Globalisation

The globalization is the process of economic integration of countries, through the increasing flow of goods, services, capital and labour. (Stiglitz, 2003)

But do we clearly realise what is globalisition?

Globalisation characterized by the following processes:

1) Spread of telecommunications and information technology;

2) Reduction of national barriers for trading and making investments;

3) Increase cash flow and interdependence of financial markets.

Globalisation really promotes the growth of human mobility, however migration control now restricted. Global alliances between companies are becoming increasingly common. With a computer you can now communicate with people all over the world. Finally, the recent financial collapses in Asia and Latin America have demonstrated a growing financial and economic interdependence.

We have a lot of advantages of globalisation.

1) Increased mobility and accelerated communications. Despite of increasing in gap between reach and poor, globalisation gave us Internet that made our communications much easier. Also all this technological progress makes simpler all communication in different ways. Lets for example take traveling. Now planes are fast and comfortable. There are even some very cheap airlines.

2) Globalisation can lead to improvements in efficiency and gain economic welfare. Because of improvement in technologies, communications and transporting system job can be done easier, with better quality, and faster (that can lead to more work done, hence more wealth).

3) Cheaper prices. Now boarders are open to foreign companies. That will lead to bigger competition and as a result prices are falling down. Competitive markets reduce monopoly profits and incentivize businesses to seek cost-reducing innovations and improvements in what they sell.

4) Deeper relationships between markets across borders enable and encourage producers and consumers to reap the benefits of economies of scale. It happens on the market because there a lot of companies who are benefiting from economics of scale. So other companies can use there cheap services or products to make new ones and save money. 

However globalisation has disadvantages. Lets focus on them more closely.

1) States losing their sovereignty. Government power has reduced by huge transnational companies on decisions that can affect people wealth.

2) Focus on economy. Economy has become more important than social and politics. This happened because private firms and international local and regional intergovernmental organizations take a leading role in public administration.

3) Loss of culture. Because of globalisation and open borders countries lose their originality. For example traveling all over the world you will see same restaurant chains (McDonalds) or the same museums (Madame Tussauds).

4) Disparity. Developed countries use countries with cheap labor force to produce goods. For example Adidas that is made in Indonesia because of cheap labor force there.

5) Unemployment. Because of open borders companies can easily change their locations. So most successful will move to developing countries and all investments and job places will move with them. That is will be a reason why rich countries become richer and get rid of unemployment and poor countries will become poorer and will suffer from unemployment. For example, Apple, which is returned productions of Iphone back to America.

From the all things considered, I would like to assert that globalisation is globally good. All its benefits are covering disadvantages. Every one gains benefit of it every single day. It makes our life easier, economy more efficient and more power has given to the private firms. It has disadvantages, as any other thing in this world. Nothing can be ideal but it very important point that by all improvements that globalisation brought to the world it improved every single part of our lives.

PESTLE analysis for Coffee industry

Operation of successful business has to be based on well-done analysises. Especially, it is a significant aspect for international businesses because it gives evidences for decision making. So, in this post I would like to discuss the PESTLE analysis and apply it to coffee industry.

Just for remind yourself, PESTLE analysis is an analytical tool for strategic business planning. This analysis is a strategic framework for understanding external influences on a business.

Political
According to the policy, there are could be barriers to open stores in other countries because of bad relationships between them. Also the reason of problems could be the changes of trade law by local government because of unstable political situation inside of country.

Economical

Coffee industry also affected by economy. It become expensive to open stores and buy new equipment in different regions the reason of it is rise of local currency exchange rates. 

Social

It might be risky for branching stores in the new places (countries) because potential customers may prefer local coffee shops. Moreover, there is a possibility of boycott, eg. in 1791 in England was the boycott of sugar produced by slaves, as a result of it sales dropped by between third and a half.

