Strategic Decision Making

In May 1998 Vanessa Kullmann, the owner of Balzac Coffee, decided, after living 2 years in the USA, that the German coffee consumer is ready for an American coffee module and established the very first branch of Balzac Coffee in Hamburg. 14 years later, Kullmann is employing more than 800 workers with yearly revenues of €23 million.

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A Cup of Coffee in Berlin

Last week I was invited for a friendly cup of coffee, which included a short espresso tasting course, in the bourgeois neighborhood of Prenzlauerberg in Berlin by Marlone, a manager in one of the 53 branches of the Balzac Coffee spread around Germany. Marlone explains that Balzac Coffee recently purchased one of the leading competitors in Germany World Coffee, becoming the leading coffee chain in the country. When asking the manager what is the secret of success, the business strategy of Balzac Coffee, Marlone sits comfortably on one of the many sofas around the café and explains the German consumer has a different taste than the American.

“This old looking sofa that we’re sitting on, the graffiti picture behind me, that is how it looks like in each and every branch of Balzac – it’s comfortable!” Marlon says with a smile. He continues and explains that the quality of the Balzac products is the number one reason for its success: unlike the leading American competitor Starbucks, foamed milk is produced by hand and not by machine, espresso is served within several seconds since it left the machine and coffee related products are made from fresh ingredients only, and not from different kinds of syrups. He adds, that the location is one of the most important aspects that higher management considers when opening a new branch, trying to pick neighborhoods with an age average above 30 and with a high density of tourists.

Business Strategy

Around the World

Evan Carlmichael, the owner of the world-known entrepreneur blog, reports that when Starbucks began to expand, it used a different and rather controversial location-based strategy than its competitors. Starbucks decided ‘blanketing’ an area, open many branches in a specific neighborhood rather than opening them in different locations around the city. This created a short delivery and management times and shortened the waiting lines for customers in every individual store. Moreover, Carlmichael reports that providing the costumer with an intimate and welcoming environment, accompanied with a great cup of coffee as well as new innovations as pre-orders via the internet, new fresh can drinks, these will all create a good reputation on its own. As a result, Starbucks spends less money on normal advertising.

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 Another example can be seen looking at Caribou Coffee, the second largest company-owned coffeehouse in the world, which has quite a different business strategy than Starbucks. AdAge.com, an international world-known business blog, , quotes Alfredo Martel, VP marketing and project marketing:

“we don’t have interest in being the biggest… we’d rather be great at what we do”.

This symbolizes the business world-view of Caribou – a smaller but a higher-quality chain with little pretense. Caribou began offering exclusive oatmeal breakfasts, ‘grown-up’ sandwiches combined with permanent and limited-time new avant-garde drinks, that haven’t been seen in the market so far.

Moreover, in order to keep improving, logisticsit.com reportsCaribou is using the services of SuccessFactors, a global leader in on-demand performance and talent management solutions. With their assistance, Caribou is identifying successful young employees more professionally and eventually promoting them to higher positions in the firm, creating a long term successful management.

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