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Major Project: A Business
Development Proposal
The Viability of Maxis’ Venture into Coffee
Industry in Malaysia
Master of ...
EXECUTIVE SUMMARY

Maxis Berhad has been the market leader in Telecommunication industry in Malaysia for many
years and th...
Table of Contents
EXECUTIVE SUMMARY .........................................................................................
3.2.2

Sampling Size ........................................................................................................
6.5

ORGANIZATIONAL/OPERATIONAL PLAN ........................................................................ 50

6.5.1

O...
TABLE OF FIGURES
Figure 1.1 Maxis’s Corporate Structure......................................................................
Figure 4.14 External Factors Rating in Coffeehouses .................................................................. 33
...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

CHAPTER 1

INTRODUCTION
...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

With their long-term str...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

Throughout these uproar ...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia
Figure 1.3 Maxis’s Custom...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

1.1.4 The Profit-Margin
...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia
Figure 1.6 Earnings Growt...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia
Figure 1.7 Growing Trend ...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

Corporations like Renoma...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

1.4 TERMS OF REFERENCE
1...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

CHAPTER 2

BUSINESS REVI...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

generating transactions ...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia
Figure 2.2 Franchising Bu...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

A proper branding could ...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia
Table 1.1 Summary of Bran...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia
Figure 2.3 Mean frequency...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

2.3.2 Coffee Industry An...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia
Figure 2.5 Health Benefit...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

Even so, youths are gett...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

place’ derived from the ...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

CHAPTER 3
3.1

RESIGN DE...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia
Table 3.1Information Need...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia
Figure 3.1 Types of Resea...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

or irrelevant answers in...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

Google Drive, therefore ...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

CHAPTER 4
4.1

DATA ANAL...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia
Figure 4.3 Respondents’ O...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia
Figure 4.4 Income Level v...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

More than half of the re...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

When such question relat...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

Through this question, c...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

Generally the respondent...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

focus on, it would be fr...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia
Figure 4.14 External Fact...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

To further understand th...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

4.2

BUSINESS IMPLICATIO...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

3. Factor 3: Market char...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

Price on the other hand,...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

CHAPTER 5
5.1

BUSINESS ...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia
Figure 5.1 Ansoff’s Growt...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia



Market Penetration

...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

5.3

COMPETITIVE ADVANTA...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

5.4

STRATEGIC GROWTH OP...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia
Table 5.3 ERRC Strategy C...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

5.6

THE BUSINESS CANVAS...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

CHAPTER 6

BUSINESS PLAN...
MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia

6.3

KEYS TO SUCCESS

Th...
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
The viability of maxis venture in coffee industry in malaysia
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The viability of maxis venture in coffee industry in malaysia

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A MBA Thesis - Business Development Proposals focusing on researching the brand extension of one of the Telecommunication service provider in Malaysia; into coffee industry. This proposal facilitates first and second data collection which covered areas including literature reviews on the food & beverages development in Malaysia, the existing coffee industry (sales & forecast), brand extensions discussion as well as business strategic tools proposed to identify how Maxis should drive into being an exotic coffee industry player too.

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  • Thanks YC Chau. Im Sara by the way. Your comments made me day :)
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  • HI Fiona,
    Good proposal, Recently, I have invested into the coffee business in Malaysia. Some of your market information has beneficial to me..

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Transcript of "The viability of maxis venture in coffee industry in malaysia"

