Financial Management And Control In International Organisations Q&A

Financial Management And Control | Strategy In International Organisations: Reconciling The Paradox Of Localisation & Globalization In A Turbulent Environment

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Introduction of Financial Management And Control In International Organisations Q&A Sample

The report focuses on analyzing the global industry and how it impacts strategic management in a multinational corporation. The report deals with the demonstration of critical understanding and how relevant strategic tools are used in an organization in the leadership role. It also has seen understanding the relationship between strategic management and decision-making systems in an organization to evaluate their mission and objectives. The report basically deals with three important issues, the first one being the paradox of localisation and globalization in an uncertain environment. The second issue related to the report is the development and organization made towards building the core competence in the market by improving their products and services and establishing itself as a dynamic brand that is capable of tackling any unforeseen situation in the market. The last section represents a personal reflection of the learner based on these issues (Tamayo-Torres, et al. 2019).

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The report is based on such factors that have affected the operations of Starbucks corporation and how the company devised a plan to tackle them. The report helps the learner to understand the key strategic issues by analyzing them deeply within the strategic context to generate an understanding of the decision-making process in a firm. The use of different tools and methodology for the research is also elaborated and recommendation is presented on the basis of this analysis.

As covid-19 impacted the business of minor organizations across the world but the impact of the pandemic was immense on the economy of UK Abou (Kamar and Alsetoohy, 2021). This is because the UK has recently gone through Brexit after which many international organizations left the country. The Russia-Ukraine war also brought a major impact on the market of the UK as a mini organization started living in Russia after the war began. It is important to analyze all these factors that have led Starbucks to discontinue its operations in Russia and how they adopted different compatible advantages that are sustainable.

Besides this, the complete advantage of Starbucks over the competitors is also analyzed by evaluating the advantages and disadvantages of the organization from various aspects of leadership. An understanding of the social responsibility and profit earning capacity of a company is also required to achieve competence in an international environment.

Question One: Managing the Demands for Localisation & Globalization

The demand for localisation

The strategy to localize a product or service is usually considered a long-term plan for an organization under which they have to attack their products according to the culture and language of the local communities. The main purpose of this strategy is to frame the company according to the sections of society and their demands. It helps a company to frame its position in the new market so that it can make an easy and smooth transition. The localisation strategy helps Starbucks to curate its products according to the knees and wants of the customers. It also has the same demand in the products that are locally produced which reflects the originality of the company and that they value the sentiments of the customers. There are many factors that affect the external operation of a business therefore a company must remain cautious while deciding their future plans for localisation depending upon it.

The demand for globalization

Starbucks is continuously growing towards becoming one of the major companies having their operations in almost every country in the world. They have become experienced with sales in international markets as the old markets for the company have become saturated so they have tried to find the new ones. Stabucks has customize your products according to the demands of the customers in the new markets where they tried to localize but in the context of localisation they also have to make your products more Cosmopolitan so that it is suited to the demands of an international market. The main reason behind this popularity is that any business which assumes to operate in an international market must attack the taste inferences of international customers (Kiarie, et al. 2021). Customizing the products according to the demands of a new market requires a company to manage the resources and offer globalized products that are reliable, functional and set at low price. One of the powerful driving forces that makes a company go global is the converging commonality between the trends and technology which makes the transportation, traveling and communication among the consumers very easy. Therefore the company also tries to attack these changes so that they do not isolate customers with their offerings. Starbucks has tried to offer modern approaches to their products so that customers don't feel part of the place and irrelevant while sitting at Starbucks.

The potential impact of a possible post-Covid-19 era

The Covid-19 pandemic was a serious threat for Starbucks as the company owes around 915 million dollars during it. Many stores remained closed during the pandemic as public gathering was not allowed in many countries. People were not allowed to hang out together at public places; this led to the loss for the company. There were curfews and multiple lockdowns in different areas of the UK which was also not favorable for the business. Starbucks believed they would be able to earn at least enough to cover the cost of damage that has impacted the company during the pandemic. The impact affected the company drastically as the sales declined about 3% in the US and more than 8% in the UK. As of today around 50% of the supply chain system of Starbucks is closed. It shows the after effect of the pandemic (Yan, 2022). There are more than 9000 stores located globally but only half of them are currently operational. The CEO of the company has expected to earn a stable revenue even though the company has been facing a lot of difficulties in earning it. As the pandemic led to a loss of ownership and loss of revenues for many small businesses and people which have led the demand for Starbucks go low in the economy.

