Global strategic management: Case Study of Shih Chen Foods Company 全球策略管理: 石城實業股份有限公司 個案研究
Author(s): Yu-Ling Chiang(江郁姈), You-Jen Yang(楊友甄), Pei-Chun Liao(廖 珮君)
Class: 2nd year of Department of International Trade
Student ID: M0602085, M0601437, M0601569
Course: Global strategy management
Instructor: Dr.Fang-Yi Lo
Department: Graduate Institute of International Business
Abstract
This paper via introduce the case of Shih Chen Foods Company to realize the whole instant drink industry. In this study, we apply nine analytic methods to understand Shih Chen Foods Company. If an instant drink company can open international market, it will have more chance to make profits. 3:15pm, a most successful brand in Shih Chen Foods Company, made it in a few brands which can internationalize. In forward sections we compare 3:15pm with the brands included international brands in Taiwan market, but in rear parts we will more concentrate on comparing 3:15pm with other domestic brands. In front, maybe we will infer the value of 3:15pm comes from R&D or quality, however, in latter parts the answer of value coming from is successful marketing and another aspect of quality. We also have a conclusion that not only in instant drink industry but also other different field industries that creation and customer trust are two critical factors of companies to survive.
Keyword：
Shih Chen Foods Company, five force, Resource Based View, value chain, BCG, national diamond摘要
本研究將透過石城實業股份有限公司之個案研究了解整個沖泡式飲品產業。本研 究採用九種不同的策略分析了解石城實業股份有限公司。如果一間沖泡式飲品公 司可以成功打開國際市場，那他就有更多機會賺取利潤。三點一刻是石城實業最 成功的品牌，也是少數幾個國際化的國內品牌。本研究前部分將比較三點一刻與 台灣市場中的其他品牌(包含國際品牌)，而後半段我們將會完全專注在三點一刻 和其他國內品牌的比較。前半段中或許我們會推論出三點一刻的價值來自 R&D 或產品品質，但越往後面章節分析，我們發現三點一刻真正的價值來自於行銷及 另一面向的產品品質。最終，我們得到了一個結論-"創新”及”顧客信任”是企業生 存的兩個關鍵法則，而此法則不僅可以運用在沖泡式產業，亦可運用在其他不同 領域的產業。關鍵字:
石城實業股份有限公司、五力分析、資源基礎理論，價值鏈，BCG 矩 陣，國家鑽石理論Table of Content
Chapter 1 Introduction ... 6
I. Why to select this case ... 6
II. Shih Chen Company ... 7
III. SBU-Brand ... 10
Chapter 2 Case Analysis ... 11
I. Three Level Strategy ... 11
(I). Corporate-level... 11
(II). Business Level ... 12
(III). Functional Level... 14
II. Strategic Map... 18
(I). Quality... 18
(II). Differentiation ... 19
(III). Meet market need ... 20
III. Five Force Analysis ... 22
(I). Industry competitors ... 22
(II). Bargaining power of suppliers ... 23
(III). Bargaining power of customers ... 23
(IV). Potential entrants ... 24
(V). Substitutes ... 24
(VI). Summary / Conclusion: Industrial profitability ... 24
IV. Strategic Group ... 26
(I). Competitors’ innovation and geographic scope ... 26
(II). Cluster ... 29
V. RBV & VRIS ... 31
(I). Definition ... 31
(II). The framework for appraising resources and capabilities ... 35
(III). VRIS ... 37
VI. Value chain ... 40
(I). Primary activity ... 40
(II). Support activity ... 41
(III). Where is the value come from? ... 42
(IV). Differentiation or low cost strategy ... 43
VII. BCG ... 44
(I). BCG analysis ... 44
(II). Synergy ... 45
VIII. Vertical integration & Diversification ... 47
(II). Different Types of Vertical Relationship ... 49
(III). Diversification Strategy ... 49
IX. National Diamond ... 52
(I). Factor endowments ... 52
(II). Demand ... 53
(III). Firm strategy, structure, and rivalry ... 54
(IV). Related and Supporting industries ... 55
Chapter 3 Conclusion ... 56
List of Figures
Figure 1. Business allocation 1 ... 7
Figure 2. Business allocation 2 ... 7
Figure 3. Porter‘s basic strategy of Shih Chen Foods Company ... 13
Figure 4. Sales volume of 3:15 pm in 2016 ... 16
Figure 5. Strategic Map of Shih Chen Foods Company ... 18
Figure 6. Five force ... 22
Figure 7. Strategic group of Shih Chen Foods Company ... 26
Figure 8. RBV for Shih Chen Foods Company ... 31
Figure 9. The framework for appraising resources and capabilities ... 35
Figure 10. BCG of Shih Chen Foods Company... 45
Figure 11. The value chain of 3:15 pm production ... 47
Figure 12. Different types of vertical relationship ... 49
Figure 13. Diversification of Shih Chen Foods Company ... 50
List of Tables
Table 1. History of Shih Chen Foods Company ... 9
Table 2. Honor and approval ... 10
Table 3. Financial information of Shih Chen Foods Company ... 17
Chapter 1 Introduction
I. Why to select this case
Maybe lots of people in Taiwan haven’t heard about Shih Chen Food Co., LTD. However, they must heard about 3:15p.m. A popular milk tea in Taiwan. This brand has been exist when I was a child. 3:15p.m. is also very famous in the world, such as Mainland China, America, South Asia, and so on. Why this milk tea is so special and popular? That is because it’s not just a normal milk tea. Everyone ever drink milk tea, maybe bought from convenience store, teashop or even made by yourself. But can you image that you can buy a mike tea which is in a tea bag? Moreover, the special of 3:15p.m. is the real tea leaves and milk powder inside the tea bag, and you can make the milk tea twice with one tea bag. The characteristic of this kind of tea bag is it won’t turn into bitter and acerbic(澀味) and it can stimulate different flavors with time. This kind of technic is rare and it is impossible for normal milk tea powder.
One time I got an opportunity to visit this company and listened their introduction about their brand, product, and farm. This is the key moment for us to choose this case. They have an experimental tea plantation and they plant tea there with a nature way. So far, you will say that this plantation is organic. No, they use pesticide. If it just organic, I think it is not special for you. They let the tea tree grow higher, in the same time the root of the tea tree will grow deeper in soil. Just grow like mirror, upside and downside. That is to say if the tree grow high enough, the root can absorb groundwater directly, and the groundwater have mineral. After tea tree absorbing groundwater, they will stimulate their resistance. That is to say, they can grow by themselves with enough water and don’t need people to take care of them. In their experimental plantation, you can see lots of grass on the ground and still lots of insect inside the grass. Don’t eliminate them away. They really make sense there. The grass there control and maintain the temperature of the ground not too hot, cold, wet, and dry. Moreover, insect there make them form an ecosphere naturally. This kind of innovation make their tea tree grow well and they can survive for a very long time. This creative way not only make their tea tree survive by themselves to cut down cost of taking care of them but ecofriendly.
To sum up why we choose this case. First, it is the honor of Taiwan. Second, special milk tea into tea bag. Third, plant the quality tea tree with creative and ecofriendly way.