Technological

Consumers are less prone to buy coffee in cafes. The reason of it is that currently a variety of Hi-tech equipment and diversity of ingredients are easily accessible in shops that gives opportunity to create as tasty coffee as sold in coffee shops. Eg. Coffee machines ‘Nespresso’. So, the technology developing may affect demand of the product.

Legal

The fact of introduction of policies and regulations by health authorities on caffeine production and consumption leads to the new standards of product quality that companies will need to achieve. Also business may face problems with the licensing regulations related to the industry.

Environmental

It directly depends on its suppliers. There is a probability of poor land productivity because of the environmental disasters in countries producing coffee beans such as earthquake, drought, and poor harvest. All things mentioned influence the quality of product consequently impact on its realisation as well.

International Business

International business includes all commercial transactions that take place between two or more regions, countries and nations beyond their political boundaries. It is not a new phenomenon for people. It exists since the antiquity. One of the most famous examples, which became the fundamental for trading relationships between countries, is the Silk Route.    

Each business has an opportunity to become global. There are two types of strategies:

Internal Strategies

   1)    Exporting is a selling good to customer in another country. It is a relatively low-cost activity to get involved in international business and expand profit. However, The business is further depended on the fluctuation of transportation costs. So, high transportation costs can make such business uneconomical. e.g. International Precious Metals inc.

   2)    E-commerce. The way of buying and selling products through the Internet. This method is chiper, but also has a negative side. There is a probobility of online fraud that leads to loss money and goods simultaneously. eg. Amazon.

   3)    Direct investment when entrepreneur establishes operations in another country. This is expansive process that is a disadvantage.

     External Strategies

   1)    Franchasing when a franchisor allows a franchisee to trade under its name for the percentage of its profit. It is a fast way to expand by multiplying the number of locations through other people’s investment. That allows business to reduce influence of competition and gives opportunity to focus on changing market needs. From the other hand, the is a big risk that the name of a business will be spoiled by misfits. e.g. McDonalds, Costa.

   2)    Strategic Alliance when several businesses share human resources and financial resources on a project. It gives opportunity to a business to reach new markets. Entering a strategic alliance will automatically increase awareness of a brand among an entirely new market. In addition, it helps to access to new customer base. However, there can be some challenges with finding a partner. Choosing the wrong partner can be damaging if it is not able to contribute to the growth of your business.

             Local businesses are easier to manage. There are a lot of risks of operating international business is because to become international each company has to adopt to the rules and laws of location where it want be established. Also there can be high exchange rates that leads to reduction of business. Local businesses do not face such problems as international, for example managment challenges, it is hard to control each store all over the world. However the significant point for international business is a profit. It is much higher .

             In my view, the best way to go global is Franchising. Business almost do not need any extra spandings on it. It is a quick way to create a well-known brand through the people's investment.

Organisations and strategy

Strategy is the thing that every year organizations spend on millions of pounds.

There are several definitions of strategy:

 

Mintzberg (1972) defines strategy as ‘a pattern in a stream of decision’.

Chandler (1963) defines strategy as ‘the determination of the long run goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals’.

Johnson and Scholes (2011) claim that strategy is the long-term direction of an organisation.

According to Chandler’s definition, it is formal and rational. He gives a clue of the steps an organisation has to do. In other words there is a planning approach. However, Mintzberg’s definition is more restrained and based on learning approach. 

	Planning	Learning
Approach	Prescriptive	Descriptive
Content	Analytical tools	Limited use of tools
Nature of processes	Formalised, systematic, top down	Adaptive, top down and bottom up
Outcomes	Lots of planning and assumption that plans are achieved	Plans made but it is accepted that not all are achieved, some may emerge
Context	Stable environment, assumes the future can be predicted	Future unpredictable, complex, dynamic

PESTLE analysis is a strategic framework for understanding external influences on an organisation. Businesses could increase its opportuninties and drop the threats by knowledge of these external factors of influence.

PESTLE analysis helps to identify what are Political, Economic, Sociological, Technological, Legal and Environmental factors have impact on business.

