Case synopsis:

This case explains the entrepreneur journey of Sun Kwon Kim, founder and CEO of the specialty
coffee franchisor Caffebene. The case describes issues and challenges faced by Kim, how he
decide on certain issues and problems and what are the innovative initiates implemented by him
in his business Venture.
Issues:
1. Issues and challenges of new ventures
2. Development of inclusive organizational culture and environment
3. Environmental analysis and its utilization
Case facts and Analysis:
Caffebene just started in 2008 was able to challenge the market position of Starbucks, a
multinational coffee brand because of its unique and innovative strategy. Kim, the founder of
Caffebene was able to identify the gap between the service provided by existing coffee house
including Starbucks and need of local customer. Instead of following the path of successful
company, Caffebene tried to identify what are the true needs of its customers. Through extensive
research of coffee consumption, linking of experience from travelling or other sources
(education, competitors strategies etc.) and identifying the need of target customer, Kim
(Caffebene) was able to see the larger picture of global business. Through the success as well as
failure of past experience, Kim had continuously improved his business idea and made it one of
the promising and leading business in the country.
Although franchising was one of the new concept in Korea, Kim was able to cash on this trend.
After the Asian financial crisis of 1997, franchising business was popular in Korea which results
in stiffs competition. Many leading franchisor had withdrawn their business from Korea. But
Caffebene franchising concept was not only successful, it sparked the interest of many individual
who wanted to invest in small business. One of the major sources of revenue for Caffeebene was
the revenue generated from the franchising fees, equipments and infrastructure used by
franchisee with addition to sales revenue. Kim didnt only successfully identified and
implemented the franchising concept he was also able to generate revenue from it.

During his visit to Canada, he observed coffeehouses with stores in every corner that were filled
with customers. He found that the operation of such kitchen was rather simple. His idea was to
develop a global business brand and he knew opening a general coffeehouse wouldnt fulfill his
idea. He mixed his idea with the Korean tradition in which Korean regard coffeehouse as not
only a place to enjoy coffee but also a place to meet and enjoy conversation with friends and
dates. Here, Kim precisely identify the opportunities of serving Korean who not only missed the
items in menu but also miss the chance to spend quality time in coffeehouse. Thus, he developed
his business model in which he could attract a new segment of customers of casual restaurant,
who dont feel comfortable staying long time due to uncomfortable chairs or cheap ambience. He
further innovate his menu to address the need of his customers. Instead of offering every items,
he only offered certain item of specific taste that could supplement the coffee. Waffles
harmonized with taste of coffee and was also a popular item among youth in Korea. But it was
neglected by every coffeehouse. Kim offered waffles along with ice-cream which could attract
and fulfil the demand of its target customers. He also focused on quality and price accordingly;
which in his language is Masstige strategy which means Premium but affordable
Another issues faced by every business venture was to the attraction and retain the customers.
Kim launch a marketing program which was not tried by anyone else. It tied up with iHQ, one of
the biggest talent agencies and they together produced a TV commercial featuring Ye Seul Han,
a popular Korean actress. Shareholders argued that such spending in commercial might be
disastrous and even established company didnt spend so much in marketing. But when the
commercial go on air, it received overwhelming response and its business grow exponentially
(by December 100 stores were signed). During recession, when every business house cuts their
budget, but Caffebene utilized the availability of prime time slot in TV in low price. It could be
argued that this strategy was similar to sowing seeds in winter and harvesting the crop in
spring. To retain the customers, they never compromised in quality and continuously valued
their customers. Responsible communication with customers, free borrowing of notebook
computers and umbrella, Beppys Granting Customer wishes are few examples of the activities
done by Caffebene to retain its customers.
Caffebene never stop to innovate. Its book caf concepts, inclusion of healthy drinks in menu,
regular video conferencing with managers of franchise, decentralization of organization to make