  1. 1. Major Project: A Business Development Proposal The Viability of Maxis’ Venture into Coffee Industry in Malaysia Master of Business Administration Cardiff Metropolitan University SARA YEAP TH’ENG TH’ENG 0008VMVM0112 6/17/2013 i
  2. 2. EXECUTIVE SUMMARY Maxis Berhad has been the market leader in Telecommunication industry in Malaysia for many years and their continuous efforts in upgrading and maintaining its services delivering to its customers had earned them numerous awards in recent years. Nevertheless, the intense rivalries with partnership strategy emerged had starting taking a toll on Maxis’s performance; number Postpaid and Prepaid subscribers had declined as well as the new number of subscriber too, slowing down which resulted depleting in market share with only 3% ahead of Celcom, its strongest rivalry. On the contrary, food and drinks related businesses had been picking up real fast, gaining countless profits. The current trend of FAFH (Food-Away-From-Home) had grown more than 17%, assisted the development of FAFH in Malaysia by generating more than RM16,312 million as of 2007. Additionally, the raising income and rapid urbanization in Malaysia, particularly in the state Kuala Lumpur, Penang and Johor had further increased the averagely household expenditure on food statistics because of workload. The initial objective of this development plan is to testify the high opportunity for Maxis to venture into food & drinks industry, especially into coffee industry which populated the food & drinks industry by more than 55%; while the second objective is research on the possibility of increased Maxis subscriber pool via this café. This plan had included the reviews of current market trends of food and drinks industry in Malaysia, coffee industry in Malaysia, a closed-up study of consumer’s purchasing behavior in café (coffeehouse) and eventually, the brand extension effects from different industry as seeing Maxis operating a coffeehouse may confuses their consumers. All these reviews are accompanied with research surveys and interviews which are represented in graphical charts. Towards the end of this business development proposal, there will be marketing plan, operational & organizational plan, implementation plan, contingency plan and ultimately, the financial plan that covers the projection of few important statements namely annual sales, cash flows and etcetera. ii
  3. 3. Table of Contents EXECUTIVE SUMMARY ......................................................................................................................... II TABLE OF FIGURES ................................................................................................................................ VI LIST OF TABLE ...................................................................................................................................... VII CHAPTER 1 INTRODUCTION ................................................................................................................ 1 1.0 BACKGROUND & CONTEXT ................................................................................................... 1 1.0.1 The Organization................................................................................................................... 1 1.1.1 The Prestigous Memory Lanes ............................................................................................. 2 1.1.2 Their Breadwinners ............................................................................................................... 3 1.1.3 The Rivalry-edge................................................................................................................... 4 1.1.4 The Profit-Margin ................................................................................................................. 5 1.1 BUSINESS OPPORTUNITY ....................................................................................................... 6 1.2 THE PURPOSE AND RATIONALE ........................................................................................... 7 1.3.1 1.4 The Rationality...................................................................................................................... 7 TERMS OF REFERENCE ........................................................................................................... 9 1.4.1 Research Questions ............................................................................................................... 9 1.4.2 Research Objectives .............................................................................................................. 9 1.4.3 Research Framework............................................................................................................. 9 CHAPTER 2 BUSINESS REVIEW ......................................................................................................... 10 Factor 1: Market Trends of food and drinks industry in Malaysia ......................................................... 10 2.1.1 Franchising Division ........................................................................................................... 11 Factor 2: The effects of brand extension from different industry ........................................................... 12 Factor 3: Coffee Industry Market characteristics in malaysia ................................................................ 14 2.3.1 Coffee Influences in Malaysia ............................................................................................ 14 2.3.2 Coffee Industry Analysis in Malaysia ................................................................................. 16 Factor 4: Malaysians’ purchasing behavior in coffee industry which influenced by essential market characteristics.......................................................................................................................................... 17 CHAPTER 3 RESIGN DESIGN............................................................................................................... 20 3.1 INFORMATION NEEDS SPECIFICATION ............................................................................ 20 3.2 RESEARCH METHODOLOGIES............................................................................................. 22 3.2.1 Sampling Unit .................................................................................................................... 22 iii | P a g e
  4. 4. 3.2.2 Sampling Size ..................................................................................................................... 22 3.2.3 Sampling Method ................................................................................................................ 23 3.2.2 Sampling Location .............................................................................................................. 23 3.2.4 Collection Method............................................................................................................... 23 3.2.5 Ethical Issue ........................................................................................................................ 24 3.3 QUESTIONNAIRE DESIGN ..................................................................................................... 24 CHAPTER 4 DATA ANALYSIS ............................................................................................................. 25 4.1 PRIMARY DATA ANALYSIS.................................................................................................. 25 4.1.1 Demographic ....................................................................................................................... 25 4.1.2 Consumer’s Purchasing Behavior ....................................................................................... 26 4.1.3 Products............................................................................................................................... 29 4.1.4 External Factors .................................................................................................................. 33 4.2 BUSINESS IMPLICATIONS..................................................................................................... 35 CHAPTER 5 BUSINESS MODEL........................................................................................................... 38 5.1 OVERVIEW ANALYSIS........................................................................................................... 38 5.2 CORE STRATEGY .................................................................................................................... 38 5.3 COMPETITIVE ADVANTAGES AND SUSTAINIBILITY .................................................... 41 5.3.1 SWOT Analysis ......................................................................................................................... 41 5.4 STRATEGIC GROWTH OPTIONS .......................................................................................... 42 5.5 PARTNERSHIP NETWORK ..................................................................................................... 43 5.6 THE BUSINESS CANVAS MODEL ........................................................................................ 44 CHAPTER 6 BUSINESS PLAN .............................................................................................................. 45 6.1 OBJECTIVES ............................................................................................................................. 45 6.2 MISSION .................................................................................................................................... 45 6.3 KEYS TO SUCCESS ................................................................................................................. 46 6.4 MARKETING PLAN ................................................................................................................. 46 6.4.1 Product ................................................................................................................................ 46 6.4.2 Price .................................................................................................................................... 47 6.4.3 Place .................................................................................................................................... 48 6.4.4 Promotion ............................................................................................................................ 49 6.4.5 Process ................................................................................................................................ 49 6.4.6 Physical Evidence ............................................................................................................... 49 6.4.7 People.................................................................................................................................. 50 iv | P a g e
  5. 5. 6.5 ORGANIZATIONAL/OPERATIONAL PLAN ........................................................................ 50 6.5.1 Organizational Plan ............................................................................................................. 50 6.5.2 Operational Plan.................................................................................................................. 51 6.6 FINANCIAL PLANNING .......................................................................................................... 53 6.6.1 Start-Up Cost ...................................................................................................................... 53 6.6.2 Projected Cash Flow ........................................................................................................... 54 6.6.3 Projected Balance Sheet ...................................................................................................... 54 6.6.4 Projected Profit and Loss Statement ................................................................................... 55 6.6.5 Annual Sales Forecast ......................................................................................................... 55 6.7 IMPLEMENTATION PLAN ..................................................................................................... 56 6.8 CRITICAL SUCCESS FACTOR ............................................................................................... 57 6.9 CONTINGENCY PLAN ............................................................................................................ 57 REFERENCES ........................................................................................................................................... 58 APPENDICES ............................................................................................................................................ 62 Appendix A ............................................................................................................................................. 62 Appendix B ............................................................................................................................................. 63 Appendix C ............................................................................................................................................. 64 Appendix D ............................................................................................................................................. 65 Appendix E ............................................................................................................................................. 66 Appendix F.............................................................................................................................................. 67 Appendix G ............................................................................................................................................. 68 Appendix H ............................................................................................................................................. 69 Appendix I .............................................................................................................................................. 70 v|Page
