Pricing Decision and Balanced Scorecard Analysis in Chatime

This paper is arranged in order to fulfill Management Accounting Lecture Assignment by:

Mrs. Gia Kardina Prima Amrania,S.E.,Ak.,M.Acc

Arranged by:
Venesa Hafid El Haq 120110170119
Sunny Angelia Naibaho 120110170120
Fatharani Hasya Abadi 120110170129

ACCOUNTING UNDERGRADUATE PROGRAM

FACULTY OF ECONOMY AND BUSINESS
PADJADJARAN UNIVERSITY
2019
Table of Contents
CHAPTER 1 ................................................................................................................................................ 2
CHAPTER II ............................................................................................................................................... 5
2.1 COMPANY PROFILE ............................................................................................................... 5
2.2 SWOT ANALYSIS ..................................................................................................................... 6
2.3 INDUSTRY ANALYSIS............................................................................................................. 8
2.4 BUSINESS STRATEGY ANALYSIS ....................................................................................... 9
2.5 CUSTOMER ANALYSIS ........................................................................................................ 10
2.6 COMPETITOR ANALYSIS.................................................................................................... 10
2.7 MARKETING ANALYSIS ...................................................................................................... 10
2.8 BALANCED SCORECARD ANALYSIS (NON FINANCIAL MEASUREMENT) .......... 11
2.9 FINANCIAL MEASUREMENT ............................................................................................. 15
REFERENCES .......................................................................................................................................... 17

Tables of Figures
Figure 2.1 Chatime Logo ............................................................................................................................ 5
Figure 2.2 Chatime Industry Analysis ...................................................................................................... 8
Figure 2.3 Chatime Strategy Map ........................................................................................................... 14

Table of Tables
Tabel 2.1 Chatime Profile........................................................................................................................... 5
Tabel 2. 2 Chatime Balance Score Card ................................................................................................. 12

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 CHAPTER 1
OVERVIEW

To give a satisfying marketing-mix, companies have to set a price that is acceptable

to target market members. Price is the value paid for a product or service in the market, it
is a key element in the marketing-mix and one that generally is the only variable that can
be quickly changed to react to market changes such as competitor actions or demand
variations. Pricing decision which shown all roles from the demand theories, cost, and
market structure. The pricing decision has been the main focus of economic theory in the
analysis of resource allocation, but its position in managerial economics is more
qualified. In determining the selling price of a product or service is influenced by three
factors such as competitor, customer, and cost. As we know, price is strategic in an
operational variable, so that pricing decisions can bring a significant effect on future and
yet in present performance. Because of this time dimension, pricing decisions have to be
careful in classify which is for short run and long run since setting a low price may be
the optimal decision if the formation of a dominant market position as a consequence
results in sufficient long-term profits to outweigh any short-term profit. In general, there
are two approach in determining selling price such as market-based approach which
selling price is determined by market and cost-based approach which selling price is
determined by profit margin that targeted by companies.

As a result of a year-long research with twelve companies on the future of the

performance measurement, Robert S. Kaplan and David P. Norton published the
summarized results in their 1992 Harvard Business Review article: "The Balanced
Scorecard: Measures that Drive Performance". BSC was the first original, consistent and
logical approach that with its "4box" simplicity was providing balance between financial
and non-financial measures, leading and lagging indicators and short and long-term
objectives. The authors proposed to managers, in addition to traditional financial measures,
to fill out the empty boxes with limited number of customized measures from three other
business perspectives: Innovation and Learning, Internal Business and Customer
Perspective. Each perspective's measures should provide answers to the performance
questions: How do we look to shareholders? (Financial Perspective); How do customers

