Strategic Entrepreneurship in Taiwans Food and Catering Industries:

The Case of 85oC Cafe Shop

Paper delivered at the Sixth Annual Conference organized by the Asian Studies
Association Hong Kong held at the Chinese University of Hong Kong
on 4-5 May 2011

Fu-Lai Tony Yu
Professor
Department of Economics and Finance
Hong Kong Shue Yan University
North Point, Hong Kong
Email: [email protected]
&
Ming-Wen Hu
Professor
Graduate Institute and Department of Industrial Economics,
Tamkang University,
Tamsui, Taipei 25137, Taiwan
Email: [email protected]
&
Visiting scholar
Department of Economics and Finance
Hong Kong Shue Yan University
North Point, Hong Kong

Abstract: This paper presents a theory of strategic entrepreneurship based on the

contributions of Austrian economists. The paper argues that the most significant
feature of Taiwanese entrepreneurs is their ability to look for profit opportunities.
After identifying a profit opportunity, they surf on the waves of the growing market.
They are quick to respond to the rapidly changing environment. Some small firms in
Taiwan may not conduct long-range planning. As long as they discover a profit
opportunity that others have not yet noticed, they will enter the market and exploit
profit margins. Though not as innovative as Henry Ford or Gill Gates which
revolutionizes

automotive

industries

and

information

technology

industry

respectively and drastically changes the everyday lives of the world economy,
Taiwanese entrepreneurs are excellent adopters of technology. They are able to add
some new attributes to the product so that the product differs slightly from the
original one and fits into the unserved market.

Furthermore, Taiwanese

entrepreneurs utilize social network extensively. By using business network and

personal relationship, they operate in nexus and hunt in pack in the market. Through
social network, they support each other and create a win win situation for each
other. Hence, we can conclude that unique features of these entrepreneurial strategies
allow Taiwanese enterprises to compete in the global markets. This argument is
applied to understand the business success of the 85oC Caf in which the shop
currently competes face-to-face with the world known Starbucks caf in Taiwan.
Keywords: Strategic entrepreneurship; Taiwan, 85oC Cafe Shop; food and catering
industries; Austrian economics

Introduction
The economic success of Taiwan during the post Second World War period is

well known. Taiwan has been referred by the World Bank in 1993 to as one of the

economies which contributes to East Asian Miracles. Explanations on economic

success of Taiwan are not lacking.1 However, most of them utilize neoclassical
Cobb-Douglas production function to explain Taiwans economic growth.
Specifically, these studies, ignoring structural uncertainty and knowledge problems,
never consider the role of entrepreneurship in economic development. Hence, these
orthodox neoclassical studies have failed to provide us with a satisfactory explanation
of the economic development of Taiwan. Entrepreneurship is often regarded as a
locomotive of economic growth. A systematic investigation of the role of
entrepreneurship in economic development is of utmost importance. This paper
attempts to develop a theory of strategic entrepreneurship which can be applied to
explain Taiwans economics dynamics. The organization of the paper is as follows.
Sections 2 and 3 introduce Taiwans entrepreneurship. The theoretical arguments are
given in Sections 4 and 5. The case study of Taiwanese entrepreneur, namely Mr. Wu
Cheng Hsueh and his 85oC Cafe Shop will be presented in section 6 . Section 7 is the
conclusion.

2.

Taiwan: an Island of Boss

It is well known that Taiwan is blessed with entrepreneurs. According to Small

and Medium Enterprise Administration (SMEA 2004), in 2003, there were 1,171,780

For example, Kuo (1997) argues that the economic success of Taiwan is attributed

to government policies including curbing hyperinflation of the early 1950s, utilization

of US aid, land reform, trade strategies, creation of job opportunities, foreign direct
investment, and policies on infrastructure. Shih (1994) argues that major factors
contributing to Taiwan's economic development include the external environment, the
colonial legacy, the role of the state and ethnic cleavage.

enterprises (including large and SMEs) in Taiwan. With a population of 23 million,

one out of twenty persons owns a company (Yu, Yan and Chen 2006). These army
of ants have been the major contributors to Taiwans economic miracle (Economist
1998). Taiwans people exhibit a passion of being a boss. This has something to do
with their Chinese thinking. According to the Chinese saying, people are rather
being the leader of chickens than the follower of an ox. In other words, although
chickens are small, one can still take the command. On the other hand, an ox is big.
However, one is only a follower, living under the command of other people. This
saying implies that one should be a boss, no matter how small the business may be,
rather than working for the other person in a big company. Furthermore, in the
Chinese tradition, parents expect their sons to continue with the family business. The
eldest son has the obligation to expand his fathers enterprise. As a result, males in
Taiwan are obsessed with being a boss. Moreover, when new generations become
adults, they separate from their families. Their parents always support them to
establish a new business whenever possible. This custom results in the formation of
new small businesses.2

3.

