Tealive Study - assignment PDF

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Contents 1.

2.

Introduction...................................................................................................................................2 1.1.

Background of Tealive...........................................................................................................2

1.2.

Purpose of the proposal..........................................................................................................3

Market Analysis.............................................................................................................................4 2.1 Market Segmentation...................................................................................................................4 2.1.1. Geographic...........................................................................................................................4 2.1.2. Demographic.......................................................................................................................4 2.1.3. Psychographic......................................................................................................................6 2.1.4. Behavioral............................................................................................................................7 2.2. Pestel Analysis of The South African Market.............................................................................9 2.2.1. Political................................................................................................................................9 2.2.2 Economic factors..................................................................................................................9 2.2.3 Social factors......................................................................................................................10 2.2.4 Technical factors.................................................................................................................11 2.2.5 Environmental factors.........................................................................................................11 2.2.6 Legal factors.......................................................................................................................11 2.3. Hofstede Dimension.................................................................................................................13 2.4. Porter Diamond Model.............................................................................................................15 2.4.1. Factor condition.................................................................................................................15 2.4.2. Context of Firm strategy rivalry.........................................................................................15 2.4.3. Demand condition..............................................................................................................16 2.4.4. Related and supporting industries......................................................................................16 2.5. Marketing Mix..........................................................................................................................17 2.5.1. Price...................................................................................................................................17 2.5.2. Product...............................................................................................................................17 2.5.3. Place..................................................................................................................................18 2.5.4. Promotion..........................................................................................................................18

3.

Questionnaire result analysis.......................................................................................................19

4.

Interview result analysis..............................................................................................................25

5.

Market entry strategy...................................................................................................................28

6.

Conclusion...................................................................................................................................30

References...........................................................................................................................................31

1. Introduction Recently , there is a trend of bubble tea is bombarded toward Southeast Asia and bring up a new handcrafted drinks business in the market even influence the customer preferences or demands on the bubble tea. According to the statistical result shown that, the Malaysian bubble tea market was valued at $49.8 million in 2018 and expected to grow about 6.9% within the next 7 years (Li Mei, 2019). At the same time, there was a research done by Grabfood, which revealed that Southeast Asians drink at least four cups of bubble tea per person each month (Genevleve Chia, 2019). Hence, the bubble tea industry is foreseen to be continued growth in the next few year, although that is the stiff competition in the market. In the current market, there are about 100 brands existing in Malaysia market, while, among all the bubble tea brands, Tealive, is one of the Malaysian homegrown brand.

Figure 1 Average number of bubble tea cups ordered per GrabFood user per month in selected Southeast Asian countries in 2018. Source: statista, 2018

1.1.

Background of Tealive

Tealive, one of the brand under LOOB Holding and founded by Bryan Loo (LOOB Holding, 2019). Before Tealive born, initially Chatime was the brand that brought into Malaysia market by the founder and also being a master of the Chatime Franchise in Malaysia. However, due to the franchisor, La Kaffa International decided to take back the franchise (Maan, 2017). Thus, Bryan Loo decided to transform his own business form from being a franchisee to a principal brand, Tealive.

According to the research, Tealive, does not restrict itself to being a bubble tea store, in fact, it positioned itself “a modern tea company” and there are about 9% of the drinks associated with the bubble and overall of the focus is the tea base (Maan, 2017). Until now, Tealive success to increase the number of the stores across Malaysia, the latest data shown that, Tealive had opened 404 stores in Malaysia while this number will gradually increase time to time. To strengthen the leadership position in the handcrafted industry in Malaysia, therefore, the team even started to transform the traditional business model by introducing “Tearush” which is part of the family of the Tealive. The significant difference between both, Tearush’s core value is to have the quick serving tea to the tea lovers who constantly on the go, but it only serves the popular tea drinks rather than the full menu of Tealive (LOOB Holding, 2019). Next, second strategies adapted to continue to expand the Tealive’s market, LOOB Holding had a contract of collaboration with Petronas Dagngan Bhd in this year. Here is a statement from Bryan Loo, who mentioned that, Tealive expected to open 300 outlets in Petronas station within 3 years (TMR, 2019). The third strategies, operated the new standalone store added with drive thru service which is newly opened in Penang (Alena, 2019). The last strategies, Tealive do focus on the train station in Malaysia, and the way of operation had significant difference with normal outlet as intend to meet the tea lovers who are in rush all the times.

1.2.

Purpose of the proposal

Tealive success to sustain its own business in Malaysia even constantly expanding its own business in different business models as aforementioned. In addition, it is also taking steps into entering to international market such as China, Philippine, Vietnam, UK, Myanmar, and Brunei. Thus, the purpose of preparing this proposal is to suggest Tealive enter into the South African market and by doing so, this report will detail all the considerable elements such as the market opportunity and phenomena in South Africa, plus there are a primary data provided which extracted from customers’ opinion about the Tealive’s performance in Malaysia and other regions.