Rebound of Starbucks after the pandemic

Figure 1: Rebound of Starbucks after the pandemic

(Source: ft.com, 2022)

The strategic implications of the UK’s Brexit

Being in the American company it was easy for Starbucks to take the hit in the UK market. But when they realized that most of their operations are being held in the UK they evaluated that they are going to face a lot of loss in revenue due to Brexit. Starbucks has around 30000 locations across the world and many parties are involved in operating it. The global production chain of the company has been disrupted due to the government policies that were implemented after Brexit. Many companies have lost interest in doing business with the company due to unrestricted policies of the government. The multinational corporation started to move to the European Union leaving the UK with around 980 stores. It shows that trading with multiple nationalities is important for the company to generate a consistent source of revenue. Brexit broadsides a number of issues for the company regarding its financial position and disruption in the supply chain system. The major companies were dependent on the supply chain arrangements with Starbucks as Starbucks is responsible for sourcing coffee from different regions outside the European Union and the UK. They usually import coffee from tropical regions such as Africa and Asia Pacific where they find the highest quality coffee. But with the loss of market, they also lost many important suppliers that were helping them source the best quality of coffee.

Russia-Ukraine War on your organization’s approach to sustaining competitive advantage

Low-cost leadership

This strategy aims to offer low cost to the customer to become a market leader by providing products at affordable rates and their competitors. This model was adopted by Starbucks amid the Russia-Ukraine war so that they were able to gain a larger market edge during times of critical situations. The strategy was to produce goods that offer a compromisingly lower cost than the competitors in the market which will help in attracting most of the customers locally and will be the source of generation for maximum revenues (Rodríguez-Fernández, et al. 2019). Starbucks required that they have to become a market leader but due to the trade relations between USA and Russia gaining a lot of controversies related to geo-political factors. The company had to close its operations in Russia. Due to this the company lost a huge market in Asia as well as lost a huge customer base that they have built up with a lot of hard work over the years.

Product differentiation

It is a strategy that multinational corporations use so that they can make their products unique by providing better quality and services to the customers. It allows the company to give a competitive advantage in the market by differentiating between better quality and services that offer unique features to the customers compared with the generic quality of its competitors. Starbucks provided more options in coffee than any of its competitors globally. But due to the disruption in the supply chain during the Russia-Ukraine war, it was not easy for the company to keep running their corporations as the resources were not easy to allocate. There would be multiple treaty restrictions and heavy import duties on the borders of Russia due to the war. It was also not functional for a multinational corporation like Starbucks to keep running their operations while facing losses from the war. They are known for providing the risk quality of coffee in a number of options to the customers globally but the customers have to choose between uncertainty and safety.

Market focus

Starbucks had to leave Russia because they had no brand presence in the country due to the bad publicity and bad influence from the Russian politics. The company had to stop operations in Russia and was one of the largest corporations that withdraw from the market because the country was invading Ukraine. Starbucks wanted to support the people of Ukraine during the war by showing that they are not going to support the economy of Russia anymore. The company completely withdrew from the Russian market without leaving any brand presence in the country. They suspended almost all of their business in response to the issues in Ukraine which haunted the shipments of Starbucks products that were sent to Russia (Tsai, et al. 2020). The company entered the country in the year 2007 and set up around 130 stores all over Russia. The company also employed more than 2000 employees, whom the company held to get a new job during the time of war. It was not easy for the company as well as for the company to cut relations abruptly.

