This is a report on the international dimension of Costa Coffee and Coffee Aroma.

5. More Business Opportunities: A CSR program requires an open, outside oriented approach. The business must be in a constant dialogue with customers, suppliers and other parties that affect the organization. Because of continuous interaction with other parties, your business will be the first to know about new business opportunities.
6. Long Term Future for Business: CSR is not something for the short term. It’s all about achieving long term results and business continuity. Large businesses refer to: “shaping a more sustainable society”.

This helps Costa in building a good brand image. So they might not lose their consumers. Consumers believe that they will not be cheated so they visit Costa more often and suggest their friends to do so. If Costa takes part in social services then consumers would want to be a part of it to help out the cause. This leads to an increase in the sales of Costa’s coffee.

• Type of competition: Costa faces perfect competition. The Major competitors of Costa are Starbucks, Café Nero, Dunkin Donuts and Caribou Coffee. Perfect competition is a situation in which there are lots of buyers and sellers of a product. Perfect competition describes markets such that no participants are large enough to have the  to set the price of a homogeneous product. Because the conditions for perfect competition are strict, there are few if any perfectly competitive markets. Still, buyers and sellers in some -type markets say for  or some financial assets may approximate the concept. Perfect competition serves as a benchmark against which to measure real-life and  markets. Generally, a perfectly competitive market exists when every participant is a "", and no participant influences the price of the product it buys or sells. Specific characteristics may include:

• Infinite buyers and sellers – Infinite consumers with the willingness and ability to buy the product at a certain price, and infinite producers with the willingness and ability to supply the product at a certain price.
• Zero entry and exit barriers – It is relatively easy for a business to enter or exit in a perfectly competitive market.
• Perfect factor mobility - In the long run  are perfectly mobile allowing free long term adjustments to changing market conditions.
• Perfect information - Prices and quality of products are assumed to be known to all consumers and producers.
• Zero transaction costs - Buyers and sellers incur no costs in making an exchange (perfect mobility).
• Profit maximization - Firms aim to sell where marginal costs meet marginal revenue, where they generate the most profit.
• Homogeneous products – The characteristics of any given market good or service do not vary across suppliers.
• Non-increasing returns to scale - Non-increasing  ensure that there are sufficient firms in the industry.

In the short term, perfectly-competitive markets are not  as output will not occur where  is equal to , but , as output will always occur where marginal cost is equal to , and therefore where marginal cost equals . In the long term, such markets are both allocatively and productively efficient.

Under perfect competition, any profit-maximizing producer faces a market price equal to its . This implies that a factor's price equals the factor's . This allows for derivation of the  on which the neoclassical approach is based. (This is also the reason why "a  does not have a supply curve.") The abandonment of price taking creates considerable difficulties to the demonstration of existence of a  except under other, very specific conditions such as that of .

The Major competitors of Costa are Starbucks, Café Nero, Dunkin Donuts and Caribou Coffee. Costa is the second leading brand of coffee of the world, first being Starbucks. Costa is the leading brand of coffee in the UK.

Market Segmentation:

• While evaluating their consumer market the conclusion was that the ideal consumer’s economic profile will be:

• Upper Middle Class
• Privileged Class

• While the age demographics will be:

• Students and Youngsters
• Professionals
• Families
• Mature Consumers

• Gender and Ethnic/Religious Background was researched to have minimal or no effect on the choices concerning coffee made by consumers and their patronage of coffee houses.

As Costa is a luxurious brand it segments its market to the Upper Middle Class and Privileged Class. Costa is for students and youngsters who want to hang-out and have fun, so Costa creates a friendly environment for them. Costa even creates a peaceful, friendly and relaxing environment for mature consumers and families. It provides free Wi-Fi for the youngsters, students and professionals so that they can continue their work if they want to.

I have chosen Coffee Aroma for the investigation of a European business. Coffee Aroma is a well known business in UK, now spreading its market out of UK. Coffee Aroma has been making a splash – and has been voted the 5th best coffee shop in the world by .

• Name of the organization with European presence: Coffee Aroma was created in 2005 by Richard Teasdale who says “we are coffee fanatics! We aim to provide our customers, staff, and community with an unparalleled and complete coffee experience in an environment steeped in understanding, knowledge, skill, service and mutual respect.”
• Operating Market: The market for Coffee Aroma is UK. It is situated in 24 Guildhall Street, Lincoln. So this location is the operating market of Coffee Aroma. Opening soon in Dublin, Ireland.
• Industry: Hospitality.
• Main Activities: Serving coffee, hot drinks, beverages, sandwiches and subs.

• Legal Format: Coffee Aroma is a private limited company (Ltd.). A type of  that   to its  but that  certain  on its . These restrictions are spelled out in the company’s  or  and are meant to prevent any  attempt. Limited liability - is a form of business protection for company shareholders and some limited partners. For these individuals the maximum sum they can lose from a business venture, into which they have contributed going bust, is the sum of money that they have invested in the company - this is the limit of their liability.

The major ownership restrictions are:

1. Shareholders cannot  or  their  without offering them first to the other shareholders for ,
2. Shareholders cannot offer their shares or  to the  public over a ,
3. The number of shareholders cannot exceed a fixed figure (commonly 50).

• Type of Business: Coffee Aroma is a B2C business. Business that sells products or provides services to end-user consumers. A firm operating in such a way can deal with consumers directly. Coffee Aroma can know the demand and their fluctuations quickly. This type a business understands the needs and wants of consumers better. So this way Coffee Aroma is closer to their consumers and consumers will be satisfied with Coffee Aroma and they will gain brand loyalty.

• Target Market:

• Age:

• Young adults–Nice place to relax, chat, chilly music and trendy coffees which present their lifestyle
• Middle age–Nice place to calm down, relax, chat, read a book and possibility for a small (healthy) snack with a great coffee

• Psychographic:

• Coffee lovers–Trendy, fresh, high quality, new developed coffee (some: fair-trade)
• Atmosphere lovers–A great third place

This kind of segmentation helps Coffee Aroma to understand their customers and provide coffee and their products according to their choices.

