Teacher’s Summary
This article provides an in-depth examination of Old Town White Coffee’s (OTWC) organizational development and market expansion. The author effectively analyzes the company’s growth, challenges, and strategies, highlighting the importance of adapting organizational structures, rebranding, and leveraging technology to sustain global expansion. The paper also emphasizes the need for strategic interventions like mergers, re-engineering, and leadership development to maintain OTWC’s competitive edge.
Grade: A
Old Town White Coffee: Growth, Challenges, and Strategic Global Expansion
Question 1
Old Town White Coffee (OTWC) is a successful coffee chain in Malaysia and at present, it is expanding internationally. Similar to other organizations, OTWC needs to continually seek to review its organizational development effectiveness to achieve the company’s objective.
OTWC was established in 1999 in Ipoh, Perak. Currently, it is a public listed company acquired by Dutch-based Jacobs Douwe Egberts (JDE) group through its Asia holding company since early 2018. OTWC vision is to be Asia Pacific’s leading white coffee brand, providing high-quality products to customers globally. This is achieved through their business of manufacturing coffee and other beverages that include coffee, tea, coffee/tea mix, and chocolate drink, operating café chain of OTWC of own outlets, franchise outlets, and food processing, and the marketing and sale of beverages. The unique identity of the company is driven by the high-quality coffee beans that are roasted using its own unique proprietary roasting process to formulate the hot and cold beverages. In addition, the company also takes pride in catering the Malaysian food choice of rice, noodles, and bread servings through its cafe outlets.
Rapid growth over the 20 years reflects the organizational change and development needs of the company to cope with its expansion of business channels, increasing the number of outlets, and scope of business outside Malaysia. Currently, the company’s beverage product is distributed across 13 countries globally. In addition, it also has around 237 café outlets mainly in Malaysia and in other countries in the region such as Singapore, Vietnam, and China. This rapid growth over the 20 years has shaped the organization into a self-renewal organization covering various aspects of the organizational effectiveness that can be analyzed through the organizational development issues faced by the company as per the following:
Organization Control
Firstly, the rapid growth of the OTWC results into the complex structure to manage the main company that manufacturers and distribute the beverage product along with two hundred over café outlets that may result in lack of capability to control the operations of the organization and to ensure the quality of the deliverables and product to customers. Inability to affect an effective control mechanism may result in compliance issues, reputational issues and potential damages
Competencies and behaviors
Large-scale operations in Malaysia and outside Malaysia reveals the need to manage various people in the organization. People’s development is core to ensure the effectiveness of the organization. In view of different cultures and background of people to manage in OTWC, issues of ensuring people competencies on the level of service they can provide to the organization such as ensuring the originality of the beverages taste and presentation is important along with their behavior that needs to be adapted to ensure the OTWC brand retains the Malaysian originality despite operating in foreign countries.
Organizational planning and changes
The evolution of OTWC from coffee manufacturing and distribution in Ipoh with a renowned brand in beverages, especially as one of the leading brands in Malaysia reflects the journey of change that the organization must adapt over the years. Managing organizational change for business expansion is a key issue to be addressed effectively along with external changes such as online shopping and e-commerce that disrupt the organization’s operating model.
Strategy and communication
Organizational strategy is a key issue for most of organizations. OTWC needs to ensure its organization strategy is aligned to its vision and mission whilst ensuring the strategies are communicated clearly within the organization and to external stakeholders effectively
Organizational Structure
As the business grows, OTWC needs to seek the best structure for the company to ensure a unified team is built for the effective delivery of organizational results.
Organizational development issues are common in most companies, OTWC needs to understand the issues and identify potential solutions through organizational development strategies and includes organizational change and intervention strategies to overcome the issues.
