Karam Coffee — SME Case Study (UAE)

Karam Coffee is owned by Emirati and is into roasting and packaging of coffee. The company started its operations around six years ago by sourcing coffee beans and further managing its processing. The idea to open the coffee brand began around 10 years ago by the founder’s father. The company came into existence around six years ago by setting up a plant, enabling the right infrastructure, facility and setting standards and parameters. The necessary equipment was bought and the brand building process got started.

Karam Coffee is into coffee processing, as it does roasting and packaging for green coffee companies. The commercial type of roasting is done by the company while the company is trying to do better at prevailing market products. The background behind setting up the company came with finding that there was no large scale Karam Coffee roasting capacity available in the UAE and therefore, Karam Coffee made an attempt to set its large scale roasting company to target regional markets like GCC, Iran, Pakistan, India at a regional level.

A mission statement is considered a clearly defined statement which reflects business strategies and explains an overall business purpose (Papulova, 2014).

Karam Coffee has no mission statement as it doesn’t believe in setting up a particular statement without actually applying it. The company decided to keep it unconventional and kept the website simple and basic with no mission or vision statement. Karam Coffee believes in the concept that “value less is more” since they have a belief in applying things rather than saying it. The company wants people to judge the product for themselves. Karam Coffee believes it will take time to establish a brand and mission statement. The company wants to make the product reliable and reachable so that branding can be done through a word-of-mouth approach while no mission statement is required for the company.

Vision Vision is the ability to see the big picture and to be able to reflect on the future state of the business (Papulova, 2014). Karam Coffee’s vision is to be the best coffee producer company at the regional level. Their vision is to offer the best coffee in the GCC region, India, Pakistan, Iran and at other regional places. Although there is no vision statement listed on the company’s website, the founder has set the given vision for the company from a market reach standpoint.

Organizational Structure

Organizational structure outlines the team or members roles in an organization so that overall activities can be defined from the perspective of roles and responsibilities using top-down approach (Ahmady, Mehrpour & Nikooravesh, 2016). Karam Coffee has a very simple organizational structure with limited business functions so that high level of operational efficiency can be achieved. The company has a CEO, plant manager and sales manager and there is also a quality control function manager. The employees fit under these three verticals while some unique people get merged into two verticals at the same time. Karam Coffee wants the production and sales departments to talk to each other and quality check (QC) to work as an independent body. The sales manager needs to know the production capacity and make commitments accordingly. Therefore the organizational structure is lean so that it can be managed diligently.

The top-down approach of the hierarchy model is followed for the organizational chart, which means the designation flows from top to bottom and so does the line of command and authorities (Blumentritt & Danis, 2006).

The below organizational chart of Karam Coffee reflects that the chairman is the top-most position, followed by the vice-chairman as they are part of the executive decision making. The CEO is the head of business operations while the departments are further categorized into marketing, sales, QC, trading, maintenance, factory and support functions. There are further managers and executives aligned in each department to take care of day- to-day business operations. The CEO oversees all the business departments and provides necessary direction and supervision to the business and respective managers.

Chairman Vice Chairman Marketing Sales QC Maintenance Factory and Support Function CEO Trading Figure 35: Leadership/Founder Chart of Karam Coffee Leadership The leader of Karam Coffee comes from a family background that owns many businesses in the UAE, so he didn’t have a hard time setting up a new business six years ago (Karam Coffee). The leader always insisted that a company’s greatest asset is the employee. He is always taking care of employees and always by their side.

He has a vision of making Karam Coffee into a regional company that exports coffee internationally. The CEO of Karma Coffee holds the legacy of the family and is able to deploy the competency that has been taught, while handling other family business. The chairman and vice- chairman are senior family members who hold control of the business and share their business acumen with the CEO and other management team members. There is a strong team of people who take care of various business functions like marketing, sales, quality check, trading, maintenance and other support functions. Karam Coffee is part of Karam Foods Industries LLC, and therefore it is managed by a team of strong leadership of the food industry.