• Business Sector: Coffee Aroma is a tertiary sector business. The tertiary sector of the economy is the service industry. This sector provides services to the general population and to businesses. Activities associated with this sector include retail and wholesale sales, transportation and distribution, entertainment (movies, television, radio, music, theater, etc.), restaurants, clerical services, media, tourism, insurance, banking, healthcare, and law. In most developed and developing countries, a growing proportion of workers are devoted to the tertiary sector. Coffee Aroma is a food and beverage sector business. So quality food is very important for this business.
• Product Range:

• Aims and Objectives: Coffee Aroma aim to provide a fulfilling work environment for their employees and the highest quality products for their customers. Offering the highest quality product includes:

• Training the staff to become some of the most knowledgeable people in the coffee industry: Training and development can be initiated for a variety of reasons for an employee or group of employees, e.g.:

• When a performance appraisal indicates performance improvement is needed
• To "benchmark" the status of improvement so far in a performance improvement effort
• As part of an overall professional development program
• As part of succession planning to help an employee be eligible for a planned change in role in the organization
• To "pilot", or test, the operation of a new performance management system
• To train about a specific topic (see below)

Typical Topics of Employee Training

1. Communications: The increasing diversity of today's workforce brings a wide variety of languages and customs.
2. Computer skills: Computer skills are becoming a necessity for conducting administrative and office tasks.
3. Customer service: Increased competition in today's global marketplace makes it critical that employees understand and meet the needs of customers.
4. Diversity: Diversity training usually includes explanation about how people have different perspectives and views, and includes techniques to value diversity
5. Ethics: Today's society has increasing expectations about corporate social responsibility. Also, today's diverse workforce brings a wide variety of values and morals to the workplace.
6. Human relations: The increased stresses of today's workplace can include misunderstandings and conflict. Training can people to get along in the workplace.
7. Quality initiatives: Initiatives such as Total Quality Management, Quality Circles, benchmarking, etc., require basic training about quality concepts, guidelines and standards for quality, etc.
8. Safety: Safety training is critical where working with heavy equipment, hazardous chemicals, repetitive activities, etc., but can also be useful with practical advice for avoiding assaults, etc.
9. Sexual harassment: Sexual harassment training usually includes careful description of the organization's policies about sexual harassment, especially about what are inappropriate behaviors.

General Benefits from Employee Training and Development: There are numerous sources of online information about training and development. Several of these sites (they're listed later on in this library) suggest reasons for supervisors to conduct training among employees. These reasons include:

• Increased job satisfaction and morale among employees
• Increased employee motivation
• Increased efficiencies in processes, resulting in financial gain
• Increased capacity to adopt new technologies and methods
• Increased innovation in strategies and products
• Reduced employee turnover
• Enhanced company image, e.g., conducting ethics training (not a good reason for ethics training!)
• Risk management, e.g., training about sexual harassment, diversity training.

Coffee Aroma should refrain from such behavior and discrimination with their employees. Or else employees will not work efficiently and behave badly with their customers, which will result in losing brand image and sales/customers.

• Never EVER sacrificing quality: Coffee Aroma is in the business of serving food to their customers. In other words, they are providing a product (food) and a service (waiting on the customer). The quality of the food and service is defined as meeting or exceeding the expectations of the customer as if promised by Coffee Aroma. The food should be properly prepared and the service should be prompt and courteous. The benefit of quality food and service is that customers will come back and will recommend Coffee Aroma to friends.

Quality of food

There is artistry in the preparation of food. Some food can be prepared to be delicious, while another recipe can make a dish that is repugnant. Whether the food is a gourmet meal, a chocolate chip cookie or a hamburger, the recipe can make it a hit or a miss. But note that taste of the food is not the quality of the food. Coffee Aroma tries to provide the perfect quality food to improve their brand image and increase sales.

Fulfils specifications

The quality of a product is defined as whether it fulfills its stated and implied specifications. The customer expects the food to be what is promised on the menu, to be cooked and prepared properly, to be clean and to have the correct flavor. That is considered quality food.

Note that quality food does not mean healthy food or gourmet food. It is simply what was promised. If the customer sees an advertised picture of a delicious-looking bacon and eggs breakfast and then receives burnt crisps of bacon and undercooked eggs, he will not be getting what he ordered. It is not a quality meal, because it is not consistent with what is advertised. So Coffee Aroma has to provide as they advertized.

Consistent

When you eat at a McDonald's Restaurant, you can be assured that the quality of the food will be consistent in any McDonald's that you visit. It is what you expect and is considered quality food. Same way, Coffee Aroma is a well known brand in UK, so they have to assure that Coffee Aroma will not disappoint their customers.

Quality of service

Not only are people buying a meal in a restaurant, but they are also paying for a certain level of service. Quality service is typically that which is prompt and courteous. That is what customers expect. Exceeding those expectations with extra service is a plus and can overshadow mediocre food. If Coffee Aroma’s services are satisfactory then customers will start walking out and not visit their store anymore. This could be bad for Coffee Aroma’s image.

Friendly service

I've been to a number of restaurants where the waiters and waitresses where not only friendly, but they were also entertaining. They might come up to your table and sing a song or play a musical instrument. The novelty of the extra service could bring in more business. Such attitude and entertainment could be beneficial for restaurants like Coffee Aroma. Customers would have a smile on their face and recommend Coffee Aroma to their friends.

Extreme service

Some high-end restaurants have one waiter dedicated to one customer. That gives the customer a feeling of extreme service. Of course, the cost of the meal is higher to compensate for the extra staff. This would make Coffee Aroma’s customers feel special which encourages them to visit more.

Poor service

Customers may accept poor service if the food is excellent. A famous example was the "Soup Nazi" episode on the Seinfeld television show where people lined up to have delicious soup in a specialty restaurant, but the owner was extremely rude and would refuse to serve those who did not abide by his rules. This was a take-off on an actual popular restaurant in New York City, where the soup was good but the owner was surly.