How Starbucks manages the paradox of localisation and globalization

The company has to keep offering its production services by also meeting the image of a global brand. The company currently represents one of the largest sellers of coffee in the world and has established itself as a successful global firm. There are a lot of other factors in play that has helped Starbucks to become a global coffee leader. The company started its global expansion by moving its businesses to Japan and other Asian countries like China and Korea later on which proved to be a huge success for them. By the time they ventured into the new markets internationally the company was already fishing for some serious issues in the US in terms of international culture. It was really difficult for them to enter the Chinese market as they were completely unfamiliar with them and the communist party or not easy on the policies of the company. As China does not have a culture related to America. Asian countries usually preferred the consumption of tea over coffee so this was a huge challenge for the company to enter into global markets in Asia. Because of 2014, the company was able to establish more than 1300 stores in China alone offering different menus for each country. Starbucks has been able to find traditional ways to serve local customers and provide them with options in large groups.

Question Two: Building on Core Competences & Dynamic Capabilities

Core competencies

The core competency of Starbucks relies on the brand name they have and the options they serve in coffee around the world. Starbucks has tried to reduce the risk in the supply chain by employing successful ways to operate in the segment in which they are already specialized. The company reduces their risk by finding the core competency which makes them what we need from the competitors. They had a business model which was difficult for the competition to imitate.

The core competencies' first hours can be defined by the high-quality coffee day provided to customers at accessible locations around the world (Xinyue, et al. 2022). The coffee provided by them is usually affordable for the customers and community to share a beautiful drinking experience at Starbucks. Starbucks also offers a variety of choices in coffee to customers. The competitive advantage is based on the quality service and culture of Starbucks that controls every important aspect of the business starting from the high-quality coffee to the design of their stores. They also have a huge influence on the suppliers by ensuring a competitive pricing policy and offering superior quality products. These policies have established Starbucks as one of the greatest competitors in the market and due to this the company is constantly able to improve its menu and sell energy drinks as well.

Dynamic capabilities

The operation of Starbucks in the UK usually includes the tables, human resources, the store and the coffee machine. It represents the basic state of operation that is able to justify the needs and demands of the customers. But this is not enough to cater to the demands of the customers as well as compete with large competitors at the same time (Musonera, 2021). Therefore it requires the company to utilize a set of specific resources in the market of the United Kingdom by implementing a design of shops offering a wide range of options in coffee and offering loyalty cards to the customers. These policies have made Starbucks stand unique in front of the competitors and customers choose them over the other players in the market. Starbucks was able to generate a revenue of around 13.3 billion dollars to improve the contribution of its financial system in the UK. The company also entered the market of selling juice by acquiring a company called Evolution fresh. This increases the range of their product offerings by introducing different products in their product line (Bo?an, 2021). The company also added blond roast in their coffee options which increased the range of its products. This led to the initiation of multiple corporate strategies and partnerships with multinational organizations and non profit companies that help Starbucks to stay relevant even during time of distress.

Critical evaluation of the benefits and limitations

Organizational leadership perspective

Organizational leadership is a complex element in the organizational structure of any company. A leadership style is never the same in different companies as advertised from one company to another and there are various roles and responsibilities that are dynamic according to the environment. Organizational leadership in the environment takes time away from the employees in performing the tasks that are actually important for the business (Valente and Atkinson, 2019). This reduces the productivity of the employees and the time is spent on communicating with clients and doing the sales. The most important part of a management is to understand the business and help them run strategically. It also leads to the clash between the different opinions and a purchase of leaders in an organization. The advantages of this approach is that it leads to increased productivity if the leaders are able to delegate the task efficiently in their organization. This also helps to boost the motivation and morale of the employees by acknowledging their contribution made in the growth and success of a company. By doing this the workers try to work harder for growth.

Organizational dynamics perspective

The dynamics of an organization can be stated as the process of strengthening the resources and performance of an employee by managing the learning and business practices in a better way. A leader knows the essential part of running a profitable company and the importance of human relationships within it. The essential elements require the planning of management to define the departments and divisions and execute the goals to implement the delivery bills on the basis of skills and schedules. It also includes innovation in the performance of an employee and controlling the resources to establish data monitoring.

The ability of the CEO to develop the competencies and capabilities crucial for the organization’s survival and growth

The CEO of Starbucks has outlined a vision for the development and growth of the company by focusing on creating value for all the stakeholders and believing that the growth of the company must be relied on doing right for the people and the planet. The CEO also gave updates related to the present model of growth and development and how it will drive consistency and predictable sales growth by increasing the value for the stakeholders.

