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CHAPTER 1

Introduction

One of the most competitive industries in the world is the food and beverages companies. Being one of the shopping and tourist capitals in the world, Hong Kong has many competing companies in these industries. The coffee market in Hong Kong has been markedly flourishing in the past decades leading to the sprout of the number of coffee shops in the country. the sprout of the number of coffee shops in the city. The coffee drinking culture in the said country has been one of the most eclectic from gourmet to the local blends served in coffee houses.

In Hong Kong, there exist two competing coffee shops: Starbucks and Pacific Coffee shops. It can be said that this type of industries can be considered to have a strong competition in the market. Primarily, the main goal of this dissertation is to investigate the competition between Starbucks and Pacific Coffee. In this paper, the researcher would attempt to identify how Starbucks and Pacific Coffee compete through their marketing strategies and business strategies.

Background of the Study

Two of the most recognised coffee shops in Hong Kong are Starbucks and Pacific Coffee. Starbucks Coffee is known as one of the fastest growing brands in the international level, the company made its debut in May 2000 as it opened its first store in Hong Kong at launched at Central's Exchange Square. The second store was opened at Hysan Avenue in Causeway Bay (, 2002). At the end of 2000, Starbucks had already nine coffee houses in Hong Kong and continue to grow in the following years. By the end of 2001, there are already 24 branches and 60 by the end of 2005. As of today, the company has opened close to 65 branches in the country and are now located at shopping and entertainment, commercials and residential sites across the countries. The operations of the said coffee shops were instigated by the joint venture of Starbucks Coffee Company International and Maxis Caterers Ltd under the name Coffee Concepts (HK) Ltd. (, 2007).

On the other hand, Pacific Coffee company is regarded as a popular world-class Northwest Pacific-style coffee shop group which is headquartered in south-eastern Asia. The first store of the Pacific Coffee has been established in 1992 at Central Hong Kong. Since its opening, the company has been able to provide world-class coffee to meet and satisfy the needs of the customers for specialty coffee beverages.

It is mentioned that the entrants of Starbucks in Hong Kong market had served competition among the local companies operating in the country like Pacific Coffee. With the intense competition, it is important to investigate the competition between these two companies by recognising their marketing strategies and competitive advantage.

Objective of the Study

As mentioned, the major objective of this research study is to investigate the competition between Starbucks and Pacific Coffee through their marketing strategies and business strategies. Specifically this study attempts to achieve the following objectives

To determine which company is competitive than the other (Starbucks and Pacific Coffee)

To know the coffee/ coffee shop preferences of the customers in HK.

To analyse which among the Starbucks and pacific Coffee provides quality customer service as perceived by the respondents/

To know the factors that affects the customers choice of a coffee shop.

Research Questions

The primary aim of this study is to analyse the competition between Starbucks and Pacific Coffee in HK market, in particular, the paper tends to respond to the following queries:

1. What is the coffee / coffee shop preference of the customers in Hong Kong?

2. As perceived by the customers, which company (Starbucks or Pacific Coffee) provides best quality service?

3. What are the factors that influence you to choose a coffee shop?

4. Which do you think is the coffee shop that dominates the HK market?

Significance of the Study

The competition in the Hong Kong market is very stiff, especially in companies like Starbucks and Pacific Coffee. Since both companies target common market segments, these companies must be able to be more competitive in the

market place than the other. Accordingly, the ability of the company to meet the needs of the customers is an important aspect of marketing strategy and their marketing function to remain competitive in the HK market. Obtaining customer satisfaction encourages clients to patronize the products produced by the company and even recommend them to others. While this is essential, the companies must be able to implement unique and distinctive marketing and business strategy to maintain competitive position in the saturated market of HK.

It was noted that there are a number of literatures that discussed how companies can survive and compete in the marketing place to help them sustain their competitive advantage and position. Considering the existence of many service industries, in the world and HK in particular, it is important that several studies stress this context of investigating the competition between the aforementioned coffee shops.

By and large, the purpose of this research study is to investigate the competition between Starbucks and Pacific Coffee. In addition, this study will also include the discussion of relevant literature. The outcome of this study will

be helpful for different coffee shops in HK especially those who are still in the beginning stage.

In addition, this research study is significant in terms of helping management students, marketing managers, and the company to know the importance of having a distinctive and effective marketing strategy. The findings of the study will be able to benefit different coffee shos and other food and beverage companies in Hong Kong. This means that the results of the study will be beneficial to the business environment since the research will be able to support previous claims that marketing strategies can help companies to have a competitive position in the market place. This also suggests that the findings of the research will allow leaders and organization to integrate effective marketing strategies in handling customers.

Scope and Limitations

This study will be conducted in the attempt to investigate the competition between Starbucks and Pacific Coffee in the saturated market of Hong Kong through identifying the marketing strategy of the company and the differences of the strategy used by each company. This research will cover the topics on

the intensive competition among coffee shops in Hong Kong, their strategy and their approach to survive the stiff competition in the HK market.

The discussion of this study will mainly focus on the analysis of Starbucks and Pacific Coffee and the identification of the marketing strategy for these companies. The information that will be gathered for this study will be derived from primary and secondary resources. The primary source of data will come from a self-administered survey questionnaires prepared by the researcher, which will be distributed to the participants of the study. The respondents of this study will be selected the customers of coffee companies in HK. The secondary sources of data will come from published articles from social science journals, theses and related studies on quality strategies and customer service.

Time will be the greatest limitation to this research, which may hinder long-term outcome objectives. Environmental factors, such as socioeconomic factors, are beyond the control of the researcher and can create many variables within the research. As this study will be utilizing a small sample of participants, the results may not effectively represent the general population.

Chapter 2

Review of Related Literature

Introduction

To achieve the objective of the study, this part of the dissertation discusses the relevant literature. Herein, , the relevant literature includes the situational and environmental analysis of Starbucks and Pacific Coffee using some marketing tools like SWOT, and Porters Competitive Five Forces, and PEST analysis of the HK market. In addition, this will also provide discussion about customer service and marketing strategy.

