Globalisation, Starbucks, Impact of globalisation on Jobs, inequality, poverty, natural environment.

1. Business and Economics
INTERNATIONAL
BUSINESS MGF2351

2. Objectives
 Group Presentation (20 Minutes, QnA 10 minutes)
 Tutorial Program Week 11
 Revision

3. Group Presentation
 There is no one correct method for a firm to expand operations
internationally. Therefore, firms seeking to internationalise should not
merely adopt strategies employed by its competitors or industry leaders.
Instead, firms should address three factors when contemplating foreign
expansion, type of foreign market, timing of entry, and scale of entry.
 What issues should a firm consider when deciding on which markets to
enter? Why?
 Once an attractive market(s) has been identified, when should a firm
enter that market(s)? Why?
 On what scale should a firm enter the selected market(s)? Why?

4.  http://www.youtube.com/watch?v=EVShrk7Qj_s
 Fortune at the Bottom of the Pyramid
 http://www.youtube.com/watch?v=71FTIoJOBCcwatch?v=K7eRb8aLpN
I
 Thoughts?
Globalisation and its impacts

5. Preble, 2010
 Advantages and Disadvantages of GLOBALISATION
 Globalization and Jobs
 Globalization, Inequality, and Poverty
 Globalization, National Sovereignty, and Cultural Diversity
 Globalization and the Natural Environment
 Has made recommendations with respect to to policies
 Bangladesh: http://www.cbc.ca/news/world/bangladesh-garment-
workers-lives-still-at-risk-the-fifth-estate-finds-1.1959518

6. 1. Preble (2010) addresses four key areas of the globalisation debate. What are these? How
has the globalisation process influenced the costs and benefits associated with each area?
2. "The study of international business is fine if you are going to work in a large multinational
enterprise, but it has no relevance for individuals who are going to work in small firms."
Evaluate this statement.
3. How have changes in technology contributed towards the globalisation of markets and of
production? Would the globalisation of products and markets have been possible without
these technological changes?
4. If current trends continue, China may emerge as the world’s largest economy by 2020.
Discuss the possible implications of such a development for:
 (i) the world trading system;
 (ii) the world monetary system;
 (iii) the business strategy of today’s European and Australian-based global corporations;
and
 (iv) global commodity prices.
Critical Thinking (Group work)

7. Q1. Preble (2010) addresses four key areas of the globalisation debate.
What are these? How has the globalisation process influenced the costs
and benefits associated with each area?
The four key areas are:
Globalization and Jobs
Globalization, Inequality, and Poverty
Globalization, National Sovereignty, and Cultural Diversity
Globalization and the Natural Environment

8. Q2. The study of international business is fine if you are going to work in a
large multinational enterprise, but it has no relevance for individuals who
are going to work in small firms." Evaluate this statement.
Globalization is changing the world economy.
Individuals who believe they can act in isolation by working for a small firm are
being rather myopic and insular.
Due to advances in technology, many small firms sell and source internationally
very early in their evolution.
In the United States, for example, almost 90 per cent of firms that export employ
fewer than 100 people. They also account for more than 20 per cent of U.S.
exports.
Born Global Firms

9. Q3. How have changes in technology contributed towards the globalisation
of markets and of production? Would the globalisation of products and
markets have been possible without these technological changes?
 Advances in communication, information processing and transport have
brought the world together.
 Internet
 Global Markets being created
 Co-ordination of diverse operations
 Global Virtual teams

10. Q4. If current trends continue, China may emerge as the world’s largest
economy by 2020. Discuss the possible implications of such a development
for:
(i) the world trading system; (ii) the world monetary system;
(iii) the business strategy of today’s European and Australian-based global
corporations; and
(iv) global commodity prices.
China is continuing to move toward greater free market reforms, and if it stays on
its present track, could become an industrial superpower in the near future. China,
with its 1.2 billion people, is a largely untapped market for firms.
 By some estimates, the Chinese economy could be larger than that of the
United States on a purchasing power parity basis.
 Already, annual foreign direct investment has jumped from less than $2 billion
in 1983 to $90 billion in 2008.
 China is also making waves in international markets as its firms like Hisense
(see Management Focus: China’s Hisense—An Emerging Multinational) prove
to be world class competitors.

11. Case:The Globalisation of Starbucks (Hill, 2013, pp. 2-3)
1) Where did the original idea for the Starbucks’ format come from? What
lesson for international business can be drawn from this?
2) What drove Starbucks to start expanding internationally? How is the
company creating value for its shareholders by pursuing and international
expansion strategy?
3) Why do you think Starbucks decided to enter the Japanese market via a
joint venture with a Japanese company? What lesson can you draw from
this?
4) Is Starbucks a force for globalisation? Explain your answer.
5) When it comes to purchasing coffee beans, Starbucks adheres to a “fair
trade” program. What do you think is the difference between fair trade and
free trade? How might a fair trade policy benefit Starbucks?

12. Q1. Where did the original idea for the Starbucks’ format come from?
What lesson for international business can be drawn from this?
The original idea for the Starbucks format came from Italy. The founder of
Starbucks, Howard Schultz, was inspired to start the chain after experiencing
Italy’s coffeehouses on a visit to the country.
 This shows that opportunities for international business exist everywhere.
Howard Schultz for example, was able to take a concept that had been
popular in Italy for decades and successfully duplicate it in the United
States, and then elsewhere in the world. Similarly, McDonald’s and KFC
have been very successful at creating a market for American fast food
around the world.
 Competition from foreign markets can transform industries. U.S. car
makers were forced to respond to the demand for better quality vehicles
after Japanese automakers successfully invaded the U.S. auto market
and make quality a key buying point.

13. Q2. What drove Starbucks to start expanding internationally? How is the
company creating value for its shareholders by pursuing and
international expansion strategy?
After Starbucks grew from a single store to more than 700 locations in just a
decade, the company began to explore growth opportunities elsewhere.
Today, Starbucks operates more than 16,700 stores in some 50 countries.
Not only has this strategy increased profits for the company, which is of
course a clear benefit for stockholders, it has also diversified the company’s
earnings base providing another benefit to stockholders.

14. Q3. Why do you think Starbucks decided to enter the Japanese market
via a joint venture with a Japanese company? What lesson can you draw
from this?
 A 50/50joint venture with SazabyInc.
 Starbucks required all managers and employees to attend the same training
provided to U.S. Managers.
 The JV use the same store design and menu.
 The Japanese company provided Starbucks with a local connection to the
market.
 Lesson :
 This type of strategy can be very helpful to companies that are just
beginning their international expansion.

15. Starbucks experience in some 50 countries.
Created a global market that transcends national and cultural borders.
Similarities with other global operators such as McDonalds.
Any other companies you can think of?
Q4. Is Starbucks a force for globalisation? Explain your answer.

16. Q5. When it comes to purchasing coffee beans, Starbucks adheres to a
“fair trade” program. What do you think is the difference between fair trade
and free trade? How might a fair trade policy benefit Starbucks?
 Fair trade: non-exploitative and environmentally sound growing policies
 Free trade: trade without barriers.
 Starbucks’ fair trade program is designed to empower small coffee growers
and at the same time, protect the environment.
 Engaging with consumers (Brand Value enhancement)

17. Revision
 What is Political economy?
 List any 4 political arguments for government
intervention in free trade?
 Describe any two factors discussed by Michael
Porter.
 List any two characteristics of emerging
economies?

18. Thank you!