Gloria Jean’s Coffees Close, Bids Adieu to Vietnam

RMIT International University Vietnam

BUSM 3311 – International Business

A2

Gloria Jean’s Coffees close, bids adieu to Vietnam.

INTRODUCTION

Gloria Jean’s Coffees established in Australia in 1996 which position “to be the most loved and respected coffee company worldwide”. They have more than 900 coffee houses across 39 markets worldwide. In Vietnam, Gloria Jean’s Coffees first arrived in 2006 Gloria through a franchise model located mostly in the CBD and big shopping malls with it expecting the business would develop well like it did in Thailand and Malaysia. Its plan is to focus on Arabica coffee, not to compete directly with the world's leading Robusta coffee exporter like Vietnam. (Inside Retail, 2017).

In April 2017, the last Gloria Jean’s Coffees store located in Phu My Hung District 7 close. It means that Gloria Jean’s Coffees end their operation after 10 years in Vietnam. This essay will apply International Business theory to figure out the issues then gives some possible solution to Gloria Jean’s Coffees case in Vietnam.

ANALYSIS

In the textbook named International Management, Managing Across Borders and Cultures of Deresky (2003), he claimed that going overseas helps business to increase profits, sales, access new markets, new resources, save costs and increase attractive incentives. However, international business also causes some challenges such as political risks, economic risks, legal risks, cultural challenges, business environment and modes of entry (Hill, 2011). These factors will be addressed clearly through the following the Gloria Jean’s Coffees situation.

Vietnam is a dynamic, middle-class market, which seems to be a "wonder land" for coffee chains. In addition, coffee has long been a popular drink that most people love. According to VIR (2017), so many business brands, big strategies and resources fail to stay and dominate the Vietnamese market including New York Dessert Café (NYDC), ILLY and especially The KAfe are no longer exist in Vietnam. After that, Gloria Jean’s Coffees is no exception for several same reasons.

According to Mr. Khai - Gloria Jean’s Coffees Store Manager (2017), although Gloria Jean's Coffees is a well-known brand in Asia, but they had to withdraw from the Vietnamese market because of its inexperience and lack of proper market research with intense competition at a high level. In addition, the new market entry is also risky because the market decided rather than the famous foreign brand brought into Vietnam is successful. From that, the biggest mistake of franchise brands is to choose the wrong customer segment.

Firstly, Gloria Jean’s Coffees likes many foreign-branded coffee chains in Vietnam targeted at the high-end segment of the market, the business community, the high-income group, and so on. They chose highlight locations in big cities and have encountered a dilemma of high rents. For this reason, the competition for prime locations in big cities has made rents at high levels. And if the brand makes a wrong decision, or the business is stagnant for a while, then it's going to get very bad results (Brands Vietnam (2017). Higher costs mean higher coffee retail prices for consumers, which will drive many Vietnamese to local brands. According to a report from property firm Cushman & Wakefield, “the asking price for space in Vietnam’s central business districts now stands at $119 per square metre.”

Ms.Nga (Vietnamnet, 2017) said that even when good locations are found in Ho Chi Minh or Hanoi, rental costs tend to be among the highest in Southeast Asia. This may make the selected location unfeasible for a profitable café and so does Gloria Jean’s Coffees. By 2012, Gloria Jean's has just opened six stores in the Ho Chi Minh City areas. Even the Gloria Jean's Coffees on Dong Khoi Street has been closed due to the high cost of renting the premises, the profit is not enough to offset. By the end of 2015, Gloria Jean's coffee chain in Ho Chi Minh City halved. Another striking area is closed by the end of 2016, Gloria Jean's only two stores in Vietnam, one in Con Rua and one in Grand View, Phu My Hung for the bellow reason.