II. Shih Chen Company
A. About Shih Chen Company
Shih Chen insists on providing all quality, tasty and healthy foods to our consumers. Processes tea in conscientious attitude and keeps developing various products. Their products include casual drinks, top Taiwanese tea and natural healthy drink. The marketing policy is to develop products to suit local demand according foreign countries. In the sales volume, 52% is export to foreign countries, 30% is in domestic, 11% is OEM and 7% is the other. Already had 132 branded product, 25 tea gardens and 18 exporting countries.
Figure 1. Business allocation 1
Source from: Shih Chen Foods Company
Figure 2. Business allocation 2
B. History
Justin Chu, the General Manager of Shih Chen Foods Company, was born of tea farmer family planting tea for three generations. Under influences from his families, he is well aware of difficult position for tea farmer. As per 100 years tea processing experiences, Mr. Justin Chu got wise to formulate tea leaves appropriately and created the best quality and aroma tea, even tea leaves are from different seasons. When he saw a lot of slow-selling oolong tea leaves, he decided to look for a solution for tea farmers. For this reason, Shih Chen Foods Company is established as well as 3:15PM Brand. Mr. Justin Chu is determined to spotlight Taiwan tea all over the world.
1991 Shih Chen Foods Company was established and launched 3:15PM milk
tea.
2000 Attend “Counseling of Tea Planting, Processing and Selling Program”
hold by Taiwan Tea Manufacturers Association.
2001 ISO 9001 quality management systems certificated
2002 Collaborate with Taiwan Agricultural Research Institute to absorb
innovate skill and expert experiences.
2003 Attend “Factory-Garden Cooperation” Plan hold by Agriculture and
Food Agency; Running health systems and traceability systems of tea garden.
2004 TAITRA- “Exporting Agriculture Food Brand Image and Packing
Design” -“SHIH CHEN FOODS CO., LTD.” corporate identity logo design.
2005 TAITRA- “Exporting Agriculture Food Brand Image and Packing
Design” –“Tea Master” brand identity logo design for Taiwan high mountain tea.
2006 HACCP International quality certificated
2007 “Making use of Tea leaves harvested in four seasons” program and was
chosen as a counselor for the plan “ASSTD”.
2008 Taichung city to promote “New Tea Culture” by educational experience
to all visitors.
2009 Due to Shih Chen Company insist on quality, all 3:15PM products can
stand through the test.
2010 TAITRA introduced as a commendable company
2011 All products of 3:15PM are through the analysis test of not containing
plasticizer.
2012 Taiwan oolong tea of Tea Master Brand is one of zero-tariff preferential
2013 The new movie queen “Shih Yin Hsieh” is the spokesperson for 3:15PM milk tea and white coffee.
2015 3:15PM Biotech Central-Natural Environment Conservation Station”
established in Mingjian Township, Nantao City. Table 1. History of Shih Chen Foods Company
Source from: Shih Chen Foods Company
C.
Vision
-Brewtiming
In this generation with fast steps, the beauty of life really takes time to cultivate. Mr. Chu realizes that in order to brew a pot of perfect tea, from the steps of seeding, planting, harvesting, baking, brewing and sipping, all steps have to match nature, timing and human perfectly.
-Taiwan Tea spotlights in the world
Shih Chen began from tea planting. They insist their traditional and conscientious attitude. The principle of the R&D is to make qualified Taiwan tea to spotlight all over the world. They enhance and develop new processing skills to produce tasty and healthy tea products. Hope people use tea to make friends in the world. In the future, they look forward their brand tea is be loved by oriental and western people.
D. Honor and Approval
Shih Chen looks forward they can be the world first by presenting their best Taiwan tea.
1993 EXCELLENT FOOD AWARD-GOLD METAL,
EXCELLENT FOOD AWARD-GOLD METAL
1994 EXCELLENT FOOD AWARD-BEST PACKAGING DESIGN,
EXCELLENT FOOD AWARD-GOLD METAL
1999 GRAIN MASTER SERIES-BEST PACKAGING DESIGN
2000 TEA MASTER SERIES-BEST PACKAGING DESIGN
2001 ISO 9001 QUALITY MANAGEMENT SYSTEMS CERTIFICATED
2006 HACCP INTERNATIONAL QUALITY CERTIFICATED
2007 BEST COUNSELOR FOR THE PLAN “ASSTD”
2010 EXCELLENT MANUFACTURER RECOMMENDED BY TAITRA
2011 3:15PM MILK TEA IS ONE OF “TEN BEST BUY SNACKS,
THE FOURTH AWARD-THE BRANDS CONSUMED THE MOST IN THE PAST YEAR-ALMANAC OF FOOD
CONSUMPTION SURVEY IN TAIWAN
TAOBAO.COM
2014 THE CHAMPION FOOD OF TAIWAN INSTANT DRINK IN
TAOBAO.COM, ONE OF 13 MUST BUY FOODS IN TAIWAN FOR KOREAN TOUR
Table 2. Honor and approval
Source from: Shih Chen Foods Company
III. SBU-Brand
Shih Chen Food Co., LTD have three brands, including 3:15PM, TEA MASTER, and BREWTIMING.
A. Where can buy the product
a. 3:15PM：Supermarket, Convenience store b. TEA MASTER：Internet store
c. BREWTIMING： Airport duty free shops
B. Customer
a. 3:15PM：young people
b. TEA MASTER：middle class people
c. BREWTIMING： middle class people
C. Price of the product a. 3:15PM：cheap
b. TEA MASTER：middle c. BREWTIMING： expensive
Chapter 2 Case Analysis
I. Three Level Strategy
(I). Corporate-level
A. The goal of brand
a. 3:15PM
Meeting friends out of tea, can be in the "3:15PM" to find strength and joy, as "Taiwan tea farmers own brand, marketing global, entrepreneurial success" model.
b. TEA MASTER
Heritage family of centuries-old tea technology, aim to promoting Taiwan's high-quality oolong tea to the rest of the world
c. Brewtiming
Promoting and spreading “Brewtiming” tea widely on behalf of Taiwan Tea in the world.
B. Why we selected “3:15PM” ?
a. Variety of options
“3:15PM” provide difference flavor tea bags including classical milk tea, coffee latte, tea latte and so on at least 15 kind of flavors.
b. Affordable price
Compare with other tea brands, the price of 3:15PM is more affordable than other brands.
c. The quality of product
Different from others brands, 3:15PM putting real tea leaves and milk powder in tea bag, instead of putting cheap and unhealthy tea powder in the tea bag.
d. Marketing Flexible
For example, 3:15PM in Taiwan is selling in the form of tea bags, however, when considering the Koreans preference of drinking, who do not like to spend too much time waiting, therefore 3:15PM also sell bottled milk tea, and let them directly took away.
e. New Tea Culture
New Tea Culture means Chinese-Western fusion.
In general, Chinese like to drink oolong tea and Westerners like to drink flower tea.Shih Chen Company mix two different flavors of tea together,
create new flavor tea- oolong flower tea. Let the New Tea Culture spread all over the world.
