A Sample Report on International Business
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EXECUTIVE SUMMARY
In order to succeed in the international marketplace, the company has to explore the foreign opportunities in which the company can expand business by foreign direct investment. The chances can be achieved through joint venture, licensing agreement and by acquisition. To enter in the foreign market, the company should first analyse the market factors and after that enter with powerful strategies to capture the foreign target market. Starbucks has entered into the \market of Japan, United Kingdom, Thailand, Switzerland and China to expand their business outside United States. The company is also focusing on staffing approach which are used in Japan in relation to the corporate strategy.
A sample report on International Business
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TABLE OF CONTENTS INTRODUCTION................................................................... 4 TASK........................................................................... 4 1. a) The foreign market analysis of the different markets ................. 4 1. b) The different market entry strategies with their suitability employed by Starbucks in the different foreign markets .................................. 7 2) The suitability of the staffing approach that Starbucks utilised in Japan 9 CONCLUSION.................................................................... 11
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INTRODUCTION In the present globalization era international business is consider as an effective approach that focuses on selling the products and services across the national boundaries. However, it also focuses on conducting the business transaction such as private and governmental, sales, investments, logistics and transportation etc. Starbucks Corporation is an American coffee company and a coffee house chain that is selling premium roasted coffee (Starbucks, 2016). The company is largest retailer of coffee with 23,450 stores all over the world and it also consist of 191,000 employees working in the organization. The present report is been carried on the case of Starbucks' as they are entering into the market with various strategies which shows its market analysis and staffing process in Japan.
TASK 1. a) The foreign market analysis of the different markets Starbucks has captured different markets outside the United States which are Japan, UK, Thailand, Switzerland and China (Murray-Webster, 2010). The foreign market analysis of the different countries are as follows: PEST Analysis of Japan: •
Political Factors: The factors of Japan is politically stable and the various law such as labour law, environment law etc. have not been changed from past several years. So it would be easy for Starbucks to monitor the political stability as well as other factors like tax policy, employment laws etc.
•
Economic Factors: In economic factors, it comprises interest rates, economic growth, inflation rate and the inflation rate. During the time of recession, it is hard for Starbucks to convince the target market of Japan because buyers are shifting to cheaper alternatives (Murdy and Pike, 2012). The company is also dealing with other economic factors such as increasing in labour and operational costs of the company. The additional factors which can affect Starbucks can be economic environment, taxation, local currency rates.
•
Social Factors: Starbucks has to emphasis on different cultural aspects that includes health consciousness, age distribution etc. The company has to focus on the customer’s tastes and
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preferences, changes in lifestyle of Japanese (Miller and et.al. 2011). The population of Japan is health conscious so the organisation should offer their products and services according to the buyers ' need and requirements. •
Technological Factors: The Company can focuses on the Research and development activities, new innovative technological incentives and increase the rate of technological change. This coffee house has to determine various functions like cost, quality and innovative products so that they can attract more number of Japanese customers. Furthermore, barriers to entry, production level can also affect the outsourcing decisions. PEST Analysis of UK:
•
Political Factors: Raw materials pattern of sourcing is the significant factor which can affect the business of Starbucks. Tax scandal faced by the company in UK can be the major political factor for the government (Makos, 2016). Other factors affecting the organisation include political instability, impact of local coffee retailers and a broad range of non-government organizations which will affect the political factors.
•
Economic Factors: Consumer buying behaviour is a leading economic factor which influence Starbucks profitability. During the economic crisis, revenue of the company decreases which leads to winding up of 900 stores in the country. Currency exchange rate is another crucial factor that diminishes the total profits.
•
Social Factors: Spending more time in the Starbucks can lead to American and European lifestyles in consumer perception which may attract a large number of customers (Burns, 2008). The customers are concerned about their health so that the company is using less caffeine and sugar in their coffee products. Changing in work patterns, tastes and preferences and shift in consumer values are additional social factors that effects Starbucks.