  6. 6. TABLE OF FIGURES Figure 1.1 Maxis’s Corporate Structure.......................................................................................... 2 Figure 1.2 Maxis Significant Milestones ........................................................................................ 3 Figure 1.3 Maxis’s Customer Groups ............................................................................................. 4 Figure 1.4, Malaysia Wireless Market, Q212 ................................................................................. 4 Figure 1.5 Telcos EBITDA Margin Trend in Malaysia .................................................................. 5 Figure 1.6 Earnings Growth versus Dividend Yield ....................................................................... 6 Figure 1.7 Growing Trend of Restaurant and Cafes in Malaysia ................................................... 7 Figure 1.7 Postpaid Mobile Subscribers Figure 1.8 Prepaid Mobile Subscribers....................... 8 Figure 2.1 Expenditure per Household on FAH and FAFH ......................................................... 10 Figure 2.2 Franchising Business Sector in Malaysia .................................................................... 12 Figure 2.3 Mean frequency of beverages consumed daily by population .................................... 15 Figure 2.4 Porter’s 5 Forces Analysis on Coffee Industry in Malaysia ........................................ 16 Figure 2.5 Health Benefits of Tea vs Coffee ................................................................................ 17 Figure 2.6 Top Five Must Have Physical Characteristics in Coffeehouse ................................... 19 Figure 3.1 Types of Research Design ........................................................................................... 22 Figure 4.1 Number of Maxis’s Subscriber .................................................................................... 25 Figure 4.2 Age Group ................................................................................................................... 25 Figure 4.3 Respondents’ Occupation ............................................................................................ 26 Figure 4.4 Income Level vs. Frequent Visit to Coffeehouses....................................................... 27 Figure 4.5 Purpose of Visiting the Coffeehouse ........................................................................... 27 Figure 4.6 Average amount of Time Spent in Coffeehouse ......................................................... 28 Figure 4.7 Willingness to try new Coffeehouse regardless of its Brand ...................................... 28 Figure 4.8 Promotions and Discounted rates as the factor to dine in Coffeehouse ...................... 29 Figure 4.9 Set Menus as the factor to dine in Coffeehouse .......................................................... 29 Figure 4.10 Visit Frequency on selected Coffeehouses ................................................................ 30 Figure 4.11 Preferred Drinks in Coffeehouse ............................................................................... 31 Figure 4.12 Beverages form preferred .......................................................................................... 31 Figure 4.13 Internal Factors Rating in Coffeehouses ................................................................... 32 vi | P a g e
  7. 7. Figure 4.14 External Factors Rating in Coffeehouses .................................................................. 33 Figure 4.15 Will you visit the coffeehouse opened by Maxis? ..................................................... 33 Figure 4.16 Possibility of Converting to Maxis for Benefits ........................................................ 34 Figure 4.17 Possibility of Influencing Friends & Families into Maxis for Benefits .................... 34 Figure 5.1 Ansoff’s Growth Matrix .............................................................................................. 39 Figure 5.2 The Strategy Canvas of Styl-Fé ................................................................................... 42 Figure 5.3 The Business Canvas Model for Styl-Fé ..................................................................... 44 Figure 6.1 The marketing mix (7P model).................................................................................... 46 Figure 6.2 Nescafé Dolce Gusto Circolo & Capsules................................................................... 47 Figure 6.3 Styl-Fé Charges on Discussion Rooms ....................................................................... 48 Figure 6.4 Organizational Chart for Styl-Fé ................................................................................. 50 Figure 6.5 Styl-Fé’s Value Chain ................................................................................................. 51 Figure 6.7 Styl-Fé Implementation Plan (3 years) ........................................................................ 56 LIST OF TABLE Table 1.1 Summary of Brand Extension Strategy ........................................................................ 14 Table 3.1Information Needs Matrix ............................................................................................. 21 Table 3.2 Total Sampling Size ...................................................................................................... 23 Table 3.3 Questionnaires design ................................................................................................... 24 Table 5.1 Business Strategy with Ansoff’s Matrix ....................................................................... 40 Table 5.2 Maxis SWOT Analysis ................................................................................................. 41 Table 5.3 ERRC Strategy Canvas for Styl-Fé .............................................................................. 43 Table 6.1 Start-Up Assets ............................................................................................................. 53 Table 6.2 Start-Up Expenses......................................................................................................... 53 Table 6.3 Projected Cash Flow ..................................................................................................... 54 Table 6.4 Projected Balance Sheet................................................................................................ 54 Table 6.5 Projected Profit and Loss .............................................................................................. 55 Table 6.6 Annual Sales Forecast ................................................................................................... 55 vii | P a g e
  8. 8. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia CHAPTER 1 INTRODUCTION 1.0 BACKGROUND & CONTEXT Maxis Berhad is the top notch wireless telecommunication service provider in Malaysia; grabbing the most market share by having more than 14 million subscribers nationwide and with the award of “Best Telecommunication Company” for consecutively few years which was conceitedly established by Ananda Krishnan, an entrepreneur in 1993 (Maxis Berhad, 2012). Maxis Berhad made its way to the main board of Bursa Malaysia in year 2009 and is currently being listed as the first largest public listed company in Malaysia (Ang, 2011 &Bursa Malaysia Berhad, 2012). The head-quarter is situated within Maxis Tower in the heart of Kuala Lumpur adjacent to the PETRONAS Twin Towers (KLCC). The focal point of their businesses are mainly on offering mobile services (voice & SMS), mobile devices for individual consumers, SMEs to large corporations in Malaysia (Wikipedia, 2012). An overview of products and services are listed as follows: i. Monthly subscription plans buddle with selective mobile devices ii. Maxis Internet Broadband Service (4G/LTE) iii. Prepaid call plans (Hotlink) iv. International Roaming Services (partnering with multi-countries telecommunications service provider) 1.0.1 The Organization Maxis’s success is led by fellow directors for the past decades and the current chair-person and chief Executive Officer positions are chaired by Raja Tan Sri Dato’ Seri Arshad bin Raja Tun Uda and Sandip Das respectively with more than 20 years of experiences in managing highly profiled organizations to each (The Board of Directions structure is presented in Appendix A). 1|Page
  9. 9. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia With their long-term strategic leadership skills, Maxis had prevailed and retained its market share and profits through fierce competitions and fast-evolving technologies. While efforts and resources are spent on maintaining and improving its existing products/services, Maxis once again had proven its capability by being the first to bring in 4G LTE (abbreviated as Long-Term Evolution) technology into Malaysia, recapturing the public interests and confidence towards Maxis. Maxis Berhad is co-operating with its co-operatives (subsidiaries) which each handles different operations and tasks altogether. It is a large corporation which made up of 11 entities with 100% owned by Maxis except for one subsidiary – Advanced Wireless Technologies SB which embraced 75% of shares which is clearly depicted in figure 1.1. Figure 1.1 Maxis’s Corporate Structure Maxis Berhad Maxis Mobile Sdn Bhd 100% Maxis Mobile (L) Ltd 100% Maxis Broandband Sdn Bhd - 100% Maxis Online Sdn Bhd 100% Maxis International Shd Bhd Maxis Asia Access Pte Ltd - 100% Maxis Mobile Services Sdn Bhd - 100% Advanced Wireless Technologies Sdn Bhd 75% UMTS (Malaysia) Sdn Bhd - 100% Maxis Collections Sdn Bhd - 100% Maxis Multimedia Sdn Bhd - 100% Source: Maxis Annual Report, 2012 1.1.1 The Prestigous Memory Lanes The establishment of Maxis had opened up a wide horizon of Malaysians towards sophisticated technologies such as being the first to introduce GPRS, 3G, HSDPA and even 4G LTE which allowed users to surf Internet and enjoy videos streaming up to 150 Mbps, building up a mega network infrastructure that leads its competitors to tag along. 2|Page
  10. 10. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Throughout these uproar years, Maxis managed to withstand the rough competitors in terms of competing attractive price and packages (buddle plans & mobile devices) while continuously improving their network coverage and services had absolutely earned them numerous awards (see Appendix B for latest awards gained in year 2012). Figure 1.2 presents their most remarkable milestones in their years of services. Figure 1.2 Maxis Significant Milestones Maxis was the pioneer that led Malaysian market in delivering innovative mobile products and services Maxis was the first mobile communications service provider to launch 3G services in Malaysia which is known as Maxis 3G In between year 2005 and 2006, Maxis made it to become among the world’s first to use HSDPA, a high-speed mobile network of its 3G network. At the mean time, it diverted to also provide wireless broadband services Maxis was the first mobile operator that brought in Blackberry and Apple iPhone smart phones to Malaysia Maxis once again taken the lead to launch 4G LTE (Long Term Evolution) in July 2012 Source: Adapted from Maxis Annual Report, 2011 & 2012 1.1.2 Their Breadwinners Presently, Maxis segregated their targeted customers into four main groups, to each focusing on delivering different products and services (see figure 1.3). They are primarily the family and friends, working adults, corporations such as partnering with companies on contract basis to provide telecommunications services which include mobile packages and network cable infrastructure solutions and lastly, the students with affordable prepaid plans. 3|Page
  11. 11. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Figure 1.3 Maxis’s Customer Groups •POSTPAID with supplementary lines •Mobile Plans •Portable broadband plan, product and services •Tablets Plans Family and Friends Working Adults Corporations Students •Corporate Mobile plans •High speed broadband plans and services •HOTLINK Youth CLUB plan •Broadband plan Source: Adapted from Maxis Bhd Annual Report, 2010 1.1.3 The Rivalry-edge There are only 3 key players in telecommunication industry in Malaysia as it is considered a very niche market which requires sky-high cost in purchasing and maintaining high-tech equipments such as communication towers, servers, switches and etcetera. They are nevertheless Celcom, DiGi and the newest rival – U-Mobile. Albeit Maxis still detaining the highest market share as depicted in figure 1.4, there is a possibility to be dominated soon by Celcom, sharing network with DiGi as it is only differed by less than 2% (650) subscribers. Figure 1.4, Malaysia Wireless Market, Q212 Operator No. of Subscribers (mn) Market Share (%) Maxis Communications 12,696 36.3 Celcom 12,031 34.4 DiGi 10,304 29.3 Total 34,956 100.0 Source: Business Monitor International, 2013 4|Page