But poor service can also discourage many customers from returning, even if the food is good. Popularity can be fleeting in such a restaurant, and Coffee Aroma would not want that.

Service to select customers

Sometimes service is only given to select customers. For example, I was traveling across the country and stopped in a small restaurant in Chelsea for lunch. They catered much to the highway traffic. The waitress was slow and rude. She acted like she didn't like to be bothered. But of course, it was assumed that I would probably never stop in there again.

But then an old cowboy came in and sat at the counter next to me. The waitress immediately brightened up, smiled and asked if he wanted the special. He was a local and regular customer, and it was worth her while to give him good service. Such behavior could be extremely bad for Coffee Aroma so they should supervise their employees and train them to treat all customers equally.

Benefits

A restaurant must seek to bring in customers and then satisfy them so they will return and will tell others about the place.

Word-of-mouth

A major goal of a restaurant is to get in customers. Location and advertising are major factors in drawing in people. But the main way to be successful is through repeat business and word-of-mouth advertising. A restaurant that is out of the way and has no ads can still be quite successful through word-of-mouth advertising.

Repeat business and referrals come from customers being very satisfied by the quality of the food and service. If good quality service and coffee and other food are provided then this would help Coffee Aroma to be “branded”.

• Creating a work environment that actively encourages personal growth in coffee knowledge:

• The conditions of the work environment will be regarded as important components of efforts to reduce exclusion. Action to support the ability of the workplace to receive and retain people coming from some form of exclusion is needed. Particular attention is to be paid to the psychosocial significance of the work environment. The economic benefits of a good and inclusive work environment are to be emphasized. Having a job is in itself often good for a person’s health, compared with being involuntarily excluded from the labour market. This is conditional on the physical and psychosocial work environment at the workplace being good. In the Government’s view, everyone who is willing and able to work must be given a chance to do so. Conditions in the workplace have central importance for reducing both the number of people in unemployment and on sick leave.
• The work environment as an important competitive and profitability factor is to be highlighted and thus strengthened. Initiatives to develop knowledge, to strengthen employer and product brands and the exchange of experience are to be prioritized in order to highlight and strengthen the work environment as an important factor for profitability and competition. A good work environment does not always automatically lead to profitability. But there is enough evidence to draw a positive correlation between a good work environment and important factors for profitability such as low levels of absence, high productivity, high quality and an enhanced product and employer brand. Therefore, in the Government’s opinion, there are strong incentives for employers to work for a good work environment. Central government initiatives will help to highlight these incentives.
• Awareness and knowledge of work environment issues will increase throughout society. To promote increased awareness and knowledge of work environment issues throughout society, initiatives to increase active involvement will be prioritized. Everyone concerned is to take responsibility according to their role. Management is to be well informed about the work environment. Work environment awareness in training and the dissemination of knowledge is to be prioritized. For the most part, employers have the ultimate responsibility for the work environment. When work environment measures are to be integrated into operations, everyone at the workplace should at the very least have basic work environment knowledge. Improving the work environment also involves how we relate to each other at the workplace. Issues of bullying, sexual harassment and, in certain cases, threats and violence are all included in this respect. An increased insight that everyone can contribute to improving conditions for a positive work environment for everybody is needed. To participate and influence, to be seen and heard, to be included in a community of work and feel appreciation from both bosses and colleagues are positive factors that must be included in systematic measures to improve the work environment. Managerial issues have great significance for the development of operations and it is vital that both prospective and current managers are well informed about work environment issues. Work environment education can be included in university and college courses. Research should also continue at many different universities and within different disciplines. There is however a need in this respect for some form of coordinating actor for the communication of knowledge.

This could be beneficial for Coffee Aroma. Coffee Aroma will have knowledgeable employees and will be saved from providing costly training and supervising to check if they are working efficiently.

• Providing each customer extraordinary service: The Restaurant Service is a very demanding and challenging industry. Based on statistics, a great number of restaurants usually fail within the first year. With all said this industry can be a very exciting and rewarding one if all the personnel involved continuously work on improving the service/s that they offer. Some of the ways or tips for improving restaurant service are as follows:-

• Ambiance/Décor: Potential customers who enter a restaurant are not just coming to eat. They expect a pleasant and relaxing atmosphere. They are seeking an experience. In the waiting area, seating should be available and if patrons have a waiting period of half an hour or more, perhaps, an inexpensive drink (non-alcoholic drink) could be provided. Effort should be made to have furnishings attractive yet functional. Although a restaurant is in located within, it would be very appealing to bring a little of the outdoors within. This could be done by decorating with green plants at strategic spots and a water fountain at the entrance. Piped background soft music is always appealing.
• Trained Staff: Waitresses/Waiters are very important assets to the restaurant service. They are the backbone of the industry. Sadly, many of them are not given the right compensation and respect. Therefore, many restaurants lose out on invaluable staff. Because of this, there is constant rehiring of staff that is hurriedly trained. It does not matter how great a meal is, if a waiter is impolite, that is what a patron will remember. Customers are looking for polite, friendly yet professional service from staff. Proprietors should make staff feel like they are a valuable part of the business. Then, they will have partners for the life of the business. It is a win/win situation for all.
• Healthy/Organic Food: Now-a-days, most people are trying to include organic foods in their diet. With the rise of obesity in society, everyone is counting calories. Customers should have the caloric information on meals if requested. Some customers are willing to pay the extra so as to receive food that is grown locally without dangerous chemicals and pesticides. They are seeking healthy yet delicious meals. Moreover, as the saying goes, "variety is the spice of life". At times, customers do get bored with the same dishes continuously offered. Therefore, it is a great idea that the chef uses creativity in the preparation of meals.
• Discount Day: Everyone likes something free at some point in their life. In order to attract customers, it is a great marketing strategy to offer a discount on meals during days when business is in a slump. Perhaps, the elderly could get a discount daily and/or children under 12 years old could dine for free.
• Use of Technology: For those restaurants who have not utilized the Internet, it would be an opportune time to do so. It would be to a restaurant's advantage to create an attractive web-site displaying some of its main dishes along with other pertinent information. Convenience is very important. Everyone is busy and is strapped for time. Some customers like the idea of making their reservations on line or ordering for delivery/pick-up. No doubt, sales will be increased by doing same.

