Harvard Case - From Franchisee to Startup: The Birth of LiHO Bubble Tea
"From Franchisee to Startup: The Birth of LiHO Bubble Tea" Harvard business case study is written by Seshan Ramaswami, Adina Wong. It deals with the challenges in the field of Marketing. The case study is 14 page(s) long and it was first published on : Oct 26, 2020
At Fern Fort University, we recommend that LiHO Bubble Tea adopt a multi-pronged strategy to achieve sustainable growth and solidify its position as a leading player in the global bubble tea market. This strategy involves a blend of organic growth through expansion, strategic acquisitions, and a focus on innovation, coupled with a robust digital marketing approach to enhance brand awareness and customer engagement.
2. Background
The case study follows the journey of LiHO Bubble Tea, a Singaporean bubble tea brand that transitioned from a franchise model to an independent startup. The founders, Bryan and Victor, identified a gap in the market for high-quality, customizable bubble tea and leveraged their experience in the industry to establish a unique brand identity. LiHO's success is attributed to its focus on fresh ingredients, innovative flavors, and a commitment to customer service. However, the brand faces challenges as it seeks to expand beyond its initial market and compete with established players in a rapidly evolving industry.
3. Analysis of the Case Study
We can analyze LiHO's situation using a combination of frameworks:
a) SWOT Analysis:
- Strengths: Strong brand identity, high-quality ingredients, innovative product offerings, customer-centric approach, experienced management team.
- Weaknesses: Limited international presence, potential for operational challenges with rapid expansion, dependence on a single product category.
- Opportunities: Growing global demand for bubble tea, potential for product diversification, expansion into new markets, leveraging digital marketing and social media.
- Threats: Intense competition, fluctuating raw material costs, changing consumer preferences, potential for negative publicity.
b) Porter's Five Forces:
- Threat of New Entrants: High, due to low barriers to entry in the bubble tea industry.
- Bargaining Power of Buyers: Moderate, as consumers have a wide range of choices.
- Bargaining Power of Suppliers: Moderate, depending on the availability of specific ingredients.
- Threat of Substitute Products: Moderate, as other beverage options exist.
- Rivalry Among Existing Competitors: High, due to the fragmented nature of the market and increasing competition.
c) Marketing Mix (4Ps):
- Product: LiHO's product strategy focuses on high-quality ingredients, innovative flavors, and customization options.
- Price: The brand employs a premium pricing strategy, reflecting the quality of its ingredients and unique offerings.
- Place: LiHO utilizes a combination of direct-owned stores and franchise models for distribution.
- Promotion: The brand relies heavily on social media marketing, influencer collaborations, and targeted advertising campaigns.
4. Recommendations
To achieve sustained growth and navigate the competitive landscape, LiHO should implement the following recommendations:
1. Expansion Strategy:
- Geographic Expansion: Focus on expanding into key emerging markets with high potential for bubble tea consumption. This can be achieved through a combination of direct store openings and strategic franchising partnerships.
- Product Diversification: Introduce new product lines, such as fruit teas, smoothies, or yogurt-based drinks, to cater to a wider range of consumer preferences and expand the brand's appeal.
- Strategic Acquisitions: Consider acquiring smaller, complementary brands to gain access to new markets, product lines, or customer bases.
2. Digital Marketing Strategy:
- Enhanced Online Presence: Develop a comprehensive digital marketing strategy that includes a user-friendly website, active social media presence, and targeted online advertising campaigns.
- Content Marketing: Create engaging content that showcases LiHO's unique brand story, product offerings, and customer experiences.
- Data-Driven Marketing: Utilize analytics tools to track customer behavior, optimize marketing campaigns, and personalize customer interactions.
3. Innovation and Product Development:
- Continuous Innovation: Invest in research and development to create new and exciting flavors, ingredients, and product variations.
- Technology Integration: Explore the use of technology to enhance the customer experience, such as self-ordering kiosks, mobile ordering apps, and personalized recommendations.