Question 2
OTWC market expansion
Since the establishment in 1999, OTWC has grown into a leading white coffee brand in Malaysia and the Asia Pacific. This is evidenced by various accolades and awards recognition at the national and international levels. OTWC exports beverages to 17 countries globally that include Canada, United Kingdom, Netherlands, Australia, New Zealand and to most countries in the Asia Pacific and China. In addition, its café outlet presence in more than 200 locations in Malaysia and overseas reflects a successful market expansion since its establishment
Multiple business activities
OTWC’s started off as a coffee and tea mix manufacturers and marketing and sales of the products. However, since 2005 the company has extended its business activity to include café chain business. OTWC venture from Fast Moving Consumer Goods (FCMG) business of manufacturing and marketing its beverages into Food and Beverages (F&B) business enabled its organic growth and successful expansion to provide a variety of services and products to customers
Global business ventures
Over the years OTWC has expanded its business of FCMG and F&B into various other locations than Malaysia enabling it to build a brand name that is sustainable not only in Malaysia but also in the Asia Pacific region. Its business venture into other Asia Pacific countries has strengthened its market segment. Breakthrough into other countries’ markets is a challenge, nevertheless OTWC is performing well in securing substantial market segments in other countries in the Asia Pacific, especially Hong Kong and Singapore. The Café chain business through the four different models of own café outlet, partially owned outlets, franchised and licensed outlets, and food processing has also enabled the fast expansion of its market.
Economies of scale
OTWC market expansion was also achieved through economies of scale where cost-saving started to prevail in view of best practice and resource sharing, streamlining processes, and leveraging on negotiation power in view of the sizeable operation of the company across the globe.
Established brand name
Through effective advertisement and the brand awareness creation OTWC has been able to build its reputable brand name that comes from its proprietary formula that is still maintained till today to ensure the originality taste of OTWC coffee, tea and the instant beverage mix. OTWC have done well in securing its trade secrets to ensure the it is able to sustain the OTWC brand name for expansion.
Providing for customer need
One of the attributes of the OTWC mission statement is ‘We delight our customers with our products’ has been a key success factor for the company’s market expansion. Whilst the company continues to retain its brand name and originality, the company also seeks to understand the customer preference in every new market. Detail study of acceptance of the product, brand experience, customer taste profile and such enables OTWC to enforce its sales network effectively to target customer needs and meet the various market demand be it in Malaysia or overseas.
OTWC continues to expand its market and has vast capability to go further in view of growing global market demand for food and beverages as well as beverage products globally. Since OTWC has been in the market for over 20 years now, it is able to build further business synergies to ensure sustainable growth and market expansion for the company through its product, franchising business and technology enhancement
Question 3
Successful organizations continue to grow and start forming a large organization structure that requires constant review and reshaping of the organization to ensure the organization can retain its vision and mission as well as the core values and identity to ensure effective growth. OTWC is an example of a successful company that has a strong footprint in the local Malaysian market as well as rapid growth in the global market. As OTWC performs the best to sustain its organization to cope with these changes to meet the growing demand, the company may consider several key changes that OTWC could perform differently to achieve an impactful outcomes.
Organization structure
• Management and control
The current organization structure of OTWC reflects too many single companies established locally in Malaysia and a high number of single companies incorporated in overseas. Incorporation of companies in overseas to a large extent is acceptable in view of compliance of the law and regulation in the foreign company creates the need for establishing separate legal entity, however existence of many local companies will not compliment the management and control of the organization. This will cause delays and additional effort to secure support at each company level, resulting to unnecessary red tapes as well as running costs of these companies. Below image shows the extract of company set up by OTWC as available in their 2017 Annual Report
Number of local Malaysian private limited (Sdn. Bhd.) companies forming part of the group
Number of foreign established private limited companies forming part of OTWC Group highlighted in amber
In order to achieve effective management and control of the entire organization, it is relevant to keep the organization structure in a lean manner (Nautin T, 2014). OTWC should give enough thought on performing differently through lean management to strengthen its management control across the group.
• Scope of operation
In view of key challenges faced by OTWC with respect to increasing raw material and labor cost as well impact of foreign exchange, especially on manufacturing activity of F&B may be tackled through the set-up of manufacturing hubs. Cost of manufacturing operations in Malaysia is quite expensive in the region compared to neighboring countries. OTWC needs to consider cheaper labor resource that would contribute to lower manufacturing cost in other locations in Asia Pacific region such as the Philippines and Indonesia to leverage on scale of operation whilst getting effective access into those markets for F&B
Rebranding
OTWC needs to reassess its identity of existence. Despite awareness creation to target younger generation through various attempts, including a series of mural to promote ‘Art of Oldtown’, OTWC needs to consider other elements of current lifestyle that includes healthy diet, food on the go such as drive through as well as a series of smaller servings such as snacks that would meet the demand of current lifestyle prone to skipping of meals.