All these factors help to improve the image of Coffee Aroma and help them become one of the leading coffee brands in UK and also increase sales. They can try to form a friendly environment this way the employees will be happy and customers will be satisfied.

• Being a valued part of the local community: Valued roles provide a common cause or focus for the community. The members develop a sense of pride and purpose in being a part of the community that bond and strengthen the community. The role is valued in a sense that it brings something to the wider community that it is a part of, as well as the members of the community. Valued roles are also about community leadership that is in touch with the community and can create a feeling of importance within the members. This way customers will think that Coffee Aroma cares about their environment and community which helps them build a good image for Coffee Aroma and many people will be interested to be a part of this so more people will visit Coffee Aroma.

• Contributing as a valued member of the world coffee community: While there are numerous benefits to contributing to the community's knowledge base, these are some of the benefits which we consider particularly relevant:

• Promote your unique skills, expertise and thought leadership and gain visibility for your published content (existing or new), while building your reputation and gaining the trust and confidence of the global Enterprise Architect community.
• Share your ideas and achievements, your challenges and success stories. Publish your papers and get valuable feedback.
• Communicate with your peers and develop valuable contacts and identify associated opportunities that are otherwise not available to the individual author.
• Assist in addressing the growing market demand for tool related support and build your brand, skill, expertise, product, service or organization awareness and market share.

This helps Coffee Aroma produce better quality coffee and improve their production techniques.

• Type of Competition: Coffee Aroma faces perfect competition. The major competitors of Coffee Aroma are Red Roaster, Whittard of Chelsea and Aroma Cafe. The degree to which a market or industry can be described as competitive depends in part on how many suppliers are seeking the demand of consumers and the ease with which new businesses can enter and exit a particular market in the long run. The spectrum of competition ranges from highly competitive markets where there are many sellers, each of whom has little or no control over the market price - to a situation of pure monopoly where a market or an industry is dominated by one single supplier who enjoys considerable discretion in setting prices, unless subject to some form of direct regulation by the government.

In many sectors of the economy markets are best described by the term oligopoly - where a few producers dominate the majority of the market and the industry is highly concentrated. In a duopoly two firms dominate the market although there may be many smaller players in the industry. Competitive markets operate on the basis of a number of assumptions. When these assumptions are dropped - we move into the world of imperfect competition. These assumptions are discussed below:

Assumptions behind a Perfectly Competitive Market:

1. Many suppliers each with an insignificant share of the market – this means that each firm is too small relative to the overall market to affect price via a change in its own supply – each individual firm is assumed to be a price taker.
2. An identical output produced by each firm – in other words, the market supplies homogeneous or standardised products that are perfect substitutes for each other. Consumers perceive the products to be identical.
3. Consumers have perfect information about the prices all sellers in the market charge – so if some firms decide to charge a price higher than the ruling market price, there will be a large substitution effect away from this firm.
4. All firms (industry participants and new entrants) are assumed to have equal access to resources (technology, other factor inputs) and improvements in production technologies achieved by one firm can spill-over to all the other suppliers in the market.
5. There are assumed to be no barriers to entry & exit of firms in long run – which means that the market is open to competition from new suppliers – this affects the long run profits made by each firm in the industry. The long run equilibrium for a perfectly competitive market occurs when the marginal firm makes normal profit only in the long term.
6. No externalities in production and consumption so that there is no divergence between private and social costs and benefits.

• Comment about the similarities and Differences between the businesses:

• Why do businesses become international: When a person decides to enter a product or service into the market, more often than not it will come into his/her mind to potentially expand onto a global scale and this is because it offers so many more luxuries and possibilities than working in just one nation.