(II). Business Level
A. Vision
-Spotlight in The world
“I want to do the Porsche of the Tea industry” their manager Mr. Chu said. His face is written with confidence in his own brand 3:15PM. He describes the general instant tea as cheap car that it is normal to drive by everyone. But in 3:15PM, you must to have two brushes in order to successfully control. That is one of the reason they create a unique tea bag that tea leaves replace power and the “Chu’s fragrant baking”. Insisting on their quality, he wants to let 3:15PM spotlight in the world.
-Use tea to make friends
Shih Chen hope customers can find strength and joy in 3:15PM. To be the successful model which represents Taiwan tea farmers own brand to market globally. Regardless of the area, the people in the world can think tea as a daily favorite drinks. No matter people in Asia, Europe, America or another place, they can use tea to be the bridge to make friends.
B. Porter’s basic strategic
A firm’s relative position within its industry determines whether a firm’s profitability is above or below the industry average. If in the long run still have above profitability means has competitive advantage. There are two basic types of competitive advantage a firm can possess: low cost and differentiation. Then the two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them. So there cost leadership, differentiation and focus. The focus strategy has two variants, cost focus and differentiation focus.
However, 3:15PM’s strategy is differentiation. In this strategy, the firm will seek to be unique in its industry along some special that are widely valued by buyers. Such as they create different technology to grow tea and make tea. In order to meet people in needs, 3:15PM put attributions which be perceived as important in their brand. It rewarded for its uniqueness with a premium price.
Figure 3. Porter‘s basic strategy of Shih Chen Foods Company
C. Customer, market, competitor
3:15PM’s tea bag can be brewed twice. First milk incense for children and the second tea incense for adults to drink it. Although their customers may concentrated in young people but they also concern about younger or older group with different tastes. Moreover, they combine they Chinese and Western style. Milk Tea bag’s tea flavor will not be strong but also have milk flavor. Hope all people will accept their different. After standing firm in Taiwan, 3:15PM started to sold overseas. They have a strategy is to focus on global Chinese supermarket distribution throughout the United States, Britain, Australia, Canada and so on. Their market gradually expanded that include Asia, America, and European countries.
We find some competitors which also produce instant milk tea or casual drinks as following:
a. Lipton:
This is Unilever’s brand. Be seen as the world’s leading tea brand with bright yellow symbol of light, vitality and natural beauty of fun. Their products include black tea, casual drinks, green tea, oolong tea, flower tea, milk tea.
b. Royal Milk Tea
This brand is from Japan. Their products include black tea, milk tea.
c. Mr.Brown:
Life starts from meeting Mr. Brown Coffee. This brand is from King Car industrial Co.,Ltd which is one of Taiwanese company. Their products include coffee bags,
coffee bean, milk tea and so on.
d. MaxTea:
This is Indonesia pull tea. Be seen as one of the best instant milk tea. Their products include lemon tea, milk tea.
e. True Milk Tea:
This brand is from OK TEA that is one of Taiwanese companies. Their products include milk tea, green tea, lots kinds of casual drinks, latte and coffee.
f. Nestle:
Nestle is from the world’s largest food and beverage company. From the world famous brands to the most popular local products, we can see it frequently. Their products include milk, milk tea, coffee and casual drinks.
(III). Functional Level
A. Production & Operation
As we know that, the owner of Shih Chen Food Company is a tea farmer lives in a
village in Nantou where have a lot of tea plantation and his family have planted tea for
three generation. Furthermore, his family ever be a biggest Xingnan tea (興南茶)
wholesaler in Taiwan. However, the tea market is no longer excited. Lots of tea farmers face the same problems as the CEO- lots of tealeaves unsalable. That is a crisis and also an opportunity. These tea farmers, tea plantation and tealeaves will be a strong resource to become competitive advantage of Shih Chen Food Company.
He gather the tea farmer together to plant the tea tree systematically. Spraying pesticides, recoding the situation, and testing tealeaves regularly. These tea farmers have huge experience and knowledge of planting tea. Therefore, implanting new tea technology will be flexible and won’t be too difficult for them to apply. Moreover, in traditional village, they have strong relationship between each other, you can put more confident and trust on them not like other manufacture outside that you have to spend lots of transaction cost to do evaluation and search relative information of them. These farmers help Shih Chen food company to achieve economic of scale.
B. Marketing strategy
3:15PM’s marketing strategy is “meet each area’s need”, in Korea the milk tea will adapt sweeter. Let’s see figure 4 below, Mainland China is the biggest foreign market
and its growth rate is very fast. Then the second grade is U.S. & Canada. In 2014, the newest foreign market Korea just in short 2 year that already occupied 10% in the total sales volume.
Mainland China: they found in leisure market, people love the food quick, convenient,
portable. Furthermore, they have drinking fountain in public, so the convenient noodle is a hot-selling product there. For this market, 3:15PM develop Chowder series, which include corn, crab, mushroom and pumpkin chowder. In addition, China people love Sun moon lake black tea, so 3:15PM develop Sun moon lake milk tea.
Korea: the agent of 3:15PM to maintain young and fashion image of the brand, they
also hire young idol to be their one day clerk, make a advertise video and in March 2017 they open their first teashop in gangnam-gu that is the most competitive and expensive area. Moreover, the shop is just between two the biggest coffee shop in the
world-Starbuck. Their strategy of the teashop isn’t sell the cup of milk tea, their target is to sell big bags of milk tea. The price of a cup of milk tea in the teashop is 1,500 Korean won (about 40 NTD) just one third of coffee of Starbuck, but they can create average consumption 10,000 Korean won per person. That is because the price is cheap and the shop also combine with Taiwan popular souvenir such as pineapple cake, Taiwan convenient noodle, cookie and so on. The customers there enjoy the atmosphere and then buy bags of convenient, portable and good taste milk tea. (陳彥淳，2017)
U.S. & Canada: in the beginning 3:15PM promote their milk tea to America, and that
surprise America market. Because FDA said you can’t put can eat and can’t eat things together (can eat: milk, sugar, oil; can’t eat: tea leaves). For that, SHIH CHEN make effort to explain that is special technology to combine tealeaves, milk, and sugar together. This investment bring America market excited about 3:15PM because they don’t have any milk tea by tea bag with tealeaves inside. Also the package of tea bag is convenient for them to bring out, and have a leisure afternoon with freshly- made milk tea (現泡奶茶).
Europe: the CEO found that European have great interest in oolong tea, but due to the
strong taste make them hard to accept it. What they favorite is still herbal tea. To meet European’s need who like herbal tea, 3:15PM use NGO transplant technology to eliminate the bitter and acerbic (澀味) of oolong tea and replaced by rose, Peppermint, and lavender flavor.