In addition, premium coffee is getting more popular and gaining more customers as well. OTWC needs to reflect differentiation from the rest of the competitors to place itself in a desired position to gain the trust and loyalty of its customers.
Consideration to be given to other local food preferences as well, especially in the FCMG market that involves expansion to overseas. Despite promoting Malaysian food choices, OTWC would need to give equal importance to the local flavors in foreign locations to attract customers in overseas. In addition, the certification of ‘Halal’ is additional strength to anchor on in promoting OTWC in foreign locations as the recent trend of customers seeking ‘Halal’ certified cafes are increasing in this diverse socio culture and would be a competitive advantage in comparison to lesser competitors with ‘Halal’ certification.
Technology Upgrade
It is timely for OTWC to consider technology transformation and invest more in automation such as use of Robotics Process Automation (RPA) to support its manufacturing process that involves manual effort. This can also resolve the over reliance on labor supply that contributes to increasing operational cost. Employees need to be trained in technical skill to support the operational excellence of the OTWC operation instead of focused dedication into manual production activities in the manufacturing line.
In addition, other technology development, such as Artificial Intelligence (AI) through machine learning is a recent trend in the food industry that OTWC could leverage on. Certain machine learning technology in ‘sorting’ foods that meet the minimum requirement through sensor based optical sorting would help OTWC to sort the food in the manufacturing line. This would save money, time and improve quality of the food.
Further supply chain management is a key in food retail industry. AI in supply chain management helps organizations to manage safety requirements, forecasting of pricing and inventory as well as monitor food demand and ensuring adequate production of food to avoid food surplus and wastage. This system would help to ensure OTWC products are available at in stores at the right time and the right quantity to ensure customer demands are met timely.
AI technology also supports hygiene in food plants and kitchen. This is achieved through the use of cameras that would capture the activities in the environment through facial recognition and object recognition software that would produce the pictures of the violation to hygiene standards. This would enable in the OTWC manufacturing plant and cafes to ensure its café chain is able to comply with the OTWC safety and hygiene standards.
Leadership and motivation
Both F&B and FCMG industry are going through a tremendous transition due to changes driven by technology and e-commerce platform. This phase of change reveals needs for upskill of employee knowledge and performance to align and adapt to the latest technology and change in ways of working. Similarly, shift to e-commerce platform and market digitalization reveals the need for speed in process. Implementation of online ordering, food delivery, food apps and such requires tactful planning of resources and process change to be agile for change activities.
OTWC needs to adopt effective leadership strategies to support the change journey that OTWC face. Upskill of employees requires continuous motivation to employees and encouragement to take ownership in company. OTWC could consider assessing the team work effectiveness in line with Belbin (1981) that concludes that a better chance of cohesion and goal is achieved if teams were shaped with individual preferences and working styles in mind. This would apply well for existing employees who may face resistance to change. This can be managed through ‘The Myer Briggs Type Indicator’ (MBTI) tool that identify individual and team strength and weakness that can be exploited and explored effectively for the benefit of the organization.
OTWC needs to consider seriously the need for investment on its employees through effective leadership for change. Approach to transformational leadership (Bass, 1992), Inner and Outer Leadership (Cameron & Green, 2012) and Leadership in change (Kotter, 1996) needs to be considered by OTWC to drive a new leadership formula that fits for the organization in view of its business expansion and presence in various locations globally that sees the need to manage change across the OTWC group as well as being sensitive to diversity and local culture of other foreign location.