SWOT Analysis

In this dissertation, the situations analysis of the company will be conducted through the use of different marketing tools. Herein, Starbucks and Pacific Coffee will be analysed through the use of SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis. The purpose of this internal and external analysis is to see what the organization has to work with as it begins to position itself to deal with the opportunities and threats identified through the analysis of the external environments. Specifically, it helps identify what existing strengths and weaknesses might impact the organization's value creation capabilities.

Strengths

As mentioned, Starbucks has been one of the leading brands in coffee companies in the world. One of its strength is its being a very profitable company, in both its domestic and international branches. In addition, Starbucks is a global brand established upon a reputation of quality products and services with almost 9000 branches in different regions. It is one of the Fortune Top 100 Companies to Work for in the year 2005 and is considered as a respected employer which values the employees. Furthermore, one of the strengths of Starbucks is its strong ethical values integrated with its ethical mission statement of 'Starbucks is committed to a role of environmental leadership in all facets of our business.'

In line with the Pacific Coffee, it can be said that one of the strengths of this company is its strong market niche in the HK market. Since the company has been able to provide world-class coffee products in Hong Kong since 1992, it can be said that Pacific Coffee still holds a strong position in the HK market. In addition, like any other coffee shops in HK, Pacific coffee is also known to provide quality products and services in the market.

In addition, one of the strengths of both companies is the idea of providing free internet access among customers as well as the ambience of the branches and outlets of both Starbucks and Pacific Coffee

Weaknesses

Although both companies encompass much strength, these companies have also its weaknesses. One of the weaknesses of the companies is the notion that both Starbucks and Pacific Coffee remain vulnerable to the plausibility that they creativity and product development may falter over time. In addition the company has also lacking the ability to look for a business portfolio for various regions, like in the case of Pacific Coffee so as to spread business risk. In addition, the company is largely dependent on its main competitive advantage which is coffee retailing. Such aspect could make them slow to diversify in other aspects when the need arises.

Opportunities

With the management system and the marketing strategies implemented within Starbucks and Pacific coffee in HK as well as with the strengths that both companies enjoyed, it can be said that both companies has bigger opportunities to still dominate the Hong Kong in terms of providing quality

coffee products and services to its residents, commercial and industrial clients or even have an opportunity to be the most competitive brands in the HK market. With the continuous innovation of these companies and the support that it shows to different needs of the region, the company can gain loyalty from their customers to make them more competitive in the marketplace.

The continuous initiatives of the company in diversification of its revenue resources also open new opportunities to make the business become stronger to outgrow all its rival companies. Such opportunities will include e-business development, leveraging the companys investment in the World Class customer Satisfaction systems, and other business opportunities in both non-core and core areas. In line with Starbucks and Pacific Coffee, these companies have the opportunity to expand their market in the global level, though Starbucks is on its way ahead of Pacific Coffee in terms of international expanding.

Threats

One of the threats of that Starbucks and Pacific Coffee may face is the emergence of a new and stronger company which offered a more diversified coffee products which is cheaper than the two existing companies. If these

companies will not be able to provide the latest trends in this kind of business industries, the company may experience some industrial threats.

In order for the company to maximise its strengths and minimise or totally eliminate its weaknesses, the company must be able to use or impose a strategic management system that will help them enhance their business operations. The management may use the concept of Total Quality Management to make sure that all business performances adhere to their goal of providing quality service to its customers. In addition, the company must not only focus on its strengths but must try to also pay attention to their weaknesses and find solution to solve such issues and maintain a competitive business operation and performances.

Porters Competitive Five Forces

Accordingly an industry is a group of companies which market its products and services closely substituted from each other. As noted by (1980), some companies tend to become more profitable and competitive than their rivals, hence, an existing company such as the coffee shops should always bear in mind that their company will only survive in the market competition by using a strategy which would enhance the competitiveness of the business.

Through the use Porters Five Forces Model, the analysis of the industry aspects of the Starbucks and Pacific Coffee will be analysed.

New Market Entrants

The first element of Porters Five Forces Model includes threat of entrance of new industries. Apparently, the objective of Starbucks and Pacific Coffee in HK is to build a position in the coffee shops service industry and to be recognised as company which would always be competitive in the HK market. Starbucks and Pacific Coffee are said to be a world-class companies in providing coffee products and services in HK. With this, it can be said that because of the existence of these two industries, having another coffee shops is unnecessary unless, the new company which will emerge will have the appropriate and efficient marketing strategy to outgrow both leading companies. Hence, it can be said that the coffee shop belongs to a higher entry obstruction because of the existence of competitive companies like the companies and their other rival industries.

Supplier Power

It can be noted that the conditions and the present system in the coffee shop industries largely determines the extent in which effective competition can be

achieved. The bargaining power of a supplier could be a threat for the profit of the company, and both Starbucks and Pacific Coffee are very much aware of it. In this manner, Starbucks and Pacific Coffee are trying to have a good contract with its supplier, herein, Starbucks and Pacific Coffee makes it sure that they are also benefited in the said contract while the suppliers enjoy the agreement with them. In this kind of business, there is a high level of competition in the broadband supply market.

Competitive Rivalry

Both Starbucks and Pacific Coffeestill enjoy their competitive position in the Hong Kong market. In this analysis, it shows that both companies still dominate the coffee market by providing those quality and innovative services. This means that Starbucks and Pacific Coffee are still on top of the competition among other coffee retail companies in HK. The company enjoys its competitive position in the region and still trying to sustain its competitive advantage among its rivals.

Buyer Power

Porters also include in his model the concept of the bargaining power of Buyers. Hence, the management of Starbucks and Pacific Coffee makes sure

of it that their clients and customers in all aspects will be satisfied for the quality service they provide. Specifically, the company has focused their marketing approach on the demands and needs of the buyer for a coffee service source that satisfies the and heavily positioned their products in this segment. The company also uses their corporate responsibility as a good public image to make the company more appealing to their customers. The competitive aim of each company is to do significantly a better job of providing what buyers are looking for and, thereby enabling the firm to gain competitive advantage and out compete rivals within the marketplace ( & , 2003).

