MGB8013

STRATEGIC MANAGEMENT

CASE STUDY 1

GLORIA JEAN’S COFFEE IN MALAYSIA

PREPARED BY : NURUL HANIS BINTI KAMARUDIN

MATRIC NO : 3170065
PREPARED FOR : DR UMMI SALWA AHMAD BUSTAMAM

FACULTY OF ECONOMIC AND MUAMALAT

(GSM)
Semester 4,2018/2019
 GLORIA JEAN’S COFFEE IN MALAYSIA

1. Background

In 1979, Gloria Jean Kvetko founded Gloria Jean’s Coffees with her first outlet
opened in Chicago where it began as a small coffee and gift shop. In 1996, Jireh
International Pty Ltd, founded by Nabi Saleh and Peter Irvine, identified the
potential in the coffee chain and purchased the rights to franchise Gloria Jean’s
Coffees in Australia. Together, they opened their first Gloria Jean’s Coffee in
Miranda, Sydney, and then in East garden, Sydney, two week later.

In 2005 they purchased the rights to the Gloria Jean’s Coffees brand for all
international countries except USA and Puerto Rico, to further expand the
brand name. Then in 2010, they purchased all outlets making Saleh as the
owner of GJC franchise worldwide.

Gloria Jean’s Coffees is known for its signature range of hot and cold coffee
drinks including traditional espresso and ice blends; coffee beans, specialty
teas, pastries and coffee accessories.

2. Gloria Jean’s Coffees in Malaysia

Gloria Jean’s coffees started in Malaysia when Tai Thong Group (TTG) of
Restaurant Sdn Bhd signed the Malaysian Master Franchise Agreement with
tenure of ten years. TTG operated its first GJC outlet in KLCC and until 2000
there are 13 outlets in total in Klang Valley and other metropolitan areas in
Malaysia. For renewing the Master Franchise Rights for Gloria Jean's Coffees
Malaysia, Malaysia International Franchise Sdn Bhd (MyFranchise) was
acquired in November 2006. It also owns the Master Franchise Rights for
Malaysia, Brunei, Indonesia and Myanmar. Due to some management
problem, Saleh had doubly rethink to renewing the master franchise
agreement with TTG and choose My Franchise as a new franchise.

After more than 20 years in the gourmet coffee business, Gloria Jean’s
Coffees Malaysia has developed its gourmet coffee operations offering the
widest selections, the finest products, and the strongest support in the
industry. Gloria Jean’s Coffees offers more than 40 varieties of the world’s
 finest gourmet coffees gloriously brewed for the guests. This variety is offered
to please the discriminating tastes of our customers in the country and in the
region. Driven by the mission to develop a world class franchisepreneurs,
MyFranchise offers Gloria Jean’s Coffees franchise rights to interested
entrepreneurs to start the glorious journey of successful gourmet coffee
franchise business.

3. Vision Statement

Gloria Jean’s Coffees to be the most loved and respected coffee brand
worldwide.

4. Mission statement

Gloria Jean’s Coffees is committed to build a unified family who consistently

served the highest quality coffee and provide outstanding & personalized
service in a vibrant ambience.

5. Recognition in Malaysia

2008
Best Operation Award
2013
Asian Outstanding Business Awards (F&B Category - Drink “Coco Loco Chiller”)
Best Master Franchisee Award
2014
Outstanding Market Development Award
Best Social Corporate Responsibility Award
The Malaysia Book of Records for 'Mount Kinabalu Barista Climbing Challenge-
Coffees Cupping on Highest Altitude'
6. Issues

A. Renewing of master franchise agreement

There are number of factors that cause the downfall of GJC under TTG
management both internal and external factors. After starting operated in
Malaysia GJC had shown a very positive growth when they had open up to
13 outlets until 2000 after 4 years’ operation. However, business seems so
bad when only 3 GJC outlets left by the end of 2005.

The external factors of this situation are due to the impact of economic
recession in early 2000 in Malaysia. Besides, the countless attack from the
competitors that cause GJC suffered extreme losses. The mushroomed of
many home-ground copycat brands also make customers shift to more
affordable alternatives.

While the internal factors that cause GJC to this condition is due to the
classic management which led to downfall and non-performance of GJC
under TTG. The conflict of the Tan brother also makes the situation worse.
Tan Sri Danny is Executive Chairman of TTG at the same time he is Deputy
Chairman of Berjaya Group which is jointly owner of Berjaya Starbuck
Coffee Company Sdn Bhd. The owner of Berjaya Group is Tan Sri Dato’
Vincent Tan which is brother of Tan Sri Danny. This may have led him into
a critical position where the two brands are competitors in the market.