In addition, nowadays people take care about their health, 3:15PM also provide healthy series product, such as brown sugar ginger tea, five grains nourishing tea. To meet each age customer, 3:15PM also develop roasted, rose fruity, earl grey, coffee and latte series. 3:15PM make a lot of effort to combine western and eastern tea flavor and emphasize on their tea is beyond different tea area, season and ethnicity to bring customer fashion “new tea culture” (非凡新聞周刊，2011)
Figure 4. Sales volume of 3:15 pm in 2016 Source from: STEN.com
C. Human Resource Management
For an enterprise, employee is a very important treasure. How to make your employee willing to hard work and stay in the company creating value? Shih Chen build a
comfortable office and welfare system to encourage employee. As we know that, Shih
Chen is an innovative company, it need creative idea all the time. Therefore, it provide lecture such as innovation, professional, and safety (Shih Chen Foods Co., Ltd).
D. Research & Development a. Milk tea
Taiwan oolong tea plus Uva black tea (烏巴紅茶) of Sri Lanka to creation the first milk tea of multi-serve tea bag.
Incompletely fermented oolong tea is very active, that is to say, with different time in water that will generate distinctive flavor. However, oolong tea leaves will easy to deteriorate and turn to smell bad, especially in moist weather like Taiwan or combined with something that is high moisture content such as sugar. Therefore, the R&D team utilize multilevel baking technology to integrate Taiwan oolong tea and Uva black tea in perfect combination, to let the flavor of tea gentler and can peacefully stay with high moist content-sugar (非凡新聞周刊，2011).
b. Jhihuo (直火) Oolong Flower Tea
“Chu’s fragrant baking”(朱氏香焙)-endue the new for summer oolong tea. Sparkle-out the first oolong-herbal tea in the world.
Customers will buy spring and winter-oolong tea because the fragrance and flavor will stronger and richer. Also, the price of spring and winter-oolong tea will be higher. However, the fragrance and flavor of summer-oolong tea is weak and price is cheap. For these reasons, most summer-oolong tea will sell in very cheap price or even stay in the warehouse until it go bad. But the owner can stand with wasting so many tea that won’t create value. When he tested the oolong-herbal tea, he found too strong fragrance tea can’t combine with flower because it will let the scent of flower disappear. That is to say is time and perfect stage for summer-oolong tea.
They utilize multilevel baking technology to let oolong tea and black tea ferment. Then, take advantage of NGO transplant technology to extract bitter and acerbic(澀味) of oolong tea and in the same time inject nature flower fragrance to make the dream of the first oolong-herbal tea come true. (非凡新聞周刊，2011: Shih Chen Foods Co., Ltd)
E. Finance
About the aspect of finance, we can’t search this part, maybe it isn’t in public. We only find the relative information in Ministry of Economic Affairs,R.O.C. of
corporate information.
Total asset
50,000,000 NTD
Title Name Shareholding Chairman 朱俊宏
31,200
Director 張䕒美
13,000
Director 朱育瑩
1,700
Supervisor 蔡敬
2,500
Table 3. Financial information of Shih Chen Foods Company
II. Strategic Map
Figure 5. Strategic Map of Shih Chen Foods Company
Shih Chen Food Company devoted to be Porsche in the milk tea market, also yearn to promote quality and authentic Taiwan oolong tea to all over the world. Therefore, they want to build MIT new tea culture brand and adopt three main activities to achieve this big target, which separated into meet market target, quality, and differentiate.
(I). Quality
To achieve the goal of promoting Taiwan tea all over the world, they use Taiwan oolong tea, and first must to meet the standard- quality. To meet this strict standard, the tea farmers are tutored and audited by professional and take pesticide testing regularly. Furthermore, they make the record of tea farming and inspection of product periodic and packaging materials to attain health management and traceability before their tea being final commodity. Thus, their efforts have been seen. They get lot of awards and in recent years, they get Halal Certification. With these awards and Halal Certification, they can get closer to the final goal. Due to Halal Certification, they can sell their product to Islam country, as we know that Islam country’s market base is quite big. Therefore, it can help Shih Chen Food Company to get closer to their dream.
However, about the quality of their tea, some news showed that their oolong flower have been tested out contain DDT residue. Though health bureau of Taichung city government check upstream manufactory- Shih Chen Food Company found that their oolong tea is from Nantou tealeaves store and rose is from Tainan. However, Shih Chen Food Company don’t have any proof about pesticide testing. In addition, health bureau of Tainan city found that the description on the box of flower said: “Flower herbaceous plants for spices, not edible”, and they still found there are signature on it (Liberty times net, 2015). This news examined whether they implement their activity well or not. The company said that they do pesticide testing and product inspection
before it turn into final commodity, but in fact maybe we will put more question on
the quality of the product.
The second question of the quality is, the use summer oolong tea to make oolong flower tea. As we know about the product they said it is because the taste and flavor of summer oolong tea won’t be too strong, it won’t let the flower fragrance disappear. And this way can also give a new road for summer oolong tea, why it is a new road? As mentioned before, consumers will buy winter or spring oolong tea owing to the fragrance and flavor are strong and clever compare to summer oolong tea. Therefore, on the other side, the quality of summer tea is not good. From these two viewpoints, the basic question is how Shih Chen Food Company define the means of “quality”.
(II). Differentiation
Shih Chen’s position is differentiation. This is one of the reasons why their
profitability is above the industry average. In order to be different from the other milk tea brands, 3:15PM did lots innovation as following.
A. Innovation
a. Chu’s fragrant baking(朱氏香焙)
Endue the new for summer oolong tea. They create unique way of baking oolong tea to sparkle-out the first oolong tea in the world. Utilize multilevel technology to let oolong tea and black tea ferment.
b. Diversification of taste
In Shih Chen their total number of products already is 132. Not only produce tea kinds of production but also casual drinks. Included milk tea, coffee, healthy drink, soup, flower tea and so on. Moreover, in every kind of drinks has a series of different tastes.
c. Chinese-Western fusion.
In order to catch bigger markets, Shih Chen will mix two different flavors of tea together. For example, in general, Chinese like to drink oolong tea and Westerners like to drink flower tea. So they mix them and create new flavor tea-oolong flower tea which meets the need of Chinese and Western people in the world. It is called New Tea Culture.
d. Tea bag
They are the first to launch tea-bag kind of milk tea. It is different that their tea bag includes leaves but not all power. It can be used twice. Therefore, first milk incense will be stronger then second is tea incense.
e. Natural nursing research and development base
This main purpose is using natural wild way to cultivate the most-healthy wild tea. Mr. Chu think no matter how the world change, it is needed the natural and time to perfectly match to brew a pot of tea. However, the concept of breeding R&D base is from Yunnan Pu’er tea farm in order to return and develop nature tree garden.
(III). Meet market need
Shih Chen company in order to meet market need, they took flexible marketing strategy.
A. Chain tea shop In the past, 3:15PM Observed more and more people in the world like to drink tea, Shih Chen company announced that it will cross the catering industry, with its own brand " 3:15PM " set up a chain teahouse. Through the agency or authorized way to flag the world's major cities, including Shanghai, Malaysia and other existing agents.
B. Tourism factory; garden "3:15PM sightseeing factory" to provide teaching of experience, also promote Taiwan's "new tea culture", peace of mind to enjoy another kind of leisure style. In addition to providing kindergarten to the Institute of student knowledge learning trip, also provide foreign guests and the community to visit. Through tea experience and outdoor teaching, understanding of industrial culture, the tea to be passed on. The production line opens to visit, through the experience of goods and then establish a healthy consumer confidence in the cycle.