The Road to Become an Entrepreneur

There are three common ways of becoming a boss in Taiwan. The first way is to

work as an apprentice in a factory and then set up a business on their own later. The
second way is to spin off from a family business. The third way is to form a business
partnership with friends or classmates with the same interests or skills.

For a detail discussion of factors incubating entrepreneurs in Taiwan, see Yu, Yan

and Chen (2006).

(a) Starting out as an apprentice: In most cases, people in Taiwan starts as an

apprentice in a factory. These apprentices are called black hands (hands become
black and dirty due to working in a factory). After earning enough skills as an
apprentice and saving enough money, they set up businesses and become a boss.
Hence, this process is referred to as black hands turning into a boss (Shieh
1993:98-99). As soon as being hired as apprentices, these black hands start to prepare
themselves to become a boss in the future. During their employment, they learn a
wide range of jobs in the factory. For example, in printed circuit board, an apprentice
learns handling materials, manufacturing printed boards, punching, packaging and
quality control. Knowing a whole range of jobs gives them skills in establishing a
business. Furthermore, while working as employees, they have set up good customer
relationship so that current clients will become future customers of their own
enterprises. Some employees are also involved in business development. The job
provides them with the knowledge of where they find customers, buy materials,
contact businesses, etc Most importantly, the workers learn to be the middlemen
whom they will exploit profit opportunities in future (Shieh 1993:109).3
(b) Many entrepreneurs are nurtured by their own family businesses.4 Starting up a
new business is a gradual process. Initially, an individual works in the business
owned by his or her parents. Some individuals may work part-time in their family
businesses. Step by step, parents provide offspring with business skills and prepare
them to set up their own businesses. In some cases, some jobs or orders are too small

Kirzner (1973) equates entrepreneurship with a middleman.

As noted by Greenhalgh (1995), in most of the societies that have been studied,

family entrepreneurship has declined in importance as industrialization has proceeded.

However, this is not the case In Taiwan.

for the parents firm to handle. Parents then help offspring to set up a small company
to handle those small orders. In this way, family members start and learn business
operation in a small unit. Though a new firm is independently owned, it is still linked
with the family network. This business network satisfies economies of scale and
flexibility, as well as the reduction of transaction costs due to the trust among family
members (Shieh 1993:111-112).
(c) Forming business partnership with friends or alumni
Some Taiwanese, after graduated from Technical colleges or universities and with
several years of work experience, may team up with their friends or alumni in the
same fields or interests to form a joint venture. Apart from profit, eager to test their
insight is a major factor to drive these young entrepreneurs to form start-ups.
4.

Personal Characteristics of Taiwans Entrepreneurs

The successes of enterprises in Taiwan have been built upon certain personal

traits. Shieh (1993:96-98) identifies four personal characteristics of Taiwanese

entrepreneurs:
(a) Dare to venture: Taiwanese entrepreneurs are dare to venture new businesses.
While being employed during the daytime, they have already tried to set up a
business with a friend at night. As long as they can earn a normal profit of NT$30,000
per month for their survival (equivalent to one month salary of an university graduate
with 3 to 4 years working experience in Taiwan), they are not afraid of being a
full-time boss (Shieh 1993:117). Some entrepreneurs bring boxes of products along
with them to open markets in Africa. Without any connection in the other side of the
globe, they look for businesses from door to door. All they want is to test their
foresights.
(b) Strive to succeed: In order to succeed, entrepreneurs in Taiwan do not mind
working hard. They make full use of their time to maximize income. They can endure
5

long working hours, often more than twelve hours per day. Small entrepreneurs
usually involve in a wide range of jobs in their factories, including loading cargo,
delivery, driving the truck as well as packaging.
(c) Drill down the problem: Taiwanese entrepreneurs believe that only by drilling
down the problems can make fruitful returns. With enthusiasm in their businesses,
entrepreneurs are keen to crack their brains to solve business and technical problems.
They firmly believe that putting more thoughts on their businesses will bring them
success.
(d) Willing to learn: Entrepreneurial learning is important in the market process (Yu
2007). Entrepreneurs in Taiwan are willing to learn. They learn to do business while
they are employed. After they set up a business, they continue to learn new
production skills, improve knowledge, choose better materials, reduce costs, and
catch up new ideas. They know that learning will make them become more intelligent.
More importantly, learning that involves creativity will keep their business
competitive. They are willing to put their novel ideas to market tests. If their new
plans do not meet the expectations in the market and result in loss, they will quickly
revise their plans and adapted to the new situation. Through revisions of plans and
error elimination, they are able to reap the reward.

