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BCC_Case - Black Canyon Coffee Planning for a Second Decade...

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Black Canyon Coffee: Planning for a Second Decade of Growth Case prepared by: Brian Boyd Executive Director, Corporate MBA Program W. P. Carey School of Business Arizona State University Tempe, AZ 85287-4006 +01 480 965 4781 [email protected] http://www.briankboyd.com Contents copyright © 2003 by Brian K. Boyd. Unauthorized duplication, transmission, or storage prohibited. Case development was supported by a grant from the Hong Kong University of Science and Technology. The BCC logo and selected images © Black Canyon Coffee, and are reproduced with permission. This case was written to stimulate class discussion, and not intended as an exemplar of effective or ineffective managerial practice.
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Black Canyon Coffee / page 2 Background Introduction Black Canyon Coffee (BCC) celebrated their tenth year in 2002. Starting with a single Bangkok location in 1993, the company now operated the largest chain of coffee shops in Thailand. Detailed financial data is not available as the firm is privately held, however, 2002 revenues were 318 million baht, with a profit margin of 10 percent. BCC has been experiencing 15 – 20 percent annual growth, and has little debt. The chain employs 2,000 staff – 500 as direct employees, and the remainder working for joint venture partners or franchisees. The founder and Managing Director 1 , Pravit Pong, had recently begun to pursue international expansion. Concurrently, Starbucks and other international chains had recently begun to focus on Thailand and other Asian markets. Experts predict a consolidation phase in the industry that will leave five or six global competitors. What steps should MD Pong consider to help ensure the survival of his company? History While the basis for many startups are prior experience or a personal interest, BCC’s founders had no restaurant expertise, and weren’t even coffee drinkers. In the early 1990’s, relatively few Asian consumers drank coffee, and Thailand was no exception. For many Thais, Nescafe instant was the only coffee product they were familiar with. So, how did a group of computer consultants end up building Thailand’s coffee house market leader? MD Pong explained 2 : Ten years ago, we were actively involved in the IT business. We found that it was a very tough business. We did not own any intellectual property, but just represented someone else, such as IBM or HP. We wanted to own something that belonged to us. The IT business was up and down, up and down, very fast. The change in the new technology came every two or three months, and the margin was less and less. Many people would go into the same market, and the competition was very high. So, I think that we can build our own brand name. Secondly, the things that we thought about would be clothes, food, medicine, and household necessities. I cannot do the house, I cannot do medicine, I cannot do clothes, so coffee is the easiest to do.
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