Threats of substitutes

In terms of threats and substitutes, although the company is aware that there were threats for substitute products or retail coffee shops because of its high demand in the Hong Kong market, specifically now that companies offered coffee alternative products and flavours which suit the needs of the HK market.

Marketing/Business Strategies

Business administration and management characterizes the process of leading and directing the systems within an organization by exhausting available resources extensively so as to achieve the objectives of the business

operation. It most of the time includes the conceptualization of business plans and monitoring its execution for assessment and evaluation of the efficiency and effectiveness of the business transactions. Strategic management is the process of identifying and enumerating the aims of the organizations in order to come up with sound business policies and plans from which the profit of the business organization will be fully maximized (, 1999). Companies employ detailed business plans and strategies in order to gain several benefits from its competitors such as increased profits and enhanced customer relations as company objectives.

Firms respond to conditions in their marketplaces by modifying their competencies such as internal capabilities and linkages with suppliers and associates and the ways in which they position themselves in relation to their competitors specifically their strategic direction ( & , 1999). Each of these components is intricately related and ultimately contributes to firm competitive advantage.

Indeed, making a business successful in a particular setting demands crucial and detailed studies and examination of the factors that will generate the best results that will serve the aims and objectives of the company. In this

light, owners of big business organizations operating in a competitive business environment should be in constant look out with its competitors and the overall status and events in the industry.

Customer Service

Some marketing strategies give emphasis in the long-term retention and satisfaction of the customers through the provision of products or services that directly suit their needs. While these marketing strategies have been used for various purposes within the customer life cycle, obtaining and maintaining customers remain its prime objectives. Currently, the use of such strategies had increased as businesses give more priority to their markets. In addition, changes in the consumer trends had caused the increased interest of businesses for the marketing strategy.

Specifically, customers nowadays prefer their vendors or distributors to act as product consultants one who would provide assistance while choosing a product in order for them to purchase the one that will give them the most advantage. Customer assistance can also be provided by instructing consumers how a certain product is used or explaining the purpose of the item. Providing this assistance will in turn result to customer satisfaction and loyalty

( 1998). The use of this strategy benefits both the company and the customers the company obtains greater profit and market growth while the customers are able to acquire the products that fit their standards. In other words, this strategy works well as it promotes a two-way benefit effect.

Accordingly, the ability of the company to meet the needs of the customers is an important aspect of marketing function. The means or alternatives that Kubota will apply should then focus on this. Obtaining customer satisfaction encourages clients to patronize the products produced by the company and even recommend them to others. While this is essential, the alternatives for companies should also be implemented to maintain this satisfaction level. This is based on the main principle of efficient marketing function, where customers are not only obtained but maintained as well (, & , 1998).

There are several ways on how organizations can ensure quality operations and increased levels of customer satisfaction. One of which is by means of addressing all customer concerns and taking them seriously. The employees on the other hand, should be empowered to make efficient decisions that will augment customer satisfaction. One way of achieving this is

by creating a self-initiative work environment rather than one that is constricted to rules and company policies. Procedures that will ensure quality control should also be enforced during business operations.

In the business arena, more and more organisations are able to realise the importance of having good relations with their clients. In this manner, many industries are trying to identify ways on how to promote or enhance client relationships. The customer-company relationship is based on a continuum wherein both always-a-share and lost-for-good relationships occupy the two extremes of the continuum. In an always-a-share relationship, transactions are arms-length and discreet. Customers are valuable and at the same time, replaceable. On the other hand, in a lost-for-good relationship, the probability that the customer will purchase again from the same company is extremely low when the customer decides to terminate the use of a product due to product defects or problems (, , & , 1998). With these problems the performance of the business are being affected negatively. In order to solve the issue, different methods or approaches can be used to ensure good client relations and satisfaction.

Most business always value this quote: Keep the customer satisfied. Basically, every organization agrees that satisfaction of customers is important. But what exactly is customer satisfaction? Actually, customer satisfaction is the difference between what the customer expects from a product or service and what the customer perceives he/she received. As a result, customer satisfaction is perceptual in nature. It is defined by how customers think and feel about your product or service. Objective issues of product performance are important as a basis for influencing customer perceptions about how a product actually performs.

All corporations have different strategies in which they allow their organization to operate, which all depend on the different factors that the leaders believe affect their operations, ranging from the environment that their employers are in, the products or services that they are releasing and the dates in which they will be released, and also concerning their human resources that involve the employment, especially regarding their actions that affect the decisions within the departments of the company. With all these factors, it is easier to understand and visualize that indeed in running a company, there are different features that affect the outcome of the company as well as the way in which the operations within it are being followed. However, emphasis must also be

given on the clients of whom the companies are serving, of whom many businesses regard as the source of their operations.

Chapter 3

Research Methodology

This research was conducted in order to assess the competition between Starbucks and Pacific Coffee in HK. In addition, this study also aims to determine if there is a significant difference between Starbucks and Pacific Coffee in HK market and to determine the factors which influence the customers choice of a coffee shop.

In order to answer these research goals, the researcher opted to obtain the view of customers in line with this topic. Specifically, a total of 150 respondents from were randomly selected to make up the sample. Selected participants answered a survey questionnaire structure in Likert format. Data gathered from this research instrument were then computed for interpretation. Along with primary data, the researcher also made use of secondary resources in the form of published articles and literatures to support the survey results.

Research Design

The descriptive method of research was used for this study. To define the descriptive type of research, (1994) stated that the descriptive method of research is to gather information about the present existing condition. The emphasis is on describing rather than on judging or interpreting. The aim of descriptive research is to verify formulated hypotheses that refer to the present situation in order to elucidate it. The descriptive approach is quick and practical in terms of the financial aspect. Moreover, this method allows a flexible approach, thus, when important new issues and questions arise during the duration of the study, further investigation may be conducted.

