Good vs. Bad Strategy - Arcaffe vs. Starbucks

Introduction

The Israeli coffee-shop market emerged in the 1930s, as Western Europe immigrants arrived and brought the coffee culture to Israel. Coffee shops were inexpensive and popular serving coffee of medium to low quality. In the late 1980's, importers responded to socio-economic changes and customer's demands for better quality coffee by bringing in prestigious brands, mainly from Italy, such as Lavazza, Illy, and Segafredo. The consumption of coffee in Israel had grown and international brands like Arcaffè from Italy and Starbucks from the US entered the local market.

Arcaffè

The Arcaffè chain was established in 1995, with the aim of bringing real Italian espresso bars to Israel. The Israeli founders traveled to Livorno, Toscana in Italy and learned the secrets about how to prepare real Italian espresso from a local coffee-producer company called Arcaffè. They also saw that Italians accompany their coffee with a good Italian sandwich (ciabatta, foccacia or tramizzino), so they learned to prepare authentic sandwiches from the appropriate Italian "gurus". After mastering in the Italian coffee, they launched their own French bakery. They traveled to France and learned how to make classic French breads and even established a factory in 2003 (Our Concept). Arcaffè's good strategy has 3 main points which correspond to "The Kernel of Good Strategy":

• Diagnosis: Arcaffè's founders understood what the Israelis are looking for – high quality coffee and food to go with it.

• A Guiding Policy: They realized they had to bring the best of both worlds.

• Coherent Actions: They traveled to the countries known as being the best in each field, and learned how to make the products on their own; established a local production factory.

Over the last 12 years Arcaffè has opened 23 branches in Israel and 2 in France.

Starbucks

In the beginning of April 2003, Starbucks, the world leader in coffee shops with 7000 locations worldwide ended its 6-store operations in Israel...