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see us? (Customer Perspective); What must we excel at? (Internal Business Perspective);
Can we continue to improve and create value? (Innovation and Learning Perspective). The
definition of Balanced Scorecard was imprecise and focused on the selection of measures
for each of the perspectives. The authors 'precaution on managers' well-documented
measurement assertiveness was shown with the alert that they shouldn't put their focus on
identifying what could be measured in the company, but on choosing only limited number
of measures customized by using attitudinal questions related to the company vision and
strategic goals. They endorsed that by "putting vision and strategy in the center of the
measurement system" improved organizational performance can be expected, but only if
appropriate changes in human behavior are made and necessary actions to achieve those
goals are carried out.
After over 10 years, franchise Chatime has carved put an impressive reputation as
the nation’s largest Bubble-tea brand. With an emphasis on metropolitan areas, the
Taiwanese franchise has translated a strong local history of iced-tea success into booming
global network. Innovation and adaption have been critical to Chatime’s operations, with
new initiatives proving to be key drivers for success. The brand has achieved double digit
like-for-like growth for three years in a row, and has its sights set firmly on continued
growth. Chatime also has a target to achieve 200 stores in Australia in 2021 and they are
on the track to achieve that. Chatime has a significant number of metro locations in major
cities. But, the critical point for Chatime how they can reduce their cost of entry to get
quicker return on investment for their investors and continue to grow the brand. The
balanced scorecard can serve as the focal point for the organization’s efforts, defining and
communicating priorities to managers, employees, investors, even customers. The
scorecard’s measures, on the other hand, are grounded in an organization’s strategic
objectives and competitive demands. And, by requiring managers to select a limited
number of critical indicators within each of the four perspectives, the scorecard helps focus
this strategic vision.

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 CHAPTER II
ANALYSIS RESULTS

2.1 COMPANY PROFILE

Figure 2.1 Chatime Logo

Tabel 2.1 Chatime Profile

Industry Beverages

Genre Bubble tea

Founded Zhubei in Hsinchu

County, Taiwan (2005)

Headquarters Zhubei,

Taiwan

Number of 2500 in 38 countries (December 2018)

locations

Area served Worldwide, mostly Asia

Key people Henry Wang Yao-Hui

(Chairperson, Founder)

Products Bubble tea • Tea • Flavored tea

Services Tea

Revenue US$20 million (2011)

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 Website chatime.com.tw/zhchatime.com.tw/en

Chatime is a Taiwanese franchise founded in 2005 with over 800 retail outlets
across countries like Taiwan, Malaysia, China, India, Macau, Vietnam, Singapore, Hong
Kong, Thailand, Korea, Philippines, Indonesia, Australia, Dubai, Vietnam, Canada, UK
and the United States.
In order to serve a beverage liked by all, Chatime uses sophisticated tea and coffee
machines to produce only the highest quality drinks. As the birthplace of pearl milk tea
beverages, Taiwan is set to revolutionize the tea brewing industry by capturing the attention
of fashionable tea lovers in a stylish and modern way.
With Chatime’s initiative in combining over 30 years’ worth of tea manufacturing
experience and expertise from a team of professional researchers, the tea drinking culture
is now experiencing an exciting shift - consumers are no longer content with consuming
teas laden with artificial ingredients and flavours - they want something real and flavourful.
In order to revolutionize the tea-drinking scene, Chatime uses only the best
imported tea leaves and quality ingredients, minus additives and preservatives. To keep
customers coming back, Chatime gathers ideas from top Japanese tea producers and takes
cue from their quality control and design concepts. Now, every cup of tea is freshly brewed
upon order. In line with the brand’s promise and commitment, Chatime will continue to
serve the best quality beverages and cultivate a modern tea.

2.2 SWOT ANALYSIS

SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework
used to evaluate a company's competitive position and to develop strategic planning.
SWOT analysis assesses internal and external factors, as well as current and future
potential.
A SWOT analysis is designed to facilitate a realistic, fact-based, data-driven look
at the strengths and weaknesses of an organization, its initiatives, or an industry. The
organization needs to keep the analysis accurate by avoiding pre-conceived beliefs or gray
areas and instead focusing on real-life contexts. Companies should use it as a guide and
not necessarily as a prescription.