2. Market Analysis 2.1 Market Segmentation 2.1.1. Geographic In South Africa, 34.6% of housing expenditure comes from Gauteng province, estimated of total USD 50 billion a year, followed by the Western Cape (17.7%) and KwaZulu-Natal (16.5%). It is estimated that these three provinces, where 52.3% of the total number of households of South Africa reside, will be responsible for 68.8% of the total household cash expenditure in South Africa in 2005 (Martins, 2007). A research from Foreign Affairs Relations recorded that 3 out of 6 wealthiest cities in the whole contingent of Africa are located in South Africa, like Johannesburg, Cape Town, and Durban (Campbell, 2019). In the South African cites, rich people are concentrated in certain suburbs (Sandton for Johannesburg or Clifton and Bishopscourt for Cape Town, for example) rather than in the center. 2.1.2. Demographic Table 1 Race in South Africa. Source: worldometer.info,2019

SA is a country with 58 million people consisting of different race groups and speaking 11 official languages. The South African government estimates that 80.2% of the population is black, 8.8% mestizo, 8% white and 2.5% Asian (Santander, 2019). South Africa’s median age is considered low, 26.6 years old, while their mean age is 24.4 years (Worldometers, 2019). This indicates that most of the population in this country consists of young people, which means they are at their productive age of working. Nearly 44% of people aged 15 to 64 in

SAhave a paid job, and the employment average of 68% (OECD, 2019). The population of the working force increases, this shows that saving increases, which then leads to a promising income level. As a third world country, SAhas a good prospect of annual income level, at the rate of $8,700 averagely (Desilver, 2013).

Figure 2 South Africa population. Source: worldmeters.info, 2019

Table 2 South Africa population. Source: worldometers.info, 2019

Table 3 South Africa's life stage. Source: Parker (1998)

From table 2 and 3, as most of the populations are at the age range of 25-54 years old, both are categories in first-generation and second generation. People in stage five, Freedom Years, concerns about fun and entertainment feature strongly, while people in second-generation spend most of their income on meeting practical needs. The most percentage of their housing expenditure is on food and beverages, which contribute 24.6% to total spending (OECD, 2019).

2.1.3. Psychographic

Figure 3 Poverty in South Africa. Source: statssa.gov.za, 2017

According to National Income Dynamics Study (NIDS), South Africa’s population is dominated by the middle and lower class. 54% of the population are considered live within

poverty, as they still can’t fulfill their basic needs. Only one out of four South Africans is in the category of the secure middle class and the elite (BusinessTech, 2017). South Africans can be classified as achievers, as they are driven by achievements and success, yet at the same time develop the perceptions that they “live in order to work”. In general, even with the limitation in their finances, they have the willingness to realize their impulses and desires with regard to enjoying life and having fun. In addition, they place a higher degree of importance on leisure time, act as they please and spend money as they wish (Martins, 2007). 2.1.4. Behavioral

Figure 4 South Africa FDI from 2014 to 2019. Source: ceicdata.com, 2019

Due to the limited level of income, consumers in South Africa have tight budgets, hence, the South Africans perceive price/quality ratio as an important factor before they purchase goods or services. Not only that, to increase their savings, some purchases are sometimes pushed back. For example, South Africans prefer to have a home-cooked meal rather than at restaurants. The consumers have tendency to make a purchase when there is discount price. Over the years, as internet penetration gets stronger, the number of online sales purchases has also improved. According to Euromonitor, online shopping is very often influenced by a publication on social media by a company or a brand. Consumers in Africa appreciate local brands more, because of the lower price that they charge. (Santander, 2019). However, people in South Africa are very welcome towards new things, especially things that they find interesting. This can be seen from a lot of foreign direct investments and foreign goods sold in South Africa, worth for US$93.4 billion in 2018 alone (CEIC, 2019). South African’s preference of drink and beverages is more towards western culture, whereby the consumption of Beer takes the lead. Wine consumes 7.2% of household expenditure on

beverages, according to Basket of SA’s Goods CPI. Only a total of 10% were spent on tea and fruit juice (Timeslive, 2019).