In this study, the descriptive research method was employed so as to identify the role and significance of using personality questionnaire in recruiting and selecting employees during the time of research. The researcher opted to use this research method considering the objective to obtain first hand data from the respondents. The descriptive method is advantageous for the researcher due to its flexibility; this method can use either qualitative or quantitative data or both, giving the researcher greater options in selecting the instrument for data-gathering. The aim of the research is to determine the role of personality questionnaire in human resource processes as well as the advantages and disadvantages of using psychometric testing in the

recruitment and appraisal of employees; the descriptive method is then appropriate for this research since this method is used for gathering prevailing conditions.

The research is using customers of coffee shops as respondents in order to gather relevant data; the descriptive method is then appropriate as this can allow the identification of the similarities and differences of the respondents answers. For this research, two types of data were gathered. These included the primary and secondary data types. The primary data were derived form the answers the participants gave during the survey process. The secondary data on the other hand, were obtained from published documents and literatures that were relevant to the study. With the use of the survey questionnaire and published literatures, this study took on the combined quantitative and qualitative approach of research. By means of employing this combined approach, the researcher was able to obtain the advantages of both quantitative and qualitative approaches and overcome their limitations.

Quantitative data collection methods are centred on the quantification of relationships between variables. Quantitative data-gathering instruments establish relationship between measured variables. When these methods are

used, the researcher is usually detached from the study and the final output is context free. Measurement, numerical data and statistics are the main substance of quantitative instruments. With these instruments, an explicit description of data collection and analysis of procedures are necessary. An approach that is primarily deductive reasoning, it prefers the least complicated explanation and gives a statement of statistical probability. The quantitative approach is more on the detailed description of a phenomenon. It basically gives a generalization of the gathered data with tentative synthesized interpretations.

Quantitative approach is useful as it helps the researcher to prevent bias in gathering and presenting research data. Quantitative data collection procedures create epistemological postulations that reality is objective and unitary, which can only be realized by means of transcending individual perspective. This phenomenon in turn should be discussed or explained by means of data analysis gathered through objective forms of measurement. The quantitative data gathering methods are useful especially when a study needs to measure the cause and effect relationships evident between pre-selected and discrete variables. The purpose of the quantitative approach

is to avoid subjectivity by means of collecting and exploring information which describes the experience being studied.

Quantitative methods establish very specific research problem and terms. The controlled observations, mass surveys, laboratory experiments and other means of research manipulation in qualitative method makes gathered data more reliable. In other words, subjectivity of judgment, which is not needed in a thesis discussion, can be avoided through quantitative methods. Thus, conclusions, discussion and experimentation involved in the process are more objective. Variables, both dependent and independent, that are needed in the study are clearly and precisely specified in a quantitative study. In addition, quantitative method enables longitudinal measures of subsequent performance of the respondents. It has been noted that qualitative researchers aim to decode, describe, analyze, and interpret accurately the meaning of a certain phenomena happening in their customary social contexts. The focus of the researchers utilizing the framework of the interpretative paradigm is on the investigation of authenticity, complexity, and contextualization, mutual subjectivity of the researcher and the respondent as well as the reduction of illusion.

The researcher opted to integrate the qualitative approach in this study due to its significant advantages. The use of qualitative data gathering method is advantageous as they are more open to changes and refinement of research ideas as the study progresses; this implies that qualitative data gathering tools are highly flexible. Moreover, no manipulation of the research setting is necessary with this method; rather than employ various research controls such as in experimental approaches, the qualitative data gathering methods are only centered on understanding the occurring phenomena in their naturally occurring states. Aside from these advantages, researchers use qualitative data-gathering tools as some previous researchers believe that qualitative data are particularly attractive as they provide rich and well-grounded descriptions and explanations as well as unforeseen findings for new theory construction. One of the notable strengths of the qualitative instruments is that they evoke a more realistic feeling of the research setting which cannot be obtained from statistical analysis and numerical data utilized through quantitative means. These data collection methods allow flexibility in conducting data gathering, research analysis and interpretation of gathered information. In addition, qualitative method allows the presentation of the phenomenon being investigated in a more holistic view.

Participants
The respondents of this research include 150 general public participants or customers of coffee shops. The general public who have participated in the research have voluntarily answered the questions which were distributed to them by the research. In this manner out of 500 questionnaires were sent to the public, only 150 responded and some participants were not included due to the incomplete answers and extreme values.

Research Instruments
The study use survey questionnaires to gather pertinent data. Moreover, the researcher also uses previous studies related to the current situation of Starbucks and Pacific Coffee in the market and compares it to its existing data in order to provide conclusions and competent recommendations. A self-administered structured questionnaire is employed by the researcher so as to save time and effort in the organization of the answers that will be gained. The questionnaire was distributed to the general public. The questionnaire was structured in such a way that respondents will be able to answer it easily. Thus, the set of questionnaire was structured using the Likert format with a five-point

response scale. A Likert Scale is a rating scale that requires the subject to indicate his or her degree of agreement or disagreement to a statement. In this type of questionnaire, the respondents were given five response choices. These options served as the quantification of the participants agreement or disagreement on each question item. Below are the designated quantifications used in the questionnaire:

1 2 3 4 5

Strongly Agree Agree Uncertain Disagree Strongly Disagree

Data Analysis and Presentation


In order to analyze the data gathered from the survey, the weighted mean for each question item was computed. Weighted mean is the average wherein every quantity to be averaged has a corresponding weight. These weights represent the significance of each quantity to the average. To compute for the weighted mean, each value must be multiplied by its weight. Products should then be added to obtain the total value. The total weight should also be

computed by adding all the weights. The total value is then divided by the total weight.Statistically, the weighted mean is calculated using the following formula:

or

The range and interpretation of the five-point scale are shown in Table 1.