C. Get into tourism commodity market In fact, getting into tourism commodity market will be subject to network blog and travel books recommend, and because of the effect of word of mouth in the Korean tourist group has a very high brand
recognition and purchase of the name of the "3:15PM ".
D. Interactive physical shop This year Shih Chen company established the first store in Korea, and the store and sold well.
E. Combined with movie star to maintain product image This year 3：15PM invited to receive the Golden Horse Award for best supporting actress Xie Jiaying as a brand representative.
F. 3:15PM fan page In order to let more people know 3:15PM, Shih Chen company
created a Facebook fan page. Shih Chen company not only update its status on news feed, but also answers questions in chat box.
G. Bottled milk tea Considering the Koreans preference of drinking, who do not like to spend too much time waiting, therefore 3:15PM also sell bottled milk tea, and let them directly took away. From 2017, Bottled milk tea also sold in Taipei 101.
III. Five Force Analysis
(I). Industry competitors
In Taiwan the competitors of Instant drink industry are over 25 firms, and you can them buy in convenience stores, supermarket, shopping mall or internet.
Figure 6. Five force
A. Competitors’ concentration → low
The conception of competitors’ concentration is how many competitors share the market in this industry. If there are only three companies share the market, they can control the market price. In other words, when competitors’ concentration is high, the competitive degree of this industry will be low and they will control the whole market. In this case, 3:15PM in instant drink industry, as we all know there are many firms provide instant drink not only in Taiwan but also all over the world. Instant drink is very common, and also considered a kind of daily necessity. We can find more than 25 brands of instant drink in hypermarket easily, such as Carrefour, A-mart (愛買), etc. Furthermore, it is convenient to buy other foreign brands in online shop. From these viewpoints, we examine the industry is in a perfect competitive situation. Thus, the competitors’ concentration is low.
B. Product differentiation → become lower
Just as we mentioned above, the products in this industry is very similar, maybe just a little bit different on their flavor. It is in a perfect competitive situation. As far, there
powder rather than oil, and their special technology of oolong flower tea, etc. Therefore, perhaps we can make a conclusion that Shih Chen Food Company have differentiation from other brands, and also we can attract more attention from customers. However, the era for only one tea bag milk tea is pass. A brand, Taiwan brand, called Chatime (日出茶太), they develop tea bag milk tea. Furthermore, they have same ability to make the milk tea twice with one tea bag. 3:15pm developed a kind of milk tea with milk power, at that time it is creation. But now lots of competitor adopt milk power in their milk tea such as OK TEA(歐可), GREENMAX(馬玉山), MR. BROWN(伯朗), GINO(基諾). How about oolong flower tea? Shih Chen Food Company said they utilized NGO technology- Chu’s fragrance baking to make oolong flower tea. However, there are some firm also have oolong/ black flower tea, such as Wang De Chuan (王德傳), Herdoor (禾多). The different between them is the price of 3:15 pm is cheaper.
To sum up, in this industry, two strategies are in low level. Low concentration and differentiation between competitors become lower. Therefore, from these two perspectives, their rivals in this industry are very strong.
(II).
Bargaining power of suppliers
Because there are many companies in Taiwan are selling brewed tea bags, therefore companies import similar raw materials. Compared with other larger companies, Shih Chen Food Company's purchasing power is relatively small, and Shih Chen Food Company requires high quality on the raw materials, therefore the Bargaining power of suppliers is low.
(III). Bargaining power of customers
The Bargaining power of customers is high due to low switching cost of buyers, buyer’s price sensitivity is high and information availability is high too.
A. Why buyer’s switching cost is low and price sensitivity is high?
In recent years, customers become caring about their health so that many instant drink companies began to follow the footsteps of 3:15pm to sell tea bag milk tea that put true tea leaves inside rather than some chemical additives, such as IMEI, Chatime, etc. Owing to diversity choices for customers, instant drink industry in Taiwan is in hyper competitive. To sum up, buyer’s switching cost is low and price sensitivity is high.
B. Why information availability is high?
Nowadays, due to develop of the Internet as well as online shopping trend, consumers can access a lot of information including brands, comments, ranking via internet. Thus, information availability of buyer is high.
(IV). Potential entrants
In the threat of potential entrants include economies of scale, product differentiation, capital needs, exit barriers, access to the distribution channel, switching costs and so on… In the instant drink industry, they can reach to economies of scale easily. In the limited resource, if produce and sell more they will get higher economic scale. Their product differentiation is low because all products are similar just a little different in flavor but we can’t deny their product diversification. The companies don’t need too much capital needs. Then their exit barrier is low. If your product is good or popular, it is easy to access the distribution channel. The switching cost of buyers becomes low. It is less chance to see price competition so that retaliation is low. Therefore, in this industry of barrier to entry of film is low. And the entrants will also increase.
(V).
Substitutes
3:15PM produce the instant drinks. Separated two parts of customers, when you just want to drink something indoor, the substitutes include mineral water, tea drink, carbonated or sports drink, coffee, juice, milk and so on… The threat of Substitute is high. In addition to instant drinks, it also has different choices when customers want to drink something. The other parts is when you want to drink outdoor, the substitutes also include hand-shake drink and any kinds drink which can be bought outside.
(VI). Summary / Conclusion: Industrial profitability
Over all, this industry is in a perfect competitive situation, their profit will be very low theoretically, but why lots of firms engage in this industry. Due to few entry barrier, the market is easy to access in. For bargain power of buyers and suppliers, there are many kinds of drinks in the market, and you can buy it everywhere, the products are so similar. The switching cost is very low, the consumer will choose the commodity by cheaper, good taste, fashion or other reasons. Moreover, consumers’ taste will change very quickly, maybe they change by their mood, weather, or superstar affect them to pursue it. Furthermore, the price gap between each other are small. Thus, buyers’ bargain power is very strong. About the suppliers, the suppliers of Shih Chen Food Company is from CEO’s village, so maybe the bargain power of supplier is not very big. Furthermore, there are many tea farmers in Taiwan, it is easy for Shih Chen
Food Company to find lots of tealeaves suppliers. Why in this part we focus on “Taiwan”, due to they address to promote Taiwan tea. But, owing to they want to create something new to catch consumers’ eyes, such as oolong flower tea, they need to rely on import goods to support their creation. Furthermore, Shih Chen Food Company is not a big company and their sales volume not as big as some listed companies are, so they don’t have sufficient power to against big suppliers outside. However, Shih Chen Food Company have power of brand, and this power become stronger. Therefore, we argue the bargain power of suppliers will become lower. There are many potential competitors in this industry provide diversify drinks, not only instant drinks but also many tea shops, so there is no denying that there are many substitutes in the market. Although the market for Shih Chen Food Company is good now, due to the increase of growth rate, but the situation of the market is very competitive. Thus, firms in this industry are so called survive in a fissure; they have to keep creating new product to catch customers taste, and then they will have opportunity to sustainable survive.
IV.Strategic Group
We apply innovation and geographic scope two variables to analysis strategic group of instant drink industry.