Because of this situation, the owner of GJC Nabi Saleh rethink of

renewing the master franchise agreement with TTG which he had
overlooked this detrimental situation before which led to the downfall
situation of GJC in Malaysia.

The franchisor Gloria Jean's Coffees (GJC) in re-establishing its market

presence in the Malaysian coffee market. GJC recently underwent an
exchange of ownership. Under the new leadership, the company decided
to appoint a new strategic master franchise in Malaysia to see a section of
its expansion plan in the ASEAN region re-established. After went through
several meeting and discussion, GJC choose My Franchise as a new
franchise and have a right to cover GJC in Malaysia and Brunei. My
Franchise act as franchising arm of Perbadanan Nasional Berhad (PNS) -
government agency under Ministry of Entrepreneur and Cooperative
Development.
B. Competitors

The direct competitors of GJC are Starbucks Coffee and Coffee Bean. They
have more outlets compared to GJC in Malaysia which is 115 outlets and
54 outlets respectively, while only 13 outlets of GJC. Starbucks Coffee
conquer the market with the highest market share in Gourmet Coffee
brand industry.

The competition in Malaysia gourmet coffee market is very high and

fierce. International well-established brands are competing with each
other to carve the extra percentage of market shares in Malaysia.
Competitions between these franchises can be seen colliding head to head
confrontation in mall and high areas in Kuala Lumpur and big city.

C. Substitutes product

The mushroomed of home-grown copycat brands such as Coffeehouse and

the Coffee Shack cause the customer to have another substituted that offer
similar product with less price tags which is more affordable for general
customers.
On top of that, there are rising trend of the Kopitiam in Malaysia where
some of it offer similar product that cost so much lesser yet tasty. This may
cause the customer substitute to the local brand that is more reasonable
in price.

D. Secure choice business premise

Most premises will be taken up by GJC’s competitors long before the actual
construction of mall or shop outlet started. Besides, the premises are being
directly offered to them. This may be due to the works of ‘unseen hand’ as
the other competitors owned and operated by a companies with very large
network and also deep pocket.
 7. SWOT-TOWS Analysis

Internal Analysis

STRENGTHS

1. Strong company image, GJC is third globally among premium coffee brand.

2. The differences of the aroma and flavor of the coffee beans through the
roasting process in Australia.

3. Malaysia’s Master Franchise Agreement signed with Tai Thong

Group(TTG), a huge F&B company in Malaysia that have strong financial
position which TTG can sustain and afford losses.

4. Re-establishing its market presence by Renew Malaysia’s Master Franchise

Agreement with My Franchise which is subsidiary of PNS (government
agency under Ministry of Entrepreneur and Cooperative Development).

5. Ministry pleased with My Franchise and provide financial assistance,

guidance and training.

6. Two type of GJC franchise, fully owned by My Franchise and operate by

other selected franchisee which can decrease failure rate.

7. Highly skilled workforce -The management team is well equipping with

experiences and new staffs recruited from the local franchise industry.

8. Efficient marketing strategies such as provided with Wi-Fi connection

(internet café) in all outlets, student card, give a merchandise and provide
services of running baristas.

9. Well selected location of outlet in most metropolitan area.

10. My Franchise success to open 5 new outlets in 6 months which is very good
achievement.
WEAKNESSES

1. Mismanage of GJC under TTG that cause downfall and non-performance of

company in Malaysia.

2. CEO had overlooked the situation of Tan’s brothers that detrimental to

overall position of GJC.

3. Average product quality offered by GJC which cannot challenge the

competitor’s product which result number of outlets decrease from 13
outlets in 2000 to left only 3 outlets in 2005.

4. Niche/small target market.

5. Marketing strategies conducting talent competition and music act was not
too significant in rising sales.
 STRENGTHS Important score Weighted Capability
in the industry average score
1 Strong company image, GJC is third globally among premium coffee brand. 6 6/76=0.0789 7 0.55

2 The differences of the aroma and flavor of the coffee beans through the roasting process in 8 8/76=0.105 7 0.74 S5
Australia.

3 Malaysia’s Master Franchise Agreement signed with Tai Thong Group(TTG), a huge F&B company 6 6/76=0.0789 5 0.40
in Malaysia that have strong financial position which TTG can sustain and afford losses.

4 Re-establishing its market presence by Renew Malaysia’s Master Franchise Agreement with My 6 6/76=0.0789 6 0.47
Franchise which is subsidiary of PNS (government agency under Ministry of Entrepreneur and
Cooperative Development).