quick decisions, franchisee training program are few of the improvement it made since its
establishment. Kim himself read every comment in their websites and also encourage
subordinates to do so. He also tried to address every possible issue. This strategies of identifying
need of improvement through various means including feedback prove successful to Kim.
There were various issues and challenges face by Kim to start a caffebene. But Kim tried to
address them and improve continuously. Starting with the identification of needs, coping with
failure, taking risks, addressing problems in creative way, Kim had done every right thing to
grow and became successful.
Successful organization usually develop organizational culture in which they foster participation.
Caffebene also had develop culture in which employees and customers were given priorities. To
develop a sense of pride and loyalty various activities were implemented. Every Monday at 8:00
am, executives held regular meeting through video conferencing. During this meeting, Kim
receive reports and decide on any issues that need immediate attention. Employees opinions was
highly valued through programs like 365 Days of Idea. Employees benefit programs was
introduced in which all employees were eligible for housing loan based on their rank to the
amount of $500,000 USD. Vacation facilities was provided to each employees. Welfare card of
$3oo USD was provided to employees which they could use for their self-improvement. Many
other initiatives were taken by caffebene which is costly for organization in short run but yields
better results in long run.
Caffebene focus on quality service and for this purpose it need to empower it employees and feel
them valuable. It empowered its employee through various training programs and had always
valued them. When the demand to open franchise was high, Kim provide authority to its
employee to make quick decisions regarding the agreement with franchisee, choosing of location
etc. When their demand of coffee was projected to be high, they acquire new machine, which not
only met the demand but also reduce the cost and increase the profit margin for them as well as
for franchisee. All executives of franchisee were not able to attend the training program and to
address it, Caffebene launch a special training program to train franchisee and their employees
onsite in their own stores.
Hence, Kim as an entrepreneur was able to identify factors that could affect his business. To
address those factors he had developed an organization culture in which every stakeholders

including employees, franchisee, customers or other people who are directly or indirectly
associated with Caffebene feel valued.
Mr. Kim has studied the consumption pattern of coffee in Korea and other developed countries.
Since, majority of people are consuming instant coffee which has no premium as such. But, there
are increasing the premium coffee consumption in Korea. Through this appreciation of premium
coffee consumption, company can focus to increase the premium products. It is good to identify
the trends of consumption, but at the same time, Mr. Kim need to consider that, it is not good to
rely totally on patterns only, sometimes in the market; results may be contracted due to various
political and economic reasons.
It is very important to know and understand the policies related to business activities. Since Mr.
Kim is unaware about the permission, he forced to pay one hundred thousand dollar per month
which blocks to grow at speedy rate. By taking proactive actions while gaining information
regarding business activities help to avoid the fines and penalties in current and future. Not only
that, fail to identify the rules and regulations, it may create bad reputation in the market which
will be difficulty to create credibility in the public in coming days.
Regarding stakeholders analysis, Mr. Kim has include employees, BoDs, etc. to create a
corporate culture that provides sense of unity and make them loyal as much as possible. In order
to make them loyal, company has provided various facilities such as vacation, monetary rewards,
offering equity, and feedback system etc. which leads to make employees part of it. Even though,
providing facilities to employees, it is not guarantee that it always brings helpful outcomes for an
organization. Due to delegating power, employees may demand more and more which leads to
strike, solvency of firms in coming future. By offering equity to employees, it is obvious that it
helps to support rapid growth. But, by looking different angle and dimension, employees get
voting right while selecting BoDs. On that time, employees can play the political games which
are difficult to overcome by Mr. Kim in future.
In terms of technological aspects, company has acquired large scale of machines to increase the
production level upto one thousand tons of coffee per year. By adopting this method, it benefits
to customers and franchisees as well. But, it is not sure that by acquiring complex and costly tech
materials will always bring positive results. Sometimes, it will be difficult to generate the
revenues or incomes by utilizing and adopting new technology. And also, employees may resist

adopting or operating the new technology due to lack of competency. For the same purpose,
company needs to provide free training course to them which again leads to spend some cost for
it.
According to demographic method, Mr. Kim has rightly identified waffle products for right
customers between twenties to thirties at right time. Mr. Kim has chosen this product because it
is very easy to make which leads to fast service for customers. In addition, Ice cream was
segregated for young Korean women. By targeting specific customers, it assists to increase the
satisfaction level of customers because company is moving toward specific products for specific
target market. By specifying the specific products, company was able to understand and take
actions even the small components and mistake of the products.
By examining the competitor SWOT analysis, Mr. Kim is able to recognize the Starbucks
weakness. Competitors are only focusing and concentrating in their product quality whereas Mr.
Kim focused quality of products and ambience around the places which leads to increase the
customer arrival in the caf. Mr. Kim moves on by preferring local preferences. By providing
enough space for chairs and tables, it creates comfortable zone for entire customers. In the other
hand, by adopting this type of strategy, it failed to use the available resources (space) on
maximum way.
Recommendations:

Long term vision

Learning from failure and success

Integration of culture and trends.

Environment should be assessed properly before making any move.

Valuing and developing employees

Respecting customers key aspects for business growth

Innovate regularly.improvement.