Seizing the Indonesian Market: A Strategic Roadmap for Cafe2Go

Purpose

This analysis is going to provide a comprehensive analysis of how and why Cafe2Go should demonstrate strategic organisational ambidexterity (OA), given the industry-based considerations in exploiting the business opportunities in the food and beverage industry in Indonesia. In addition, I will be recommending a strategy that Cafe2Go should implement given the resource and industry-based considerations in entering the Indonesian hospitality industry.

Background

Back in 2009, Jassim Al-Bastaki opened his first Cafe2Go in the United Arab Emirates (UAE) specifically, in the Murooj Rotana across from the prestigious Dubai Mall. Today Cafe2Go can be found across several different countries such as Qatar, Libya, Saudi Arabia and Spain (Mohammed, A. A. and Ahmad, S. Z. (2019).

Cafe2Go has created its distinctive trait to set it apart from the rest of the hospitality industry by incorporating innovative menu options that celebrate healthy traditional-style camel products. In addition, they have multiple different types of distributing methods, such as kiosks, mobile carts and cafe fronts. Due to the business's immense success since its inception, Cafe2Go is now available to be purchased as a franchise (Mohammed, A. A. and Ahmad, S. Z. (2019).

Organisational Ambidexterity

A business achieves OA when it has the capability to “both explore and exploit—to compete in mature technologies and markets where efficiency, control, and incremental improvement are prized and to also compete in new technologies and markets where flexibility, autonomy, and experimentation are needed” (O'Reilly and Tushman, 2013). If Cafe2Go is to successfully achieve OA they have to ensure that they do not compromise on the present returns from the business by only focusing on the future and vice versa; in other words, seeks long-term survival and short-term success (Roxas (2021). Furthermore, if a business can conduct itself at a state of OA then it will ultimately enhance overall profitability, growth and revenue (Roxas (2021). Cafe2Go has the capability of achieving OA due to their innovation which is an example of exploration capability and the type of menu items that they deliver which is an example of exploitation capability.

Within this analysis, I will be utilising Michael Porter's 5 forces model to determine some critical industry considerations to prepare them for their international expansion (McMillan, 2010). As previously mentioned, there are 5 different forces that I will be reflecting on rivalry among existing competitors, threat of new entrants, bargaining power of buyers, bargaining power of suppliers and threat of substitute products or services (McMillan, 2010). For the purpose of this assessment, I will only be focusing on the Bargaining power of buyers and the threat of substitute products or services.

This company has demonstrated this through their ability to ‘explore’ by transforming the means by which it delivers its product through not only using a traditional cafe front but also utilising kiosks, carts and vending machines after mobile vehicles were deemed illegal (Mohammed, A. A. and Ahmad, S. Z. (2019).. This innovation gave them the opportunity to reach a larger demographic of people as they could be accessed in more locations. Embodying their slogan of “wherever you are” will be a key to the success of this potential expansion. I think that this innovation capability is very useful in addressing the powerful bargaining position of consumers in Indonesia, especially during/post the Covid-19 pandemic. According to industry reports, consumers no longer wanted the social interaction of dining in-store due to strict social distancing measures in place, but instead wanted to access their favourite cafes through delivery and takeaway service (Euromonitor International, (2021). Therefore, having more locations where customers can access their stores via online platforms such as UBER EATS, Gojek and Kulina will allow for successful integration into the Indonesian market. The current market in Indonesia demonstrates that consumers have an exceptionally high bargaining power. They demand high-quality coffee and for it to be still accessible through a variety of mediums. Therefore, as Cafe2Go has shown in their previous business actions within the UAE that have an exceptionally high ability to be successfully innovative then I think that they can develop and modify certain aspects of the business to be successful in expanding to Indonesia.

Furthermore, this company has demonstrated its high capability to ‘exploit’ its current business activities by providing healthy traditional-style food in the same manner as a fast food takeaway business. Providing a healthier option for consumers has proved to be very effective in the current countries that they have been operating within. According to industry reports consumers are becoming more aware of the implications of modern ‘fast food’ options to their health(Mohammed, A. A. and Ahmad, S. Z. (2019). According to The Indonesian Health Journal, 28% of all Indonesians, with a higher percentage being women, suffer from obesity (Had Buono, D. S., Pramono, L. A., Yunir, E. and Subekti, I. (2018). In addition, according to research conducted in Indonesia ensuring the menu is continuing to evolve constantly, whilst ensuring that key products are maintained continuously throughout trade is the most effective way to continue to drive profit (Wididaiati (2020). I think that continuing to utilise this type of menu structure modified to suit Indonesian traditional style food rather than middle eastern, will be the most effective way to integrate the business into this market. Consumers have a significantly strong buying power, they demand high-quality food, with variance which Cafe2Go has proven that they can deliver in a healthy manner. This further demonstrates their ability to enter a market with a lack of threat of substitutes as their previous success in the UAE again proven that this market can be highly profitable if it is executed properly. I urge in this case, that if Cafe2Go can develop a ‘traditional style’ healthy menu that celebrates variance that meets the needs of their target market then this venture will be successful.

If Cafe2Go can demonstrate their ability to utilise both the examples that I provided above of exploitation and exploration methods interchangeably then I deem Cafe2Go to be at a state of OA.

For the purpose of this analysis, I will be recommending one of Michael Porter's generic competitive strategies to enter the Indonesian hospitality industry(McMillan, 2010). Based on Cafe2Go’s unique innovation and its broad target market scope, I believe utilising a ‘differentiation strategy’ will be the most beneficial strategy for them to be successful within Indonesia.

Porter's generic strategies ``describe how a company pursues competitive advantage across its chosen market scope (McMillan, 2010).” A business has to decipher how it will position itself within a market depending on two factors: competitive advantage and scope. For the purpose of Cafe2Go to be successful within the hospitality industry they need to focus on a ‘differentiation strategy’ as aforementioned. This means that as Indonesia has a high level of competition within the hospitality industry, it needs to utilise its innovation capabilities to set them aside from the rest of the market in order to be successful.

Utilising a differentiation strategy is appropriate in this instance as the target consumers within Indonesia are not price sensitive due to their overall increased disposable income (reference) and they have unique resources that are difficult for competitors to imitate such as innovative ways to deliver the product to the customers and their traditional style menu items. It is also feasible for Cafe2Go to implement this as they are already a highly established brand that has successfully expanded internationally.

Cafe2Go should enter the Indonesian market by opening several small kiosks across densely populated areas within the main cities. This will allow them to access a large number of customers as having multiple locations will increase foot traffic and therefore brand awareness. In addition, it will also increase availability for delivery applications that usually have a 25km radius limit for people to order from them. This will allow consumers to begin to interact with Cafe2go and ultimately show loyalty as they can begin to gain trust and familiarity with the products that they offer. Further, by offering a menu that mimics the conceptualisation of the original menu in the UAE being ‘traditional, healthy fast-food’ but modifying it to adapt to traditional healthy Indonesian cuisine I believe that the market will adapt to this as the importance of health and convenience is an ever growing trend.

Overall, according to my analysis of the Indonesian hospitality industry and the main relevant market forces, being the buying power of consumers and the ability to differentiate from competitors I think that Cafe2Go is more than capable of expanding into the Indonesian Market successfully. This success will be attributed to them utilising their proven innovative distribution techniques and healthy traditional fast food menu items.

REFERENCES

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