Table 1: The Five-point Likert Scale

Scale

Range

Interpretation

4.50 5.00

Strongly Disagree

3.50 4.49

Disagree

2.50 3.49

Uncertain

1.50 2.49

Agree

0.00-1.49

Strongly Agree

Weighted mean was used to measure the general response of the survey samples, whether they agree to a given statement or not. Results of the

survey were presented in tables. Excerpts from the interview were integrated based on the analysis outline. Relevant literatures to support the findings are also included. The Likert scale was used to interpret items in the questionnaire. These responses were based on the respondents assessment of the current investment process model. There were instances that the respondents were asked to rate the effectiveness of implementing the phases in the investment process.

Ethical Considerations

In keeping with the appropriate procedures and in the interest of maintaining the integrity of the research, the researcher had made every effort to ensure that the ethical guidelines for conducting a study were strictly followed. Prior to commencing with the research, permission was obtained from each customer, who participated in the study. All data collected from the respondents were kept in a secure location. The names of the respondents were secured. The objective, purpose and the significance of the study were all relayed to the participants before initiating the research process.

Statistical Treatment of the Data

After the collection of information from self-administered questionnaire, and related studies, the researcher collated all the data. The statistical analysis for the information from semi-structure questionnaire was conducted using Microsoft Excel where the data is tabulated, graphed, and evaluated. The testing of the level of significance was conducted using the Statistical Package for Social Sciences (SPSS) and tabulated in the Excel files. The SPSS is the standard software in conducting statistical analysis.

Percentage to determine the magnitude of the responses to the questionnaire:

where: n = number of responses

N = total number of respondents

Weighted Mean:

where: f weight given to each response

x number of responses

xt total number of responses

To evaluate the information gathered, the percentage analysis and mean analysis are used:

Data Summary
As stated in this methodology part, the research underwent stages. In the research design, the researcher collected secondary data and formulated and developed the self-administered questionnaire. In this stage, these instruments were subjected to approval and validation. During the information collection, the researcher collated and summarised the data obtained from the self-administered questionnaire and survey. The researcher then analysed this information and from these, the researcher came up with findings and recommendations that shall be presented in the next chapters.

Chapter 4

RESEARCH FINDINGS AND ANALYSIS

This part of the dissertation will present and analysed the gathered information from the customers. Herein, the result of the survey questionnaires given to the chosen respondents will be discussed. To ensure ethical considerations, the purpose, the significance as well as the objectives of this

dissertation relayed to the participants prior to the distribution of the survey questionnaire. In addition, the respondents were also assured that all the information that they had given are solely for the purpose of the study while their identities would remain confidential. All questions asked in the survey questionnaire pertain only to the respondents insights regarding the competition of Starbucks and Pacific Coffee in HK market.

For a comprehensible presentation, the findings from the survey are presented in graphs and tables. To provide an accurate flow of discussion, findings are also divided into sections. The first section will discuss the summary of the demographic profile of the respondents who participated in the study. The discussion of the perception of customers who took part in the study about their coffee or coffee shop preferences will be discussed on the next part. The next part will discuss the perception of the respondents regarding their choice of a coffee shop that provides better quality service. The third and last part will discuss the factors that influence the customers choose a coffee shop and their perception on the coffee shop that dominates the HK market respectively.

Demographic Profile

This part will discuss the demographic profile of 150 individuals who answered the survey questionnaire sent by the research. The description of the respondents includes their gender, age, educational background, occupation and monthly average income.

Gender of the Respondents

Figure 1

Figure 1 show the distribution of the general public who participated in the study in terms of gender. Herein, it shows that 91 (61%) were female and 59 (39%) were male. This may indicate that females are more interested to participate in surveys than male.

Age of the Respondents

Figure 2

The figure above presents the distribution of age of the respondents. The figure shows that 79% of the total respondents belong to below 25 and 25-34 years of age and 35-44 which may indicate the most of the customers of coffee shops in HK market belongs to adolescents to young adults. In this study, there are only 21% of the respondents belong to 45-54 and 55 above age. The

result indicates that coffee shops have a strong appeal from different type of individuals regardless of their age.

Education Level

Figure 3

Figure 3 presents the distribution of the participants in terms of their educational level. In this regard, majority of the respondents have attained bachelors degree and post graduate which comprises 47% and 25% of the total respondents respectively. Other participants belong with post-secondary level (16%) and secondary level (12%).

Occupation of respondents

Figure 4

As can be seen in the figure above, 49% of the total respondents are professional and 15% (23) were non professional. Other participants in this study are self-employed and student which comprises the 12% and 10% of the total respondents and the remaining 8% and 6% have other occupation and clerk. This could mean that the customers of coffee shops belong to a large market niche from students to professionals.

Monthly Average Income

Figure 5

Figure 5 shows the monthly average income (HK$) of the general public who joined the study. In this, 150 possible answers were gathered. It can be seen that most of the respondents (51% and 36%) have an average monthly income below $10,000-$19999and below $10,000. Since most of the respondents are young adults, it can be concluded that most of them are just starting to work or some are not yet working which affects the distribution of the monthly average income. The remaining 13% of the total respondents have income from $20000-$40000 above.

Perception of the Respondents

This part of the study will show the result of the analysis of the answers of the respondents in the survey questionnaire given. Herein, the standpoint of the respondents regarding the competition of Starbucks and Pacific Coffee will be assessed.

1. The Preferred Coffee Shop of the Respondents

One of the objectives of this research study is to know the most preferred coffee-shop in Hong Kong as perceived by the respondents. In this regard, the data gathered from the customers revealed that 56% of the respondents preferred Starbucks compared to 39% who preferred Pacific coffee as their choice of a coffee shop. Others revealed that they prefer Cova (2%) and Pokka Cake (3%), than Starbucks and Pacific Coffee (See Figure 6).

Figure 6

The Study also identified the number of cups of coffee consumed by the respondents per day (See Figure 7). The data revealed that majority of respondents consumed a cup of coffee per day which comprises 54% of the total respondents while 34% revealed that they have 2 cups of coffee a day. The remaining 7% and 5% revealed that they drink 3 and 4 cups above of coffee per day. In this regard, the results may indicate that majority of respondents only drinks coffee in moderation per day.

