Scope of Business Activity

The scope of business activities refers to the geographical reach of a company's operations. Businesses can operate on three main levels: local, national, and international. Each scope presents unique opportunities and challenges that affect a company's strategy, operations, and success.

Local

Definition:

Local businesses operate within a specific town, city, or geographical area, serving the immediate community.

Characteristics:

Often sole traders or small businesses
Examples: hairdressers, newsagents, local fruit and vegetable shops
Typically found on local high streets or in community centers

Advantages

Deep understanding of local community needs
Ability to provide personalized service
Strong community relationships
Lower operational costs

Challenges

Small Customer Base
Limited buying power or ability to take advantage of economies of scale.
Limited brand recognition

National Business

Definition:

National businesses operate across an entire country, serving customers in multiple regions or states.

Characteristics:

Multiple locations or strong delivery network across the country
Examples: Greggs (UK), Target (US), Canadian Tire (Canada)
Often started as local businesses that expanded over time

Case Study: Greggs Bakery

Started as a local bakery in Newcastle, UK
Expanded to over 1,950 stores nationwide
Adapted menu to changing national tastes (e.g., vegan options)
Implemented customer-centric innovations (calorie counts, free Wi-Fi)

National Business Case Study - Greggs.pdf

Advantages

Larger customer base
Greater buying power, leading to competitive pricing
Brand recognition across the country
Ability to adapt to national trends and preferences

Challenges

Managing operations across multiple locations
Balancing standardization with local preferences
Competing with both local and international businesses
Navigating different regional regulations within the country

International Business

Definition:

International businesses operate in multiple countries, serving a global customer base.

Characteristics:

Presence in two or more countries
Examples: McDonald's, Starbucks, Apple
Complex organizational structures to manage global operations

Case Study: McDonalds

This is a fantastic and entertaining 45-minutes video documentary about the growth and evolution of McDonald’s, one of the world's largest multinational companies.

The video provides significant insights into the challenges and opportunities that come with operating in the International Sector; including aspects of corporate culture and contrasting cultural dimensions.

The video also features a former Four Seasons Hotel chef who talks about his career move to McDonald's, while the company's expansion in China and concerned nutrition-conscious customers are also explored.

The potential for 'culture clash' is a significant challenge that businesses can face when they move from local, to national and then international scope. When a business such as McDonald’s opens a store in another country outside of the USA, it has to make significant changes in its marketing mix to adapt to the countries' culture and the wants and needs of its residents.

For example:

In Canada, McDonald’s serves ‘French Fries in Gravy and Cheese Curds’ (known as Poutine) which is a Canadian staple.
In Korea, McDonald’s serves a ‘Shrimp and Beef Burger’ to satisfy the wants and needs of Korea’s McDonald’s customers.
In China, McDonald's serves ‘Ham N' Egg Twisty Pasta’ on its breakfast menu, which is quite different to the ‘Bacon Roll’ served in the UK.
However, it’s not just cultural differences which a business must consider when operating internationally, the law is often different in every country.
Therefore, it’s crucially important that the business is clearly aware of these rules and regulations when it expands into a new country.

Case Study: Why Starbucks failed in Australia

Starbucks' journey in Australia serves as a compelling case study in international business expansion and the importance of adapting to local markets. In 2000, the Seattle-based coffee giant entered the Australian market with high hopes, rapidly expanding to 87 stores across the continent by 2008. However, this aggressive growth strategy soon backfired. By 2008, Starbucks Australia had accumulated $105 million in losses, leading to the closure of 61 stores – a staggering 70% of its locations.

The reasons for Starbucks' initial failure in Australia were multifaceted. The company's rapid expansion didn't allow for organic growth or adaptation to the local coffee culture. Australia, with its deeply ingrained café scene influenced by Italian and Greek immigrants since the mid-1900s, presented a unique challenge. Australians preferred specialty coffee, personalized service, and had strong loyalty to local cafes and baristas. Starbucks' offerings of large, sugary drinks at higher prices failed to resonate with this sophisticated market.

Knowledge Check - Why Starbucks Failed in Australia

In contrast, Gloria Jean's, another American coffee chain, found success in Australia with over 400 locations. Their triumph was largely attributed to franchising to local Australians and adapting their menu to local tastes. This stark difference highlights the importance of understanding and respecting local preferences when entering a new market.

Starbucks, however, wasn't ready to give up on the Australian market. In 2014, the Withers Group purchased Starbucks Australia, implementing a new strategy focused on targeting tourists in popular destinations. This approach aimed to serve American and Chinese visitors familiar with the brand, leveraging Australia's growing tourism industry.

The Starbucks Australia story offers valuable lessons in international business. It demonstrates the challenges of global expansion and the critical importance of understanding and adapting to local markets, even for well-established international brands. Success in one market doesn't guarantee success in another, and the ability to adapt and respond to local consumer preferences can make or break a company's international ventures.

Advantages

Access to a vast, diverse customer base
Potential for higher revenues and profits
Risk diversification across markets
Economies of scale in production and distribution

Challenges

Adapting to different cultures and consumer preferences
Navigating complex international laws and regulations
Managing currency exchange risks
Coordinating operations across time zones and languages

Knowledge Check:

Confirm your understanding of the key content in this topic by completing the quiz on the right.

Knowledge Check - Business Scope

Page updated

Report abuse