Figure 7. Strategic group of Shih Chen Foods Company
(I).Competitors’ innovation and geographic scope
A. OK Tea (歐可)
OK Tea was founded in 2010 by a steel factory worker. One time he got an
opportunity to see tea making process and he found that tea farmers made tea directly without washing tealeaves. Therefore, he made up his mind to make cleanest tea which is the meaning if their brand name- OK Tea.
Innovation:
With sufficient knowledge and experience of iron products, OK Tea create a package- bag stick tea (袋棒茶), made by special aluminum foil which can resist 121 degree. There are 550 small holes in one tea bag, let concentration of tea evenly. Follow the
Generialists
Common
Dog
trend of health, they also designed sugar control package let consumers can adapt sweetness by themselves.
Geographic scope:
They were built for seven years and only focus on domestic. But now their business has ride high, they consider to expend oversea in the near future. (OK Tea)
B. Kugi Foods (廣吉食品-台灣茶品集)
Kugi Foods was set up in 1987. Kugi Foods was a professional food processing, manufacture and food agent.
Innovation:
Their objective is to make nature food, so they use milk powder to make tea bag mike tea. Using technology to keep food origin flavor.
Geographic scope:
Kugi Foods has exported their products to U.S., Canada, Hong Kong, Macao, Mainland China, England, Malaysia, Singapore, Australia, and Japan, etc. (Kugi Foods)
C. One Fresh Cup (鮮一杯)
Kenjohn Trading Co., Ltd reinvested and set up Lariat partners limited in 1999.
Promote drip bag coffee (濾掛式咖啡) to every department stores in Taiwan and U.S., Australia, New Zealand, and Hong Kong High consumption market. In 2011 they applied the brand name “ One Fresh Cup”.
Innovation:
Lariat is the first company that import drip bag coffee from UCC Japan. They also add dietary fiber- acacia(膳食纖維-阿拉伯膠) in their coffee powder. This kind of dietary fiber is natural and healthy which can also improve bowel movement.
Geographic scope:
Their markets include Taiwan, U.S., Australia, New Zealand, Hong Kong, Philippines, and Turkey. (One Fresh Cup)
D. GREENMAX (馬玉山)
Ma Yu Shan Foods Co., Ltd was established in 1965;From the early discovery, it is testified to say the remarkable contribution of cereal products to the health of human being can’t be easily detectable by their general outlook, therefore, Ma Yu Shan has being fully devoted herself in the area of natural cereal products for 30 years.
Innovation:
GREENMAX has rigorous and professional testing of raw materials, semi-finished products, finished product with advanced technical support. They have many kinds of goods such as flaxseed & Nuts cereal, nuts cereal, enzyme, organic foods, milk oatmeal, almond powder, multi grains porridge, mixed cereal powder, seeds &seeds powder, multi grains rice, rice powder& soy beans powder, milk tea, snack foods, tea, coffee, gift pack. And every series also have different taste.
Geographic Scope:
GREENMAX sold their products to more than 20 countries, including: Japan, China, Taiwan, Hong Kong, Macao, Malaysia, Indonesia, Singapore, Brunei, Australia, New Zealand, Canada, United States, South Africa, Germany, France Netherlands, United Kingdom… (GreenMax)
E. Mr. Brown (伯朗)
Kingcar company was founded in 1979. Then in 1982 the first jug of Mr. Brown coffee was launched in 1982. Then start to export to the world.
Innovation:
Their product is only one series. The main is Coffee. Then launched out different taste of instant coffee or beans. It is worth mentioning is their drip’ coffee which is different from the original powder.
Geographic Scope:
They already export to Asia, European, Middle East, Africa countries. About thirty
countries. (Mr. Brown)
F. ZenQuo (真鍋)
ZenQuo company founded in 1991. Their main products and service are café shop, instant drink.
Innovation:
Their product include milk tea, coffee with different tastes.
Geographic Scope:
They mainly sold in Taiwan. There are some shops that located in Taipei, Taichung,
Puli. (ZenQuo)
G. 3:15PM (三點一刻)
the general manager of Shih Chen Company, creates the brand “3:15PM” to spotlight Taiwan tea all over the world. He wishes hard working tea farmers and qualified Taiwan tea can find love in 3:15PM brand. Nowadays, 3:15PM has more than 15 kinds of tea bag flavors.
Innovation:
In 1990, Shih Chen Foods Company launched 3:15PM milk tea and the first company to use tea leaves in tea bag. In 1991, invent series of "GrainMaster" and "vitality 100", these products provide high fiber, high calcium, zero cholesterol, etc. In 2006, Shih Chen Foods Company proposed a concept of Chinese-Western fusion, and launched new product “Oolong Flower Tea" that a brand of Oolong Tea in the world.
Geographic Scope:
3:15PM tea bags promote to 18 countries, including Korea, USA, Canada, Australia, China etc. (3:15PM)
H. MOCCA (摩卡)
Founded in 1974, MOCCA brand has been registered in Taiwan for over 40 years. MOCCA has become a professional coffee manufacturing company. "Loyal to the original flavor" is the company's consistent demand for coffee taste. It hopes to produce aromatic coffee to satisfy consumers' taste and thus be the leader in the professional field of Taiwan's coffee market.
Innovation:
In 1974, the first introduction of freeze-dried granulation made of granular coffee manufacturers in Taiwan, there is no commercially available condensed coke flavor thick coffee.
Geographic Scope:
Today MOCCA establish factory and Office building in China. (MOCCA)
(II).Cluster
Separated three parts, first cluster is dogs included ZenQuo, MOCCA and Gino. The reason why they put here is they only stay in Taiwan without sell to the other countries. And they have few innovations. Second, Common included One Fresh Cup and Kugi Foods. Compared with other brands, they are put in middle in our strategic group. Among them, Kugi Foods said their innovation is keep food’s original taste but this means they didn’t do any innovation. The meaning is just be same as their cluster named “Common” nothing special. Third, Generalists included GreenMax and 3:15PM because they have bigger geographic scope and more innovations so that we
called them generalists means they can do everything. However, if Dogs want to grow up to Common Generalists, it need to put more money and cost to do their innovation and also need international marketing to sell to other countries. And some brands such as OK they don’t have lots ability of producing so that if they move to high
geographic scope they need to have more outputs. If the brand want to be generalists, it must need to have some sacrifices.
V. RBV & VRIS
Figure 8. RBV for Shih Chen Foods Company
(I). Definition
A. HRM
In the company of 3:15PM, Shih Chen has a good human resource management. Separated into two parts, first is their employee training. The company thinks it is important that their employees should always update knowledge. Through the inside training and other speeches of professional advisors, they can get more power to reach new goals which include R&D innovation, production differentiation, talent
specialization and safety of manufacture. Second, Shih Chen keeps that benefit sharing, share weal and woe in mind. Viewing employees as family members. Employees are their biggest assets. Therefore, they have perfect welfare system include health insurance, allowance, health check, gifts and travel. Different from other companies in Taiwan, their power distance is lower, they encourage employees
Capability
HRM
Quality management
Vertical integration
Resource
Intangible
Tangible
Land
Equipment
Brand
Patent
R&D
Marketing
to provide personal opinion and get along as families.