- Sustainability Initiatives: Implement sustainable practices in manufacturing processes, packaging, and sourcing to appeal to environmentally conscious consumers.
4. Brand Management:
- Brand Positioning: Clearly define LiHO's brand positioning as a premium, innovative, and customer-centric bubble tea brand.
- Brand Consistency: Ensure consistent messaging and brand experience across all touchpoints, including stores, website, social media, and marketing materials.
- Customer Relationship Management (CRM): Implement a CRM system to track customer interactions, preferences, and feedback to enhance customer loyalty and retention.
5. Basis of Recommendations
These recommendations are grounded in the following considerations:
- Core Competencies and Consistency with Mission: They align with LiHO's core competencies in product quality, innovation, and customer service, while supporting its mission of providing a unique and enjoyable bubble tea experience.
- External Customers and Internal Clients: The recommendations address the needs of both external customers, by offering a wider range of products and an enhanced digital experience, and internal clients, by providing tools and resources for efficient operations and growth.
- Competitors: The recommendations aim to differentiate LiHO from competitors by focusing on innovation, digital marketing, and a premium brand image.
- Attractiveness: The recommendations are expected to drive increased revenue, expand market share, and enhance brand equity, ultimately contributing to LiHO's long-term profitability.
6. Conclusion
By embracing a multi-pronged strategy that encompasses expansion, innovation, and a robust digital marketing approach, LiHO Bubble Tea can successfully navigate the competitive landscape and achieve sustainable growth. The brand's commitment to quality, innovation, and customer satisfaction, combined with a strategic focus on emerging markets and digital channels, positions it for continued success in the global bubble tea market.
7. Discussion
Alternatives:
- Focusing solely on organic growth: While organic growth is valuable, it may not be sufficient to compete effectively in a rapidly evolving market.
- Aggressive franchising: While franchising can accelerate expansion, it requires careful management to ensure brand consistency and quality control.
Risks:
- Expansion challenges: Rapid expansion can lead to operational inefficiencies and quality control issues.
- Competitive pressures: The bubble tea market is highly competitive, and LiHO may face challenges in maintaining its market share.
- Technological disruptions: The industry is constantly evolving, and LiHO must adapt to new technologies and trends.
Key Assumptions:
- Consumer demand for bubble tea will continue to grow.
- LiHO can successfully implement its expansion and digital marketing strategies.
- The brand can maintain its focus on quality and innovation.
8. Next Steps
- Develop a detailed expansion plan: Identify target markets, assess potential franchise partners, and develop a timeline for store openings.
- Implement a digital marketing strategy: Create a website, develop social media content, and launch targeted advertising campaigns.
- Invest in product development: Explore new flavors, ingredients, and product lines to cater to evolving consumer preferences.
- Monitor key performance indicators: Track sales, customer satisfaction, and brand awareness to measure the effectiveness of the implemented strategies.
By taking these steps, LiHO Bubble Tea can solidify its position as a leading player in the global bubble tea market and achieve sustainable growth.
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Case Description
The case begins in 2009, when the Gong Cha franchise was launched in Singapore by entrepreneur Rodney Tang with a sole outlet in a mall. Within two years, the franchise expanded to 20 outlets, and another five years later, there were 80 outlets in the city-state, and Gong Cha had a well-established and loyal patronage. In 2016, when financial restructuring of the parent company led to some important changes in the operating clauses of the franchise agreement, Tang had to decide whether to extend the contract or to set up his own new chain. Taking away a brand, valued by so many loyal consumers (and one which might yet re-enter the Singapore market with a different operator), while introducing a new brand, located at the same outlets as the Gong Cha ones clearly presented some major challenges. Competitors like Koi, Sweet Talk and Each-a-Cup would also be looking to attract the loyal Gong Cha patrons. Establishing a new brand would have its own set of challenges. How could Tang differentiate from Gong Cha while not alienating the Gong Cha loyal consumer, especially when the original brand will likely return to the Singapore market?
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