Franchising business model
OTWC has potential to expand the FCMG business through the effective franchising model. In view of large number of OTWC café outlets in Malaysia, approximately 197 (in year 2018) and outside Malaysia of approx. 35 outlets reveal the lack of competitiveness of OTWC to venture into the global market. OTWC needs to review the effectiveness of its franchising strategy and improve or close the gaps that limits OTWC from venturing into global markets through franchising model. OTWC may also seek to study the effectiveness of ‘own’ café outlet in comparison to franchising model to leverage on best business model to grow outside Malaysia
Transformation
It is timely for OTWC to consider a Business Transformation journey by looking into fundamentally changing its system, process, people and technology to embark on growth strategy to strengthen its market presence and achieve its vision and mission. In view of disruptive technology in F&B and FCMG industry, OTWC needs to accept the fact that Millennials are now driving the market. They support going green and care for carbon footprint. Whilst they are being artistic at heart and mine the internet for case proving data, ignoring to this generation’s preference, interest and causes may affect the business badly down the road.
OTWC is a growing company that has ample potential to grow and expand its business both at the domestic and international level. Nevertheless, retaining the company’s core values and objectives is in the heart of the company. Several change that OTWC could consider doing differently are elaborated through above point. OTWC needs to devise a successful plan to changes effectively to retain its business and continue growing. Failure to implement changes soon may result to OTWC being unable to compete and survive in the F&B and FCMG industry in view of the increasing number of competitors and technological changes driving the industry.
Question 4
Business dimension and scope of operation of OTWC is growing in line with market demand for white coffee brand and café outlets with Malaysian local delights. In view of this, OTWC needs to control and implement the growth and business expansion through effective change strategy. Organic growth through expansion of café outlets and increase in manufacturing and sales and marketing of white coffee is exposed to potential risk of change in technology, politics, environment, economy and cultural change. As such OTWC needs to manage change intervention through strategic change activities.
Contingency Theory driven strategic intervention
Some strategic change activities are driven internally and involves tremendous internal effort and cost within the organization. Contingency theory acknowledges that each organization has its own characteristics, and such may face different challenges. In view of that, 5 types of change style that can be considered by organizations such as OTWC are:
• Development transition – observing constant change and team work collaboration (consultive approach)
• Task focused transitions – Managers are responsible for respective unit or department change through constant communication and information relay to employees
• Charismatic transformation – Practical approach where organization is not performing well due to not having a good fit to the environment
• Turnaround aimed at inspiring change- suitable approach to the balance achievement of goals in deficit to the motivational side of employees
• Taylorist – change through modification and reshape exercise set by framework governing values, beliefs, operational plans and strategies.
Rebranding
Another potential strategic intervention can be achieved through ‘rebranding’. This is in view of marketing OTWC through creation of a new representation of differentiation in position and mind frame of stakeholders and competitors.
This could give OTWC a brand-new strategy to access into markets that are less explored such as healthy diet, niche scope of premium coffee brand and many other potential rebranding. However, the key to rebranding is sustaining relationship with stakeholders. This requires careful change intervention activities to be implemented to gain a new different position where the company wants to move to as well as enabling the company to access foreign markets with international brand and look.
Acquisition
Merger and acquisition (M&A) are one of the common growth strategies adopted by most organizations. OTWC may consider this strategy to enable a faster organic growth of the company to expand its business locally and access into international market. OTWC needs to find the right collaboration partner to benefit from merger and acquisition strategy. This may be a complex strategic option but nevertheless a potential option to consider. Key rules for M&A are:
• Ongoing communication
• Designing suitable organizational model
• Plan to manage customers
• Work process method
The challenge to identify the right collaboration partner to meet the key rules above is critical as OTWC would not want to change its core values and trade secrets with the other potential business partner. It may assume to seek to get the other business partner to adopt OTWC’ s values and working style to retain OTWC legacy. As such M&A may not a be a good intervention strategy.
However, OTWC may consider organic acquisition of other companies to takeover. With this approach OTWC would be able to implement freely its business style and approach in a take over manner where OTWC will not lose its identity but still able to increase its customers and scope of operation through the other company that is taking over successfully.