Question Three: Personal reflections and reflections on learning

The assessment helps to develop a basic understanding of the international business operations of stairs and how the different approaches of globalization and adaptation of local behaviour affect them. It also relates to the core competencies that Starbucks has in the market which makes them apart from its competitors. The companies are able to manage the social relationship with the customers as well as keep consistent profits for the survival of their growth. The vision of the company is to create an impactful experience for the customers while also serving the planet at the same time. The leadership system at Starbucks refers to the full film of objectives for various stakeholders including the employees and the customers. Nobody is given preference over the other. This has helped the company in adapting to customer behaviour and fulfilling the requirements to increase the overall value in the market.

References

Ft.com (2022) Starbucks chief bullish as crisis engulfs smaller coffee shops Cited from: https://www.ft.com/content/ab959c91-7ef2-44d7-bf8c-d03718ae5393 [Accessed on 16th November, 2022]

Musonera, E., 2021. STRATEGIC MARKETING CASE ANALYSIS: STARBUCKS. Journal of Business and Social Science Review, 2(11), pp.12-22.

Tsai, P.H., Lin, G.Y., Zheng, Y.L., Chen, Y.C., Chen, P.Z. and Su, Z.C., 2020. Exploring the effect of Starbucks' green marketing on consumers' purchase decisions from consumers’ perspective. Journal of Retailing and Consumer Services, 56, p.102162.

Valente, A. and Atkinson, D., 2019. SUSTAINABILITY IN BUSINESS: HOW ESG CAN PROTECT AND IMPROVE FINANCIAL PERFORMANCE. Economic and Social Development: Book of Proceedings, pp.234-245.

Rodríguez-Fernández, M., Sánchez-Teba, E.M., López-Toro, A.A. and Borrego-Domínguez, S., 2019. Influence of ESGC indicators on financial performance of listed travel and leisure companies. Sustainability, 11(19), p.5529.

Tamayo-Torres, I., Gutierrez-Gutierrez, L. and Ruiz-Moreno, A., 2019. Boosting sustainability and financial performance: the role of supply chain controversies. International Journal of Production Research, 57(11), pp.3719-3734.

Bo?an, E., 2021. A review of prominent theories in perceived CSR-employee outcomes link in hospitality literature. Journal of multidisciplinary academic tourism, 6(2), pp.99-105.

Kiarie, J., Kirori, G. and Wachira, D., 2021. Influence of Point-Based Program on Financial Performance of Selected Firms in the Service Industry in Kenya. American Journal of Finance, 6(1), pp.42-55.

Sinha, R., Ganatra, V., Pandey, P., Kee, D.M.H., Lekha, G.S., Kumar, N., Kew, S.D., Dhupad, A., Nair, R.K., Tenh, Y.Y. and Yue, H., 2021. Impact of Covid-19 on business performance: A case study of Starbucks. International journal of Tourism and hospitality in Asia Pacific (IJTHAP), 4(2), pp.13-27.

Abou Kamar, M. and Alsetoohy, O., 2021. Franchisee-franchisor relationship quality and its impact on restaurants' operational and financial performance: An application of Leader-Member Exchange Theory. Journal of Association of Arab Universities for Tourism and Hospitality, 20(4), pp.1-24.

Azharuddin, M., Kee, D.M.H., Hafizzudin, M., Fitri, M., Zakwan, M.A., AlSanousi, D., Kelpie, A. and Kurniawan, O., 2020. Becoming an international brand: A case study of Starbucks. Journal of the Community Development in Asia (JCDA), 3(1), pp.33-43.

Xinyue, O., Qiao, L. and Yang, C., 2022, July. Research on Financial Risk Management in the Coffee Industry under COVID-19. In 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022) (pp. 3-9). Atlantis Press.

Yan, Y., 2022, July. Correlation Analysis of Stock Returns and Financial Indicators of Starbucks Corporation. In 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022) (pp. 370-374). Atlantis Press.

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