5.

Strategic Entrepreneurship in Taiwan

Entrepreneurs in Taiwan adopt some business and management strategies which

are similar to small businesses in other Asian latecomer economies such as Hong
Kong and southern Guangdong in China (Yu 1997).
5.1 Entrepreneurial alertness and exploitation of profit opportunities: The most
important feature of Taiwans entrepreneurs is their ability to look for profit
opportunities (Shieh 1993:114; Yu, Yan and Chen 2006). However, entrepreneurial

alertness (Kirzner 1973) does not come out by itself. It is the result of diligent work.
A question always lingering in those business peoples minds is: Where is the
golden ditch (opportunity)? For example, in the electronics industry, the first and
most frequently asked question during social gathering is whether certain PC
connectors so far have been manufactured in Taiwan. If the answer is negative and
that those components are imported from Japan, then they will try to go into that
business. For an electronic component is not produced in Taiwan, this implies that the
product can be imitated in Taiwan at lower costs and thus brings them huge profit
margins. Also, the phrase so far no one has produced it yet implies that imitation
needs to be done quickly. Soon many firms will join in and render the market no
more profit. If there are competitors in the industry, then entrepreneurs will specialize
on one niche product to get competitive edge (Shieh 1993:114).
5.2 Quick to respond: After identifying a profit opportunity, Taiwans
entrepreneurs surf on the waves of the growing market (Shieh 1993:119-122). Some
firms do not do long-range planning. As long as they discover a good profit
opportunity that others have not yet discovered by others, they will enter the market
and shave off profit margins (in their own slang, it is called robbing good air). As
other competitors pour in, they will compete by lowering prices until good time
disappears and leave the industry (Shieh 1993:119). Therefore, these small
enterprisers are competent in jumping on the bandwagon. For example, a small factor
owner in the electronics industry said: I was in the audio business. My friend
imported transducers from the United States. At that time, no one produced
transducers in Taiwan. Then he and his friend formed a small joint venture to produce
transducers in Taiwan. At the beginning, their firm was a monopoly and the profit
was impressive. One company noticed our good profit in the business. It hired away
our technicians and penetrated the market. Now there are four to five firms working
7

in the area and the profit is not as good as before (Shieh 1993:120). Entrepreneurs in
Taiwan always adapt to the rapidly changing environment. As one entrepreneur in the
electronics industry describes, I am not too pessimistic in my industry (PC
components) as long as there are two- to three-year good time. It is important to know
that each industry has its life cycle and wont have good time forever. I wont follow
the book, write out a plan and carry out my plan step by step. No, I wont do that. For
me, if the PC market is good, then my business will be good. If the PC market is not
good, then I shall need to struggle during bad time (Shieh 1993:119).
5.3 Creative imitation: Imitation is the key for the success for many Asian latecomer
economies. Imitation should not be downgraded as copycats. Instead, it involves
insightful investment & creativity (Bolton 1993:30-45). Baumol (1968) uses a term
imitative entrepreneurs to describe those agents who put new idea in use. In Baumols
view, imitative entrepreneurs exploit the success of others by perfecting and
positioning them. They add some new attributes to the product so that the product
differs slightly from the original one & fits into a slightly different market. Baumols
arguments can explain Taiwans economic dynamics. For example, regarding
manufacturing connectors, electronic items originally produced in Japan need to be
plugged in the circuit board one by one. Taiwans electronics entrepreneurs, by some
R&D, discover that these items can be plugged in with the whole lots, and then
finished the product by cutting off the other ends. The new method saves a lot of time
and costs (Shieh 1993:115-116). Hence, Taiwanese entrepreneurs compete by
modifying or improving the products, or supplying something which is still lacking in
the market. In Leibensteins view (1968), they are gap fillers or input completers.
5.4 Utilizing social network: Taiwanese entrepreneurs operate together in nexus.
While there are many contributing factors to Taiwanese enterprises success, such as
sophisticated food technology, creative thinking, flexible management and quick
8