5 Ministry pleased with My Franchise and provide financial assistance, guidance and training. 8 8/76=0.105 9 0.95 S2

6 Two type of GJC franchise, fully owned by My Franchise and operate by other selected franchisee 8 8/76=0.105 7 0.73 S4
which can decrease failure rate.

7 Highly skilled workforce -The management team is well equipping with experiences and new staffs 10 10/76=0.132 9 1.19 S1
recruited from the local franchise industry.

8 Efficient marketing strategies such as provided with Wi-Fi connection (internet café) in all outlets, 8 8/76=0.105 8 0.84 S3
student card, give a merchandise and provide services of running baristas.

9 Well selected location of outlet in most metropolitan area 9 9/76=0.118 6 0.71

10 My Franchise success to open 5 new outlets in 6 months which is very good achievement 7 7/76=0.092 7 0.64
76 1.00
 WEAKNESSES Important Weighted Capability
score in the average score
industry
1 Mismanage of GJC under TTG that cause downfall and non-performance of company 9 9/39=0.23 10 2.30
in Malaysia. W1

2 CEO had overlooked the situation of Tan’s brothers that detrimental to overall 7 7/39=0.18 8 1.44
position of GJC W4

3 Average product quality offered by GJC which cannot challenge the competitor’s 9 9/39=0.23 9 2.07
product which result - number of outlets decrease from 13 outlets in 2000 to only 3 W2
outlets in 2005

4 Niche/small target market 8 8/39=0.21 8 1.68 W3

5 Marketing strategies conducting talent competition and music act was not too 6 6/39=0.15 7 1.05 W5
significant in rising sales.

39 1
External Audit

OPPORTUNITIES

1. The market in Malaysia very adaptive and welcoming to the new gourmet
coffee-drinking lifestyle.

2. Long-term growing trend of drinking coffee among adults especially the

younger adults- catering to young educated adults as it will increase profit
levels now and in the future.

3. The target market is a group labeled as ‘Kippies’ which is group of young,

mostly single and executives with high disposable income.

4. GJC caters a different segment in the market when compared to Kopitiam.

5. Attract more young college students such as hosted a contest and music
performance in outlet with high concentration of college student.

6. Introduce student club to attract more customers among students, where

they can get 30% of discounts on F&B items.

7. Localization strategies by offering local delights and food (Nasi Lemak, Nasi
Briyani and Murtabak). This strategy gets positive response from GJC
customers.

8. Entrepreneurs that want to be a franchise can obtain loan from

Perbadanan Nasional Berhad (PNS), SME Bank or other financial
institutions.

9. Tesco had offering excellent premises to GJC in all upcoming stores.

10. GJC is in the process to obtain Halal certification from JAKIM.

THREATS

1. Economic recession in early 2000

2. Highly competitive industry - Competition in gourmet coffee market from

well-established brand (Starbucks Coffee, Coffee Bean) and new brand
mushroomed everywhere.

3. Many home-grown copycat brands such as Coffeehouse that is more

affordable alternatives to customers.

4. Tremendous or ridiculous price tag of the gourmet coffee compared to

local brand that more affordable.

5. The issues of Tan brothers, Tan Sri Danny is Executive Chairman of TTG at
the same time he is Deputy Chairman of Berjaya Group- jointly owner of
Starbuck Coffee and Tan Sri Dato’ Vincent Tan (owner of Berjaya Group) is
his brother.

6. To find the right franchisee with good sense of business.

7. To Secure choice business premises - there are ‘unseen hand’ that give the
competitors advantages to get most premises in new places as there have
very large network and deep pocket.

8. Customers are more demanding because of no switching cost

9. Increase of awareness among customers to have healthy lifestyle and the

issue of obesity.
 OPPORTUNITIES Important score Weighted Capability
in the industry average score
1 The market in Malaysia very adaptive and welcoming to the new gourmet coffee-drinking lifestyle. 6 6/76=0.0789 7 0.55

2 Long-term growing trend of drinking coffee among adults especially the younger adults- catering 7 7/76=0.092 6 0.55
to young educated adults as it will increase profit levels now and in the future.

3 The target market is a group labeled as ‘Kippies’ which is group of young, mostly single and 8 8/76=0.105 7 0.74
executives with high disposable income. O5

4 GJC caters a different segment in the market when compared to Kopitiam 7 7/76=0.092 7 0.64

5 Attract more young college students such as hosted a contest and music performance in outlet 7 7/76=0.092 6 0.55
with high concentration of college student

6 Introduce student club to attract more customers among students, where they can get 30% of 6 6/76=0.0789 6 0.47
discounts on F&B items.