  12. 12. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia 1.1.4 The Profit-Margin The financial highlights in 2012 for Maxis are having a revenue of RM9 billion with revenue growth of 1.9% YoY. With RM1.9 billion of Profit after Tax that was lower by RM671 million (26.5%) for YoY (Maxis Berhad, 2012). The reason being was throwing in lump sum of funds in expanding its network to 4G/LTE and losing its market share to its rivalries. Nevertheless, Maxis still retaining RM2.1 billion of free cash flow with net debt to EBITDA ratio at 1.46 and net debt to Equity ratio at 0.90 (Maxis Berhad, 2012), permitting cash flow for additional activities and in time of crisis. While comparing its EBITDA to its rivalries, although there were so hiccups in year 2010 and 2011, Maxis still managed to fair it well in year 2012 (see figure 1.5). Figure 1.5 Telcos EBITDA Margin Trend in Malaysia Source: Kenanga Research, 2012 Regardless of its performance in recent years, Maxis had paid up to RM3.0 billion of dividends to its investors and shareholders as a form of appreciation (Maxis Berhad, 2012). It is also one of their strategies by allowing more investors to buy their shares as a technique to ‘loan’ money from the public for its product developments simultaneously. Figure 1.6 displayed a high yield dividend payouts compared to its rivalries despite its earnings growth. This showed the confidence and establishment of Maxis to their investors. 5|Page
  13. 13. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Figure 1.6 Earnings Growth versus Dividend Yield Source: Maybank IB, 2012 1.1 BUSINESS OPPORTUNITY The food and drinks service industry is observed as the largest and continuous growing industry in Malaysia with an average of 2% increased for successively 3 years, which made up to 55.9% of contribution to Malaysia economic as at March, 2013(see Appendix C) (Department of Statistics Malaysia, 2013). This percentage signifies that Malaysians averagely spent more than 50% of their monthly income just on meals itself while the rest goes to clothing, health, transport and etcetera. Malaysians hectic lifestyles specifically in urban areas had contributed the increased trend of food-away-from-home (FAFH) by dining out frequently. According to Tan and Lee (2007), food-at-home (FAH) practice had declined from 33.7% to 22.2% while FAFH had rose from 4.6% to 10.9% in contrast with less than 10 years. Predictably, FAFH will continue to rise at 1.5% to 2% every year. Given that the growing trend of FAFH and increasingly fast-paced; cosmopolitan lifestyles of Malaysians, more development of mega malls had emerged or upgraded to cater such needs. Among of them are The Curve, Mid Valley, Sunway Pyramid, Centrepoint Bandar Utama Phase 2, Citta Mall in both urban and rural areas. This further advocated the amount of new restaurant and cafes serving coffee specialty and food had increased terrifically over the years (see figure 1.7). 6|Page
  14. 14. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Figure 1.7 Growing Trend of Restaurant and Cafes in Malaysia 250 No. of Outlet 200 Starbucks 150 Coffee Bean Dome Café 100 Black Canyon Papparich 50 Old Town 0 2009 2010 2011 2012 2013 Years Source: Various Corporations’ Website (2013) To summarize, the business opportunity derived from the three points below: i. Food and drinks industry is the largest contributor to Malaysia’s economy ii. Food-Away-From-Home (FAFH)’s demand continuously shift upwards, soliciting supplies iii. 1.2 The rapid development and expansions of restaurants and coffeehouses in Malaysia THE PURPOSE AND RATIONALE The purpose of the business development plan (BDP) is to identify and study the important key areas to facilitate the feasibility of Maxis venturing into coffee industry; starting from the urban area – Klang Valley. It will include an overview of the business with marketing strategy, financial prospective, operations outline and exit strategy as well. 1.3.1 The Rationality The rationality behind this BDP is to discover the possibility of diversifying into the fast growing industry – food and drinks services narrowing down to coffee sector from telecommunication industry for Maxis. Why Maxis, many will ask. It is no longer a bombshell to see market players from different diligence joining the bandwagon of profitable F&B industry in Malaysia. 7|Page
  15. 15. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Corporations like Renoma and SEED, are both seen actively operating their bars and café in the heart of Kuala Lumpur. Apart from alternative profit generating source, this BDP also seek to gain more Maxis subscribers by simultaneously promoting their core products by venturing into coffee industry. With attractive price, promotions and products from its rivalries, Maxis is seen losing its market share gradually from both segments; Postpaid and Pre-paid users which presented in figure 1.7 and 1.8. If this situation continues, Maxis would suffer a detriment to their revenue, the trust from shareholders and stakeholders soon. Figure 1.7 Postpaid Mobile Subscribers Figure 1.8 Prepaid Mobile Subscribers Source: Business Monitor International (BMI), 2013 Additionally, BMI’s next 5 years forecast trend for Telecommunication industry in Malaysia also stressed that the pattern of subscribers mostly would descend in urban areas due to market saturation in mobility segment – Everyone will have at least one mobile line subscription at that time! 8|Page
  16. 16. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia 1.4 TERMS OF REFERENCE 1.4.1 Research Questions The research questions for this PROJECT are listed as: 1. What are the current market trends in food & drinks industry in Malaysia? 2. What are the effects of brand extension in the context of business diversification for Maxis? 3. What are the market characteristics for coffee industry? 4. What are the influencing aspects of Malaysians purchasing behavior for coffee? 1.4.2 Research Objectives To support the findings for the abovementioned research questions, the smart objectives are: 1. To analyze the current market trends in food & drinks industry in Malaysia, focusing into Klang Valley 2. To learn the positive and negative effects of brand extension coming from different industry 3. To study the market characteristic that includes competitors’ analysis which will impact the possibility of Maxis diversifying into coffee industry 4. To conduct a research on the influencing factors of Malaysians’ purchasing behavior towards coffee 1.4.3 Research Framework The entire research framework for this BDP covering the following factors:  Factor 1: Market Trends of food and drinks industry in Malaysia  Factor 2:: The effects of brand extension from different industry  Factor 3: Market characteristics in Coffee Industry  Factor 4: Malaysians’ purchasing behavior principally in coffee industry influenced by essential market characteristics. 9|Page
  17. 17. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia CHAPTER 2 BUSINESS REVIEW FACTOR 1: MARKET TRENDS OF FOOD AND DRINKS INDUSTRY IN MALAYSIA As Malaysia advances to become a more developed country, hectic lifestyles had been engraved into Malaysians particularly in the urban areas. This had cultivated their eating habit to be mostly consumed outside, which in another word; food-away-from-home (FAFH). While food-at-home (FAH) in contrast, had gradually became a burden to the career-minded mothers. Hence, the comparison between are conducted in figure 2.1. Figure 2.1 Expenditure per Household on FAH and FAFH Source: Department of Statistics Malaysia, 2000 The household expenditure on FAH is seen steeping from 33.7% to 22.2% while FAFH rose expectedly from 4.6% to 10.9% between year 1973 to 1999 (Department of Statistics Malaysia, 2000). The inputs from FAFH’s upward shift came from five main categories; dine-in restaurants (including hotel coffeehouses), fast-food service outlets, food courts (hawker centers), coffee shops and roadside hawkers. Each category has a clear cut on frequented income groups. For instance, upper income groups usually prefer full range services, cozy and air-conditioned ambience (Tan & Lee, 2007). Given that the demand of FAFH grew vastly in Malaysia, the consumer food service market had a 16% of increase in the consumer food service units to a total of 20,235 from year 1999 to 2003 (Euromonitor International, 2004). It assisted the development of FAFH industry in Malaysia by 10 | P a g e
  18. 18. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia generating transactions of RM16, 312 million during the same period; grew from 22% to 39% respectively. However, FAFH food service outlets had neglected health aspect in food preparations, which later created awareness among the public to be more health conscious on food selections. Tan & Lee (2007) produced a table consolidating responses from approximately 10,000 respondents and it concluded that 82% urban occupants compared to 59% from rural occupants (see Appendix F) While on the Malaysians’ average monthly household expenditure on food aspect, it increased from RM1, 161 per month in 1999 to at least RM1, 937 in 2005; a survey conducted by Tey et al. (2009). It is believed to grow constantly with the rising income and rapid urbanization in Malaysia. Additionally, the same researchers had concluded that the income elasticity of demand for FAFH is relatively larger than income elasticity for FAH (Tey et al., 2009). Food Export Association (US) on the other end provided a forecast on Malaysia’s foodservice market by envisaging from an average growth of 6.5% per annum for the last 5 years, to be having a likely growth of 7-10% per annum in the next 3 to 5 years; especially from the tourism industry (Food Export Association of the Midwest USA, 2011). 2.1.1 Franchising Division Looking into franchising division in Malaysia, Food & Beverage commanded one-third of the market share at 31%, being the highest invested division by foreign investors that brought in many foreign brands (see figure 2.2). Yet, it continues to be the best franchise prospect for Malaysia today (Yeoh, 2009). 11 | P a g e
  19. 19. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Figure 2.2 Franchising Business Sector in Malaysia Market Share (%) Food & Drinks - 31% Apparel & Accessories - 15% Education - 11% Services - 11% Beauty & Health - 8% Retail -4% ICT - 4% Others - 16% Source: Ministry of Domestic Trade, Co-operatives and Consumerism, 2009 Many foreign investors seized this opportunity to bring their products into Malaysia especially Taiwan and Korea thus the born of well-known ChaTime, Snow Fakes, Tong Pak Fu and more dessert houses emerged in Malaysia F&B industry. Although similarity exists in their product range, Malaysians particularly from urban areas were enthusiast and willing to spend on these brands for the sake of being trendy (Food Export Association of the Midwest USA, 2011). FACTOR 2: THE EFFECTS OF BRAND EXTENSION FROM DIFFERENT INDUSTRY In today’s business aspect, brand is inevitably essential facet in determining the optimistic or pessimistic outcome of a business. It plays an important role in delivering functional and emotional values through products or services (Franzen & Bouwman, 2001). According to David Aaker (1991) in his book of Managing Brand Equity, brand is defined as; "A brand is a distinguishing name and/or symbol (such as logo, trademark, or package design) intended to identify the goods or services of either one seller or a group of sellers, and to differentiate those goods or services from those of competitors. A brand thus signals to the customer the source of the product, and protects both the customer and the producer from competitors who would attempt to provide products that appear to be identical." 12 | P a g e
  20. 20. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia A proper branding could discern the difference between similar products and competing brands (Martinez & de Chernatony, 2004). Conversely, will consumers able to accept different products emerge from the same brand which entirely differed from the original product? Keller (1993) stated that “within the multidimensional brand images, direct associations are seen with both products and aspects of the brand” thus through various methods of measuring the dimensions of a brand’s image, brand extension is acceptable among the public (Aaker & Keller, 1990). Brand extension strategy is perceived in reducing risk when launching new products. It will also assist in reducing cost and efforts in communicating new products to the public, simultaneously allows enhancing higher probability of success since consumers are familiar with the particular brand’s history and strength (Tauber, 1981; Aaker, 1990; Aaker& Keller, 1990). This has been one of the favorite diversification strategies followed in as many as 8 out of 10 new product launched (Ourusoff et al., 1992). Many corporate utilized its well established image from existing brand to launch new products in an entirely new market. Take the infamous Virgin Group for an example. It started off on retailing and publishing of popular music; owned a radio channel. They took their brand reputation and image as an opportunity to venture into new market and now they even owned air lines, becoming a well reputed financial advisor and Cola producer (Randall, 2000). Similarity of new products to the parent brand must exist to persuade greater success on brand extensions (Aaker & Keller, 1990), however findings from Smith and Park (1992) proven otherwise. Further findings from Wernerfelt (1988) demonstrated the importance of good reputation from the parent brand as a supportive evaluation cue when unfamiliar brands are presented publicly. Many researchers conducted feasible tests on brand extension strategy which each concluded different results from different hypothesis (see Appendix D).To consolidate and further strengthen various findings, Dr Leif (2001); an Associate Professor and his researchers carried out an experiment on factors namely; similarly, reputation, perceived risk and innovativeness as the influencing factors on brand extensions’ acceptability on FMCG (Fast Moving Consumers Good), durable goods and services brand. The results are as follows in table 1.1. 13 | P a g e