SWOT Analysis SWOT analysis is an effective approach to review internal business strengths and weaknesses while external opportunities get evaluated (Varadarajan, 2010). SWOT

analysis for Karam Coffee is as follows

¡ Strengths: The CEO of the company holds a strong business understanding and has been running small-scale companies for the last 15 years. The business offers a unique blend of coffee. While there is no large-scale roasting of coffee beans offered in the region, there is a strong team that manages business that functions with the desired level of expertise.

¡ Weaknesses: The company is relatively new and lacks strong branding at a global level. The business lacks diversification as it focuses business only at a regional level.

¡ Opportunities: The culture of the café is picking up the pace and that is going to bring new growth opportunities for the business.

¡ Threats: The recent pandemic situation of COVID-19 impacted business significantly while the overall business recovery is uncertain.

Strengths Weaknesses Threats Opportunities Expertise to manage coffee processing.

Strong business understanding by the CEO and team.

Lacked strong branding.

Missing diversification as only focus at regional level.

Slow business recovery in COVID19- era poses uncertainty to the business environment.

New culture of café will result in business growth.

Unique blend of coffee.

Figure 36: Strengths and Weaknesses of Karam Coffee

Restructuring of business is about adopting changes within an organization so that it can adjust business as per changing dynamics of the market or business world (Sila, Saito, 2018). Karam Coffee ensured that it was able to adjust its business as per market demand during the COVID-19 pandemic. Karam Coffee focused on setting up a simple structure, as they need an efficient one. Back in 2019, the company had the same business structure and currently, there is no structural change even due to COVID-19. The business is thankful that they haven’t lost any team members and employees still hold a firm belief in the vision of the company. Karam Coffee faced huge financial challenges during the COVID-19 period and had to make difficult decisions. However, the company kept the team within the loop and even the security guards of the business were aware of the company’s approach so that confidence with each employee was achieved. Karam Coffee adopted a collective approach, considering the company’s assets were not just equipment, but also each of the team members, as the major asset for the company is their team. That helped it to survive during COVID-19.

A report by Cadena (2020) reflected that 44% of the coffee business around the globe was significantly impacted due to COVID-19. Another 35% of survey participants reflected that the coffee business went down by 26%-50% during COVID-19 (refer to the two graphs in Figure 37). The given findings were in line with observations shared by Karam Coffee and therefore they also adopted business adjustments to address the COVID-19 situation.

3% 12% 40% 43% 1% No impact at all Minimum impact Medium Impact Significant impact Not sure Overall how much has the COVID-19 Pandemic affected your Business?

17% 9% 18% 15% 21% My sales have increase 0-10% 11-25% 20-50% More than 50% If you have seen your decline since COVID-19 Pandemic, indicate by what percentage Figure 37: Sales Report of Karam Coffee Retrieved from: https://caravela.coffee/project/impact-of-covid- 19-on-specialty-coffee-roasters-adapting-to-new-realities/ Karam Coffee’s sales dropped by around 90% during COVID-19. It was a difficult time and the company managed it diligently by finding the right solution. The company found some internal controls-based solutions to save money while the sales team focused on getting a new source of revenue. Karam Coffee focused on getting at least some sales during COVID-19 to manage operations and be able to survive during that tough time. The company is still going through a tough time trying to ensure that it is able to overcome sustainability issues. The founder of the company believes a leader needs to trust the people and needs to leverage skills and competencies. There is always a need to promote efforts irrespective of the outcome.

There is a need to evaluate the intention of the people while there is a need to empower the team members.

Karam Coffee did cut salaries during COVID-19, but the company kept the employees on retainer and eventually paid them. The founder of the company believes that large companies don’t look at employees as they look at business and cost. Some small businesses collapsed during COVID-19 as they were not able to find the solution during a difficult time. Small businesses need to survive by adopting an innovative approach.