Figure 7

Furthermore, the researcher also attempted to determine the perception of the respondents with regards to the reasonable price of a cup of good quality coffee. Based on the analysis of the gathered data majority of the respondents

who took part in this study, perceived that the most reasonable price for a good quality cup of coffee is $10-$20 which comprises of 61% of the total respondents. Other respondents perceived that the reasonable price shall be $21-$30 which composed of 33% of the total respondents. There are 9(6%) respondents who believed that a good quality cup of coffee deserved to have a price of $31-$40 (See Figure 8). This result indicates that majority of the respondents perceived that a good quality cup of coffee may not be expensive as others perceived.

Figure 8

2. Perception of the Customers regarding which Company provides best quality service

In order to determine which company is competitive than the other, this paper also attempted to know the perception of the respondents on which company provides best quality service. As can be seen in the figure below (Figure 9), 54% of the participants of these study perceived that Starbucks provide best quality of the beverage as compared to the 41% who said that it is Pacific coffee that provides the best quality beverage in HK market, the remaining 5% have revealed that Pokka Cake and Cova provide the best

quality service in HK. The result revealed that when it comes to the quality of the beverage offered, Starbucks and Pacific Coffee dominates the country.

Aside from the beverages, the respondents were also asked which coffee shop provides the best quality of the food. The result of the data gathered revealed that both Starbucks and Pacific coffee were perceived by 39% of respondents as coffee which provide the best quality of the food. In this study, there are 15 (10%) respondents who believed that Pokka Cake offered the best quality of the foods and the 9% of the total respondents revealed that Cova provides them best food quality. The remaining 3% have mentioned that other coffee shops offered the best quality of the food than Starbucks and Pacific Coffee. In terms of competition, the data have revealed that the quality of the food offered within Starbucks and Pacific Coffee are perceived by the majority to have the best quality of the food.

Figure 10

Since one of the most dominant products of coffee shops in Hong Kong are coffee beans, the researcher also asked the respondents about their view on which coffee shop provides best quality coffee beans. The following figure provides the result of the analysis from the gathered data. Herein, it shows that

majority of the respondents perceived that Starbucks (45%) and Pacific Coffee (44%) has the best quality of coffee beans to offer in the market. The remaining 11% of the respondents perceived that there are other coffee-shops that offered the best quality of coffee beans other than the one provided by Starbucks and Pacific Coffee. In this result, it can be concluded that both companies holds a strong market position in the market when it comes to the quality of the services and products they offered.

Figure 11

3. Factors that Influence Customers with their Choice of a Coffee Shop.

The competition of the coffee shops in Hong Kong can be said to be affected by the behaviour of the customers. Coffee Shops competitive position depends on the choice of their target market. In this dissertation, the researcher attempts to determine the main concern of the respondents in sitting in coffee shops, factors that influence the choice of customers for a coffee shop, the coffee shop which provide more choices for a coffee and the reason of the respondents for going to a coffee shop.

Main Concern of the Respondents in Sitting in Coffee Shops

Table 2

Weighted Statements 1 2 3 4 5 Mean 128 22 0 1. The outside of the store was clean Agree 2. The inside of the store was clean 132 18 0 3. The services of the store Agree 150 4. The taste of the coffee Agree 150 5. The environment of the coffee shop Agree 98 6. Others (location of the store) Agree 45 0 7 0 1.44 Strongly 0 0 0 0 1.00 Strongly 0 0 0 0 1.00 Strongly 0 0 1.12 150 0 0 0 0 1.00 Strongly Agree Strongly 0 0 1.15 Strongly Interpretation

Table above provides the perception of the respondents regarding their main concern when sitting in a coffee shop. In this regard, the data gathered revealed that majority of the respondents strongly agreed that the cleanliness

of the coffee shop, the services of the store and taste of the coffee, the environment of the store as well as their location are the main concerns of the respondents when sitting in a coffee shop. Such result indicates that the respondents are not only looking for the food and beverage offered but also the way the coffee shop treats their customers and the way the coffee shops give value to their environment.

Factors Affecting Customers Choice of a Coffee Shop

Table 3

Weighted Statements 1 2 3 4 5 Mean 1. The brand affects the choice of 118 32 0 customers for a coffee shop. 2. The recommendation or referral of the family and friends affect the choice of customers for a coffee shop. 3. The affordability of the coffee or 121 29 0 products affects the choice of 0 0 1.19 Strongly Agree 85 48 0 11 6 1.70 0 0 1.21 Strongly Agree Agree Interpretation

customers for a coffee shop. 4. The quality of the food and services 150 affects the choice of customers for a coffee shop. 0 0 0 0 1.00 Strongly Agree

5. The quality of the services offered by the coffee shop affects the choice of customers. 6. The convenience of the store 118 21 0 location affects the choice of 6 1.23 Strongly Agree

customers for a coffee shop. 7. The Shop Environments affects the choice of customers for a coffee shop. 98 45 0 7 0 1.44 Strongly Agree

Table 2 presents the view of the respondents to each given statement relevant to the factors that affects or influences their choice for a coffee shop. Majority of the respondents strongly agreed that the brand, price affordability, the quality of the food and beverage, quality of the service, the location of the store and the environment of the store affects their choice for a coffee shop. On one

hand, majority of the respondents have agreed that the recommendation or referral of their family and friends influence their choice of a coffee shop.

Coffee Shop that Provide More Choices of Coffee

Figure 12

The figure above shows the perception of respondents regarding the coffee shop that provides them more choice of coffee. Herein, 54% of the respondents have mentioned that Starbucks provides them more choice of Coffee compared to the 46% of the respondents who said that Pacific Coffee provides them more choice of coffee. This result may be indicated to the strategy of both coffee shops to provide variety of coffee for the customers as well as the strategy of allowing the customers to have a more personalised coffee of their choice.