7 Localization strategies by offering local delights and food (Nasi Lemak, Nasi Briyani and Murtabak). 9 9/76=0.118 9 1.06
This strategy gets positive response from GJC customers. O1

8 Entrepreneurs that want to be a franchise can obtain loan from Perbadanan Nasional Berhad 9 9/76=0.118 8 0.94
(PNS), SME Bank or other financial institutions. O2

9 Tesco had offering excellent premises to GJC in all upcoming stores. 8 8/76=0.105 8 0.84 O4

10 GJC is in the process to obtain Halal certification from JAKIM. 9 9/76=0.118 8 0.94 O3

76 1
 THREATS Important Weighted Capability
score in the average score
industry
1 Economic recession in early 2000 8 8/69=0.116 6 0.70

2 Highly competitive industry - Competition in gourmet coffee market from well-established brand 9 9/69=0.13 9 1.17 T1
(Starbucks Coffee, Coffee Bean) and new brand mushroomed everywhere.

3 Many home-grown copycat brands such as Coffeehouse that is more affordable alternatives to 8 8/69=0.116 9 1.04 T2
customers.

4 Tremendous or ridiculous price tag of the gourmet coffee compared to local brand that more 7 7/69=0.101 8 0.81 T5
affordable
5 The issues of Tan brothers, Tan Sri Danny is Executive Chairman of TTG at the same time he is Deputy 7 7/69=0.101 7 0.71
Chairman of Berjaya Group- jointly owner of Starbuck Coffee and Tan Sri Dato’ Vincent Tan (owner
of Berjaya Group) is his brother.

6 To find the right franchisee with good sense of business. 8 8/69=0.116 8 0.93 T3

7 To Secure choice business premises - there are ‘unseen hand’ that give the competitors advantages 7 7/69=0.101 8 0.81 T4
to get most premises in new places as there have very large network and deep pocket.

8 Customers are more demanding because of no switching cost 8 8/69=0.116 6 0.70

9 Increase of awareness among customers to have healthy lifestyle and the issue of obesity. 6 6/69=0.087 7 0.61

69 1
 STRENGTHS WEAKNESSES
S1 Highly skilled workforce -The management team is W1 Mismanage of GJC under TTG that cause
well equipping with experiences and new staffs downfall and non-performance of company in
recruited from the local franchise industry. Malaysia.

S2 Ministry pleased with My Franchise and provide W2 Average product quality offered by GJC which
financial assistance, guidance and training. cannot challenge the competitor’s product which
result number of outlets decrease from 13 outlets
S3 Efficient marketing strategies such as provided in 2000 to only 3 outlets in 2005
with Wi-Fi connection (internet café) in all outlets,
student card, give a merchandise and provide services W3 Niche/small target market
of running baristas.
W4 CEO had overlooked the situation of Tan’s
S4 Two type of GJC franchise, fully owned by My brothers that detrimental to overall position of
Franchise and operate by other selected franchisee GJC
which can decrease failure rate.
W5 Marketing strategies conducting talent
S5 The differences of the aroma and flavor of the competition and music act was not too significant
coffee beans through the roasting process in in rising sales.
Australia.

OPPORTUNITIES
O1 Localization strategies by offering local delights
and food (Nasi Lemak, Nasi Briyani and Murtabak).
This strategy gets positive response from GJC
customers
THREATS
T1 Highly competitive industry - Competition in
gourmet coffee market from well-established
brand (Starbucks Coffee, Coffee Bean) and new
brand mushroomed everywhere.

O2 Entrepreneurs that want to be a franchise can T2 Many home-grown copycat brands such as
obtain loan from Perbadanan Nasional Berhad (PNS), Coffeehouse that is more affordable alternatives
SME Bank or other financial institutions. to customers.

O3 GJC is in the process to obtain Halal certification T3 To find the right franchisee with good sense of
from JAKIM. business.

