Fundamental Question

that study of global business seeks to

answer
&
Two Perspectives
from which to answer it

Reported By: JAYLEBERT P. MONCATAR

Fundamental Question

Although there are certainly a lot of questions to raise, numerous other questions all relates in one way
or another to this most fundamental question.

 What determines the success and failure of firms around the globe?

Global Business

- not limiting the business to the home country

- treating the entire global economy as your potential playground or battlefield

Some firms may be successful domestically but when they venture abroad, they fail miserably.

Successful Companies that went Global

 Cinco Corporation – Potato Corner

 Leslie Corporation – Minute Burger

 Golden ABC, INC – Penshoppe

 Suyen Corporation – Bench

 Jollibee Foods Corporation

 San Miguel Corporation

Two Core Perspectives to answer the Question

1)
Institution-
 Based View

Institution-Based View
 Suggests that the success and failure of firms are enabled and constrained by institutions.

 Institution – simply means “rules of the game”

2) Resource-
Based View
Types of Institution:

Formal Institution – laws, regulations, policies

Informal Institution – cultures, ethics and norms

So, Institution-Based View places emphasis on the external factors that could affect the firm.

Ex: Understanding the laws, culture, values and habits of the other country before putting up a
business there.

Resource-Based View
 Suggests that firm performance is determined by its competitive advantage.

Competitive Advantage in:

1) Internal Resources

Tangible – financial and physical assets

Intangible – reputation and brand

2) Capabilities

Customer service and innovation

In Resource-Based View, it focuses on the internal strengths of the firm.

The ability to provide satisfaction and great experience to the consumers that will allow them to obtain
competitive advantage or outperform competitors.
10 Reasons Why Starbucks Failed in Australia
1) Australian Consumer

The Australian consumer was fully formed. Many Australians prefer to drink coffee in
small cafes with their “fellow” baristas, with whom they can chat about daily routine.

2) Business Model Simply Copied From American

Starbucks thought that what works in the US will work in any English-Speaking country.

3) Too Rapid Growth

After Opening their First Café, Starbucks decided not to wait. New Coffeehouses
appeared almost every month.

4) The Expansion Strategy Was Not Organize

From the very beginning, the total income of all cafes did not show that the next new
place is really needed. Company’s Losses grew constantly in the first year.

5) Crisis of 2008

The Financial Crisis was a heavy blow even for the toughest nuts. As a result, the
number of cafes decreased from 87 to 26.

6) No Consumer-Oriented Menu

Australian consumers have their own preferences.

Starbucks ignored this point, and the menu offered in Australia completely copied the US Style.

Australians do not like sweet coffee drinks.

7) Pricing Policy

Expensive. Starbucks did not want to equate prices to the local.

8) Mentality

Citizen perceive their favorite coffeehouse as a closed community and a personal place
for communication.

9) Smart Consumers

Consumers had a vast knowledge with regards to coffee. The demands of quality coffee
of an ordinary customer have increased.

10) Tough Market

 The Australian Coffee Market is one of the fastest growing in the world. Australia is not the
easiest way for any foreign company to penetrate because local companies hold their position firmly.

Result

 Company’ losses grew constantly and in 2008 they decided to close 61 cafes. The number of
cafes decreased from 87 to 26.

 The remaining stores were located in the tourist destinations where they targeted the tourist
consumers.

Starbucks thought that their business model could just roll out to a different environment and
that there was no need for them to adjust. They did not consider the culture, values and habits of the
locals.

They tried to grow the empire too fast by rapidly opening up multiple locations instead of slowly
integrating their product into the Australian market. Although they are already big and have a brand
reputation they did not properly utilize them to have a competitive advantage. They fail to satisfy the
consumer/customer.

REFERENCES

Peng, Mike W. (2011, 2009). Global Business, 2nd edition.

Jager, Chris. (August 7, 2018) "Why Starbucks Failed In Australia"

https://www.lifehacker.com.au/2018/08/why-starbucks-failed-in-australia/