Reason for Going to Coffee Shop

Table 3

Weighted Statements 1 2 3 4 5 Mean Interpretation

gathering

59

35 25 20 11

2.26

Strongly Agree

reading

89

34

1.35

Strongly

Agree using the Internet 150 0 0 0 0 1.00 Strongly Agree Enjoying Coffee 150 0 0 0 0 1.00 Strongly Agree Others (Relaxing) 118 21 0 6 1.23 Strongly Agree

Table 3 presents the answers of the respondents regarding their reason for going to coffee shop. Herein, it shows that majority of the respondents strongly agreed that they go to the coffee shop because of the free internet access, to enjoy coffee and for relaxation and reading. On one hand, majority agreed that they go to coffee shop for gathering purposes. With the approach of both Starbucks and Pacific coffee to have a multi-purpose environment for customers, the reason for having coffee in the coffee shop can be considered as just one of the reasons why customers opted to go to coffee shop than other

restaurants. Part of the strategies of both Starbucks and Pacific Coffee is to provide optimal quality service by giving the customers what they need and they want like for example, providing them a place, where they can enjoy the food and coffee while enjoying the free access of internet.

Chapter 5

Summary, Conclusion and Recommendation

This chapter discusses the summary, conclusion and recommendation based on the findings presented in the previous chapters. The main goal of this paper is to investigate the competition between Starbucks and Pacific Coffee through the perception of the customers. In particular, the study attempted to determine which company is more competitive than the other. This would be determined through the preferences of the customers for a coffee shop, their perception on which company provides the best quality customer service. Further, the paper also attempted to determine the factors that influence the choice of the customers for a coffee shop. As noted above, the respondents include 150 general public. The data gathered from the customers provided answers to the queries set by the researcher.

The primary source of data came from a survey-questionnaire which was distributed to the respondents: 150 customers of coffee shop have responded to this study. In this study, the cooperation of the respondents was fervently soughed after and its descriptive and statistical analysis was undertaken by the researcher throughthe descriptive, qualitative and quantitative research method that uses observation and surveys.

Summary

This dissertation was conducted so as to investigate or evaluate the competition between Starbucks and Pacific coffee, which are considered as the two leading coffee shops in Hong Kong market. Since, there are many competing coffee-shops in Hong Kong, firms Starbucks and Pacific Coffee are faced with the challenge of sustaining their competitive advantage and position in the marketplace. To be able to analyse the current situation of both coffee shops in the HK market, the researcher have provided industry analysis using some marketing tools like SWOT Analysis, SWOT and Porters Competitive Five Forces. Accordingly, through these marketing tools the researcher has been able to identify the both companies (Starbucks and Pacific Coffee) have

a strong competitive advantage against their rival industries and hold a strong competitive position in many parts of Hong Kong.

One of the objectives of the study is to determine the preferences of customers in HK for a coffee or coffee shop. Analysis of the data revealed that most respondents in this study preferred Starbucks than Pacific Coffee. Furthermore, the research have revealed that majority of the respondents who took part in this study revealed that they only consumer one cup of coffee per day (54%) and 4% revealed that they prefer to have 2 cups of coffee per day. For the respondents in this study, they perceived that a reasonable price for a good quality cup of coffee is $10-$20. Which indicates that, customers considers the price when they are buying or purchasing coffee products and that they relate the price to the quality of the goods or services.

The research has also revealed that most of the respondents perceived that both Starbucks and Pacific Coffee have the best quality of the beverage offered to the market as compared with other coffee shops in Hong Kong. In terms of food, both companies were perceived to provide the best quality of the food served. In this regard, it can be noted that in line with competition, the analysis have revealed that the quality of the food offered within Starbucks and

Pacific Coffee are perceived by the majority to have the best quality of the food. In line with the coffee beans offered, majority of the respondent revealed that both Starbucks and Pacific have the best quality of coffee beans to offer in the HK market as compared with other coffee shops. In this regard, it can be said that both companies holds a strong market position in the market when it comes to the quality of the services and products they offered.

The findings of the research shows that majority of the respondents strongly agreed that the factors that affects their choice of a coffee shop includes the brand of the coffee shop, the price or cost of the coffee, the quality of the food and beverage, quality of the service, the convenience of the location of the store and the environment. These factors influence the preferences of the customers on whether they would choose Starbucks or Pacific Coffee or other coffee shops in Hong Kong. On one hand, majority of the respondents have agreed that the recommendation or referral of their family and friends influence their choice of a coffee shop. This may indicate that word of mouth have a minimal effect on the customers in deciding where they would have a coffee. The analysis of this study has also revealed that Starbucks offers more choices of Coffee as compared to Pacific coffee. This

could mean that Starbucks may offer variety of coffee flavors and personalize coffee to meet the needs of their customers.

The research findings also revealed that the customers go to coffee shops because they want to have a free internet access, to enjoy coffee and for relaxation and reading. The research further revealed that majority of the customers agreed that they go to coffee shop for gathering purposes. With the approach of coffee shops in a saturated Hong Kong market to have an environment where customers would be able to do what they want while having a cup of coffee has become of the essential reasons why most customers go to coffee shops.

All in all, it can be said that based on the findings of the research, both companies (Starbucks and Pacific Coffee) enjoy having competitive position and advantage in Hong Kong market. This can be attributed to the strategies of the company to meet and satisfy the needs of their market.

Conclusion

There had been a number of strategies implemented by various companies in order to practice quality customer service and to ensure competitive advantage and position in the marketplace. In HK market which is

surrounded by various coffee shops, the companies must be able to determine whether they are in a competitive position and they have a competitive advantage from their rival. In this regard, the assessment of the competition of the two coffee shops (Starbucks and Pacific Coffee) is important to know which company dominates the HK market as perceived by the respondents. It can be concluded that although competition in the HK market environment is tough, Starbucks and Pacific Coffee are still able to compete well in the marketplace because of their effective and quality customer service. Herein, it can be concluded that that their business approach has been founded by the entire companys desire to enhance the capabilities and potentials as well as performance of the coffee shops to satisfy the needs of the customers.