• Growth and Expansion: When a new company enters a particular market; growth is always one of the basic aims. The growth of a business means the more renowned and recognised it is becoming wherever it may be that it is located - meaning having higher growth levels in more locations only means more success for business owners and the business itself and this is what most likely was the attraction for Costa Coffee and Coffee Aroma. No matter how successful a business becomes, owners will always be looking for opportunities to expand and if dominance and success has already been achieved in the business's home nation, then that is when businesses begin to look abroad for new these new opportunities and new markets, If the chance to expand your business's range arises, businesses must complete some necessary research to assess the risks and benefits that would come with selling globally. An example of the type of research that would need to be carried out is demand for the product/service being offered - if an established Russian potato company had the chance to expand to the UK, they would have to research to see if demand for potatoes in the UK was high to assess whether it could be seen as a huge benefit to the company or a massive risk in the sense that not as many people would buy them as people done so in Russia. The same would apply to both Costa Coffee and Coffee Aroma, before they decide to expand into a new country e.g. - India, it would be necessary and responsible to check if demand for coffee in Japan were high because if they weren't, then it would be a waste of time and money to try and develop there, along with it having a negative effect on their overall market share. If demand would be high, there would also be the need to check which are currently the fastest growing economies as this is a more suitable home for a new product to enter and would also enable the product/service to have a higher chance of success here. So for example, as can clearly be seen by their advertisements and prices, Costa Coffee target people who are unconcerned with price and more focused on the quality, in this case taste of their coffee so moving to a country with a slow economy such as Pakistan would be a disaster because simply the majority of people would not be able to afford to use the service.
• Raising Profits and Market Share: Out of all the reasons for wanting to expand onto the international scene, gaining higher profits and obtaining more market share are probably the most obvious. Put very simply, working in a multinational market as opposed to an individual country provides the opportunity of more customers - meaning the opportunity of more sales (turnover) and this in my mind was not doubt the reason for Costa Coffee and Coffee Aroma's wanting to expand onto a global and European scale. Along with this, expanding internationally gave Coffee Aroma and Costa Coffee the opportunity to work in a more demanding and competitive market as they will not only be battling for the most market share of a market in e.g. - the UK, they will be competing for the most market in a specific continent and on a world scale market which is likely to increase efficiency and work productivity of workers. To add to this, with the chance to increase sales will come the chance to cut costs and being able to achieve this whilst increasing revenue will generate large amounts of profit for both companies.
• Different Markets: One of the most important incentives behind any business succeeding is to make sure they give all consumers what they want, and to be even more successful give them what they want where they want it and that is the difference and without a doubt there main reason why global businesses are more successful than one-nation ones because even though both can give customers what they want, global organisations can give customers what they want anywhere around the world and the is the difference. Recently more so than ever, the market for many products is worldwide and that is why so many businesses today want to gain international status to make sure their product/service do not fall behind similar products in the same market. Obtaining an international presence has allowed Coffee Aroma and Costa Coffee to explore many different markets across a global scale and analyse which of those seen would most suit and give their good (i.e. coffee) being offered the most chance of success.
• Seeing a gap in the market: One of the main attributes of having a good business brain is being able to spot a gap in the market and being able to take full advantage. Many UK based companies are renowned for and very good at being able to spot a gap in foreign markets and this is a big factor as to why so many of them work internationally such as Costa Coffee and Coffee Aroma. When deciding to pick a gap from the global market or a continental market, it would make more sense and better opportunity for the business to sell it in a country that is rapidly developing.
• Protecting their market share: One of the differences between businesses with a local presence and businesses with an international presence is that local businesses only have one market to compete in, the national market (Costa Coffee and Coffee Aroma - England) they are involved in whilst international businesses have their own national market and the global market and this could be a factor into why so many business owners decide to experiment globally. Because the UK has such a massive economy and is a 1ST world nation, it will also be difficult for any type of product/service brand to dominate their market because it the UK, there will always be massive competition regardless of the business type. For this reason, so many companies are tempted to spread into other nations where the competition may not be as high in order to protect their overall market share as opposed to their British one. For example, if Costa Coffee only operated in the UK and they began to have a rapid fall in market share in the field they work, that is a rapid fall in their whole market share and that would be a very dangerous situation to be in, in regards to the security of future of the business itself. However, because Costa Coffee work in some many other countries such as Russia, USA, India, South Africa, Canada, Brazil, etc. this means their overall market share is much more protected. This is because before their success was solely dependent on their efforts in the UK, but now their overall market share is split and divided upon so many nations, the percentage of risk is far lowered. This means that even if their market share did begin to decline in the UK, this damage could be repaired by the success available in all the other countries they operate in and this gives their overall market a much more secure outlook, which gives the business as a whole a much more secure outlook.
• Risks in Different Countries: In every country across the world, the risks of certain products are highlighted in many different ways - radio, television, posters, etc. Risk exposure is one of the key elements that contribute to the fall in demand of certain products and because risk exposure is higher in certain countries than it is in others, many businesses rightly see it as senseless to expand into a nation where risks of the allocated product or service is widely known. An example of this could be cigarettes and tobacco. In Holland, the risk exposure of smoking has risen dramatically over the past year, as pictures of the effects it has had on real life human beings have been placed on cigarette boxes over the country and this has led to a reduction in demand because people are obviously emotionally affected by what they see and this causes them to make a decision. It has recently been known to people in the UK that this technique will be shortly introduced here as well and if it has the same effect, demand of cigarettes here are also set to be lowered instantly. This is why it would not be clever for a new let's say Romanian cigarette brand to expand to Holland or the UK because it is completely pointless to work in nations were demand of your product is falling and it would most likely be more effective to companies to work in countries where risk exposure is low to remove any chances of this affecting the product's chances of success in foreign locations. This is why many companies decide to stick to their home nations or nations very close by because the risk of moving far and failing can be too high and this is what risk exposure can do.

• Comment on whether the businesses meet their aims and objectives by being International businesses:

12.2 Research and Analysis of the Factors for Business having an International presence (Costa Coffee)

• Strategic Objectives: a strategic objective is one which has major long term implications for an organization, involves major resources and sets out an objective to be worked towards. Costa strategic objectives are:

• The goods or services Costa provide is based on raw materials that can be found mostly in overseas markets. For example, Colombian & Brazilian coffee beans. Cocoa from Ghana, etc.
• There are a lot of opportunities for Costa in foreign markets. Costa can sell into a larger market. The bigger the market the greater the opportunity for economies of scale. Different countries have different growth rates. Costa can re-launch the products in foreign markets that are maturing in the domestic (UK) market.
• Costa wants to overcome tariff walls. Tariff is a tax on the import of a product. Costa can round the tariff wall if they set up off shorts of their own companies in different countries.
• Costa wants to increase its profit margin. Costa to increase their profits have to go global the market is mature in the home country. It is possible to spread all sorts of fixed costs over large outputs. The following are the examples of the costs over the scale of production:

• Marketing and Advertising Cost
• Research and Development Cost
• Top Manager Salaries Cost

• Spreading risks over many countries and markets through the geographical spreading’s of production and sales, it is possible to reduce risks.
• Increased foreign competition acts as an incentive for Costa to increase efficiency and standards. The best form of defense is often attack. For instance, Starbucks, a US firm, is expanding into the European market then it makes sense for any European firm like Costa expanding in USA.

• Theory of Comparative Advantages: Comparative Advantage is a situation in which a country, individual, company or region can produce a good at a lower opportunity cost than a competitor. This explains why many companies are moving their factories to economies where wages are lower. For example; India and China. Having a comparative advantage is not the same as being the best at something. In fact, someone can be completely unskilled at doing something, yet still have a comparative advantage at doing it! There are a few advantages on focusing on the home market:

• It is easier to gain information about and thus understanding demand patterns.
• It is much cheaper to produce at home, supplies don’t have to come from far away and you benefit from having much lower distribution cost per unit as the cost of distribution goes up with distance.
• Marketing and advertising costs can be much lower because you don’t have to advertise in other languages, so this cuts down on packaging and promotional costs.
• You don’t have the cost associated with having to change currencies, for instance, Euros (€) to Pounds (£) or Dollars ($) to Yens (¥).