B. Quality management
To achieve the goal of promoting Taiwan all over the world, most of the material is from own produce and must to meet the standard-quality. First is their tea leaves. Their farms need to be checked about environment pollution and use record of pesticide, time control of spraying pesticide. Then in good time pick tea leaves by specialized people. Second, they make the record of product periodic and packaging materials to attain health management and traceability before their tea being final commodity. The biggest purpose of those strict managements is making sure their consumers have good production.
C. Vertical integration
Different from other tea brand companies, Shih Chen have vertical integration
capability. From the material to the final product are totally by themselves. They have their own raw material manufacturer, own brand and tea shop. Although they still need some retailer to help them sell product, compare to another tea company their capability of vertical integration is higher.
D. Land
Along with increasing international markets, Shih Chen Food Company establishes a long-term reliable relationship with tea farmers to stabilize our source and quality of tea leaves. Currently, Shih Chen Food Company has more than forty tea farmers to provide an adequate source of tea leaves. For European and American Pesticide Regulations and our tea plantation health management, we regularly send the experts to counsel, educate, and audit our tea farmers. Although our management is in strict compliance, we ensure that we can purchase tea leaves all seasons. In addition, we purchase at a higher price than the market price to protect our farmers’ rights and livelihood, therefore raise their willingness to cooperate with us. This establishment of tea safety management brings the guarantee for our consumers. The supports of our excellent farmers assure us to pass down our traditional tea making technique and promote Taiwan's high-quality Oolong tea to worldwide.
E. Equipment
In order to let foreigners to slowly adapt to the taste of Oolong tea, the first one step is a combination of European and American people who love to drink flower tea. To make the perfect combination of fragrance of flowers and tea rhyme, R & D team spent a full four years of hard work, and finally, 3:15PM team relying on many years
of professional production technique and hard work, biotechnology in the "NGO transplanting technology" will pull away bitter Oolong tea, implanted fragrance of flowers, creating Oolong tea that only one in the world.
In equipment Shih Chen Food Company, in addition to have a general system of tea and packaging equipment, because of its Oolong flower tea is the use of
biotechnology in the "NGO transplanting technology," so the device is also customized for this series of products a set of equipment, which is currently Shih Chen Food Company's most advanced equipment.
F. Brand
Milk tea, and bubble teas, have been around for decades in various forms. The most popular style of milk tea originated in Taiwan back in the 1980s and it is a simple blend of black tea, creamer and sugar. Since then, however, this one simple drink has turned into a revolutionary tea culture that has allowed tea lovers to pair their favorite teas with a myriad of creamers, flavors and sweeteners. But that is not even the best part. It’s also incredibly popular and provides phenomenal profit margins for tea retailers.
Since 2006, China has ranked No.1 in tea consumption for nine years. From the above information we can see that the Brand awareness at 3:15PM is high in the Chinese market.
From 1994 3:15PM start sold their products to China. In 2017, 3:15PM ranked fourth on tea drink list in China, it is synonymous with afternoon tea in Taiwan and the tea market spokesman, the sales tentacles even more to Europe. 3:15PM milk tea emphasizes "four-dimensional space three-dimensional taste," milk tea will have different flavors due to the length of immersion, you can adjust the immersion time according to personal preference to meet different tastes.
G. Patent
With 100-year experience of planting tea, Shih Chen Food master tealeaves in high accuracy. Therefore, they created the first patented tea-bag milk tea in the world.
H. R&D
As mentioned before, they have a 100-year experience of planting tea, so they can master tea leaves in high accuracy. Furthermore, they have plentiful tea knowledge. Thus, they can combine black tea, unfermented Oolong tea with high water-contented sugar. Making the first tea-bag milk tea successfully. This kind of milk tea is different from other milk tea. Its tea flavors are stronger. Furthermore, they use unfermented Oolong tea leaves inside, its tea flavor will change with time and can re-brew it twice.
In addition, to meet European needs, they developed nature Oolong flower tea with different flavors. The nature flower Oolong tea is made by unique NGO bio-tech to eliminate the biter of Oolong tea and transfer into flower fragrance. Besides, to keep the trend of health, they also developed life cultivation series.
I. Marketing
Their marketing strategy is to meet each area’s needs, so in Taiwan, 3:15pm invite an new idol drama actress-Hsin-Ying Hsieh(謝欣穎) to be the brand representative. In Mainland China, they create Chowder series that let the people there can have their meals conveniently. Chinese people love Sun Moon Lake black tea, so they apply Sun Moon Lake black tea to make milk tea. In Europe, they European love herbal tea, so they combine herbal tea and oolong tea to make oolong flower tea. In Korea, they want to maintain young and fashion image of the brand, they also hire young idol to be their one day clerk, make a advertise video and in March 2017 they open their first teashop in gangnam-gu(江南). In addition, they creates bottle milk tea to meet “fast” culture in Korea. So far, we know the ambition of 3:15pm that they want to be
international. However, there is some questions that they want to be international, but they adopt the strategy “meet each area’s needs”. This strategy make their reputation won’t be high. Because in Taiwan, some people still don’t know who is Hsin-Ying Hsieh, let along in foreign countries. Take Lipton for example, Lipton is an
international brand and its reputation is very high, it adopt super star Lee-hom Wang (王力宏) to be their brand representative.
(II). The framework for appraising resources and
capabilities
Figure 9. The framework for appraising resources and capabilities
A. Key strengths:
a. Vertical Integration:
Because they have their own manufacturer, they can maintain their produce quality, produce schedule, assigns key resources. Use own brand to spotlight in the world. Although spend more costs to coordinate but also get more benefit.
b. Quality management
Shih Chen also put many efforts on their quality management. We can see relative information on their website. So that we can ensure we can use their products with peace of mind.
c. Land
Shih Chen Food Company establish a long-term reliable relationship with tea farmers to stabilize our source and quality for tea leaves.
d. Equipment
Shih Chen Food Company have the most advanced equipment of "NGO transplanting technology" and no others company have the equipment.
e.
Patent:Their patented tea-bag milk tea not only help them open the market, but also bring them go into internationalization.
f. Marketing:
There is no denying that they made a lot of efforts on their products, including “meet each area’s needs” so that they created and developed many different series of
products. However, we know Shih Chen Food Company’s target is to promote Taiwan tea all over the world, so their goal is international market. In this case, their
advertisement of “meet each area’s needs” strategy may run counter to build international brand. Who they invite are all local young idols, maybe they can
maintain the young and fashion image but most people don’t know them. In addition, most of their videos are in Chinese. That will make their efficiency lower. Therefore, we think their marketing is their weakness. But we can not erase their success on instant drink market. They are one of the few instant drink which open international market successful. Thus, we classify marketing in their key strength.
B. Key weaknesses:
a. Brand
The brand of 3:15PM is famous in Taiwan, China, and Korea, but compared with other brands such as Unilever or Twining, 3:15PM at a disadvantage position.
