Question

Part One

1. What is the main assumption of factor proportion theory by Heckscher-Ohlin that makes it different from other international trade theories?
2. What are the critical ways in which standardization and adaptation are different from each other when preparing international market selection? Give an example to support your answer.

3. The strategic planning process for international business requires different types of analysis, one of that is the Internal analysis of organizational resources, Discuss why the assessment of internal resources is critical as early as possible in developing a global strategic plan.
4. Explain which and what appropriate staffing strategy will be better to apply for foreign international companies working in UAE. Support your answer with suitable example.

Part Two

Read the case-study carefully, then answer all questions:

Starbucks announced that they would be closing 600 local US stores. With a goal to open 500 new international stores in China, Starbucks seems to have a strategy in place to expand its international operations, and believes that China its most important opportunity with the potential of becoming its largest market, it is also optimistic on India, despite a slow growth in the country with only opening 75 stores in three years.

But locally Starbucks started to lose, and in order to keep up, Starbucks would either have to cut prices or cut down on stores to restore its brand exclusivity. Mr. Bocian, the company’s CEO, said that the company would continue to examine its options and said: ”We continue to take action in areas we can continue to control”.

Mr. Bocian said "The power of our brand, the strength, and momentum in our business, and the world-class management talent we have assembled give me great confidence in our ability to capture the enormous global growth opportunities ahead.” also said " Starbucks would continue to focus on expanding internationally renewal including introducing new products like fruit smoothies and the introduction of Pike Place, a mild drip-blend coffee.

Since its launch in China, Starbucks has adapted itself to the local environment and this strategy has been instrumental to its growth in the region and provides a social gifting option to its Chinese customers. Also, Starbucks start doing some partnership with a local player.

Question 1: Analyze the strategies (strategic actions and moves) that Starbucks takes in its International entry and expansion

Question2: Conduct a PESTEL analysis (political, Economic, Social, Technological, Environmental/cultural, and legal) factors that affect Starbucks in its International operations

Answer 1

Part Two

Question 1: Analyze the strategies (strategic actions and moves) that Starbucks takes in its International entry and expansion

The first retail shop of Starbucks was opened in Seattle in 1971, as a roaster and retailer of bean and ground coffee, tea and other spices. Today, there are over 20000 starbucks stores across the world. Starbucks is a definitely a unique company, in a continuous evolution across the world

Starbucks has proved itself to be a pioneer in the coffee house industry having introduced this concept to countries in
the Asia-Pacific region
Starbucks has reinvented itself in European countries where the coffee house culture is more sophisticated.

The factors which Starbucks follows while its International Mode of entry and expansion are:
1. Country specific factors- Culture, Demographics, Local competition, Bargaining and Buying power of customers and suppliers.

2. Firm specific factors- Which includes assets, international experience, need for growth and adaptability of business model.

3. Industry specific factors- Growth trends in the industry, competition, barriers to entry and its position in the industry.

Starbucks have followed various entry modes like partnerships with local firms via a joint venture or through licensing/franchising.
Franchising limits the extent to which Starbucks can monitor the products and services, as compared to the wholly-owned subsidiaries.

Question 2: Conduct a PESTEL analysis (political, Economic, Social, Technological, Environmental/cultural, and legal) factors that affect Starbucks in its International operations

Political factors:
1. Sourcing of raw material from suppliers.
2. Adherence to the laws and regulations of the country from where Starbucks is procuring the raw materials
3. Regulatory pressures in the home market of US.
4. Policies concerning tax in the country it is operating
5. Employment laws of the country it is operating

Economic factors:
1. Chances of global economic recession
2. Rising Costs related to labor and other operations
3. Local currency exchange rates
4. Local economic environment in different markets

Social factors

1. Expansion of customer base to lower and middle income tiers and countries
2. Social concerns of “green” and “ethical chic” consumers
3. Changing family patterns in USA and Europe and related consumer preferences
4. Changes in the work patterns of customers
5. Changes in lifestyles and education of population

Technical factors

1. Need of Wifi and other internet based offerings at outlets
2. Introduction of mobile wallets and digital payments
3. Emergence of innovative technology
4. Biotechnological developments and developments in agriculture

Environmental factors

1. Acknowledging the concerns of activists and international advocacy groups.
2. Environmental rules and regulations
3. Environmental disasters in countries which produce coffee beans
4. Global warming

Legal factorsL
1. Laws and regulations in the home market and countries from where Starbucks buys raw material
2. Policies related to caffeine production and consumption
3. Introduction of stricter customs and trade regulations