Introduction
The biggest challenge facing multinational companies in the contemporary times is the ability to respond to rapid changes in the market. These factors include globalization and expansion of networks, escalating level of consumption and sustainability, the ever-increasing role of the state in business regulations, the rise of emerging new markets, and increased market productivity among others.
Therefore, corporates have to consider other factors such as core capability and industrial structure before developing corporate strategy. Moreover, the global trend today and in the future will require firms to adapt to local production. This demand stems from government agencies (in order to satisfy regulations) and customers (in order to satisfy their preferences and taste). Due to the rapid changes in future trends, Starbucks has to use a multidimensional strategy that supports different product lines combined with global strategy in order to remain competitive.
Globalization and regionalization
Globalization and regionalization are part of the most influential environmental trends likely to influence the Starbuck’s decision-making process and international strategy in the next ten years. These environmental trends are likely to become the most influential factors largely because the Starbuck’s choice to invest will determine its strategic competitiveness. Although globalization has helped Starbucks to expand its business in more than 50 countries, globalization has and it is expected to increase competition in overseas markets (Argenti, 2004).
Globalization has given consumers the liberty to choose what they want in their lives, due to the availability of a wide range of choices. It has created many alternatives goods and services at reasonable prices. Globalization presents novel business opportunities. However, the opportunities come with ethical issues surrounding the operations of businesses at the international level. In the future, Starbucks will be required to analyze the foreign exchange markets and the effect it has on different consumers’ specifications. In addition, going forwards, globalization is likely to influence local communities to integrate without society even noticing.
Technology is expected to spread the rise of globalization due to easy means of communication. As Starbucks expand its business in Asia, managers will have to develop different marketing strategies that fit into the current culture in their targeted country. For example, in Saudi Arabia, Starbucks cannot feature a female on the logs of its products.
In fact, it is against the people’s culture and customs to have a female on any product log. In order to appeal to the customers, Starbucks has carefully selected a crown swimming in the sea to be its log on different products. In the future, Starbucks will have to take into account different elements including individualism among others. Global culture is determined by these factors, and thus Starbucks must consider them in order to penetrate new market niches easily.
Individual beliefs and values determine how customers in foreign nations perceive goods and services, thus influencing their purchasing behaviors toward a particular brand. Customers are also mindful of the power distance and uncertainty avoidance since they base their purchasing behavior on these factors. Power distance can simply be defined as the difference in perception of power when customers interact with each other. On the other hand, “uncertainty avoidance can be defined as the extents to which customers feel threatened by unclear situations” (Goldsby, Bell & Autry, 2015, p. 15).
For instance, protesters in Lebanon and New Zealand have rejected the Starbucks’ coffee shops. In fact, Starbucks has already exited the Israel market due to the ever-looming terrorist attacks in the region, which threatens the thriving of businesses like Starbucks. Such trends are likely to influence the Starbucks’ strategic decision in terms of locating its coffee shops. Masculinity and femininity define how society perceives sex roles and cultural values within a given setup versus that of a group.
It is against this backdrop that Starbucks must understand the consumers’ perception toward its products and services. Such factors also shape the consumers’ behavior toward purchasing goods and services. In the United States, customers are not opposed to female figures appearing on the Starbucks’ product logs. However, in countries such as Saudi Arabia, a woman’s figure cannot be at the Starbucks’ logs. Starbucks must recognize this trend by ensuring that it advertises similar products differently depending on cultural beliefs and values in different nations.
The effects of globalization on free trade
Globalization will rapidly change the amount of gods and services that customers can access in a given market segment. There have been rapid changes in terms of the creation of global free trade agreements across the world. Globalization has given consumers the liberty of choosing from a wide range of goods and services at affordable prices.
This scenario has occurred due to the improvement of transport means across borders and overseas coupled with intergovernmental trade agreements. Such treaties increase the availability of goods, services, and competition. Starbucks is facing stiff competition from competitors such as Dunkin Donuts and McDonalds, which operate in major economies across the globe.
The North America Free Trade Agreement (NAFTA), as a free trade treaty, has promoted the globalization of multinational companies all over North America (Das, 2013). Since the implementation of different free trade treaties, there have been an increased number of new and lucrative businesses opportunities. Free trade agreements mean that individuals have been linked to multiple varieties of products. These trends are expected to continue in Asia, Europe, and North America. Due to free trade, Starbucks will face stiff competition since there are few market barriers to entry.
This aspect means that consumers are the biggest beneficiaries of such agreements. Such elements raise the consumers’ bargaining power due to the existence of alternative goods and services existing in the market. In fact, increased bargaining power of consumers has pushed coffee prices down. This trend has negatively affected the Starbucks’ profitability, thus resulting in the closure of a significant number of outlets worldwide. The trend is expected to gain momentum as more and more countries seek to eliminate trade barriers in order to encourage free trade. However, free trade agreements have affected the US job market adversely with more people losing their jobs and others getting low salaries.