•
Technological Factors: The use of advanced and innovative technology can improve the operational efficiencies of Starbucks. The coffee house can serve advanced technology such as free Wi-Fi connection which can enhance their brand value. Other factors can be increase of innovative technology, biotechnological developments etc. Starbucks is also enabling mobile payments which gives overall consumer experience.
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PEST Analysis of Thailand: •
Political Factors: The political factors of Thailand are not stable which is scaring Starbucks the most to open their outlets in this country. The main factor is sourcing raw materials which can be expensive for the government of Thailand to buy from outside its boundaries. The other factors can be activism and political awareness, certain laws and policies.
•
Economic Factors: Thailand is suffering from drought that is highly impacting the buying behaviour of consumer by which it reduces the sales of Starbucks. Thai people are predominately dependent upon agricultural sector that is why customers are less preferring the coffee house. The inflationary environment and falling profitability is also a major issue for the organisation (Buckley, 2005). The other crucial factor may be the low level wages of the Thai people which is reducing the purchasing power of the desired customers.
•
Social factors: Starbucks is offering low priced products to Thailand so that people can purchase the products according to their income level. The company also serves products according to the needs and requirements of the consumers. Changing of work patterns, lifestyles, tastes preference of the buyer will affect the sales of the Thai consumers.
•
Technological Factors: Starbucks' partnership with Apple can bring mobile application based discount coupons and vouchers for customers to attract them to the coffee house. Other technological factors of Thailand that can affect the company are innovative and advanced technology, biotechnological developments and improvements in agriculture. PEST Analysis of Switzerland:
•
Political Factors: The Company has to follow all the rules and regulations of Switzerland to enter into their marketplace. The political condition of the country is stable and can control regulatory pressures of the market. The organization wants to attach to the social and environmental norms so that they can gather the raw materials from the source countries. The business enterprise also gives importance to the fair trade practices.
•
Economic Factors: European economic system is facing recession issues that can critically impact the operations of Starbucks. Due to this reason, the customer can shift to cheaper alternatives according to their purchasing power (Frynas and et.al., 2006). The organization has
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to deal with rising labour and operational costs to enter in the marketplace. •
Social Factors: Swizz people are highly educated and modern and are quality conscious who can pay more to get high quality products. Starbucks should serve high quality products to their customers through which it can satisfy its customer and increase its profitability level (Stamm and Trifilova, 2009). Change in tastes, preferences and lifestyles also affect the sales performance of the company.
•
Technological Factors: The people of Switzerland are very active in E
marketing and
E-banking through which consumers can buy products and make payments through internet channel. There are large numbers of internet user in the country so by this Starbucks can introduce free Wi-Fi connection and charger sockets to the retail outlets with online services. PEST Analysis of China: Political Factors: The flexibility has given by China in implementing business-friendly laws. This can be main advantage for Starbucks to enter easily in Chinese market to sell their products and services (Cavusgil and et al., 2008). Moreover, the company has to follows all regulatory framework described by the China government. Economic Factors: In China, there are large number of tourists and traveller which is increasing the sales of the products. This factor can affect the consumer base of Starbucks China because of increasing number of competitors in China (Brakman, 2006). The inflation cost and other operational costs are the main aspect of the economic factors. Social Factors: China possess a culture that is of high quality standards, low uncertainty avoidance, very clustered etc. Due to avoidance of the uncertainty, the consumers are tend not to plan their purchases. According to the China, their customers are brand loyal once they have been satisfied with their particular product and services which can act as a limitation for Starbucks. Technological Factors: With a highly technologically savvy population, Starbucks can provide free internet connection to their customers. The Chinese people prefer to purchase online and through this, the company could yield the advantage of this fact. In other words, Starbucks could essentially provide this need of the consuming public.