C. Superfluous strengths:
(a). HRM
In recent years, more and more companies pay attention to the rights of personnel. It is good to let them have more motivations to work for company. Shih Chen did this one but this kind of thing is thought as basic by public.
(b). R&D:
Owing to plentiful tealeaves experience and knowledge background, so they have strong power to support their R&D. Their two famous R&Ds in Shih Chen Food Company is tea-bag milk tea and NGO bio-tech oolong flower tea. The first one help
them open the markets and go into internationalization. The second one help them open Europe market and increase their reputation in foreign countries. However, what consumers care about is not a firm’s R&D skills, what they care is taste and price. As a result, we think R&D is their superfluous.
(III). VRIS
A. HRM: In HRM, although it has value, but we think it doesn’t have rareness, imperfect imitability and substitutability. It can easy to be substituted and be imitated and each company also have good human resource management. It was seen as the basic thing in companies.
B. Quality management: In quality management, it have value and rareness, it is seldom to see those kinds companies will put lots dedication on it. But it is easy to imitate and be substituted. Therefore, HRM and quality management only are competitive parity and average returns.
C. Vertical management: Be different with other company, their vertical integration have value, rareness, imperfect imitability and substitution. It is seldom to one-stop company to sell instant drinks so that in this industry 3:15PM have sustainable competitive advantage and above average returns.
D. Tangible-land: The value of Shih Chen Food Company’s land is they establish a long-term reliable relationship with tea farmers to stabilize our source and quality of tea leaves.
The rareness and imperfect imitability of Shih Chen Food Company’s land is more than forty tea farmers to provide an adequate source of tea leaves in all season.
Shih Chen Food Company’s land doesn’t have substitutability because they don’t have too many own land to control.(3:15PM)
E. Tangible-equipment: Shih Chen Food Company’s equipment have
biotechnology in the "NGO transplanting technology" will pull away bitter Oolong tea, implanted fragrance of flowers, creating Oolong tea that only one in the world. Though their equipment is hard to replace until now.
F. Intangible-brand: The value of Shih Chen Food Company’s brand has ranked
No.1 in tea consumption for nine years in China.
But 3:15PM has many competitors in milk tea powder industry, compare with them 3:15PM doesn’t have substitutability, rareness and imperfect imitability. G. Intangible-patent: It meets all criteria so it is a sustainable competitive
advantage. However, it is a little bit contradictory for us, a study talked about business model (Teece, 2010), in his study, he explained: once a new business model be started, it will be imitated in the near future. Even if it is a patent, it
will also be substituted in the future. We also found some evidences that the tea-bag milk tea of 3:15pm it is a patented package, however, it has been imitated by many brands, such as Chatime, Kugi Foods, and so on. Therefore, in here we cannot say that patent is not rare, value, imperfect imitate and unsubsitituability even sustainable competitive advantage. But in this case, patent here is not a complete sustainable competitive advantage.
H. Intangible-R&D: we also classified it into sustainable competitive advantage. About R&D it rely on their employee and company construct supported by plentiful making tea experience background. This background is a big energy database to support their R&D. Obviously, this kind of R&D is hard to imitate, substituted, also it is rare and value with no denying.
I. Intangible-marketing: in this case, marketing just meets one criteria-value.
Although in the rule of VRIS, marketing is not a sustainable competitive advantage, its contribution is not less than the other two intangible resources. Patent and R&D are energy to support their product developed. But the most important role is marketing to carry Shih Chen to international market. Even though it not rare, can be imitated, substituted. A good marketing manner can help a company successful.
VI. Value chain
(I). Primary activity
A. Inbound:
In Shih Chen, most materials are from own produced which have meet the
standard-quality. Materials will be sent to their manufactory and wait for delivery. So they can control materials by themselves. Separated two parts, cost and quality management. Although they have their own land to produce leaves, sometime the yield of leaves is not enough for their output. Therefore, they turn to find small farmers for contracting so that they can control their cost. In quality management, they have experience of growing tea leave, it is easy to decide their quality of each output.
B. Operator:
Before growing tea leaves, they will do tea garden environmental assessment and check whether the garden is suitable. They have own wild-natural garden to grow leaves. If the garden is contracting with other, they will control pesticide products which should be in standard. In order to avoid the herbicide hurt the quality of leaves, Shih Chen use artificial weeding and choose the safe time to harvest. Each harvest will be recorded for consumer viewing. The other process of tea production include sunlight withering, indoor withering, wave cyanine, static fermentation, frying, ball rolling and baking drying. Finally package it and deliver to consumers.
C. Outbound:
In part of outbound, we infer from 3:15pm story that they are good at warehousing management. When facing full warehouse of tealeaves and the tealeaves is unsalable. Their CEO came up with a good idea-combining tealeaves with milk powder and made it into milk tea. This is an evidence that their ability of warehousing
management is good. Mr. Chu, their CEO ever said that: I won’t give as many as sellers want. They want to protect their sellers from excessive competition and
fluctuate price. CEO of Taifoods (台湖食品開發股份有限公司) said that 3:15pm pay attention on their market management, and control the price between different sellers.
This is the key to hold the lead. Furthermore, Shih Chen Food Company have a
special strategy- focusing on global Chinese supermarket which include U.S., England, Australia and Canada. That let domestic consumers in foreign countries can feel the warm form home country.
D. Marketing
3:15 pm is classified experiential marketing, they want to let their customer try their milk tea first and experience the difference from other brand of milk tea.
Their marketing strategy separate into domestic and foreign market, and their
common point is meet each area’s needs. In domestic country they focus on promote city image milk tea, such as Kinmen army (金門軍), Taipei 101. In foreign market, taking Korea for example. The dealer in Korea concentrate on convenient store as their marketing channel and develop bottle milk tea, this way not only increase reputation of the brand but also meet “fast culture” of Korea. As we mentioned in prior presentation that consumer trust is a critical factor for a firm’s or a brand’s success. Therefore, they built a physical teashop, let consumers experience fresh milk tea at cheap price and see the process of making a cup of milk tea. After their
consumers trying milk tea and trusting them, the consumers will buy their products. In addition, keeping the pace of Taiwan trend, 3:15pm also export many Taiwan product to attract Korean’s eye. As we mentioned in other presentation, they open Europe market by oolong flower tea, U.S. market by tea-bag milk tea, Chinese market by chowder series. It seems that they are audacious corporate, they adapt different ways and products to meet the market need and we know that R&D is very burning up money (燒錢). However, their CEO ever said that we will develop the products depend on what we have, and it doesn’t matter for something not done, but something we done, maybe the enterprise will collapse. Thus we can infer that their strategies are remain in the middle.
E. Service
Shih Chen Food Company established the website of 3:15PM, Facebook fan page, and provided their email and toll-free phone numbers for consumers.
Customer Service Department of Shih Chen provide efficiently and courteously service, for example, when you call their toll-free phone numbers you do not wait for long time, and their customer service specialists are friendly, patient and they deal with things efficiently.
(II). Support activity
A. HRM
Shih Chen has a good and complete human resource management. For example, their employee training is important to their employees should always update knowledge. Through the inside training and other speeches of professional advisors, they can get more power to provide experiential marketing to consumers and have knowledge to