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 Many store that no Wi-Fi
Strongly branded
facility
Unique tea, juice, and
Medium-high price for
coffee
development country
Fast service
Sometimes overload
Always make a new
capacity (long queue)
promotion and discount
Almost have no different
Have a good design interior
with other brands that have
Superior technology
the same products

Strength Weakness

Threats Opportunity

The place always

High competition since the
established between factory
product is very similar to
outlet, clothes shop, or in
others with the same kind of
mall and its being a profit
brand
booster for chatime
For now only spread in Asia
everyday
so other brands in Europe
Can be accepted by most
can take our market
general people because the
flavours are familiar
Liked by teenagers which
are seeking for happening
things

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2.3 INDUSTRY ANALYSIS
Figure 2.2 Chatime Industry Analysis

Bargaining power of Buyer

5
4
3
2
Rivalry Among Existing Firms Bargaining power of Supplier
1
0

Threat of Subsitutes Threat of New Entrants

a. Competitive Rivalry
Competition between competitors in the bubble drink business is intense competition to
gain market share. Because, products can be quickly replaced and many competitors have
the same ability to face competition.
The risks faced by Chatime: Medium-High (4)
b. Threat of New Entrants
In the bubble drink business, competitors can easily enter the market to sell bubble drink
types. The capital needed to start a bubble drink business does not need large capital, so
that competitors can easily enter the market share, both large and small scale bubble drink
businesses. Also supported by Indonesia's tropical climate and tend to be hot, then entering
the bubble drink business is a great business opportunity that can relieve thirst, coupled
with unique toppings that can also release hunger.
Risks faced by Chatime: High (High-5)
c. Bargaining Power of Suppliers
In the bubble drink business, the bargaining power of suppliers for the raw material for
making bubble drink is quite low, because there are quite a lot of raw material suppliers to
make bubble drink, we can find it in many places and include daily raw materials, and
suppliers for raw materials replacement is also available.
Risks faced by Chatime: Medium-Low (2)

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d. Bargaining Power of Buyers
Bargaining Power Buyers in the bubble drink business are quite strong. Seeing competitors
in this business is quite a lot, by offering a variety of taste innovations and all types of
prices, the offer of buyers / consumers in demanding lower prices or better quality is also
quite strong.
However, with the branding program owned by chatime, it can reduce the risk of this
bargaining power of buyers, because consumers will continue to buy chatime products with
branding programs that only exist on Chatime products.
Risks faced by Chatime: Medium (3)
e. Threats of Substitute Product
In the bubble drink business, there are many substitute products for Chatime drinks, both
from small to large scale bubble drink.
The risks faced by Chatime: High (5)

2.4 BUSINESS STRATEGY ANALYSIS

In business strategy, company should evaluate about their pricing strategy that they
will choose according to the market and consumer itself. There are two strategies that
company may choose, first is cost leadership, a method to reduce costs and produce the
least expensive goods in a market or industry in an effort to gain market share. The modern
business environment is a very complex and sophisticated one with consumers being aware
of the choices available to them. One way firms differentiate themselves is through
competitive pricing. Businesses who have the least production costs are able to offer the
same level of product quality compared to their competitor for a much lower price. Second
is market-based pricing strategy, also known as a competition-based strategy. In this
pricing strategy, the company will evaluate the prices of similar products that are on the
market. It is important to only consider those products that are similar to the product being
offered. Depending on if the product has more or less features than the competition, the
company sets the price higher or lower than the competitor pricing.
Chatime business strategy based on Porter’s Analysis above is cost leadership,
since its industry is perfectly competitive which means Chatime has so many substitute
product so they cannot be price maker but a price taker. It requires them to make the costs

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 as small as they can because the smaller the better it is so that they can set a lower selling
price than other competitors.

2.5 CUSTOMER ANALYSIS

Chatime customers come from all walks of life, because this minimum is like tea
that can be drunk from children to adults. Chatime identifies the needs of her customers
who want fast and practical drinks and adjust to the prices that customers are willing to
pay. Their strategy is carried out by holding lots of promos, discounts in collaboration with
other parties, and also rewarding by collecting points.

2.6 COMPETITOR ANALYSIS

Economists make the assumption that there are a large number of different buyers and
sellers in the marketplace for each good or service available. This means that we
have competition in the market, which allows price to change in response to changes
in supply and demand. Chatime as franchise that serve beverages also have competitors in
the market, there are direct competitor and indirect competitor such as:
 Direct competitor: ShareTea, Calais
 Indirect competitor: Starbucks, Fruity
Since Chatime sells products that similar with others like already metioned above,
what makes it different from one to another is their branding and sometimes their
effectiveness in manage the costs.