response etc., Henry Heng5, argues that business network stands out as the most
important one. Taiwanese entrepreneurs in the market process are able to operate as a
network or in Hengs words, hunt in a pack (Waring 2005).6
Entrepreneurs in Taiwan know that in order to survive, they need to support each
other. They often co-invest in large projects. Behind social activities such as karaoke
singing, wining and dining is a strong social network that facilitates information
exchanges, develop business opportunities, or seek help in time of trouble. Taiwanese
entrepreneurs take their obligations to help their business friends very seriously. They
recognize that if they help their friends today, their friends will help them back in the
future. They also believe that if someone wins, their friends will likely win too
(Waring 2005).

6.

The Case of 85o C Cafe Shop in Taiwan

Henry Heng is a business consultant from PSB Corporation. His firm provides

academic and business advises to universities.

6 For instance, it is reported that a Taiwanese IT firm in Dongguan (Pearl River Delta)
which specializes in electrical and electronics testing receives a request from another
firm in the mainland to test a mechanical device, which he is unable to carry out. The
boss of the firm does not turn down the request. Instead, he replies that he can do it
and arranges for the sample to be sent for testing. He then calls another Taiwanese
testing firm that he is familiar with the job. In this way, the job is then done. This
business practice repeats over and over again and fully illustrates the importance of
business network in Taiwan entrepreneurship (Waring 2005).

Our entrepreneurial approach means that it is preferable to use the storytelling

approach7 or case study in empirical studies. This paper presents a case study of 85oC
Caf shop in Taiwan.
The 85oC Coffee8 company was established in Taichung City by Mr. Wu
Cheng Hsueh in 2003. The first 85oC Caf was opened in New Taipei City in July
2004. Within one and a half years, the enterprise expanded to 137 shops throughout
Taiwan. The franchisee chain group entered the international market in September
2006 and opened a cafe in Sydney, Australia. In Nov 2007, the company opened its
first store in Shanghai China, and ventured into United States in 2008. It has now
about 325 stores in the world.
The company name is originated from the idea that 85 degree Celsius is the
ideal temperature to drink coffee. Wu Cheng Hsueh established his business empire
because he thinks that he can provide customers with five star quality coffee, cake
and bakery at the affordable price.
Wu was born into a poor family in Yunlin County (Taiwan) in 1967. He
always dreamed of setting up his own company, and became rich so that he could stay
away from poor living condition. Like many legendary figures, Wu started from a
humble beginning. He dropped out of school at the age of 159, and vowed to become
a rich person. With his educational background, he could only get a job with small
salary. To make a fortune, Wu knew that he had to set up his own business. Taiwan
has long been boasted as the Island of Bosses. Many Taiwanese enjoying being a

For storytelling as economic methodology, see McCloskey (1990).

See http://www.85cafe.com/ or the companys website in Australia, http://www.

85cafe.com.au/html-au/aboutus-au.htm, or the site in the US, http://www.85cafe.us/.

9

Later, Wu got his junior high school diploma in supplementary evening school.

10

boss. Wu is no exception. He has involved in several ventures including, beauty shop,

footwear, marble company, a bubble tea franchise, roast chicken fast food business,
and a Pizza franchise. Although these businesses enjoyed success in the beginning,
Wu failed to turn any of them into a lucrative business empire in the end. At least, not
until the operation of 85oC Caf franchise. What is special for Wu Cheng Hsueh is the
fact that he could learn from his mistakes, instead of defeated by them. After
numerous attempts, the 85oC Caf finally helps Wu to win the ultimate trophy. In
whats followed, we shall examine the entrepreneurial process conducted by Wu in
associated with his ventures chronologically.
6.1 The beauty salon: Wus first attempt
Wu is a born enterpriser. Throughout his whole life, he has only worked as an
employee for three months after he finished his obligated military service. He got a
job of making tennis rackets, but soon realized he preferred to be his own boss. So he
quitted the job, and shifted into a piece rate contract arrangement. In a freer
environment, he worked tirelessly to save money to start his own business.
As a dropout from high school, Wu examined what kind of skills or training he
owned in order to start a business. The answer was hardly any. Still, he remembered
he earned some experience in hair cutting from his military service. With the money
earned from the piece rate contract, Wu teamed up with a hair stylist and started his
own business. Self-motivated and hardworking, Wu opened a second branch in less
than six months. Though the shops had some customers, the business did not make
good revenue because ladies came into the shop were not just for their hairs, they also
wanted someone to talk to. As a result, his employees spent a lot of time chatting with
these women. Wu learnt that this kind of business could not yield good profit.
Therefore he started to spot other business opportunities.