The business can save themselves by adopting cost- effective measures since the government is only going to assist in such a pandemic situation, by adopting the right level of business restructuring approach.

Karam Coffee offers locally produced coffee that is sourced from coffee growers. Further, they do the roasting, ground, blending and brewing. Eight different types of coffee are offered by the company to offer a range of blends and tastes. The list of products offered

by the Karam Coffee is as follows

¡ Coffee: Arabic, Turkish, espressos and filter coffee are offered by the company in various flavors, packaging and size. These coffees are offered through online and offline store retail options.

¡ Coffee machines: There are coffee making machines offered by the company in various categories and they are as follows: La Piccola Sara System, La Piccola Cecilia, ECM Compact HX-2, ECM CASA V. These coffee machines can be used for personal or commercial purposes.

The right business strategies are required to manage the desired level of sustainability and to help overcome competition (Blumentritt & Danis, 2006). Business strategies for Karam Coffee are to try to reach break- even and to manage better performance on the financial front. The target is to create a good product that allows the consumer to come back and to retain it by virtue of having a good product. The break-even point can be reached when there is no money lost nor no money is made. There is a right business sight that gets created once the business reaches break-even.

As per founder of Karam Coffee, a strategic decision has to be adopted whenever a change is identified so that the business can move from one stage to another.

Business needs to be profitable as part of business strategy so that the company can survive. Profit alone can’t work, but there is a need to reward the people, manage product innovation and to ensure consumer interest is duly met.

Karam Coffee Break-even Point Product Innovation Profitability Talent retention Figure 38: Business Strategies of Karam Coffee

The operational strategy is to set the right level of plans so that operational resources are utilized to achieve the desired level of efficiency and effectiveness (Adamides, 2015). Karam Coffee’s operational strategy is to manage operations and to meet its desired level of quality standards. As a CEO, Karam Coffee’s founder understands aspects of the business. The leadership understands the infrastructure, the way machines work, and they are aware of every aspect of the business. The better understanding of the limits and competency of the machine enables setting up the right operational strategy. Then the right product and sales target can be defined on the basis of it. Once the business limitations are identified, then the right business planning or strategies can be defined around it. The business needs to work with understanding the limitations of business so that the right decision can be undertaken by aligning operational strategies as per business resources.

The operational strategy requires an understanding of business and to align the right resources to gain competency. As per founder of the Karam Coffee, a CEO needs to go down to the line level and have a strong understanding of the business. The leaders go down to the deeper level to understand the capabilities of business and further form strategies around it. A CEO needs to ask questions to understand the business and move from one stage to another. Karam Coffee runs a small operation with limited team members as the CEO knows how to run the business plant and to set the right operational strategies around it to manage success.

Understanding of business and to align the right resources to gain competency Right operational strategies to manage business success Understanding of the limits and competency of the coffee machines Figure 39: Operational Strategies of Karam Coffee

Marketing strategies ensure that various marketing tools are used to promote the product or service and to enable it to reach consumers. The right marketing strategy allows branding and enables the active engagement of the target customer audience (Varadarajan, 2010). In the GCC region, word-of-mouth approach is significant for marketing, therefore Karam Coffee wants to start it in that way that manages a simple form of marketing and goes from one customer to another. The target of Karam Coffee is to be like Illy (a global Italian brand known for coffee) of the Middle East and to manage a unique placement of its product as part of the marketing approach. To enable brand-based marketing, the company will use a consistency-based approach so that a clear message for the brand is shared across its customers.

The brand name is a major part and it’s a challenge for business. However, the plant was initially set up as a B2B operation and marketing was limited. There was reluctance in B2B operations, so the company built a retail brand and further expanded its marketing approach.

The regional branding focus started so that both B2B and B2C operations can be done. B2B includes supply to hotels, restaurants and other businesses that use roasted green coffee while B2C directly serves customers and therefore a balanced marketing approach was adopted.

