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Starbucks: Global Expansion and Challenges

Learn about Starbucks' international expansion strategy and the challenges it faced. Discover the impact of globalization on jobs, incomes, labor policies, and national sovereignty.

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Starbucks: Global Expansion and Challenges

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  1. Chapter 1 Globalization

  2. Thirty years ago, Starbucks was a single store in Seattle. Today, the company operates more than 7,600 stores, 2,000 of which are found in 34 countries outside the U.S. The company has employed a joint venture strategy for most of its international expansion believing that the local knowledge a joint venture partner can provide is important to the success of Starbucks in foreign markets. www.starbucks.com http://www.starbucks.sh.cn/zh-n/_Social+Responsibility/ OPENING CASE: Planet Starbucks

  3. How does Starbucks, Japan differ from Starbucks, USA? What challenges faced Starbucks in its quest for a global presence? Starbucks

  4. What does “globalization” mean? What are its causes? Why is it proceeding rapidly? What is its impact on Jobs? Incomes? Labor and environmental policies? National sovereignty? International Trade patterns Foreign direct investment flows Economic growth rates Multinational corporations and their impact Globalization

  5. The Globalization of Markets The Globalization of Production WHAT IS GLOBALIZATION?

  6. Declining Trade and Investment Barriers The Role of Technological Change 1. Microprocessors and Telecommunications 2. Moore’s Law predicts the power of microprocessor technology doubles and its cost of production falls in half every 18 months. 3. The Internet and the World Wide Web 4. Transportation Technology - commercial jet aircraft, super freighters and the introduction of containerization, DRIVERS OF GLOBALIZATION

  7. Thomas Friedman, “The Lexus and the Olive Tree” (2000) Capital Information Technology Globalization

  8. Each MNC Sources particular goods and services from a set of locations it selects around the world Develops a global web of suppliers as a source of competitive advantage Decides “where to produce” depending on a country’s factors of production Labor, land, capital, energy, expertise Host governments have a stake in the successful establishment of an MNC’s operations Globalization of Production

  9. These define the “rules” of international economic activity World Trade Organization (succeeded GATT) International Monetary Fund (IMF) World Bank United Nations Global Institutions’ Emergence

  10. World trade increase more than 20x up between ’50 and ’98 25x up from ’70 to ’02 FDI annual flows increased more than 10x from ’84 to ’98, or 50x between ’75 and ’00 Declined about 50% between ’00 and ’03 Evidence of Globalization

  11. FDI bilateral treaties up more than 10x from ’80 to ’02 By 1998 60,000 parent companies: operated away from home markets through 500,000 subsidiaries / affiliates Produced US$11 trillion in global sales, 25% of global output US, Japanese, Western European companies the major investors in Europe, Asia, and North America More evidence of Globalization

  12. Average Tariff Rates on Manufactured Products (% value) 1913 1950 1990 2002 France 21 18 5.9 4.0 Germany 20 26 5.9 4.0 Italy 18 25 5.9 4.0 Japan 30 – 5.3 3.8 Holland 5 11 5.9 4.0 Sweden 20 9 4.4 4.0 Britain – 23 5.9 4.0 USA 21 18 5.9 4.0 “Drivers” of Globalization: Declining Trade and Investment Barriers

  13. Globalization of markets and production is the result of lowering of trade barriers and is enabled by technological change Telecommunications and microprocessors The internet and the world-wide web Transportation technology “Drivers” of Globalization:Technological Change

  14. % share of world output and exports 1963 1997 2003 1998 2003 output output output exports exports United States 40.3 20.8 21.1 12.7 11.0 Japan 5.5 8.3 7.0 7.3 5.7 Germany 9.7 (W) 4.8 4.5 10 9.6 France 6.3 3.5 3.2 5.7 5.7 United Kingdom 6.5 3.2 3.2 4.5 4.7 Italy 3.4 3.2 3.0 4.5 4.1 Canada 3 1.7 1.9 4.0 3.6 China NA 11.3 12.6 3.4 5.0 Globalization and the Global Economy

  15. A multinational enterprise (MNE) is any business that has productive activities in two or more countries The national heritage of the largest MNEs 1976 1997 2001 United States 45% 25% 27% Japan 4 25 8 United Kingdom 19 6 18 France 7 8 12 Germany 8 8 9 “Mini-multinationals” a world economyfactor Globalization and the MNE

  16. Impact of trade liberalization and FDI barrier removal on jobs and incomes Do jobs move from wealthy, advanced economies in search of lower wage rates? On labor policies and the environment Do manufacturing facilities move to developing countries with weaker labor laws and environmental protection? On national sovereignty WTO, UN, EU: supplanting national governments? Globalization: Prosperity or Impoverishment?

  17. http://www.strategy-business.com/resilience/rr00028 China's Five Surprises: 1. Local entrepreneurs are interested in producing global brands, not just low-cost commodities 2. China has become a hotbed for rapid innovation 3. Executives from around the world are moving to China for the long haul 4. Good management and transparency are starting to count more than patronage, at least in some sectors 5. China is becoming a catalyst for growth in emerging markets throughout the developing world. Globalization Matters

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