  21. 21. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Table 1.1 Summary of Brand Extension Strategy H1 – Consumer evaluates “similarity” more favorablyon H2 – Consumer evaluates brand extensions more FMCG, durable goods and service brand extensions favorably when the parent brand has a strong increases between the parent brand and the extension “reputation” category The results is positive The results is positive H3 – Consumer evaluates brand extensions more H4 – The more innovative consumers are, the more favorably as the perceived risk of the new category likely they are to evaluate brand extensions more increases. For e.g.: a new car brand extended by a totally favorably. This hypothesis emphasize on service non relevant industry, the results is negative as it doesn’t products such as telecommunication as it signifies provide trust and confidence. While from telecom or car innovativeness. industry, extending its brand to durable goods and for service products, the results are positive. The results is partly positive The results is positive Source: Extracted from Dr Leif et al., 2001 To conclude, similarity perceived in the brand extensions from the parent brand is indeed a crucial factor to be considered. However, if the brand extensions are being backed up by a reputable and trustworthy parent brand, the likelihood of a successful brand extension is high. Even so, bad brand extensions management could deteriorate parent brand image which could confuse consumers, thus diluting the brand meaning which was established years ago. FACTOR 3: COFFEE INDUSTRY MARKET CHARACTERISTICS IN MALAYSIA 2.3.1 Coffee Influences in Malaysia Coffee is the most consumed beverages after water in the world with over 500 billion cups each year and 15,000 cups every second! (Jeff, 2011). In Malaysia, the ideal hot preferences of beverages are tea and coffee. They are consumed averagely 1.58 cups of coffee and 1.78 cups of tea daily (see figure 2.3) (Norimah et al., 2008). Nevertheless, coffee is still the leading hot beverage in Malaysia in value sales term (Euromonitor International, 2012) 14 | P a g e
  22. 22. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Figure 2.3 Mean frequency of beverages consumed daily by population Source: Norimah, et al., 2008 The coffee industry in Malaysia has plenty room for growth with only 250 cups per capita consumption in a year in comparison to the Western Europe countries and US that each has an aveage of 500-600 cups per year (Kenanga Research, 2012). To accommodate to the high coffee demand, Malaysia imports of coffee beans and related products continue to rise, reaching 600,000 tons of begs which each containing 60 kilograms of coffee beans from Indonesia, Thailand and several other countries (Bernama Malaysia, 2008). Despite Malaysia’s increasing domestic coffee bean output, it is still yet to meet the demand adequately. (Bernama Malaysia, 2008). Old Town White Coffee (an origin white coffee manufacturer) started the café outlet chains in year 2005 right when the coffee demand rose, grabbing this golden opportunity to boost its profits while gaining market entries and acceptance in nationally and the region (White Coffee Malaysia, 2013). Old Town White Coffee is a native product of Malaysia with 100 over years of presence in Ipoh, Perak that is currently operating more than 180 outlets nationwide. They served aromatic white coffee; consisted of Liberica, Arabica and Robusta coffee beans, roasted with palm-oil margine and served with premium skim milk (White Coffee Malaysia, 2013). The coffee segmentation in Malaysia is seen extended to not only targeting the adults, but also the 17-21 age group.As coffee has been Malaysians’ daily diet, coffee sales are forecasted to grow at CAGR(compound annual growth rate) of 8% in value constantly the next few years (Euromonitor International, 2012). With face-paced lifestyles in the urban areas, instant coffee has been the underlying reason contributed the coffee’s growth. 15 | P a g e
  23. 23. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia 2.3.2 Coffee Industry Analysis in Malaysia Further study of coffee industry in Malaysia is presented in figure 2.4 with the used of Porter’s 5 forces analysis which consists of threat of substitues, bargaining powerof suppliers, threat of new entrants, industry rivalry and bargaining power of consumers. Figure 2.4 Porter’s 5 Forces Analysis on Coffee Industry in Malaysia Threat of substitutes – High Bargaining power of suppliers – Low Threat of new entrants High • Malaysians are getting health conscious given the susceptibility of Malaysian drinkers to prefer tea (Norimah et al., 2008). Others substitutes will be available in milk shake forms or desserts such as Chatime, SweetChat, Snowflake, etc from Taiwan market. • Coffee bean commodity market is a mature open market. Thus wide ranges of suppliers are available worldwide. • There are a lot of domestic players such as Ipoh Old Town White Coffee, Papparich, Kluang Kopitiam have entered into the coffee market which sells localized products with affordable price. (Euromonitor, 2012) Industry rivalry – High • Very competitive market with international acceptable brands such as Starbucks, Coffee Bean & Tea Leaf, Gloria Jeans and domestics players such as Old Town, Papparich etc. Both international and domestics players had unique marketing strategies on their drinks menu. Especially from the domestic players who are able to offer local delicacies with traditional hot coffee at an affordable price. Bargaining power of consumers - High • Unless the uniqueness of the menu could attract consumers’ loyalty, otherwise consumers will easily switch to other competitors to dine, given that plenty of other Source: Adapted from Eu, 2010 Strong substitutions are identified through the Porter’s 5 analysis; coffee could be potentially replaced by tea as Malaysia consumers are gradually more health conscious over the years. There are three types of tea; white, black and green. Each tea originated from different countries, for instant – green tea is from Japan. Caffeine, a stimulant from plant product could be found in both tea and coffee. It could exert its effect into human’s central nervous system and able to help us to feel temporary more alert and less sleepy. Nevertheless, both coffee and tea have its own pros and cons (see figure 2.5). 16 | P a g e
  24. 24. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Figure 2.5 Health Benefits of Tea vs Coffee Source: Policy Expert (2007) Despite older Malaysian consumers are heading towards healthier lifestyle by replacing coffee consumption with tea, nevertheless BMI forecasted a 2.9% growth yearly for the next 4 years among the youth generation in Malaysia. This creates a window of opportunity among the coffeehouses by producing more innovative flavors for coffee and able to market it comprehensively (Business Monitor International, 2012). FACTOR 4: MALAYSIANS’ PURCHASING BEHAVIOR IN COFFEE INDUSTRY WHICH INFLUENCED BY ESSENTIAL MARKET CHARACTERISTICS As conferred in earlier discussion, the rising income and frantic lifestyle of Malaysians allowing them dining out daily as they could afford to as well as time is the main factor. According to a SWOT analysis extracted from Business International Monitor (2012) report on Malaysia drinks industry, youth consumers in Malaysia are more incline to branding and tend to embrace new international products easily instead of regarding them with suspicion because of the high cost they paid, thus creating a new prospect for the international marketers (see Appendix G ). 17 | P a g e
  25. 25. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Even so, youths are getting more educated today. Influenced by the changing lifestyle and growing affluence; stirring up their behavior to be more price-sensitive, brand-conscious and demanding as well that the services they received must be in satisfactory degree (PriceWaterHouseCoopers, 2006). The business will risk losing their position and market share to their intense competitors if they are not sensitive to their consumers needs. As such, this same standard of services applied in coffee industry as well. Unfortunately with the geographical landscape unsuitability, Malaysia has been unable to yield from the export of second largest commodity in the world – beans (Diaz, 2009). Though incapable to plant high-quality coffee beans as the landscape is more suitable towards rubbers tree plantation (Rahman, 2010), they still strived in its own ‘kopi’ business – Kopitiam (known as coffee shop or café) with lower-quality coffee beans production back in World War 2 (Feemelah.com, 2010). During good old days, besides savoring freshly brewed coffee; Kopitiam also served as a hot spot for socializing where they spent most day playing cards with each other, conversing, listening to the radio as well as sipping their coffee with newspapers or magazine in their hands (Wilson, 1967). Similar traits are also found in today’s 21st century where infiltration of branded coffeehouses fashioned with lifestyles like Starbucks and Coffee bean & the Tea Leaf had greatly increased of the expectations to a coffeehouse from consumers. Consumers today seek not only eminence coffee but also the packaged external factors such as ambience; substantial food choices that match their beverage offerings in which are perceived as an added value to coffeehouses. Singapore was the first in Asia that carved the trend of fulfilling modern desires by shaping the ‘new age’ coffeehouse with modern pursue such as WiFi connectivity, fancy interior designs that provided homely feel dining in with air conditioning and soothing background music while retaining the classic food menus and ‘kopi’ (Toyad, 2012). Toyad (2012) also stated that modern consumers would not mind paying extra to enjoy their meals provided the attributes of the coffeehouse matches their desires. An exploration study by Waxman (2006) related to social and physical factors influencing place attachment in coffee shop in which she regarded as ‘third places’ have much emphasis and impacts on neighborhood gathering places that enhanced the lives of people. The term ‘third 18 | P a g e
  26. 26. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia place’ derived from the amount of time spent in daily routines of people besides home and work; the cafes. Her findings advocated that the top five physical characteristics of the ideal and most frequented coffeehouses in shown in figure 2.6 posed from the most important to the fifth important. Figure 2.6 Top Five Must Have Physical Characteristics in Coffeehouse Cleanliness Aroma Adequte Lighting Comfortable furniture A vew to the outside Source: Waxman (2006) Whereas for the social aspects, Waxman’s (2006) findings further revealed social benefits attained through coffeehouses included the opportunity for people to linger, to feel a sense of ownership and establish a territoriality, feeling of trust, respect, and anonymity, the opportunity for productivity and personal growth and the supportive systems to patrons from the staff (customer service). These attributes are not often portrayed in a coffeehouse but it is achievable. It is believed that besides innovative product development in this era, the physical and social attributes discussed above are able to further actualize what consumers are continually willing and looking to trade up with (Business Monitor International, 2012). Apart from that, promotions such as free samples, ‘buy-one-get-one-free’ concept and points collecting system are proven to be effective marketing tool among the Malaysians (Osman et al., 2011). 19 | P a g e
  27. 27. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia CHAPTER 3 3.1 RESIGN DESIGN INFORMATION NEEDS SPECIFICATION Despite excessive business reviews on existing case studies and research works from others which is known as secondary data collection, real time and up to date information from the urban earners are essential to determine this project’s feasibility. The data collective method is referring to primary data collection which aims to gather raw data from the public through survey, interviews or observations; structure and development them into useful information. The specification of information needed for this project derived from two methods of collection – quantitative and qualitative. Quantitative research involves the use of data collected from the distribution of questionnaire surveys which questions posted like who, what, when, when, how much, how many and how. Quantitative data analysis typically presented in graphical form, consisting statistically numerical form such as averages, ratios or ranges (UKAid, 2010). Qualitative research on the other handis concerned with opinions, experiences and feelings of individuals producing valuable subjective data. The data from qualitative research could be used to develop concepts and theories that assist us to understand the social world, closing the gap of uncertainties in developing marketing strategies (Hancock, 2002). The information needs specification is illustrated as a matrix shown in table 3.1 with quantitative and qualitative methods across primary and secondary data collection technique 20 | P a g e