11

6.2 Venturing into mainland China: The footwear sole manufacturing company
One of Wus customers in the salon introduced Wu into the footwear sole
manufacturing industry. With money saved from the beauty salon business, Wu
invested in a company manufacturing footwear sole. In the mid-1980s, as the
industrial environment in Taiwan experienced vast transition: labour shortage and the
resulting increased in wage rates, as well as the increasing competition in the export
market from other developing countries. A lot of Taiwanese firms, especially the
labour- intensive small and medium sized enterprises (SMEs), thus moved to
Mainland China for resources sourcing. Wus company was no exception. At the age
of 26, Wu moved to Guangdong Province of China, in charge of a factory sized one
thousand workers. However, the success in the mainland was short lived, due to the
bad debts of some fellow partner companies. Wu had no choice but to close down his
business. Wu learnt the significance of controlling the resource supply. Wu also learnt
that if he could deal directly with the resource owners, the quality of resources can be
better maintained.
After Wu retreated from China in Taiwan, he helped his father in a marble
factory. Again, he worked hard, and even learned to become a marble master himself.
Having the technique, Wu opened a small marble company and became a boss again.

6.3 The experience of franchise business: The bubble tea shop

In 1992, a Wus old acquaintance from the military service, Mr. Ko Wen-Ho
opened a bubble tea shop called Easy Way, Ko invited Wu to join the franchise. Wu
soon realized that business franchising is a profitable method to expand business.
When Kos bubble tea shop went international, Wu was invited to take charge of
marketing Easy Way in Taiwan.

12

One of Wus talents was his keen to spot the demand and the market trend. He
spent a lot of time mingling with people, making new acquaintances. He kept alert to
the change in the world market. As soon as he could identify a product or service that
could attract consumers, he quickly ventured on it without hesitation. This is why
whenever he opened a new business, the business soon became a popular one. Some
people describe Wu as a destructive innovator10, for he would introduce something
new to replace the old business. In fact, Wu was simply ahead of other people in
terms of identifying profit opportunities in the market.

6.4 The Pizza franchise

The bubble tea shop taught Wu about business franchising. Since Wu was one of
the partners in the bubble tea enterprise, there was always a conflict of opinions on
how to run the business. Hence, Wu felt that he would rather be the one who was
really in charge. Wu then ventured into a fried chicken fast food business. However it
was short lived too due to too many competitors, and his product lacked an identity
and image. He then understood that to be successful, he must be able to find a market
niche in the highly competitive food and catering Industries.
Wu searched for this niche market and came up with the idea of selling small
sized pizza. He perceived that small sized pizza fitted into the market where
individual serving has become popular in modern Taiwan society. He named the new
business Hot to Home Pizza. When the Hot to Home Pizza first opened, people
were waiting in line to get Wus novel small sized pizza. Wu immediately received a
lot of requests for franchising. The business expanded rapidly at the beginning, but

10

Schumpeter (1934) used the term creative destruction to refer to the impact of

entrepreneurship on the traditional economy.

13

soon experienced a slump. Wu discovered that this was due to supply outnumbered
the demand. Without any sustainable competitive advantage11, his business could
easily be copied by imitators. Having been in the business for such a long time, Wu
knew the traits of Taiwanese entrepreneurs. Taiwanese, including Wu himself, loved
to jump on the bandwagon and rushed to a hot business to be a quick second. It is
worthwhile to mention that when Wu copied others success, he modified it with
some new features. That is why, Wus business often exhibited leadership in the
market.
Wu understood that he could not forever indulge in the joy of the success.
When the market became saturated, he had to seek for a new venture. Many of the
franchisee blamed Wu for only trying to squeeze profit from franchise payment. For
Wu, he just wanted to prevent from further loss once the market is saturated.
The defeat in Pizza business taught Wu a lot. First of all, the novelty of his
product, namely small sized pizza, could only guarantee a success for a very short
period of time. The Pizza market quickly became matured. To prolong the product
cycle, Wu needed to continue to invest in product innovation. Secondly, he learned
that he should put more money on his next venture. Previously, lacking fund in
start-up, Wu could only confine to small sized businesses. Now Wu could invest in
R&D so that the company could enjoy profit in long run. Thirdly, Wu learnt that he
needed to maintain the core competence (Prahalad and Hamel 1990) of his business,
so that a quick response to customers demand could be achieved. For example, in
Hot to Home Pizza, the dough was outsourced. The quality of the dough was beyond

11

A firm is said to have a competitive advantage when it is implementing a value

creating strategy not simultaneously being implemented by any current or potential

player (Barney 1991: 99).