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1. b) The different market entry strategies with their suitability employed by Starbucks in the different foreign markets
The suitability of entering into different market various strategies have been employed by Starbucks such as through direct foreign investment in joint-venture (Frynas and et.al., 2006). The different market entering strategies in the varied foreign markets are as follows: Market entry strategies in Japan Starbucks first target in foreign market was Japan and it happened in mid-nineties. To enter in the Japanese market, the company first decided to license the agreement from Japan government. As per the view of case study, to accomplished a joint venture with a local retailer and restaurant operator, Sazaby Inc. Starbucks join as a partner of 50% stake in the venture. This joint venturing is done by direct foreign investment. Furthermore, reported in the case, Starbucks initially invested $10 million in this joint venture (Bartlett and Ghoshal, 2003). After that, the company gets licensed to venture and later takes over the responsibility for expanding their business widely in Japan. According to the given case study, it states that to secure the trading operations of Japanese company should send their some employees to the Japan to create the same US ambience. As per the success in the Japanese market, by the end of the 2007. The suitability of joint venturing is successful here by which Starbucks opens 700 stores across the Japan and planning to continue opening more. Market entry strategies in United Kingdom After exploring the first foreign market opportunities in Japan, Starbucks started focusing on an assertive foreign investment program. According to the given case study, the company acquire Seattle Coffee which is a one of the popular British coffee chain across United Kingdom. The organisation's market entry strategy is that, to buy the coffee house outlets and to formulated in the Starbucks coffee house (Freeman and et.al., 2010). Here, the business enterprise use the strategy of acquisition in which one company buys another company to enhance its sales performance and profitability. The suitability of this strategy is moderately successful. The acquisition is done on the basis of direct foreign investment to buy another coffee house with the amount for $84 million. Seattle coffee is another coffee retailer that is American based which was set up by a British couple with an intention of establishing famous coffee chain in United Kingdom.
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Market entry strategies in Thailand Subsequently succeeding in in Japan and United Kingdom, the company has started their stores in Asia. In the late nineties, Starbucks opened its coffee retail outlets in Taiwan, South Korea, Thailand, New Zealand, Singapore and Malaysia. To start their outlets in Thailand, the company uses the licensing agreement as the market entry strategy. The organization initially entered into the market with Coffee Partners which is a local Thai company by a licensing agreement. According to the terms and conditions of the licensing agreement, Thailand coffee company was mandatory to open at least 20 Starbucks coffee retail outlets within the span of five years in the country (Pehrsson, 2009). In Thailand, there is a low wage level of income and banks also provides less funds to the Thai population. However, the suitability of the licensing agreement is not that appropriate because Coffee Partners also found it difficult to take funds from Thai banks to finance for its business elaboration in the Thailand. To overcome this situation, Starbucks uses another entry market strategy that is acquisition, so that they can open more coffee stores in the Thai market (Griffith and Hoppner, 2013). The coffee company acquired Coffee Partners for about $12 million to expand its market share. This strategy's main goal was to gain clinched control over the expansion plan and to open more stores in Thailand. Market entry strategies in Switzerland After expanding their business in United Kingdom, Starbucks was following an assertive expansion in mainland Europe. The organisation's market entry strategy was to come into joint venturing with the local company of Switzerland. After signing the joint venture agreement with a Swiss company, i.e. Bon Appetit Group which is the largest food service company of the country (Hill, 2006). As per the evaluation of the case study, Bon Appetit is holding the majority of stake in this joint venture. The main strategy of the company was to connect with Switzerland who has two motives and they are firstly, joint venturing with local company to target the native swizz people. The other motive is to use that company’s relations in expanding the business in Asia. In this market, the strategy is suitable because company fulfils its all motives to expand globally. Market entry strategies in China After doing joint venture in other countries through direct foreign investment, the company give statement that it is believed that there is now also potential to open 15,000 stores outside United States. The company think that the major opportunities is in China and for that the company has taken the risk
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of opening Starbucks coffee outlets without any joint venture and licensing agreement. The market entry strategy which is used by the company in China is single market opportunity (Hofstede, 2010). The Chinese policies are very flexible and allowed the foreign companies to sell their products and services into their market. The entry barriers in China are flexible enough to allow Starbucks to do their business in the country and the suitability of the strategy is successful because currently they have 350 stores in China. 2) The suitability of the staffing approach that Starbucks utilised in Japan HRM is an important part of all organization where the corporation is identified that the only mode of maintaining a boundary is to spend properly in the development of employees’ ability. Starbucks is providing their employees to gain foreign market experience by sending them to their international outlets which can act as a opportunities for them. The company is secure the trading operations of Japanese company should send their some employees to the Japan to create the same US ambience. (Holbeche, 2009). In order to meet the licensing agreement standards, the management wants all Japanese store managers and