O4 Tesco had offering excellent premises to GJC in all T4 To Secure choice business premises - there are
upcoming stores. ‘unseen hand’ that give the competitors
advantages to get most premises in new places as
O5 The target market is a group labeled as ‘Kippies’ there have very large network and deep pocket.
which is group of young, mostly single and executives
with high disposable income. T5 Tremendous or ridiculous price tag of the
gourmet coffee compared to local brand that
more affordable.
 SO Strategies

1. Expand more outlets by gaining loan from PNS (S2, S4, O2)
2. Increase sales promotion and marketing to target group (S3, O3, O5)
3. Differentiation of product offered to customer (S5, O1)

WO Strategies

1. Review the owner of Master Franchise Agreement (W1, W4, O2)

2. Review product offered to compete with rival in market (W2, O1)

ST Strategies

1. Experience worker train the new franchisee (S1, T3)

2. Wider the connection with high profile persons (S2, T4)
3. Invest in product development to make GJC different from competitors (S5,
T1, T2)

WT Strategies

1. Choose the right management that do not have conflict of interest that can
compete in the market (W1, T2, T2)
2. Look into product differentiation and invest more to develop better
product (W2, T1, T2)

8. Suggested Solution

1. Expand more outlets

GJC can expand their business by increase the number of outlets in
selected location. For the financial assistance for expanding outlets, GJC
can get a loan from PNS which providing financial aids in form of term-loan
with very low interest.

2. Increase sales by promotion and marketing to target group

GJC need to actively doing marketing to promote their brand especially to
their targeted market which is the group of Kippies so they can increase
their sales and profit.
 3. Look into product differentiation and invest in product development to
have better product than competitors.
The advantages of GJC is their roasted bean process from Australia which
give different aroma and flavor. So, they need to invest more in their
product development, innovation and differentiation to give them
competitive advantage in coffee product offered in GJC outlets.

9. Case Study Questions and Discussions

1. Why do you think GJC entered an agreement with TTG? What were the
motivations and driving forces behind it?

In the first place, GJC entered an agreement with TTG because of their huge coverage
in F&B market which cater large segment in the market with their well-established
restaurant, café and bars. Due to this factor, GJC trust that TTG had huge experience
in managing F&B business segment and can bring GJC successful achievement in
Malaysia and Asian market. Besides that, the strong financial position of TTG bring
more trust to GJC management make an agreement with them.

2. What were the underlying benefits for Gloria Jeans Coffee to enter into
an agreement with MyFranchise?

After outperformance of TTG in managing GJC, the renewing agreement were

conducted with new franchise which is MyFranchise. The benefit of tied a link with
this company is their strong position in the market because it is a franchising arm of
Perbadanan Nasional Berhad (PNB) which is a government agency under Ministry of
Entrepreneur and cooperative development. PNS is sole government agency
responsible to develop the local franchise industry. MyFranchise is led by selected
PNS officer with well experience in local franchise industry. The ministry also provides
an academy to train and groom potential franchise to success in this industry. The
strong government support is a huge advantage to MyFranchise to sustain in the
market and GJC having a huge opportunity to expend in the market with their
cooperation with MyFranchise.
 3. Locations are one of the most important factors in the marketing mix.
Considering the major competitors in Malaysia are owned or operated by
companies with large organization behind them and having established
related business networks, discuss what can be done to secure locations
before any direct competitors do?

Selection of location in vital to ensure the sustainability of the outlet. In this gourmet
coffee market, competition to secure the best location is real.

In my opinion, to compete with other rival that have large network, GJC also need to
widen and spread their connection with more people to have larger network. They
need to have a good relation with high profile and successful businessman person.
Besides that, GJC should approach the big hypermarket or mall owner to get good
place of their new outlet such their success to win the heart of Tesco’s CEO that will
offer an excellent premise in all upcoming stress.

4. From your point of view, why did the entry mode of GJC differ from
Starbucks?

The entry mode of GJC is through franchising which is differ from Starbuck who did
not franchise its outlet. MyFranchise approach on GJC’s market expansion is through
owner-operated by franchisees and corporate owner by MyFranchise. Through this
approach, the franchisees failure rate will be decreases as they are managing by
different owner. This can lower the risk of unsuccessful and outperform of business
outlet due to management problem. However, the challenge is to find the right
franchise that have a good sense of business and less financial commitment.

5. Do you think the localization efforts done by MyFranchise are enough to

appeal to Malaysian? Compare and analyze across brands like KFC and
McDonald’s.

In my opinion, the localization effort by GJC is still not enough compared to the other
name of brands. The main expertise of GJC is their beverages which is different type
of coffee. Coffee do not have much option to be localize into Malaysian taste like other
drink. However, the opportunity is to offer local drink and beverages that meet the
taste of Malaysian likes chendol, sugarcane juice and others. They can take an example
from McDonalds that offer durian ice-cream and dessert that hit the market and well
accepted by customers. Besides that, GJC should varieties their food and delight to the
local taste and preference that will attract more customers to their outlets.