However, despite these benefits often there are greater rewards from trading internationally.

• Tesco is a famous retailing brand having stores around the world.
• Cadbury Schweppes sells chocolates and their confectionary all around the globe.

Comparative advantage is used to explain why specialization takes place in international trade. We assume that UK is more efficient at producing:

• Whisky
• Aircraft engines
• White Wine

And comparatively Italy is absolutely efficient at producing:

• Cheese
• Coffee
• Red wine

This shows that UK could specialize in whisky, aircraft engines and white wine and sell it overseas. And the same applies on Italy. These are the areas in which it has the greatest comparative advantage. In the modern business world companies concentrate on their ‘power brands’. These are the brands in which they have the greatest comparative advantage.

Costa specializes on making its own unique taste for coffee. It has been well in continuing this and has successfully attained the position of the second best coffee chains globally and best coffee shop of UK and most of Europe. It has willing and successfully helped poor countries like Ethiopia, Uganda, Costa Rica, Colombia, Vietnam and Guatemala. It is also helping out through its own foundation “Costa Foundation”. This helped to gain a good brand image and they also gained brand loyalty.

• Impact of host countries in ‘inviting’ Costa Coffee to set up and trade: A nation in which representatives or organisation of another state or country is present because of government invitation or international agreement. These are a few benefits gained by the host country:

• They can gain competitive advantage over other local organizations.
• They can assess the labour at a cheaper rate.
• They can also assess the resources of the country.
• Benefits such as tax relieve and infra-structure provided by the government can be enjoyed.
• Business goodwill is increased.
• Goods can be produced at a cheaper rate than producing at home country.
• New skills and knowledge can be developed.
• There will be creation of jobs in the local economy often with higher average pay rates.
• Cater to the wide customer base.

There are a few problems for host country in operating overseas market:

• It is difficult to build up an enterprise culture overnight. For Western countries’ setting up in a new economy has often been a frustrating business. There have been restrictions on what they can and cannot do.
• A lack of local knowledge can cause problems like how to modify a product to appeal to local taste.
• There are additional cost associated with product modification, packaging and marketing.

Costa has created a lot of jobs in countries like India and China where unemployment rate is quiet high. Costa has also provided with varieties and choices for consumers to choose from. Costa has launched new products to achieve the customer demands. By opening its shops in countries like Brazil Costa is able access the coffee beans more easily without increasing its transport costs instead reducing it.

• Incentives provided by the host country to set up and trade:

• Tax Incentive: Incentives that reduce the tax burden of enterprises in order to induce them to invest in particular project or sectors. They are exceptions to the general tax amount. These include reduced tax rates on profit, tax holidays, accounting rules that allows accelerated depreciation and loss carry forward for tax purposes and reduce tariffs on imported equipments, components and raw materials or increased tariffs to protect the domestic market for import substituting investment projects. Costa has to pay much less tax as it has opened its stores in the host country and brought a lot jobs for the people.
• Subsidies: A benefit given by the government to the groups or individuals usually in the form of cash payment or tax reductions. Costa has received lower tax rates from its profits.
• Foreign Direct Investment (FDI): FDI incentives are defined as any measurable advantages accorded to specific enterprises or categories of enterprises by a government in order to encourage them to behave in a certain manner. This includes measures specifically designed either to increase a rate of return on FDI undertaking or to reduce Costa’s costs or risks.

• Impact of business activities on competitors, customers, suppliers and the business itself:

International activity is bound to have an effect on competition. We can already see this in the UK for many years Boots was one of the UK’s most successful companies, known for pharmaceutical products that it makes such as Neurofen and Clearasil, and for its chain of pharmacies. Although Boots is a very big company by UK standards it is relatively small when compared with some huge international players.

This has been particularly true for Boots retailing operations. Today you don’t have to go to a chemist to buy Aspirin or some vitamin tablets. Instead you can buy them from the local supermarket. Big supermarkets like Tesco and ASDA are able to buy these medicines on a massive scale direct from manufacturers like Astra Zeneca. It can therefore buy in quantities perhaps ten times larger than Boots.

Competitor analysis according to Michael Porter’s five forces:

• Threat of new entry:

• High economies of scale (coffee import)
• Brand Awareness
• No special knowledge needed (using coffee machine)
• Low capital requirement

• Competitive rivalry:

• Mature market
• Many competitors with little differentiation (Starbucks, Nero etc.)

• Threat of Substitution

• Tea, Hot Chocolate

• Supplier power

• Low bargaining power cause many coffee bean producer (Indonesia, Brazil etc.)

• Buyer power

• Buying power of a single person is low, buy only little quantity
• Medium level of price sensitivity
• Low switching cost

There are a few advantages to the multi-nationals i.e. Costa Coffee operating internationally:

• Multi-national companies (MNC’s) like Costa are more protected from the risks and uncertainties of the trade cycle within their own economy.
• They benefit from the growing world market for goods and services. This is part of the process of globalization.
• MNC’s are response to increased foreign competition and to protect their world trade shares/world market shares.
• MNC’s benefit from being able to operate with reduced costs by setting up operating units close to foreign customers, it is possible to reduce transport costs. For example; setting up soft-drinks bottling and confectionary manufacturing plants in other countries.
• They can overcome tariff walls by serving foreign market.
• MNC’s can advantage of technological expertise by making goods directly rather than allowing others to do so under license. A typical licensing contract last for about 7 years and gives the licensee assess to patents, trademarks, etc in exchange for a fee or royalty.