Karam Coffee spent around 300,000 Dirham to do the design aspect as part of branding so a great marketing effort was done for by the company. The new design language was funded by stopping other projects, since the company knew that it is important, and to manage branding. The sales have grown around 30% to 40% and therefore it was important to manage design language during the early phase and get more recognition than before. The dynamics of business are unique and therefore, there is no right strategy so a unique marketing concept was adopted. Each business needs to identify a marketing strategy that suits it as there are no global common strategies and so that the right marketing efforts can be adopted.

Word-of-mouth approach Manage a unique placement of product Brand by setting up new design language Figure 40: Marketing Strategies of Karam Coffee Business and

Businesses face internal and external challenges that are required to be addressed by adopting strategic decision- making. The challenges are required to be identified upfront and have to be addressed accordingly as per business competency (Delen, Sudha, 2018). The business has to manage legal challenges which are in the form of intellectual property since Karam Coffee is a brand name.

It is very complicated and IP rules need to be understood and followed to meet legal compliance for the business.

The brand has to get registered and create a name that is not easily available in the region. Karam Coffee created the business story for the name and got the trademark for it. The business entered into the regional market and got opposition to the common name, therefore overcoming challenges. The company spent 15,000 Dirham in the UAE to get the trademark for the brand which was a good amount. There are further legal challenges a business needs to understand like the legal requirement of the municipal department, understanding the business legal requirements in countries like Iran, India and Pakistan and has to operate accordingly.

Complicated Intellectual Property - IP rules Legal requirement and its applicability Getting right unique brand name Figure 41: Legal Challenges of Karam Coffee Overcoming Challenges Legal challenges are overcome by ensuring that Karam Coffee took the help of legal experts and consultants.

The board of directors decided to hire a consultant who worked with the company and went deep into business and helped address both business and legal challenges.

The consultants spent time within the plant, understood the coffee business and therefore, future design language was introduced by those consultants. The company replaced the old and found the new design language to manage better branding through input from consultants.

The company had to write up all the old material, get material from the market and get into the new market with the new design language. It was a good decision as it was done at an early stage, as the brand had just started building at that time, helping to address business identity-related issues.

Taking assistance with legal expert Applying new design language for branding Setting up right business identity at an early stage Figure 42: Best Successful Practices

The best practices are the ones that businesses adopt to improve the level of efficiency and effectiveness and help the business to win over the competition (Meyer & Meyer, 2017). The first best practice adopted by the company was managing its employees. The CEO of Karam Coffee believes there is a need to have a solid reward system to keep employees retained and to ensure employee empowerment is done by allowing them to innovate. Karam Coffee has a minimum team to run the huge infrastructure, as they are highly skilled.

The company believes that they can make any changes internally without depending on anyone from outside.

The second best practice is that the company allows employees to do things and empower them by bringing new ideas. The company monitors trends on social media and understands the behavior of the market so that employees can bring new ideas. The trend impacts the business and therefore, the company believes that it is important to identify trends and adopt the right business approach. The present trend is of coffee and as people follow the trend, the business is considered a follower of it and therefore, is the best practice around identifying business trends and managing business accordingly.

The best practices to manage success are summarized

as follows

¡ Effective management of employees by setting up the right reward system.

¡ Manage internal changes as per business needs.

¡ Monitoring business trends by reviewing the market.

¡ Follow trends and enable employees to share new ideas.

Failed practices are the ones that provide valuable learning so that businesses can learn through them and manage future challenges in an effective way (Meyer & Meyer, 2017). Karam Coffee doesn’t expect to be profitable in the first year for the manufacturing business as it knew from past failures that business needs time and patience. As per the CEO, it is a dirty business and requires a lot of effort, to manage better efforts through learning from failure. Coffee is a challenging business and evolves as it’s about producing something that needs to meet the consumer’s taste and demand. There were issues around getting clear direction as there were assumptions that didn’t work, which came as a failure of data. The CEO stated that a business should not just rely on statistics as there are many variables that can impact business. The study can’t cover all variables, and therefore complete business decisions can’t be based on statistics. There were many dynamics that were not part of the study and business can’t be based on assumptions and therefore, all future business decisions were made by adopting a balanced approach.