  28. 28. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Table 3.1Information Needs Matrix Data Needs Primary Quantitative  Secondary Questionnaire surveys that  The statistics of spending expenditure included product features, on Food-Away-From-Home in consumers’ purchasing behavior Malaysia and external factors which are  Financial stability from Maxis  Research papers and reports on stated in figure 2.5 Qualitative  Focus group interviews (Maxis Malaysia’s market trend in foodservice and non-maxis subscribers) industry:the willingness to spend on food  Research papers on consumers’purchasing behaviors in coffeehouses/cafes  Case studies on international and domestic competitors in coffee industry  Research papers on market characteristics on existing coffeehouses they deployed to attract consumers  Research papers and pilot studies on the effective of brand extension which includes advantages and risks. Source: Adopted from previous project; (Yeap, 2012) There are various types of research designs available (see figure 3.1), but to each cater for different purposes. This project is aimed to achieve and analyze the truthful responses from Malaysian consumers onto Maxis’s choice of venturing into coffee industry with branding extension strategy. Hence, this project belongs to descriptive research which will be accompanied by questionnaire survey and focus group interviews when it required. 21 | P a g e
  29. 29. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Figure 3.1 Types of Research Design Source: Prof. Kombrabail, 2009 3.2 RESEARCH METHODOLOGIES This section contains the in-depth elaboration on the research design, sampling method, who is the targeted respondents, where and how the questionnaire survey would be distributed; lastly a sample of questionnaire design is provided as well. 3.2.1 Sampling Unit The sampling unit would be distributing to two groups of respondents- Maxis and non-Maxis users with no specified gender. It would be further split into five different age groups with the possibility of frequent dining out due to increase in gross income and frantic lifestyles, thus expenditure on food increased as well. The purpose of categorizing the respondents into Maxis and non-Maxis subscribers is to obtain a clear-cut statistics on the ability to convince non-Maxis subscribers to switch to Maxis line via the benefits of the new café house could offer. 3.2.2 Sampling Size There would a total 300 sampling size which is approximation to signify the population of 3000 respondents. A breakdown of total sampling size for this project is listed clearly in table 3.2. Bearing in mind that sampling error tends to occur commonly which includes damaged surveys 22 | P a g e
  30. 30. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia or irrelevant answers increased with a complex sample design (Brogan, 2009). Thus, at least 2% of sampling error is taken into account with highest confidence level of 95% which left approximately 294 accurate sampling units. Table 3.2 Total Sampling Size Consumers Age 15 -19 20 – 24 25 – 29 30 – 40 40 – above Total Sampling Size (Estimation) Source: Adopted from previous project; (Yeap, 2012) Maxis user 30 30 30 30 30 Non Maxis user 30 30 30 30 30 300 ~ 3000 3.2.3 Sampling Method Whereas non-probability sampling method would be carried out through convenience and quota sampling since mobile device with subscription line is necessity among majority Malaysians who holds at least one mobile device nowadays. The distribution method would be via social media, internet and electronic mail with survey questions attainable from Google Drive for environmental friendly purposes. In addition, simple interviews are to be conducted via focus group method with approximately 10 interviewees to gain valuable opinions and expression related to the purposed business concept. 3.2.2 Sampling Location The sampling hub would be focusing in Klang Valley as it is the central of urbanization where sales volume is measured the highest in Malaysia. Places that includes Subang Jaya, Petaling Jaya, Cheras, Ampang and Kuala Lumpur. These locations are filled most with shopping malls, thus accuracy is higher in answering the questionnaire and interviews. 3.2.4 Collection Method Given that survey questions are published through the cutting-edge cloud technology (Google Drive), gathered data would be analyzed and presented in graphical approach embedded in 23 | P a g e
  31. 31. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Google Drive, therefore it would translate them into useful information to progress on this project 3.2.5 Ethical Issue In this project, unethical issue such as creating bias questions that would mislead respondents to ‘forcefully’ answer in accordance to one’s favor to obtain positive answers should be avoided. This is to strengthen the accuracy and honesty level on whether or not; this project is feasible through public’s perceptions. Besides that, all facts and figures should be referenced accordingly to avoid false information which could harm the business. 3.3 QUESTIONNAIRE DESIGN According to Burgess (2011), relevant questions should be sorted and grouped into sections to maintain the questions flow smoothly to one and another, guiding respondents comfortably throughout the whole process. Hence, the questionnaire design for this project were arranged into four sections with each pertaining different set of questions in which is listed in table 3.3. Questions were given in open format choices, closed format choices with single or multiple options, rating and Likert scale format. The questionnaire could be found in Appendix I). Table 3.3 Questionnaires design Section A Questions on respondents demographics – age,income level, occupation Section B Questions on measuring consumer’s purchasing behavior Section C Consists of questions on measuring on products’ features impact on consumers Section D Questions on measuring the external factors that could lead to differ buying decision Source: Adopted from previous project; (Yeap, 2012) 24 | P a g e
  32. 32. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia CHAPTER 4 4.1 DATA ANALYSIS PRIMARY DATA ANALYSIS The data collected from the questionnaire distribution and brief interview answers would be lay out and discussed in this chapter. They would be arranged in graphical manner followed by concise descriptions. Unfortunately through the process of distributing and collecting the questionnaire, some answers were found irrelevant or left unanswered. Hence, only a total of 278 usable questionnaires collected; producing confidence level of approximately 90% upon the answers. Nevertheless, these data are still valid for this BDP as the total cumulated questionnaires are more than 70% returned successfully. 4.1.1 Demographic Figure 4.1 Number of Maxis’s Subscriber What is your age group? Are you a Maxis's mobile subscriber? 40 years old & above 7% No 50% 15- 19 years old 4% 20 - 24 years old 25% Yes 50% 30 - 40 years old 31% 25 - 29 years old 33% Figure 4.2 Age Group Source: Questionnaire Collection In this questionnaire, half of them are Maxis’s subscribers while half of them are not. They are subscribed to DiGi, Celcom and UMobile; in this case, second highest subscribers belong to Celcom. While on the age group, most of the respondents are working adults; aging from 20 - 40 years old; each forming a percentage of 25%, 33% and 31% respectively. 25 | P a g e
  33. 33. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Figure 4.3 Respondents’ Occupation Column1 Others Students Banking Officer Insurance Agent Accountant/Auditor IT Educators Engineers Sales personnel 0.00% 25.90% 25.90% 0.72% 0.72% 4.32% 26.62% 4.32% 5.76% 5.76% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% Source: Questionnaire Collection Most of the respondents were from Information Technology and Education background forming 26% for each for the entire population of this questionnaire. Whereas, there is also a 26% of students took part in this questionnaire as well. Students’ outputs to this questionnaire helped to further recognize their spending patterns on food and coffee as most of them have zero income. 4.1.2 Consumer’s Purchasing Behavior Looking at the visit frequency based on five different income groups from figure 4.3, majority of respondents would dine 3 to 5 times in a monthly basis. The highest frequented income group falls on RM11,999 – RM29,999 with approximately 50 of them. With such level of income group, it is assumed that most of them are students who took part in this questionnaire. Some of them even frequented coffeehouses for more than 10 times monthly. Personal approach to asking the purpose of their visits is mostly dealt with studies, discussions and gathering. For the rest of the income groups, averagely they would dine 3 – 5 times in the coffeehouse, hence creating a common place to dine in their daily lives. 26 | P a g e
  34. 34. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Figure 4.4 Income Level vs. Frequent Visit to Coffeehouses Income Level vs Frequent Visit to Coffeehouses 60 50 RM 11,999 and below 40 RM12,000 – RM29,999 30 RM30,000 – RM49,999 20 RM50,000 – RM69,999 10 RM70,000 and above 0 1 -2 times per month 3-5 times More than 10 times Source: Questionnaire Collection The ultimate purpose of visiting the coffeehouses was mainly for coffee which stood at 29% while the second purpose would be for gathering, having a percentage of 28.25(see figure 4.5). As per interview, nowadays coffeehouses fulfilled their needs of providing environment and services catered for gathering, permitting them to stay longer for a nice long catch-up with their peers. This is followed up by a percentage of 21.93%, having meals is the purpose of them visiting the coffeehouse; mainly is Papparich, Old Town White Coffee, Station 1 and etcetera. Minority respondents would choose coffeehouse for leisure and work purpose in which obtained 5.2%. Yet, the respondents did mention on noise level and lack of privacy for discussion and work. Figure 4.5 Purpose of Visiting the Coffeehouse Purpose of visiting the coffee/café house 21.93% Meals 29.00% Coffee 28.25% Gathering 15.61% Leisure Other 0.00% 5.20% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% Source: Questionnaire Collection 27 | P a g e
  35. 35. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia More than half of the respondents (53%) spent averagely of 1 hour in the coffeehouses, mainly for quick meals (see figure 4.6). While 32% of them would spent 2 hours, chit-chatting or having longer meals in the coffeehouses. Those respondents who spent averagely 3 hours and above (9% and 6% consecutively) usually are sales personnel and students, completing their tasks with the facilities (WiFi) provided. Figure 4.6 Average amount of Time Spent in Coffeehouse How much time you spent averagely in the coffee/café house at each visit? 3 hours Around 3 hours 9% and above 6% 1 hour 53% Around 2 hours 32% Source: Questionnaire Collection According to figure 4.7, it is somewhat optimistic that 140 of the respondents were considered as ‘early adopters’ with the willingness to try new coffeehouse regardless of its brand. In contrast, there were 112 of them are hesitated with the brand factor. These groups of respondents are relatively brand conscious and skeptical to try new product without knowing the root of it beforehand. Figure 4.7 Willingness to try new Coffeehouse regardless of its Brand Willingness to try new Coffeehouse regardless of its Brand Maybe 112 26 No 140 Yes 0 20 40 60 80 100 120 140 160 Source: Questionnaire Collection 28 | P a g e
  36. 36. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia When such question relating to whether promotion and discounted rates are one of the factors they look for in the coffeehouse, 184 of respondents answered yes which posed the majority responds. However, there are 72 of them answered maybe with the concern in quality of food and drinks they served apart from the promotions. A small group of 22 respondents are not keen in promotions and discounted rates. Figure 4.8 Promotions and Discounted rates as the factor to dine in Coffeehouse Will promotions and discounted rates be the factors you dined in a restaurant? Maybe 72 No 22 Yes 184 Source: Questionnaire Collection 4.1.3 Products Similar responses received when the respondents were asked on set menu. From figure 4.9, there were 42.45% of them agreed it was an essential element should be found in a coffeehouse while 40.29% of them are on neutral based. Whereas, for 17.27% of the respondents; set menus are not one of the factors they anticipated in coffeehouses. Figure 4.9 Set Menus as the factor to dine in Coffeehouse Will set menus lunch/dinner is one of the factors you chose to eat at the coffee/café house? Maybe No Yes Maybe, 40.29% No, 17.27% Yes, 42.45% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% Source: Questionnaire Collection 29 | P a g e
  37. 37. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Through this question, coffee consumer preferred traits towards the coffeehouses could be identified via the visit frequency towards a particular café. From figure 4.10, Starbucks posed the most frequented café in comparison to its rivalry at 31.7%. It is followed by Papparich (12.9%), others coffeehouses (Quan’s ice cream house, Station 1, Kluang Kopitiam)(10.8%), Old Town White Coffee (9.4%), Coffee Bean (8.6%) and Gloria Jean’s (5.8%). When asked most of the respondents, why would they prefer Starbucks over others and they stated few important elements that captured their interests; product innovation, location, drinks customization, Starbucks’ merchandise and lastly, good marketing promotional tool through Starbucks’ card member with buy 10 drinks, free 1 drink. Whereas feedbacks on Coffee Bean, it is more pricey and less promotions to interact with its consumers. Papparich and Old Town White Coffee are local coffeehouses which received ideal responses that they served good food and drinks with reasonable prices. However, consumers nowadays deeply western influenced with brand conscious, also location for convenience is play a vital role as well. On the contrary, the least frequented coffeehouse is Gloria Jean’s with the highest percentage of 66.9%. Comments received were because of Gloria Jean’s stall concept which operates more towards a booth concept with only limited seats and long table restrict them to hang out longer. Figure 4.10 Visit Frequency on selected Coffeehouses Which Coffee/café house you visit the most? 80.0% 70.0% Frequency 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Starbucks Coffee Bean Papparich Old Town Gloria Jeans Others.. Least Frequent 17.3% 38.1% 25.2% 14.4% 66.9% 35.3% Less Frequent 12.2% 19.4% 24.5% 23.0% 9.4% 19.4% Average 21.6% 18.0% 22.3% 27.3% 12.2% 24.5% More Frequent 17.3% 15.8% 15.1% 25.9% 5.8% 10.1% Most Frequent 31.7% 8.6% 12.9% 9.4% 5.8% 10.8% Source: Questionnaire Collection 30 | P a g e