• Effectiveness of international business:

• Costa coffee shops can be found in 25 countries and they’re now the second-biggest coffee shop operator in the world, with over 2,000 stores: more than 1,300 in the UK and more than 700 overseas. There are 95.13million customers in UK and 116.27million customers around the world (approx. figures of 2009-2010).
• The revenue of Costa Coffee £425m; in UK is £153.405m and £187.495m (approx. figures of 2009-2010).
• Costa Coffee, with underlying profits up nearly 42% to £27.8m, helped by its Ice Cold Costa campaign during the summer with new drink flavours and international growth. It opened 167 new stores during the half year, including the 100th in China.
• The net profit margin of Costa Coffee all around the world is 13.9% and the budgeted figure for 2011 was 21.2% (approx. figures of 2011).

12.3 Explore the dynamics of international organizations on “Costa Coffee” in a globally competitive environment

• The existence of the EU and its rules and regulations, e.g. trade, subsidies for farmers, taxes: EU law is divided into 'primary' and 'secondary' legislation. The treaties (primary legislation) are the basis or ground rules for all EU action. Secondary legislation – which includes regulations, directives and decisions – are derived from the principles and objectives set out in the treaties. The EU’s standard decision-making procedure is known as  (ex "co decision"). This means that the directly elected European Parliament has to approve EU legislation together with the Council (the governments of the 27 EU countries). The Commission drafts and implements EU legislation. The Treaty of Lisbon increased the number of policy areas where 'Ordinary Legislative Procedure' is used. The  also has more power to block a proposal if it disagrees with the .

To do well in the face of competition from new emerging economies, Europe must create the jobs needed by a dynamic, knowledge-based society. This requires investments in education and in science, as well as in employment policies geared to keep up with the pace of change and see the EU through the economic crisis.

Responsibility for policy in the field of employment, social affairs and inclusion is shared between the EU and its member countries. The EU:

• coordinates and monitors national policies
• promotes the sharing of best practices in fields like employment, poverty and social exclusion and pensions
• Makes laws and monitors their implementation in areas like rights at work and coordination of social security schemes.

Competition must be fair

Under EU rules, businesses:

• may not fix prices or carve up markets amongst themselves
• may not abuse a dominant position in a particular market to squeeze out smaller competitors
• Are not allowed to merge if that would put them in a position to control the market. In practice this rule only prevents a small number of mergers going ahead. Larger companies that do a lot of business in the EU cannot merge without prior approval from the European Commission – even if they are based outside the EU.

The large may not exploit the small

In doing business with smaller firms, large firms may not use their bargaining power to impose conditions which would make it difficult for their suppliers or customers to do business with their competitors. The Commission can (and does) fine companies for this practice.

EU investigations into anti-competitive practices are not restricted to goods. They also cover the liberal professions and services, including financial services, such as retail banking and credit cards.

No props for lame ducks

The Commission also monitors how much assistance EU governments give to businesses (‘state aid’), for example:

• loans and grants
• tax breaks
• goods and services provided at preferential rates
• Government guarantees which enhance the credit rating of a company compared to its competitors.

No state aid in any form may be given to ailing businesses that have no hope of becoming economically viable.

Exceptions that prove the rule

Some exceptions to the general rules are possible. The Commission can allow companies to cooperate in developing a single technical standard for the market as a whole. It can allow smaller companies to cooperate if this strengthens their ability to compete with larger ones. State aid will get a green light if there is a real chance that a business in difficulty – or a new venture – can eventually become profitable and if it is in the interests of the EU (e.g. by preserving or creating jobs).

The overriding considerations are whether consumers will benefit or other businesses will be harmed. The Commission often allows aid for research and innovation, regional development and small businesses, because these serve overall EU goals.

The benefits in practice

One of the European Commission's highest profile competition cases involved the US computer giant, Microsoft. The Commission fined Microsoft for its practice of bundling various types of software together in a single package. It decided that Microsoft had been unfair to consumers by depriving them of choice, keeping prices artificially high and stifling innovation in the software industry.

Intervention by the Commission has also resulted in cheaper cars for many people. The Commission’s efforts to bring greater transparency in pricing have meant that differences in pre-tax prices across the EU have narrowed considerably. Country-to-country price differences remain, because tax systems vary, but they are significantly less than before.

It is also thanks to the Commission that the way cars are sold and serviced now offers consumers more options. Multi-brand car dealerships are now possible, car dealers can operate in more than one EU country, and it is no longer necessary to be an authorized dealer to sell parts and carry out recognized repairs.

Checks and balances

The Commission's extensive powers to investigate and halt violations of EU competition rules are subject to judicial review by the European Court of Justice. Companies and EU governments regularly lodge and sometimes succeed in appeals against Commission decisions.

Committed to free and fair trade

The European Union is the world’s biggest trader, accounting for 20% of global imports and exports. Free trade among its members was one of the founding principles of the EU, and it is committed to liberalizing world trade for the benefit of rich and poor countries alike.

The trading problems for Costa Coffee within global environment:

• Uncertainty
• Organizations need guarantees that they will be paid.
• They want to know how quickly they will be paid (duration of payment).
• There may be concerns that goods will get to customers on time (availability of goods).
• There may be concerns about the quality of goods and services.

The UK also runs the Export Credits Guarantee Department (ECGD), the UK’s official export agency. This is separate government department that:

• Provides insurance. It insures exports against the risk of non-payment by overseas buyers for reasons such as insolvency
• Creates loan guarantees. It ensures that UK exporters are paid on delivery
• Reduces exchange rate risks. The ECGD can enable an organization to fix contract prices in a foreign currency when tendering for a contract and offer protection against exchange rate fluctuations.

Packages are normally despatched the same day, or next day if the order is placed after midday.

After receipt of payment orders are shipped via Royal Mail Standard, Recorded Delivery, Yodel 3-5 day service or Airmail if a European (E.U) delivery address is selected.

You can choose between 1st or 2nd Class, Standard or Recorded during the checkout process, and larger orders have the option of using the Yodel 3-5 day service, except for European deliveries for which Airmail is the only option available. 