Figure 5 Taste preference of South African on drinks. Source: timeslive.co.za, 2019

2.2. Pestel Analysis of The South African Market 2.2.1. Political South Africa is a parliamentary republic, but South Africa faces many political problems. The first is political corruption. The problem of political corruption in South Africa is endless. Around May 2019, Lyon, former chairman of South Africa's largest opposition Democratic Alliance (DA), called on all Democratic Alliance members and supporters to participate in the upcoming demonstrations to jointly protest the huge losses caused by the ruling African National Congress for condoning corruption. According to Lyon, in just five years, only Gauteng city lost 20 billion rand because of corruption, and the money was not only squandered and wasted, but also stuffed into the wallet of corrupt officials. The existence of corrupt officials may make it difficult for companies to set up, and they may even limit the development of foreign companies in order to protect their own interests. The second is political upheavals. Due to political corruption, violent demonstrations by the South African people have often occurred. For example, on 13 September 2019, a large number of South Africans gathered in Sand-ton, Johannesburg, to launch a parade for antigender and xenophobic violence against women and children. This move has caused many road sections of the city to be blocked, traffic jams, and adversely affect the personal safety of unrelated persons (Howand What.ne, 2018.). Up to today, the political problems in South Africa are very serious, which may become a factor hindering the development of foreign businesses 2.2.2 Economic factors South Africa is the only developed country in Africa. South Africa's total GDP in 2019 is $ 765.6 billion and it is one of the BRICS countries. Mining, agriculture, manufacturing, and service industries have developed (The Heritage Foundation, 2019). In recent years, poverty has improved. But South Africa still has some economic problems. In recent years, South Africa economic development has provided trade opportunities to many countries, including Malaysia. From 2015 to 2018, South Africa's imports from Malaysia increased. In 2018, South Africa's imports from Malaysia were $ 1.01 billion, which was greater than the $ 639 million in 2015. Increased trade volume in South Africa could boost foreign direct investment.

Figure 6 South Africa imports from Malaysia. Source: Trading Economics, 2019

But the rising unemployment rate is an important reason for the weakness of the South African economy. According to data released by the South African Statistics Department, the unemployment rate in South Africa in the third quarter of 2019 was 29.1%, the highest since 2008 (Trading Economics, 2019). The high unemployment rate means a decline in people's living standards and purchasing power, and it will also cause a downturn in the South African economy. This will hinder foreign companies from doing business in South Africa: not many people have extra money to buy their products. The wide gap between the rich and the poor are also an important reason for the weakness of the South African economy. The Gini score is used to measure the degree of national income inequality. The higher the Gini score, the higher the national inequality. According to the BBC report, South Africa's Gini score has remained above 60 for the last ten years, which is very bad (BBC News, 2019). South Africa's wealth is always concentrated in small number, like corrupt officials. The large income gap can be a factor preventing foreign companies from entering the South African market. 2.2.3 Social factors South Africa is a culturally diverse society. South Africa has 11 official languages, with blacks, whites, and Asians. The main religions are Christianity, Hinduism, Islam, and primitive religion. But a diverse culture may have a negative impact on business, such as cultural conflicts, violent incidents and demonstrations caused by religious conflicts.

Therefore, doing business in South Africa requires understanding the culture of each region and mastering the habits of each religious belief (Thompson, L. M., & Gordon, D. F, 2019). The South African people's acceptance level of power distance is medium, which shows that the South African people accept the hierarchy but need to be told what they need to do. Their ideal boss is a benevolent dictator. If foreign companies want to hire South African employees, they need to establish a hierarchy and actively communicate with employees. The difference in cultural dimensions is a concern for foreign companies. 2.2.4 Technical factors South Africa’s technological innovation is very slow due to the economic weakness caused by corruption and social problems, but South Africa, as the only developed country in Africa, has a relatively high level of technology in certain areas. South Africa has made an enormous progress in mobile software, security software and electronic banking services. Many technology companies choose to do business in South Africa, such as Facebook, IBM, Intel, and so on. At the same time, online shopping in South Africa continues to rise. Companies doing business in South Africa can use South Africa's well-developed social networks to expand their businesses (ASSAF News, 2019). 2.2.5 Environmental factors South Africa is one of the most popular tourist destinations in the world. South Africa has beautiful scenery and rich tourism resources, making South Africa's tourism industry developed in recent years. The readers of Telegraph rated Cape Town “the World Best City” in 2016. A well-developed tourism industry allows certain companies to get more customers, such as retail, telecommunications and so on. In general, the environmental risk of doing business in South Africa is small. However, there are still some environmental problems in South Africa, such as forest pollution, water pollution, air pollution, etc. It is necessary to pay attention to these environmental problems when doing business in South Africa (About Environment of South Africa, 2019) 2.2.6 Legal factors Legally, South Africa has a wide variety of taxes, such as value added tax, Skills development levy, Stamp duty, Customs and excise duties and so on, which is an aspect for foreign companies to pay attention to. However, South Africa legally supports foreign direct investment into all areas of the South African economy, which is conducive to the entry of foreign companies, but in some areas foreign shareholders are restricted, such as

telecommunications, banking and so on. South Africa has also enacted the Employment Equity Act, which aims to achieve equality for employees by promoting equal ...