2.7 MARKETING ANALYSIS

 Product
Menu such as milk tea, fresh tea, fruit, tea, “oriental pop tea”, “QQ” jelly, “mousse”,
juices, smoothies, and coffee with stores carrying anywhere between 30 and over 90
flavors. The brand’s best selling drink is its signature Chatime “pearl” milk tea.
 Price
 The price among IDR 15K – IDR 25K for all regular size.
 For extra topping we have to pay UDR 3K – IDR 4K.
 For upsize cup portion into a large one, they charge IDR 3K.
 Chatime price quite competitive in the market.
 Promotion
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  Membership card: gets one point each transaction multiple of IDR 5K.
 Monthly program: like Indonesia’s Independence day promo on August, Mother’s
Day, etc.
 Cooperation: collaborate their product with Telkomsel, Air Asia, etc.
 Advertisement: chatime also promoting their product through internet such as
facebook, Instagram, and website.
 Place
 Chatime used franchising as method to enter foreign market.
 30 countries that they have entered.
 Chatime has more than 100 outlets store in Indonesia.

2.8 BALANCED SCORECARD ANALYSIS (NON FINANCIAL

MEASUREMENT)
In making the Strategy Map in the Balanced Score Card, it is necessary to divide the
strategy framework into four areas or perspectives that are critical to business success. The
four perspectives might include:

 Financial Perspective
 Customer Perspective
 Internal Business Process Perspective
 Learning and Growth Perspective

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 Tabel 2. 2 Chatime Balance Score Card

Strategic Target Actual

Measures Initiatives
Objectives Performance Performance

Financial Perspective

Increase in Manage cost

Grow operating 959,300,000 1,015,700,000
operating and unused
income USD USD
income capacity

Customer perspective

Improve
customer
Customers Percentage of satisfaction by
80% 85%
loyalty loyal customer fast service &
good quality
food

Improve
10% from 15% from
Acquire new Percentage of advertisements
existing existing
customers new customers and promotion
customers customers
programs

Internal Business Process Perspective

Keep the
Percentage of
Improve freshness &
drink thrown 15% 10%
products quality good taste of
away (defect)
the drink

Reduce Time needed to Give incentive

5-8 minutes 3-5 minutes
production time produce a drink to employee

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 Identify
Increase new Number of new
customers’s 3-4 new menu 5-6 new menu
product menu drink menu
needs

Percentage of
Selective in
On time delivery on time
choosing 80% 85%
by suppliers deliveries by
suppliers
suppliers

Learning and Growth Perspective

Percentage of
Develop 85% employees 90% employees
employees Held a training
employees skills participated participated
trained

Increase Percentage of
Update the
information processes with
information 70% 75%
system real time
system process
capabilities feedback

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 Figure 2.3 Chatime Strategy Map
Increase
operating
Financial Perspective
income

Customer Perspective Customers Acquire new

loyalty customers

Internal Business Process Improve On time

Reduce Increase new
Perspective products quality delivery by
production time product menu
suppliers

Increase
Develop information
Learning and Growth Perspective system
employee skills
capabilities

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2.9 FINANCIAL MEASUREMENT
In Chatime financial measurement, writer use the financial data from Starbucks
Company (SBUX) due to the data limitations about Chatime financial data.
 Profitability Ratio

* In Millions of USD (except for per share items)

 Liquidity Ratio

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* In Millions of USD (except for per share items)

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REFERENCES
(n.d.). Retrieved from https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-
guides/glossary/pages/pricing-decisions.aspx.

Hill, S. (1989). Pricing decisions. In MANAGERIAL ECONOMICS: THE ANALYSIS OF BUSINESS

DECISIONS (pp. 208-232). Palgrave Macmillan, London.

Investing. (2019). Financial Summary Starbucks Corporation. [online] Available at:

https://www.investing.com/equities/starbucks-corp-financial-summary

[Accessed 5 May 2019].

https://journal.cea.org.mk/index.php/ceajournal/article/view/64/61

https://www.chatime.com.tw/en/2018/07/04/chatime-listed-best-bubble-tea-brand-2018/

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