employees to attend training and
development classes similar to those which are provided to the US employees. There is a culture differentiation between Japanese and American market, the company is providing their employees training opportunities which will enhanced their skills and allowed them to learn the new mechanics of the new market. The agreement which was among the Sazaby Inc. and Starbucks also stated that store should lucifer to the design parametric quantity constituted in United States. To developed an effective plan in which there are brief about the training and development initiatives which is the corporate strategy of the staffing approach that suited the Starbucks which should be utilised in Japan. In early 2000, the organization introduces a stock option plan for all Japanese employees which are making Japan the first organization to follow this plan. According to the given case study, Intellectual doubted that Starbucks can repeat their success in North American (Daniels and et.al, 2011). The employees who are working in America were trained in such a way that they can adjust in the working style of Japanese business culture. The employees were prepared in that manner in which they can transfer the relevant skills to the Japanese workforce. However, it can be critically assessed that it may be difficult for the organisation to replicate its United States success in Japan. In Asia, Starbucks' used the most common strategy which is licence agreement with the local
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retailer which was benefiting the company through the initial licensing fees and royalties (International Staffing. 2012). This common strategy was used by Starbucks to enter into the Japanese market and operates its business enterprise. To set up their business in Japan, Starbucks starts a intense employee training program which should match the strict specifications of US outlets in regards to the format and layout of the store. In order to enhance its trading operations in the market of Japan, Starbucks transferred some of its employees to the new market of Japan (Kelly, 2009). The organisation makes sure that every employee possessed the required set of skills which is mentioned in the company standards list. The training sessions which are provided by the US employees to the Japanese employees were compulsory for them to attend to enhance their knowledge in the respective field. By this compulsion training sessions, the Japanese employees could provide the similar Starbucks experience to the customers. The company is providing same experience to both the employees that is US and Japanese. For an example, the employees who are working more than twenty hours per week, Starbucks has initiated a health and safety benefit program for them. This approach is for those particular employees who are precious part of the corporation. Once the trained workforce were ready to offer the best and constant services to the customers then the staff was transfer to the different Japan outlets (Rao and et.al., 2015). After that the employees of Starbucks were even given the stock grant options for intensify their productivity level. In order to improve the motivational level of its employees, Starbucks has made essential changes in their compensation packages. For an example, the part-time workers can provide medical benefits and stock grant options to motivate them as well as to increase the production capacity of the organization. But, it can be critically assessed that it will be hard for employees to create the same ambience and same services to their customers. Since consistency among the business operations is important aspect of a firm that is why Japan is considering the Foreign Direct Investment option. The company has to secure that the employees are well trained in their providing similar and better service level to their customers. Starbucks made it certain that it employs the high quality resources for an efficient management of its staff. The company is providing employees having the same capabilities which are required for managing their international operations. Since, Starbucks focused at offering consumers with similar taste of coffee and ambience of US outlets in all of its international outlets. To offer these facilities to the Japanese people, it has started a special training and development program to their local workforce.
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CONCLUSION Starbucks is highly popular premium roasted coffee retail company across the world. The above report concluded that the company has done direct foreign investment to explore the foreign opportunities outside United States. The countries like Japan, Thailand, Switzerland etc. in which Starbucks has done the joint venturing gets successful in setting up their business. From foreign direct investment, company has expanded their business, improve their sales performance as well as increase their profitability. The firm has entered into the market by different strategies like licensing agreement, joint venture and through acquisition. To offer similar products and services to the customers, Starbucks is giving distinctive training to their employees.
A sample report on International Business
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