As perceived by the customers, they strongly agreed that one of the most important ways to maintain their competitive position and competitive advantage, the company must be able to provide quality service and approach to satisfy and the meet the needs of their target market. Through quality service, the degree of satisfaction of the customer can be increased which may enable the company to retain their customer and gain even mo clients. The study also revealed that the company must be able to provide assistance to their customer before and after they avail the services of the company. In

this regard, certain activities must be considered to interact well with the clients and make them satisfied.

Based on the findings of this study, the researcher concludes the following: 1. The respondents who took part in this study are already mature in age, responsible and reliable. They are also aware of the competition among coffee shops in Hong Kong, particularly the competition between Starbucks and Pacific Coffee. 2. The respondents perceived that both Starbucks and Pacific Coffee offered quality services for foods, beverage and coffee beans. 3. The respondents have given an overall rating of strongly agreed to each of the criteria. Most of the respondents believe that brand, quality of the food, beverage and service offered, convenience of the location, cleanliness of the environment, and price affordability affects their choice of a coffee shop. This shows that these factors are important to ensure that Starbucks and Pacific Coffee ensure competitive advantage and position in the HK market. 4. The research also revealed that respondents have their own reasons why they go to coffee shop and these include internet access, reading, relaxation and gathering. 5. All in all, it can be concluded that even if the HK market has full of competent coffee shops, Starbucks and Pacific Coffee are able to sustain their competitive position in the marketplace by providing quality customer service in all aspects of their business operations

Recommendation

It can be said that coffee shops in HK has a strong competition, hence, it is recommended that companies like Starbucks and Pacific Coffee should be able to gain competitive advantage and position in the Hong Kong market. In doing so, the company must be able to adhere to the needs of their customers for them to remain loyal to avail the services and products offered by the company. It is recommended that both Starbucks and Pacific Coffee must be able to apply prioritized quality in customer services. The assurance of quality service and products may yield to customer satisfaction, loyalty, employee satisfaction and more importantly profit growth. In order to cope with the present business challenges, several businesses have implemented different strategies that will enhance their respective customer services. Consumer studies, trainings and application of information technology are some examples of the most commonly used strategies for customer services. In line with the findings of this research study, the researcher recommends that Starbucks and Pacific Coffee and other coffee shops in HK should continuously update and upgrade their service deliveries and provide unique and quality products in order to meet and satisfy the demands of their customers.

It is recommended also that Starbucks and Pacific Coffee should incorporate customer relationship management with their business strategy. In order to do so, company management must realize that, either directly or indirectly, the achievement of its goals contributes much to the customers or clients general experience with the company. Successful incorporation of people, process and technology is probably the most efficient strategy in customer relationship management.

In addition, it is also recommended that both companies should employ strategic management. Accordingly, successful strategy requires the firm to choose the markets in which its distinctive capabilities yield competitive advantage. But the adaptive, incremental nature of strategy means that the starting-point is where the firm is now, specifically in terms of best practice management approach. Strategy is the direction and scope of an organisation over the long term: which achieves advantage for the organisation through its organization of resources within a changing market environment, to meet and satisfy the needs of the markets and fulfill the expectation of stakeholder expectations.

Reference

Appendix

Dissertation Questionnaire Coffee Shop in Hong Kong

The researcher is conducting a study on the Competition of Starbucks and Pacific Coffee in HK market. To enable the researcher to make the necessary conclusions and recommendations for this study, it would be very much appreciated if you answer all the items in the questionnaire.

Information given will be treated in strictest confidence.

1. What is your gender?

Male Female

2. What is your age group?

Below 25 25-34 35-44 5 or above

3. What is your education level?

Secondary Level Post-Secondary Level Bachelor Degree

Postgraduate Others

4. What is your occupation?

Student Professional Non-Professional Self-employed Others

5. What is your monthly average income?

Below $10,000 $10,000-$19,999 $20,00-$29,999

$30,000-$39,999 $40,000 or above

6. Which Coffee shop you usually go?

Starbucks Pacific Coffee Cova Pokka Caf

7. How many cups of coffee you consume per day?

1 2 3 4 or above

8. What do you think the reasonable price of a cup of good quality coffee be?

$10 $20 $21 -$30 $31 - $40 $40 or above

9. Which coffee shop can provide you the best quality of the beverage?

Starbucks Pacific Coffee Cova Pokka Caf Others

10. Which coffee shop can provide you the best quality of the food?

Starbucks Pacific Coffee Cova Pokka Caf Others

11.What is your main concern in sitting the coffee shop? Please check the number that corresponds to your answer.

1 2 3 4 5 Statements

Strongly Agree Agree Uncertain Disagree Strongly Disagree 1 2 3 4 5

1. The outside of the store was clean 2. The inside of the store was clean 3. The services of the store 4. The taste of the coffee 5. The environment of the coffee shop

6. Others (location of the store)

12.Which coffee shop can provide you better quality coffee beans?

Starbucks Pacific Coffee Cova Pokka Caf Others

What is the factor(s) when you choose a coffee shop

Statements 1. The brand affects the choice of customers for a coffee shop. 2. The recommendation or referral of the family and friends affect the choice of customers for a coffee shop. 3. The affordability of the coffee or products affects the choice of customers for a coffee shop. 4. The quality of the food and services affects the choice of customers for a coffee shop.

5. The quality of the services offered by the coffee shop affects the choice of customers. 6. The convenience of the store location affects the choice

of customers for a coffee shop. 7. The Shop Environments affects the choice of customers for a coffee shop.

13.Which coffee shop provides you more choices of coffee?

Starbucks Pacific Coffee Cova Pokka Caf Others

14.What is your usual reason going to coffee shop? Please check the number that corresponds to your answer.

Statements gathering reading using the Internet Enjoying Coffee Others (Relaxing)

~~ END ~~

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