The key failed practices are summarized as follows

¡ Have no expectation to be profitable in the first year of business.

¡ Known products evolve based on taste and preference of customers.

¡ Business decisions need to be made beyond just statistics study.

The company is still considered to be in its beginning stage, like a “guided missile” as per Trompennar’s cross-cultural organizational culture. The culture of a “guided missile” reflects the organizational culture of a performance-oriented approach. Common goals are achieved through a focused approach by leadership (Draguns, 2007). The CEO of Karam Coffee already holds 15 years of learning and therefore, it is important to set up the company legally in the first go, so that it can move faster than others. The company has identified the need to set the right priorities of the future, and focuses on them in a rationalized way. The business is focusing only on a brand that exists in the UAE and not worried about global forces as of today. The company came a long way and that initial learning helped groom it organically. The business slowly grew through adopting its own learnings and reached a good stage of business maturity. The company is currently overcoming business challenges faced during COVID-19, and eventually will improve its production and sales capability.

Karam Coffee is operating in a competitive environment and with the recent pandemic posing huge business challenges. The recommendations for the business are

as follows

¡ To adopt an e-commerce model: Karam Coffee can offer its product through prominent e-commerce portals and can better reach consumers. The online buying trend is significantly on the rise in the UAE and therefore, the e-commerce model can bring new revenue growth.

¡ To diversify product beyond coffee: there is a need to adopt product diversification beyond coffee so that Karam Coffee can get new sources of revenue. Coffee also goes well with biscuits, bakery products and therefore, such products will help Karam Coffee manage product diversification.

¡ To offer a business franchise model to target markets: Karam Coffee can ensure that it offers business franchises in target markets like Iran, India and Pakistan. The franchise model will enable new growth opportunities while the company manages business expansions without doing much investment.

The key lessons learned from Karam Coffee are as

follows

¡ Don’t just rely on data analysis to make a vital decision. It’s important to make a decision by reviewing the market.

¡ Correct past mistakes and manage the correct form of marketing.

¡ Be prepared to face any unexpected challengings, like COVID-19, by taking proactive measures.

¡ Ensure that focus remains on business innovation so as to drive better results.

¡ Know that employees are important assets for the business and therefore, they are required to be engaged so that business can achieve the right level of growth.

Karam Coffee came into existence around six years ago. However, the business idea is around 10 years old.

Karam Coffee believes in the concept that “value less is more” since they have a belief in applying things rather than saying it. The CEO of Karam Coffee already holds 15 years of experience and therefore, it is important to set the company up legally in the first go, so that it can move faster than others. The vision of the business is to offer the best coffee in the GCC region, including India, Pakistan, Iran and other regional places. Karam Coffee faced huge financial challenges during the COVID-19 period, and had to make difficult decisions; however the company kept the team in the loop. The founder of the company believes a leader needs to trust people and needs to leverage skills and competency. One business strategy for Karam Coffee is to try to reach break-even so that it can manage a better financial performance. Karam Coffee’s operational strategy is to manage operations and meet the desired level of quality standards. In the GCC region, the word-of-mouth approach is significant for marketing, therefore Karam Coffee wants to start it in that it goes from one customer to another. The business has to manage legal challenges, which are in the form of intellectual property since Karam Coffee is a brand name. The board of directors decided to hire a consultant who worked with the company and went deep into business and helped address both business and legal challenges. Karam Coffee believes that there is a need to have a solid reward system to keep employees retained, and to ensure employee empowerment is done by allowing them to innovate. The company monitors trends on social media and understands the behavior of the market so that employees can bring new ideas.

Business concept of “value less is more” Setting up company legally correct Offer best coffee products meeting customer needs Trusting people and using their skills Word-of-mouth branding in GCC region Figure 43: Marketing Strategies of Karam Coffee