Potential successful local coffee brands such as Nam Heong Coffee and food chain such as Kopitiam, Papa Rich and such can be considered in view of their smaller number of outlets and scope of business compared to OTWC. However, OTWC may also need to assess its financial status if OTWC is ready and has enough funds to embark on this intervention strategy. M&A strategy involves fund commitment as well as high risk exposure to ensure successful implementation.
Re-engineering
As discussed in earlier sections of what OTWC could do differently involves many scopes of technology transformation that OTWC can explore and leverage on. In view of that, OTWC could also consider ‘Re-engineering’ intervention strategy. Re-engineering is appropriate to manage process changes especially IT based changes that require people to do things differently with different input and different output. Re-engineering involves both ‘Business Process Re-engineering’ (BPR and Sociotechnical design
Business Process Reengineering (BPR)
This process involves radical change and maximizes effectiveness. Reason for radical change is due to changing of the process from scratch, requiring change in every aspect of the process causing it to become radical transformation. The core focus of BPR is mainly to keep the value to customers, redesigning processes from scratch, eliminating unwanted and un-needed process or steps in the activity, abandon the old process, it is usually IT enabled and makes the improvement strategically in the performance. Nevertheless, key risk of BPR involves managing team performance and motivation during BPR implementation and potential redundancy outcomes to manage.
Sociotechnical design
This design approach, focus is to balance the three key elements below:
Organization strategic vision
Technology and jobs required to produce or offer the product or services.
Needs of people
Principles of sociotechnical design are:
Minimum critical specification – telling people what to do, not how to do it
Variance control – problems corrected as it occurs
Multi-skilling – Individuals multi task
Boundary management – identify and manage boundaries between groups and functions
Information flow – information goes to places where action needs to take place
Design and human values – provide high quality working life for its people
Principle of incompletion – being aware that organizational design in the ongoing process
The benefit of this approach is that it involves forethought and planning opportunity whilst providing incremental change than a radical change of BPR. However, this is often assumed to be overshadowed by human values, and not to the speed of BPR.
PROGRESS Methodology
This method is a combination of BPR and Sociotechnical approach that is commonly used by most organizations. Since this approach is easily practical, OTWC may consider this intervention strategy for change. This methodology involves eight steps that are emphasizing on points of future users of system play major parts in its design. In order to achieve a cross group design team goal, senior management and skilled facilitator needs to sponsor and support this approach. This is very practical in the event OTWC intends to embark of technology transformation.
GRID OD Program
This organizational development program is using a planned change model that includes approaches to system wide planned change that address the whole organization from CEO downwards.
The objective of this program is to make individual managers more effective in dealing with subordinates and organizations through change across organizational culture. Six phases of this program are:
Phase 1: Grid seminars
Phase 2: Teamwork development
Phase 3: Intergroup development
Phase 4: Development of an Ideal Strategic Management
Phase 5: Implementing the Ideal Strategic model
Phase 6: Systematic critique
The Grid OD program can improve management and team effectiveness and in overall contribute to organizational effectiveness. However, the span of this programme could be from 3 years up to 10 years. In view of that OTWC may only consider this approach if OTWC is intended for long term strategic planning.
Survey Research and Feedback
This approach is a fast and less risky strategic intervention approach Objective of survey research and feedback approach is to identify opportunities for improvement and effectiveness of change programs. It also creates and serves as the communication bridge between managers and employees. As the name suggests, this approach involves gathering the survey results and feedback and identify action plans to improve the effectiveness of the change strategies
Strategic change intervention is much needed in current business dimension that is prone to change from internal and external factors, especially for an organization such as OTWC that has much potential to grow and expand. It is relevant for OTWC to continuously embark on strategic change intervention and strategic change activities to ensure its business survival and growth.
In view of much potential of OTWC that are yet to be explored, OTWC needs to be cautious in its strategic change intervention strategies to strengthen its business in the market, each strategy such as M&A, rebranding and so on needs careful study and assessment of its benefits and disadvantages in the context of OTWC before the strategy is adopted by the company.
OTWC needs to strategy that has less risk and more benefit, however OD is a scope that is never limited to specific strategies only, OTWC may also consider its own strategies that it may seem fit for its organization and not limiting itself to known strategies.
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