  38. 38. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Generally the respondents would go for coffee beverages in coffee house which consists of 37% (see figure 4.11), it is then followed by chocolate beverages (17%) then tea beverages as their third choice at 16%. It is still seen consumers prefer coffee over tea despites the benefits tea had over coffee. While figure 4.12 tells us that they prefer hot beverages over the cold beverages at 50% compared to 32%. In this case, ice-blended drinks are not so in favor at 14%. Reason being that ice-blended drinks are just too sweet and posed a health concern to them. Figure 4.11 Preferred Drinks in Coffeehouse What do you usually consume in the coffee/cafe house? Chocolate Beverages 17% Others 3% Others 4% IceBlended 14% Coffee Beverages 37% Fresh Fruits Beverages 12% Green Tea Beverages Sky Juice 10% 5% Which do you prefer? Tea Beverages 16% Hot Beverages 50% Cold Beverages 32% Figure 4.12 Beverages form preferred Source: Questionnaire Collection The internal factors depicted in figure 4.13, the consumers considered beverages selection and interior designs are the most important elements should be possessed by a coffeehouse which both had a percentage of 87.1 and 74.8 respectively. A good interior design is able to create comfortable ambience for the consumer as discussed in chapter 2. As for the foods selections element, 71.2% of them agreed that indeed an important facet to attract consumers to dine in with more choices. Set menus and product innovations are not so imperative to be expected in a coffeehouse with a percentage of 62.6 and 51.8 from the respondents, but via personal experience; set menus are able gain more consumers who worked around the shopping complexes while product innovation is seen prevalent strategy for Starbucks. Merchandise products on the other hand, received a less important response from them with percentage of 50.4%. Therefore to sum up what a café should 31 | P a g e
  39. 39. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia focus on, it would be from beverages selections, interior design, foods selection, set menus, product innovations and lastly, merchandize products. Figure 4.13 Internal Factors Rating in Coffeehouses Internal Factors you look for in coffee/café house 140.0% 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% Interior Design Beverages Selection Foods Selection Set Menus Products Innovation Merchadise Less Important 2.2% 3.6% 7.2% 7.2% 17.3% 50.4% Neutral 23.0% 34.5% 36.7% 38.1% 33.8% 11.5% Most Important 74.8% 87.1% 71.2% 62.6% 51.8% 17.3% Source: Questionnaire Collection As seen in figure 4.14, all external factors were rated as very important with an average of 80% and above for all of them. The most important element is the quality of beverages and foods (95%); coffee should be served fresh and evenly and foods should be in accordance to health chart, when asked during interview. This is followed by customer service (90.6%). As discussed in chapter 2, consumers nowadays are more educated and demanding, agreeable to pay more if they are served well including floor service. Surprisingly, price factor came in fourth as the most important external factor. This tells us that above all, Malaysian’ consumers are willing to pay if they received satisfactory services and atmosphere. While atmosphere and noise level are being taken into account too with each having 85.6% and 84.2% to its own as students and business men feedbacks were too many distractions if one coffeehouse is too crowded and space is vital to them. Since most coffeehouses come with WiFi facilities, however it still received a 79.1% on the importance of it. 32 | P a g e
  40. 40. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Figure 4.14 External Factors Rating in Coffeehouses External Factors you look for in coffee/café house 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% Atmosphere Price Noise Level Quality Customer Service Facilities Less Important 1.4% 1.4% 1.4% 0.7% 1.4% 7.2% Neutral 12.9% 14.4% 13.7% 4.3% 7.9% 13.7% Most Important 85.6% 84.2% 84.9% 95.0% 90.6% 79.1% Source: Questionnaire Collection 4.1.4 External Factors When this questionnaire finally revealed its objective of these findings, 79% of them responded well towards Maxis venturing into coffee house (see figure 4.15). However, 21% of the respondents did not respond well with different industry especially from telecommunication. They stated that Maxis should just stay focused on improving its core products than diversifying its resources to others. Having said that, these small groups of respondents had some dissastisfactions and disputes on services received from Maxis. Figure 4.15 Will you visit the coffeehouse opened by Maxis? Will you visit the coffee/café house opened by Maxis? No 21% Yes 79% Source: Questionnaire Collection 33 | P a g e
  41. 41. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia To further understand the possibility of non-Maxis subscribers converting to Maxis, the 140 nonMaxis respondents’ feedbacks were taken to examine against the question posted in figure 4.16. 58.6% of them replying yes of the possibility converting their line to Maxis if a promotion from the future coffeehouse under Maxis is able to provide cheaper mobile package through accumulative system points. However, there is also a high percentage of 41.4% of respondents did not find the needful to convert through the series of hassles despite the promotions. Figure 4.16 Possibility of Converting to Maxis for Benefits If Maxis offers its existing services such as getting free calls or launching its accumulative system points to redeem certain mobile devices, particularly for Maxis users; will you switch over to Maxis’s line if you’re a non-maxis just to obtain the bene No 41.4% Yes 0.0% 58.6% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% Source: Questionnaire Collection The next question evaluates the influence of peers’ pressure in Malaysian consumers into indirectly promoting Maxis through word-of-mouth approach. Fortunately through figure 4.17, 71.9% of respondents agreed into inviting their friends and families into the same bandwagon for lavish benefits whereas 28.1% of them found it irrelevant. Figure 4.17 Possibility of Influencing Friends & Families into Maxis for Benefits In regards to question above; If you are a Maxis user, will you influence your friends and family into joining the bandwagon with you to obtain the benefits? No Yes 28.1% 71.9% Source: Questionnaire Collection 34 | P a g e
  42. 42. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia 4.2 BUSINESS IMPLICATIONS Thorough analysis from business reviews and primary data collection had revealed certain facts that are proven realistic. This section would be discussed based on the BDP research framework: 1. Factor 1: Market Trends of food and drinks industry in Malaysia From observation and personal interviews with a few of working adults on what is their daily food source. 70% of them answers were dining out due to traffic congestions and fatigue from heavy workload, causing working mothers to rather pack home food from outside OR eat out with family; except for weekends whereby they will try their best to cook. 60% from the 10 interviewees replied that more than 50% of their incomes are purely spent on food. This comprises dried food and frozen food as monthly groceries basis. Also from the questionnaire, a trend of frequent dining out can be seen with 71.2% of them dined in coffeehouses between 5-10 times (see figure 4.4). This is only a statistic in coffeehouses and not included in road side hawker stall, restaurants and food court. Besides that, packing food home also considered as eating out. 2. Factor 2: The effects of brand extension from different industry Business reviews on existing case studies divulged the likelihood of extending its parent brand into different industry such as RENOMA and SEED corporations in Malaysia. Both corporations’ food prints started from apparel industry but recently, they had successfully branched out their own bar & cafés using the same brand name. Besides the downfalls brand extension failures, it appears as strong brand image plays vital role in consumer’s behavior towards it. Figure 4.15 – 4.17 provided direct responses to how consumers’ reaction towards Maxis’ diversification approach. Apparently, it received good responses due to its own impressive brand name in Malaysia. However, a small percentage of them strongly disagree with Maxis venturing into an entirely different industry against its origins; especially dealing with foods & drinks. 35 | P a g e
  43. 43. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia 3. Factor 3: Market characteristics in Coffee Industry Kenanga Research (2012) stated that despite hot tea beverages benefits overweight coffee’s benefits, coffee industry in Malaysia still has plenty room to grow in terms of sales value. It is indeed true that from figure 4.11 above, coffee beverages are being consumed the most in coffeehouses with approximately 37% out of 278 respondents. Also, 50% of them preferred hot beverages in comparison with chill and ice-blended ones which results are tally with Norimah et al. (2008) studies (see figure 4.12). On top of that, adolences such as students had opened up a new market horizon to focus in coffee industry; primarily café/coffeehouses (Euromonitor International, 2012). Survey results (figure 4.4) shown us income group RM11,999 and below whose mostly are students; holding highest percentage in visiting the coffeehouses for more than 10 times category. 4. Factor 4: Malaysians’ purchasing behavior principally in coffee industry influenced by essential market characteristics. In Waxman’s (2006) study, she revealed that the top five physical and social characteristics in coffeehouse are prominent to the growing business particularly in coffeehouses (refer to chapter 2 discussion). Since this is not a research based project but rather focused onto reality café concept, the five characteristics of each in physical and social aspects had been classified into atmosphere (also known as ambience), noise level, price, quality, customer service and lastly facilities. The responses obtained from the survey further proven Waxman’s research that indeed, consumers are always seeking the best from the atmosphere, comfortableness and the sense of attachment through it. As per discussion, long hours’ consumers are generally students and business men who longed for privacy and quiet ambience in the coffeehouses as another option for them to work besides office and library. Therefore, using Waxman’s framework; comfortable sofas should be taken into consideration to fulfill their needs. 36 | P a g e
  44. 44. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Price on the other hand, is not longer a major concern on price setting as long as the marketing concept meets the demand. As stated by Toyad (2012), majority of Malaysian consumers are willing to pay extra if they feel worthwhile and it is also proven from the survey in figure 4.14, price factor only came in fourth whereby quality, customer service and atmosphere are their main priorities. Up to this point, analysis based on four factors above given a heads-up and supportability on this BDP possibility; which is proven FEASIBLE. Nevertheless, aspects in financial, operations and concept wise would be discussed meticulously latter. 37 | P a g e
  45. 45. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia CHAPTER 5 5.1 BUSINESS MODEL OVERVIEW ANALYSIS This section of the report discusses relevant business models that would assist in identifying business and marketing strategies thus making utmost feasible decision for the business. Albeit Maxis has been able to retain its leadership in wireless telecommunication industry in Malaysia for sometime in terms of market share and network coverage, but recent analysis and statistical results from BMI (2013) indicated a plunge in both postpaid and prepaid segment which showcased in chapter 1. With many partnership relationships emerged from its strong competitors; Celcom – Telekom Malaysia & Celcom – DiGi, Maxis would be experiencing a series of challenges retaining its market position. As conferred in previous chapters, food and drinks industry in Malaysia posed a substantially opportunity for Maxis to tap into it with its existing strong brand image. Yet, there are many unforeseen risks and uncertainties come with it. Consequently, business models at this stage assist in revealing opportunity and risks. Furthermore, it could help business planning stages to identify resources needed. 5.2 CORE STRATEGY The core strategy of this entire BDP would be based on a Ansoff’s Growth Matrix which was developed by the infamous Igor Ansoff (1957). Ansoff’s matrix (in short) is portrayed by four main areas in which eachquadrant signifies where the business is and what type of risk is involved once the business has moved to another quadrant (Simister, 2011). 38 | P a g e
