Type: Process Essays
Sample donated: Lyle Lamb
Last updated: September 24, 2019
In the age of greatinternationalisation and multiculturalism, many companies try to expand theirbusiness activities across the border. The reason behind this is theopportunity to access new profitable markets, improve the company’s reputationand in some cases even reduce the costs. However, while expanding the businessbrings exciting possibilities, there are several issues that might occur duringthe process.
Hollensen S. (2008) states thatmore countries the company is involved in, more complex marketing management isrequired. This is a must in order to adapt to the preferences of customers witha different purchasing power as well as cultural, economic and politicalconditions within the country.
Therefore, marketing department’ task is tomaintain the same customer experience, while coping with the above-mentionedissues appropriately. This essay focuses on predicting the issues that mighthappen in the next decade or already happened and consequences are stillrelevant and will be present in this time-scale. Specifically, Starbucks’sproblems to adapt to cultural differences in France begun in the last decadeand yet, they are still remaining unresolved.
H clothing company on theother side has only started its expansion into South Africa, which currentlyfaces corruption and its impact on local economy and middle class. Lastly, thereis a discussion of Google’s return into China after they left in 2010 due to apolitical pressure and censorship.Cultural, political and economic issues The following example showcases the issue,which occurs after misunderstanding the foreign culture and people’s patternsof life which differ from those of in company’s “birthplace”. According toKeegan J. (2002), culture is a set of both conscious and unconscious values,ideas, attitudes, and symbols that shape human behaviour and are transmittedfrom one generation to the next. In terms of Uppsala model, when Starbucksexpanded into France, it misunderstood its cultural differences and applicationof internationalisation.
Taking into consideration gastronomystandards and quality, French cuisine is one of the world’s leading food-tourismdestination. Furthermore, in 2010 the French gastronomy was ‘recognised by UNESCO as part of theirIntangible Cultural Heritage register.’ (Mintel,2017:online) French residents are accordingly proud for their eatinghabits and culture and they profoundly refuse to use disposable cups and plates.Therefore, when Starbucks decided to expand into European markets in 2004, itstruggled to achieve the same effectiveness as in US. According to New York Times report from 2012, “after eight yearsspent setting up 63 French Starbucks stores, the company has never turned aprofit in France.” Following the report, it states that Parisians tend to sitwhile enjoying their cup of coffee in comparison to New Yorkers that rather graba coffee to go – which is one of the chain’s biggest money makers.
When looking deeper into coffeeorigins on the “old continent”, it is possible to say that first signs ofcoffee houses goes to 17th century, highly influenced by venetianmerchants. (Wild A., 2005) Since then, France hasbeen largely influenced by Italian coffee habits. Among one of them is the popularityof espresso coffee, which is the best-selling coffee drunk in France, usuallyalso called café noisette. Moreover, it is a drink which is usually drunkwithin the premises instead of using disposable cups. Conclusively, beverages to go arethe core of the company’s business strategy and therefore they struggle topenetrate the French market as they did in America or in Asian countries. Moreover,French government recently announced its plans to ban disposable cups andplates, allowing only those from 50% biologically-sourced materials by 2020 andin later years this percentage will increase even more. (Eastaugh S.
,2016) This has been cheered by many Frenchresidents who are against climate changes and fight for sustainable France.These regulations are likely to cause people to endorse independent coffeeshops instead of chain cafes. Consequently, the company might struggle tocompete with them due to its over-focused rationalization of the business.Rationalization is a term that fall into McDonaldization, which is asociological theory developed in order to minimalize efficiency and profit, butresulting in strongly negative connotation, low-status, low-paying, demeaningoccupations. (Ritzer G., 1993) Therefore a customer at Starbucks might feeldisconnected from the staff and feel “automatized”, comparing to a tableservice at independent cafés with individual approach to each customer. Another issue that happens to be amajor problem when expanding into other countries might be political stabilityand its current state in the country.
South Africa, which according to Gov.Uk is considered to be a promising market in the future andentry country into the African continent. With its developing economicinfrastructure and new opportunities, many European companies like Shell,Barclays or Vodafone have already entered the market. Specifically, H,which stands for Hennes & Mauritz, is a Swedish clothing company that expandedinto South Africa in 2015 and this year announced that it plans to open 6 morestores. Nevertheless, analysts have warned that it might get more difficult forclothing retailers in the next couple of years. Taking into example britishretailer River Island, the company exited the market, while closing couple ofstores in Cape Town, Gauteng and Sandton City. (NdlendeleS., 2017)