14

Wus control. Alternatively, dough could be produced in house. Vertical integration

meant capital investment in technology and R&D.

6.5 The 85oC caf: Trumpeting success

In order to recuperate from the setback, Wu took a holiday trip to Japan. Wu was
very impressed by the quality service he received during his trip. Wu realized that
people would appreciate good service. In Japan, Wu also found that a lot of boutique
restaurants were owned by former five star hotel chefs. A new business opportunity
sparkled in Wus mind. Wu returned to Taiwan with new ambition.
Around late 2002 and early 2003, Taiwan was hard hit by the highly contagious
SARS virus. People dared not going into public places for fear of contamination.
There was thus a huge slump in businesses of restaurants, department stores, and so
on.

Wu noticed, however, that there people waited in line outside five-star

hotels/restaurants for affordable take away meals or bakeries! This observation,

together with the experience in Japan inspired Wu to come up with the idea that
people would not mind to spend money on quality foods or services as long as they
could afford. He decided to open his own version of Starbucks caf for general
public12. He also made sure that he would not repeat his mistakes. This time, he

12

This was also vividly described in the web site of 85oC Caf US branches: In

Taiwan, a boss took a group of young businessmen for afternoon tea after a business
meeting. They went to a five-star hotel to celebrate their business success. Looking
into of cafe, the boss observed that there was a huge difference between two worlds.
Inside, life was posh and relaxed whereas outside was busy and rushed. Upon entering
the cafe, he also found that the prices were too high for businesspeople to enjoy their
favourite drink on a whim. At that moment, he decided to build a cafe which breaks

15

managed the business patiently and invested in quality service so that others were
unable to imitate his business.
First, Wu invited his old acquaintance which was a chief pastry chef of a five
star hotel in Taipei to join his venture. Teamed up with three other highly skilled
pastry chefs, the 85oC Caf was established. The shop served quality cakes and
breads. To compete with Starbucks caf, Wu insisted on using premium Guatemalan
coffee beans. Wu made sure that all things served in the new franchise with high
culinary standards at affordable prices. Thus, the 85 oC Caf successfully gained the
consumers hearts and Wu revolutionized the food and catering industries in Taiwan.
As the caf was widely accepted, Wu applied his previous franchising
experience to 85oC. The franchisee chain was a huge success. The Caf under
franchising expanded rapidly throughout Taiwan. In seventeen months, there were
eighty chain caf shops, and the business was still spreading. His previous experience
from pizza business told Wu that he needed to protect his business. Otherwise, the
economic rent would disappear because imitators could enter and share his fruits13.
Wu invested three billion NT dollars (approximately one million US dollars) to set up
his own center factory and logistic channel. He wanted to make sure that no follower
could copy his success.
In less than three years, the turnover of the company reached 19 billion NT
dollars. It took six years for Starbucks caf in Taiwan to reach the same figure. Today,
85oC Caf Company has become the largest coffee franchise in Taiwan. The

down that the wall and allows ordinary people to enjoy 5-star holiday cafe at the
affordable price. Thus 85oC Cafes journey begins (http://www.85cafe.us/).
13

This is resource base theory of the firm (Wernerfelt, 1984, p172; Rumelt, 1984,

p557-558).

