffee industry in Malaysia is booming and becoming more competitive Coffee shops are expanding and growing, including both international coffee chains and local cafés More people are consuming coffee, and it is becoming more of a regular drink, especially among young millennials Malaysia is included among the top 50 coffee-consuming countries (Rahim, Jin, and Fong, 2019) A statistical analysis of coffee consumption in Malaysia from 2013 to 2022 (forecast) shows that coffee consumption has been increasing from 635 thousand 60kg coffee bags in 2020 to 800 thousand 60kg coffee bags in 2021 and 2022 (Statista, 2021) According to the International Coffee Organization (ICO), Malaysia's coffee consumption is trending strongly due to urbanization and busy lifestyles in recent years The average consumption per capita also varies significantly between countries, especially with Malaysia having exceptional consumption (68.8 USD) The first reason can be attributed to the difference in the rate of urbanization, specifically with Malaysia having the highest urbanization rate at 73%, followed by Indonesia at 52% In other words, Malaysia is the market that customers find most accessible to coffee shops 5.3.5 The openness of the Malaysian market is significant The high level of market openness in Malaysia implies that the trade barriers for Vietnamese exports are relatively low, as both countries participate in numerous regional free trade agreements within the ASEAN and ASEAN+, particularly the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) 5.3.6 Diplomatic relations between Malaysia and Vietnam Both countries officially established diplomatic relations in 1973, marking a significant milestone in their relationship At that time, Malaysia became the first ASEAN nation to recognize the Provisional Revolutionary Government of the Republic of South Vietnam In 2015, the formal Strategic Partnership was established, built upon a solid foundation of political and diplomatic ties, cultural and historical similarities, and geographical proximity Since then, the relationship between Vietnam and Malaysia has grown robust, pragmatic, and achieved important milestones with a spirit of mutual support, cooperation, and the sharing of common strategic interests Recently, on September 8, 2023, the Vietnam Union of Friendship Organizations, in 31 coordination with the Vietnam-Malaysia Friendship Association and the Embassy of Malaysia in Vietnam, officially celebrated the 50th anniversary of the establishment of diplomatic relations between Vietnam and Malaysia Within the ASEAN regional context, Vietnam takes pride in Malaysia as its second-largest trading partner, while Vietnam ranks as Malaysia's third-largest trading partner The strong and favorable diplomatic relations between the two countries will serve as a stepping stone for the development of Vietnamese businesses investing and doing business in the Malaysian market 5.4 Threats 5.4.1 Competitions from other coffee chains and independent coffee shops The younger generation in Malaysia is increasingly embracing trends, especially when it comes to coffee With American coffee chains like Starbucks, Tim Hortons, Coffee Bean, and many others popping up all over the country, it's no surprise that Malaysian youth are now enthusiastic about and highly appreciate the art of crafting unique coffee, delicious frappuccinos, and chai lattes in air-conditioned coffee shops with comfortable seating, tables, and, of course, free Wi-Fi In today's Malaysia, specialty coffee shops are also becoming more common Despite the prevalence of traditional kopitiams, everything is gradually changing Independent coffee chains and cafes are reshaping how Malaysians enjoy coffee in public spaces There are numerous coffee shops offering a variety of coffee types, and the number of these establishments is rapidly increasing 5.4.2 Malaysia - a multi-racial country with many different cultures and consumption habits Malaysia is a culturally diverse nation due to its multi-religious composition, which contributes to a rich tapestry of regional cultures The most prevalent religion in Malaysia is Islam, accounting for over 61.3% of the population, with the remainder adhering to Buddhism, Christianity, and other faiths The widespread practice of Islam has a profound impact on Malaysia's cultural fabric, as well as daily life, economy, education, politics, and more 5.4.3 Malaysia's population is trending towards aging In 2022, the proportion of the Malaysian population aged over 65 years reached 7.2 percent, an increase from seven percent in the previous year Malaysia is currently experiencing a shift towards an aging population, and recent statistical data predicts this phenomenon to occur by 2030 According to a statement by Malaysia’s Chief 32 Statistician in July 2019, the 15 percent threshold would be surpassed in 2030 Over the past decade, Malaysia's age structure has undergone changes, with a steady decline in the share of the population aged to 14 years and an increase in those aged 65 and above The average age of the Malaysian population reflects this trend, expected to reach 34.1 years in 2030, up from 28.2 years in 2015 The issue of an aging population will bring about changes in the trends and coffee consumption behavior of customers in the future as Highlands Coffee officially enters the Malaysian market This poses new challenges that require Highlands Coffee to continually update market trends and formulate suitable business strategies and tactics 33