In activities across the border. The reason behind

In the age of great
internationalisation and multiculturalism, many companies try to expand their
business activities across the border. The reason behind this is the
opportunity to access new profitable markets, improve the company’s reputation
and in some cases even reduce the costs. However, while expanding the business
brings exciting possibilities, there are several issues that might occur during
the process. Hollensen S. (2008) states that
more countries the company is involved in, more complex marketing management is
required. This is a must in order to adapt to the preferences of customers with
a different purchasing power as well as cultural, economic and political
conditions within the country. Therefore, marketing department’ task is to
maintain the same customer experience, while coping with the above-mentioned
issues appropriately. This essay focuses on predicting the issues that might
happen in the next decade or already happened and consequences are still
relevant and will be present in this time-scale. Specifically, Starbucks’s
problems to adapt to cultural differences in France begun in the last decade
and yet, they are still remaining unresolved. H clothing company on the
other side has only started its expansion into South Africa, which currently
faces corruption and its impact on local economy and middle class. Lastly, there
is a discussion of Google’s return into China after they left in 2010 due to a
political pressure and censorship.

Cultural, political and economic issues

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The following example showcases the issue,
which occurs after misunderstanding the foreign culture and people’s patterns
of life which differ from those of in company’s “birthplace”. According to
Keegan J. (2002), culture is a set of both conscious and unconscious values,
ideas, attitudes, and symbols that shape human behaviour and are transmitted
from one generation to the next. In terms of Uppsala model, when Starbucks
expanded into France, it misunderstood its cultural differences and application
of internationalisation.

Taking into consideration gastronomy
standards and quality, French cuisine is one of the world’s leading food-tourism
destination. Furthermore, in 2010 the French gastronomy was ‘recognised by UNESCO as part of their
Intangible Cultural Heritage register.’ (Mintel,
2017:online) French residents are accordingly proud for their eating
habits and culture and they profoundly refuse to use disposable cups and plates.
Therefore, when Starbucks decided to expand into European markets in 2004, it
struggled to achieve the same effectiveness as in US. According to New York Times report from 2012, “after eight years
spent setting up 63 French Starbucks stores, the company has never turned a
profit in France.” Following the report, it states that Parisians tend to sit
while enjoying their cup of coffee in comparison to New Yorkers that rather grab
a coffee to go – which is one of the chain’s biggest money makers.

When looking deeper into coffee
origins on the “old continent”, it is possible to say that first signs of
coffee houses goes to 17th century, highly influenced by venetian
merchants. (Wild A., 2005) Since then, France has
been largely influenced by Italian coffee habits. Among one of them is the popularity
of espresso coffee, which is the best-selling coffee drunk in France, usually
also called café noisette. Moreover, it is a drink which is usually drunk
within the premises instead of using disposable cups.

Conclusively, beverages to go are
the core of the company’s business strategy and therefore they struggle to
penetrate the French market as they did in America or in Asian countries. Moreover,
French government recently announced its plans to ban disposable cups and
plates, allowing only those from 50% biologically-sourced materials by 2020 and
in later years this percentage will increase even more. (Eastaugh S.,2016) This has been cheered by many French
residents who are against climate changes and fight for sustainable France.
These regulations are likely to cause people to endorse independent coffee
shops instead of chain cafes. Consequently, the company might struggle to
compete with them due to its over-focused rationalization of the business.
Rationalization is a term that fall into McDonaldization, which is a
sociological theory developed in order to minimalize efficiency and profit, but
resulting in strongly negative connotation, low-status, low-paying, demeaning
occupations. (Ritzer G., 1993) Therefore a customer at Starbucks might feel
disconnected from the staff and feel “automatized”, comparing to a table
service at independent cafés with individual approach to each customer.

 

Another issue that happens to be a
major problem when expanding into other countries might be political stability
and its current state in the country. South Africa, which according to Gov.Uk is considered to be a promising market in the future and
entry country into the African continent. With its developing economic
infrastructure 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 expanded
into South Africa in 2015 and this year announced that it plans to open 6 more
stores. Nevertheless, analysts have warned that it might get more difficult for
clothing retailers in the next couple of years. Taking into example british
retailer River Island, the company exited the market, while closing couple of
stores in Cape Town, Gauteng and Sandton City. (Ndlendele
S., 2017)

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