Increasing role of state in business regulations
The political environment in which businesses operate determines the effectiveness with which companies execute their objectives. There is a rapid growing need by the state to control businesses through stringent regulations that discourage them from making some decisions. These forces stem from political ideologies and processes toward foreign businesses.
Although the Starbucks’ coffee shops are located in democratic nations, government regulations sometimes hinder operations. For instance, in India, political processes have affected business operations adversely. In fact, the Indian government, through its regulations, forced the Coca-Cola Company out of the country. The global financial crisis has prompted governments all over the world to excise direct control by calling for increasing regulations.
The current market trends have been stimulated by the fall of the US free trade market model. Furthermore, the growing diffusion of the global economic powers is making it difficult to reach an agreement on multilateral rules and regulation guiding business operations. Regional agreements are also on the rise and this trend is expected to continue in the future. However, this dramatic shift from a single set of rules will have adverse impacts as far as seizing new opportunities is concerned.
This move will force multinational businesses such as Starbucks to undergo many regional and national fronts full of government actors. The tension between businesses and policymakers in the coming ten years is disheartening. Governments have a duty to ensure that they foster economic growth and prosperity. In order to execute this mandate, governments must ensure social stability and security.
In addition, governments must ensure that they have sound policies in a bid to attract foreign investment. The manner in which the government reacts to these forces will determine significantly the success of businesses such as Starbucks in the next decade as opposed to any other single economic player.
While policymakers will continue to be pressured to deliver economic growth, most governments will promote an enabling working climate with business firms over the next decade. Just as governments recognize the critical role played by businesses in economic prosperity, a business entity must also recognize the challenges facing governments.
In the next decade, more and more governments will be wooing investors to invest in their countries in a bid to generate jobs. For example, Poland has created new policies that support foreign investment through tax breaks. HP and IBM have already considered putting up branches in the country in a bid to take advantage of such incentives. In addition, although governments are directly being involved in business operations, they will promote a supportive climate for foreign investment to thrive.
Therefore, Starbucks will expand its coffee shops throughout the globe. In the next decade, Starbucks will expectedly open a new outlet in countries such as Poland and Estonia. As Starbucks expands its operation, managers must be ready to develop strategies that enable the firm to deal with complicated government regulations. For instance, if Starbucks entered the Asian market, it must be ready to develop sophisticated approaches to navigate the region’s regulation framework.
The governments’ regulations on safety and labor will remain split across different countries. Globalization will not be in a position to regulate cultural norms and values toward businesses in different countries. However, interaction amongst different businesses in disparate countries will expand and probably facilitate an effective functioning of companies such as Starbucks in foreign countries. Therefore, Starbucks must take a proactive role in coping with other nations.
Rise of emerging market
The emerging market may be the major global economic condition reshaping the Starbucks’ competitive advantage. Rapid growth has been witnessed in not only China and India, but also in some Middle East and African economies. For multinational companies such as Starbucks, this emerging market rebalancing will shift significantly the way businesses make their strategic decisions. Emerging markets will create new business opportunities for Starbucks due to the growth in production and consumption. Starbucks will consider opening new outlets to take advantage of the new paradigms.
In addition, considering that more that 70 million people are expected to reach the middle-class threshold in the next decade, new opportunities will emerge (Goldsby et al., 2015). This aspect means that new opportunities are emerging all over the world. Starbucks can take advantage of the ever-growing middle class, which has some dispensable income, to take coffee shops across the globe by offering excellent service delivery. However, seizing such opportunities will be difficult since the new middle class has a wide array of product to choose from and people only loyal to specific brands.
The consumers’ tastes and preferences will change effectively to reflect new developments in the market. In addition, consumers will be sensitive toward prices changes than consumers in developed nations and they will demand quality product and services. Therefore, Starbucks must rethink on the quality of product and services they offer in order to take advantage of emerging markets.
Conclusion
Globalization has played a key role in determining the strategic decision-making in multinational corporations. As Starbucks expands its business across the globe, managers will have to develop different marketing strategies that fit the prevalent cultures in the targeted country.
The firm must take into account culture values and practices within different geographical niches in order to come up with a strategy that supports market needs and societal values. The global financial crisis has prompted governments all over the world to excise direct controls by imposing strict business regulations. The rise of emerging markets has created impressive business opportunities for multinational corporations.
References
Argenti, P. (2004). Collaborating with activists and how Starbucks works with NGOs. The International Journal of Management, 47(1), 91-116.
Das, N. (2013). Impact of Globalization on Sustainable Development in the Indian Economy. Journal of International Economics, 4(2), 99-114.
Goldsby, T., Bell, J., & Autry, C. (2015). Thinking Big! Incorporating Macrotrends into Supply Chain Planning and Execution. The International Journal of Applied Forecasting, 37, 13-18.