  46. 46. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Figure 5.1 Ansoff’s Growth Matrix Source: Usha CV Haley, Strategic Management in the Asia Pacific, pg. 249 As shown in figure 5.1, if Maxis were to venture into a total new market with new product which does not associate which its existing products; the risk is much higher. In the case of this BDP, Maxis would be employing the diversification strategy into coffee industry. Diversification strategy is a normal practice in today’s world but there are often risks and impact to the growth in its core business as resources are also diversified to focus on different portfolio (Hargreaves, 2009). Why diversification when there are many alternatives to generate revenues according to Ansoff’s matrix? See table 5.1 for justifications. 39 | P a g e
  47. 47. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia  Market Penetration   Most subscribers from Maxis derived from the urban areas, particularly from Peninsular Malaysia The current efforts are seen from Maxis is to develop its market in west Malaysia and rural area With fierce competitors, market penetration strategy could not sustain as the rest are following in term of pricing schema, bundling package. U-Mobile and Unifi landline are indirect competitors whereby their booths are also seen in all exhibitions participated by Maxis.       Product Development Market Development  Diversification Table 5.1 Business Strategy with Ansoff’s Matrix  Growing trend in food & drinks industry Most people spent their time outside in a coffeehouse Spreading future risks between parent products and new product Generating another source of profit Market is getting saturated but product differentiation is the key of success Maxis had joined the bandwagon by offering fiber optic cable and wireless solution for best data network. Maxis is doing well and gaining reputation as being the fastest and reliable data network service provider; competing head-to-head with Unifi, but soon the market becomes too saturated and left little space to grow in the future as most households already subscribed to a data network plan accordingly in the next 5 years (BMI, 2013). Source: Author Based on Maxis’s annual report (2012), they are currently expanding their network coverage in rural areas including West Malaysia, renting some of its services to UMobile to retain its revenues. Additionally, they are doing great in their broadband data network products among the corporations and wireless dongle promotions. Yet, the market would become saturated when more than 90% of nationalities holding a network enabled device unless Maxis continue to concentrate on market penetration strategy on new price schema and product bundling (Business Monitor International, 2013). Therefore, venturing into coffeehouses could be beneficial to Maxis as follows (Cheembo, 2009):  Better risk control as no longer being reliant on a single market  Provide movement away from declining activities  Spread risk by avoiding having all eggs in one basket  Stretching corporate parenting capabilities into markets and products 40 | P a g e
  48. 48. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia 5.3 COMPETITIVE ADVANTAGES AND SUSTAINIBILITY It is imperative to analyze Maxis’s capability and competences to discuss its readiness to venture into coffee industry. 5.3.1 SWOT Analysis SWOT analysis is one of the many strategic planning tools to assist in aligning an organization with the world through its internal factors (Strength & Weakness) and external factors (Opportunity & Threat) (ABARIS Consulting, 2001). Table 5.2 Maxis SWOT Analysis Strength      Opportunity    Weakness  Strong brand image to easily gain trust and acceptance from public Good network coverage is able to reduce cost in advertisement via SMS services Partnership with Astro further reduce cost in TV ads Existing partnership with iPhone and Samsung dealers facilitate further reduction through accumulative system points for redemption Financial stability with RM2.1 billion cash flow as at 2012 (Maxis Annual Report, 2012)  Lack of expertise in engaging and managing coffeehouse Market saturation in food & drinks industry. Have to niche to gain competitive advantages Threat FAFH statistics is expectedly rise 5% every year Vast demand in coffee industry Willingness to pay extra for services provided   Financial crisis and economical issues Strong existing international and domestic brands to compete with (Eg. Starbucks, Coffee Beans, Old Town White Coffee) Source: Author Table 5.2 exemplified many qualities Maxis carrying with many opportunities seen in Food & Drinks industry to tap into. Although from different industry but Maxis could use its broadcasting strength to save enormous promoting and advertising costs. The weaknesses identified will be lack of skills in managing coffeehouse especially on the standard operating procedure (SOP) primarily on coffee preparation. Additionally, strong competitors from international and domestic brands such as Starbucks and Old Town White Coffee posed a difficult market entrance; unless unique strategies are thought off to draw Maxis apart from its rivalries using Blue Ocean Strategy (BOS) model. 41 | P a g e
  49. 49. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia 5.4 STRATEGIC GROWTH OPTIONS Blue Ocean Strategy (BOS) tool would be used to evaluate what are the strategic growth options for Maxis in comparison to its rivalries in coffee industry with strategy canvas tool and action framework which comprises of ‘Eliminate-Reduce-Raise-Create’ (ERRC) grid from BOS. These tools are able to signify the potential areas where customer value could be eliminated or created through comparing the competing factors (Chan & Mauborgne, 2005). From personal observations and interview sessions, the eleven competing factors are formed shown in figure 5.2. Styl-Fé is the brand name for the new coffeehouse from Maxis which represents “Lifestyle” café. As Styl-Fé is focusing on lifestyle alone, the following strategy canvas is plotted; creating value curves. Figure 5.2 The Strategy Canvas of Styl-Fé 12 Axis Title 10 8 6 4 Starbucks 2 Old Town 0 Styl-Fé Value Curves Source: Author The identified value curves are served as competitive advantages for Styl-Fé. Starbucks and Old Town White Coffee are used as Styl-Fé strongest rivalries with the most rating in figure 4.10. The competing factors would be grouped into ERRC grid, formulating the focused strategies in figure 5.3. 42 | P a g e
  50. 50. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia Table 5.3 ERRC Strategy Canvas for Styl-Fé Eliminate Raise     Reduce    Price Waiting time Staffing (Baristas) Hygiene Facilities Ambience and soothing music Drinks Customization Create   Privacy room Entertainment room (Pool, TV, Xbox) Source: Author From figure 5.3, Styl-Fé would reduce the total waiting time as consumers themselves are the barista; preparing drinks up to each individual preference, reducing staffing cost to employ barista and hence, price to purchase drinks and foods are reduced. Hygienic issue, facilities provided, ambience and drinks customization are factors Styl-Fé aimed to raise, giving 100% satisfaction services to consumers. In addition, creating partitions could provide ease of learning, working and private discussion among students and businessmen in the café. While creating entertainment room is intended for every consumer for relaxation purposes or bonding time with their mates. 5.5 PARTNERSHIP NETWORK The suggested business partner to engage in assisting and establishing Styl-Fé successfully is Nescafé from Nestle. Reason being is Nescafé is world’s largest direct purchases of coffee and had been very well ascertained since 1938. It could certainly fill the gaps of lack of coffee expertise for Maxis. Nestle has wide range of products mostly targeting household consumers but their beverage products itself generate more than 22% of the company’s total revenue. Their global coffee market, explicitly Nescafé; is segregated into three segments which are instant coffee, roast/ground coffee and chicory. 43 | P a g e
  51. 51. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia 5.6 THE BUSINESS CANVAS MODEL Key Partners Coffee supplier such as Nescafé to provide us Nescafé Dolce Gusto Carrilo machines and its 16 different flavors capsules Interior designers to design an unique and cozy environment inside Styl-Fé Pastry supplier such as the infamous Shangri-la Lemon Garden café to provide us freshly baked cakes and pastries Suppliers for other sustainable products such as sofas, tables and chairs, kitchen utensils and cutleries Botanical Gardens to provide us plants to grow in Style-Fe Promotional partnership with Astro to advertise Styl-Fé at minimal cost Collaborating with sales department for mobile devices & packages price reductions upon redemption Key Activities Establishing first Maxis’s coffeehouse named as StyleFe in Klang Valley Developing outdoor home lifestyle concept into coffeehouses Collaborating with Nescafé to iron out coffee supplies To attract non-Maxis subscribers to enjoy Maxis’ lavish benefits via Styl-Fé Key Resources External: Interior Designers Financial: Bank Loans, shareholders & stakeholders Internal: Strategic, Sales & Marketing Team Value Propositions To provide best customizability by giving the flexibility to prepare own coffee with Nescafé Dolce Gusto Carrilo machine with chosen capsule flavor. They can adjust water and milk level to their taste. Sugar and syrup would be provided on shelf. To provide best outdoor home experiences by introducing room concept for discussions and privacy purposes and enjoy their coffee simultaneously. To be the first coffeehouse to cater for entertainment needs such as Pool, TV and Xbox experience To establish loyalty program like point systems for discounted rates Nescafé Machines or boxes of capsules. Additionally, accumulate premier points to redeem mobile devices or subscription Maxis plans Cost Structure Fixed costs of salaries, premise rent, coffee machines rental and other utilities Promotions/Marketing Campaigns Customer Relationship Dedicated personal assistance (self service) A simple CRM Mobile application and website which helps to keep track birthday and accumulated points for discounted items after each purchase by them. Customer education on our promotions and activities through mobile application or website Channels Promotions through Maxis’s existing channel: SMS and MMS services Media advertisements through Astro’s partnership Website Word-of-mouth promotion via consumers Customer Segments Mass market: Targeting children to adults to senior citizens who like coffee and other beverages Also, partitioned rooms are targeting businessmen and students for privacy purposes Revenue Streams Sales of coffee, other beverages and pastry in coffee shop Sales of merchandize items Sales from entertainment: Pool table Figure 5.3 The Business Canvas Model for Styl-Fé 44 | P a g e
  52. 52. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia CHAPTER 6 BUSINESS PLAN This section of this report will cover the business planning for Styl-Fé which includes marketing planning, financial planning, organizational and operational planning and lastly, the contingency plan as exit plan. 6.1 OBJECTIVES Styl-Fé is a project from Maxis aimed to venture into coffee industry with the objectives to expand its business as well as gaining more mobile subscriptions via promotions set up in StylFé. They also believed the potential of establishing coffeehouse in Klang Valley is vast with the upcoming youths and young adults who prefer services over the price they pay. With this mindset, Styl-Fé hoped to achieve their first year of milestones as follows:  Becoming the ‘Best New Coffeehouse Concept in Klang Valley” by local restaurant guide  Turn in profits within the first 6 months of operations  Mobile subscribers pool increased with the influenced of Styl-Fé in house point accumulation system 6.2 MISSION Styl-Fé’s mission is to push outdoor home lifestyle café into coffeehouse; providing best efforts in up-keeping its promises to deliver unique environment to allow consumers to socialize comfortably and at ease with their friends and families while enjoying the best quality of customized flavored-coffee and pastries in town. Additionally, great ambiences with best facilities are able to facilitate stress by providing peace of mind to hectic working adults. Ultimately, Styl-Fé will continue seek to increase consumers’ satisfactions while in turn returning attractive dividends to its shareholders and stakeholders. 45 | P a g e
  53. 53. MBA Business Development Proposal – Viability of Maxis’ Venture into Coffee Industry in Malaysia 6.3 KEYS TO SUCCESS The keys to success for Styl-Fé will be: 1. Interior store designs that are visually and mentally attractive to consumers, as well as designed for fast and efficient operations 2. Creating good impressions on services and products, thus inviting more consumers through positive word-of-mouth. 3. Continuous good marketing strategies to build a solid base of loyal customers, as well as maximizing profits margins and increased number of Maxis subscribers in Malaysia 6.4 MARKETING PLAN Styl-Fé marketing plan would be conveyed by 7Ps marketing mix model displayed in figure 6.1 Figure 6.1 The marketing mix (7P model) Source: Marketing-Made-Simple.com 6.4.1 Product As suggested, Styl-Fé will be partnering with Nescafé to provide the latest Nescafé Dolce Gusto Circolo (DGC) coffee machines for operations. There are 16 types of different coffee flavors ranging from coffee, tea and chocolate which could be served hot and cold. So far, there is no coffeehouse in Malaysia serves Nescafé products in their menus but rather developing their own signature coffee. Partnership with Nescafé is able to iron out coffee supplier issue as it takes care of consumers’ concern on the coffee whereabouts. Moreover, it provides more resources to focus on other area where competitors overlooked. 46 | P a g e

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