          ·        Political factors

       - Government policies
- Trading policies
- Wars and conflicts
- Corruption

·        Economic factors
- Inflation
- Industry growth

·        Sociological factors
- Demographics
- Consumer attitudes and opinions
- Cultural Taboos

·        Technological factors
- Research and Innovation
- Information and communications

·        Legal factors
- Legislation
- Health and safety regulations

·        Environmental factors
- Environmental regulations
- Ecological regulations

Porter's Generic strategies

There are three strategies such as Cost Leadership, Differentiation and Focus. These strategies used by businesses for achieving competitive advantage.

      1.     Cost Leadership

The target of this strategy is to become a lowest cost producer in industry. It targets a broad scope. Likely aspects are high level of productivety and capasity utilisation. Eg. Wal-Mart.

      2.     Differentiation

This strategy aimed to differentiate its product to compete more successfull. Firms create unique resources to sutisfy customers needs. Companies that have thriving differentietion strategy such as BMW Group Automobiles which upgrades car because of personal desires of customer that may be anything, Nike which gives opportunity to its customer to make their own sneakers by choosing colour and unique inscription.

3.    Focus 

Focus strategy concentrates either on market segment with narrow scope or on mass market with broad scope. With regards to narrow scope, firms operate on certain niche of market.  The choice of focusing on low prices or differentiation depends on demand of this segment, eg. PepsiCo has a strong competitive position in the beverages segment. According to broad scope, there is the same situation but firm’s choice based on needs of mass market. For example Apple inc. aims the mass market by iPods and iPhones, simultaneously it diversifies this with design and branding. 

SWOT analysis & Porter's 5 forces

In this blog I would like to discuss SWOT analysis and Porter’s five forces. These are two significant methods that valuable to analyse and develop business strategy.

With regards to SWOT, it is a guidance, which gives opportunity to identify positive and negative positions INside your organisation and OUTside of it. Evaluation of the Strengths, Weaknesses, Opportunities, and Threats can be carried out not only for organisations but for a product, place, industry or person too. Also it could be effective at any stage of effort. SWOT analysis may be used to the following things: the first one is investigation of possible solutions to problems, secondly to do any decision-making when objective has been defined.  

This video involves a simple explanation of SWOT that gives a chance to better understand the idea.   

To give a practical example I have done the SWOT analysis to Apple Inc.

Internal		External
Strengths	Weaknesses	Opportunities	Threats
1.     Customer loyalty       2.     Brand awareness and reputation       3.     Successful marketing and advertising campaign	1.     Declining market share 2.     High price 3.     Changes in management	1.     High demand of IPhone 5 and IPad mini 2.     Growth of tablet and smartphone market	1.     Rapid technological changes 2.     Price pressure from Samsung 3.     Tax increases

According to Porter, the competitiveness of an industry is based on 5 factors. It does not enough to look only at direct competitors. There is an importance to consider four other factors, such as Threat of substitute products or services, Bargaining power of suppliers, Bargaining power of customers and Threat of new entrants. The level of certain industry identifies through the consideration all of these points. 

Example: Airline Industry.

1. Threat of New Entrants.
    This aspect has a low threat. There are low switching costs between brands; consumers tend to choose well-known companies.

2. Power of Suppliers.

    Currently, there are two manufactures Boeing and Airbus. Moreover, most firms have long-term contracts with their providers. So it has a high threat.

3. Power of Buyers.

    Firms usually occupy the certain niche of market, e.g. British Airways (it is a high price, service and refreshments during flights), but EasyJet (low price, no business class). So, each company has loyal customers. However, often purchase affected by time of traveling and name of airline does not make sense. There is a medium level of threat.

4. Threat of Substitutes

   This industry has a medium level because of existing alternatives such as car, train, and bus. However, planes stay the fastest way to achieve a destination.

 5. Rivalry among Existing Players

     The rivalry of existing firms is high because customers have a great amount of choice. The number of competitors stays the same during a long time.