16

company has also gained success in Australia, the US, and mainland China. In
September 2006, one of Wus friends operated the first 85oC franchise shop in
Sydney, Australia. This marked the time when 85oC Caf company penetrated
international market. In November 2007, Wu opened the first store in China at
Fuzhou Road, Shanghai. In 2008, a branch was opened in Irvine, California. Now the
company has four branches in three continents.
It is amazing that in the country that offers Starbucks to the world, a single
Taiwanese 85oC Caf shop in Irvine (USA) could earn an average 0.74 million US
dollars monthly revenue.14 That was the highest score among all the branches of
85oC Caf in the world. By October 2009, total revenue from overseas branch shops
had suppressed the proceeds from Taiwan. In November 2010, the franchisee chain
group has become a listing company in Taiwan15. The new goal set by Mr. Wu is to
open at least 100 new branches in China and 20 more shops in the US by the end of
2011.
It is not always easy to penetrate and operate in an entirely new market. For
instance, the first 85oC Caf shop in China was closed down by government in a few
days after its opening. Wu perceived that there was nothing wrong with the managing
strategy or decision making. However, he admitted that the company were not
familiar with the local laws and regulations. Chinas business environment is utterly
different from Taiwan. Wu realized that he must carefully review the legal
environment in China before further expansion. When the 85oC Caf shop in
Shanghai Fuzhou Road reopened, the proceed from the first three months was about

14

The story was reported by a newspaper Orange County Register in the US, and

85oC Caf was described as Taiwanese Starbucks.

15

The name of the listing company is Gourmet Master.

17

four times of the companys original expectation. It earned a total of 1.8 million RMB
in three months operation.
Furthermore, Wu allowed no business franchisee in mainland China - a major
difference between Wus operation strategy in China and other countries. All shops in
China are run by the company directly. Wu wanted to maintain the quality of the
product and service, as well as for the brand image. Wu wanted to keep close watch at
this big market. Without profit sharing as business franchising, Wu needed to solve
the incentive problem in his business. He did it by making his staff members a
wealthy employee. For in Wus mind, workers were the most valuable asset of the
company. Wu was generous to his employees. He let the team share the companys
profit. He allowed his staff holding up to 50% of the company total shares16.
In terms of logistics, Wu also copied his Taiwans model to mainland China.
He set up the companys own factory centre and logistic channel in China. This did
not only help maintain quality, but also cut costs. Furthermore, Wu knew the
importance of R&D. Each month, about ten new products (coffee mix, breads or
cakes) were created by the research team and then tested in the market. If the new
products were proved fruitful, they would replace the non popular ones. It was
reported that three products were replaced each month.
Wu strive to open at least one thousand branch stores in China in the next six
years. Wu notice that his competitors such as Korean Paris Bagutte and Black
Talk from Singapore also served fine coffee and bakery in China. However, in Wus
view,

these competitors have expanded too slow, and behaved too conservative.

Therefore, Wus strategy is to quickly expand his empire before his rivals does. For

16

For a classic discussion on shirking, opportunistic behaviour, monitoring costs and

incentive systems, see Alchian and Demetz (1972).

18

Wu, there is only one true competitor: Starbucks. Interestingly enough, Starbucks
coffee company had licensed a Taiwanese Corporation for its operation in China.
This is Uni-President Enterprises Corporation (UPEC). The business empire was
founded in southern Taiwan in 1967. The Corporation itself is of the same age as Wu.
UPEC is also the representative of Starbucks Coffee in Taiwan. In Taiwan, it was the
85oC Caf that rules the caf market. Given uncertainty and fierce competition, who
will win the ultimate battle remains to be answered.

7.

Conclusion
This paper has presented a model of strategic entrepreneurship which can be

used to understand Taiwans economic dynamics. The paper identifies four personal
characteristics of Taiwanese entrepreneurs and four major entrepreneurial strategies
adopted in Taiwans enterprises. The paper argues that the most significant feature of
Taiwanese entrepreneurs is their ability to look for profit opportunities. They are
quick to respond to the rapidly changing environment. As long as they discover a
profit opportunity that others have not yet discovered, they will enter the market and
exploit profit margins. Taiwanese entrepreneurs are creative imitators and behave as
strategic followers. They improve and add some new attributes to the product so that
the product differs slightly from the original one and fits into a different market.
Furthermore, Taiwanese entrepreneurs utilize social network extensively. By using
business network and personal relationship, they operate in nexus and hunt in pack in
the market. Through social network, they support each other and create a win win
gain for each other. Hence, we can conclude that unique features of these
entrepreneurial strategies allow Taiwanese enterprises to compete and earn world
class brand name for their products in the global markets. This argument is applied to
understand the business success of the 85oC Cafe Shop in which the caf currently

19

competes face-to-face with the world known coffee shop Starbucks in Taiwan. This
paper concludes that our theory of strategic entrepreneurship is fruitful in
understanding the business successes of enterprises in Taiwan.
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