Postage fees include handling and packing fees as well as postage costs. Handling fees are fixed, whereas transport fees vary according to total weight of the shipment. We advise you to group your items in one order. We cannot group two distinct orders placed separately, and Postage fees will apply to each of them. Your package will be despatched at your own risk, but special care is taken to protect your items and we use Jiffy Bags & sturdy boxes to keep them from being damaged.

We now deliver to the following European countries: Austria (EU), Azores (EU), Balearic Islands (EU), Belgium (EU), Bulgaria (EU), Corsica (EU), Cyprus (EU), Czech Republic (EU), Denmark (EU), Estonia (EU), Finland (EU), France (EU), Germany (EU), Gibraltar (EU), Greece (EU), Hungary (EU), Irish Republic (EU), Italy (EU), Latvia (EU), Lithuania (EU), Luxembourg (EU), Madeira (EU), Malta (EU), Monaco (EU), Netherlands (EU), Poland (EU), Portugal (EU), Romania (EU), Slovakia (EU), Slovenia (EU), Spain (EU) & Sweden (EU).

The Department of Trade and Industry (DTI) helps organizations who want to trade and invest overseas. To do this they have to set-up an organization is to support businesses in the UK Trade & Investment. The purpose of this organization is to support businesses in the UK who trade internationally as well as overseas enterprises who want to set up and develop their activities within the UK.

There are a number of key events and features of the EU:

• The Single European Act. The aim of the Single European Act was to kick-start the flagging process towards integration by setting and working towards a deadline for the completion of the Single European Market in 1992. It was also an exercise in tidying up loose ends. It was signed in 1986 by all the member countries and included provisions for some institutional changes (some of which were necessary to facilitate the spreading up of the decision making process to meet the single market deadline), some additional policies and a Treaty for European Political Co-operation. The object of a single market was to remove as many barriers to trade as possible. This way Costa achieves easier trading facilities and free trade to the members of the EU.
• Maastricht. This was convened as part of the on-going process of European Integration. Although the Single European Act went a long way towards establishing a single market and tidying up the various issues related to integration, it was not the finished product. At that time there were aspects of integration which were and still are incomplete and questions and problems over certain policy areas remain unresolved. The summit meeting at Maastricht was the culmination of these events and the agreements concluded at Maastricht formed the basis of the Treaty on European Union.
• European Monetary Union (EMU) –  The treaty on European Union prompted phrases that led to monetary union within the EU. This helped to increase the mobility of finance to the company and out of the company.
• The European Parliament – This is the only body of the EU whose members are directly elected by the citizens of member states. Seats are allocated to the population of each member state.
• The Council of the European Union – this is the EU’s main decision-making body. It comprises single representatives at ministerial level from each of the member of the countries. Each minister is empowered to commit their government to decisions that are taken.
• The European Commission – this makes policy proposals that are then presented to the Council of the European Union.
• The Court of Justice – based in Luxembourg, this makes sure that EU legislation is interpreted and applied in the same way in all EU countries.
• The European Court of Auditors – this checks that EU funds are properly collected and spent legally and for their intended purpose.
• Common Agricultural Policy – the creation of a common agricultural policy was proposed in 1960 by the European Commission. The six member countries wanted to intervene in agriculture to control how agriculture was organised and guarantee prices for goods. They wanted to increase productivity, ensure a fair standard of living for those within the European Union, stabilise markets and provide a secure availability of supplies, while providing the consumer with reasonable prices for agricultural products. The Common Agricultural Policy (CAP) is a system that maintains the prices of products by using subsidies to support production. Subsidies have helped to make EU countries self-sufficient in food. However, today agricultural subsidies in the form of payments to farmers represent around 44% of the spending of the European Union. These subsidies work by guaranteeing a minimum price for farmers for the crops they plan to produce.
• Taxation – In the European Union governments retain the sole right to maintain and set levels of direct taxes. These are the taxes they set for incomes and company profits. Instead, EU taxation policy focuses upon indirect taxes. In direct taxes include value-added tax and excise duties. It is argued that where VAT or excise duties are put on petrol, drinks and cigarettes, that they have the capability to distort competition in what should be a free market. Some of the EU budget is funded from VAT. By having a common approach to this it means that contributions to the EU are fairly distributed across all markets.

Costa Coffee achieves a few benefits from EU. EU encourages Costa to sell their products in the global market. This forces Costa to provide quality food and satisfy the consumers and never cheat then.

• The existence of the World Trade Organization (WTO) and its rules and regulations on the sector(s) of Costa Coffee: The General Agreement on Tariffs and Trade (GATT) was the predecessor of the World Trade Organization (WTO). The WTO was formed in 1944.The WTO has agreements on the following area:

• Goods: GATT was the forum where lower custom duties rates were negotiated as well as other barriers to trade across a whole range of areas from agriculture to textiles.
• Services: Banks, hotel chains, insurance firms and all other businesses that provide services are able to enjoy the same principles of free trade as those who trade in goods.
• Intellectual property: These are rules and agreements related to trade in ideas and creativity. Rules refer to copyrights, patents, trademarks, names, designs, trade secrets and so on.
• Dispute Settlement: The WTO has a procedure for resolving trade disputes and this is important as it provides a means for enforcing its rules in order to ensure that trade flows smoothly.
• Policy Review: This is designed to provide a better understanding of the policies that countries adopt and to assess their impact.

Costa Coffee’s existence in China (member of WTO): China, with its huge customer base and an ever growing economy is attracting companies from across the globe to set up shop. Many well known Western brands have entered China and many others are making a beginning. One thing that has emerged as a common factor from the experiences of all these companies is that China is a tough place for Western companies to do business in.

Many factors make the going tough in China but the most important one is the difficulty in understanding the local culture and preference of local customers. Being a quintessentially collectivistic society, China is completely different from the Western world and this creates some obvious challenges. In order to overcome this seemingly easy challenge, many companies opt for either joint venture or strategic alliance route to establishing their business in China. , the British coffee brand is the latest addition to the list of such companies.

Costa Coffee is part of the British leisure group Whitbread. With around 500 coffee stores in the UK and another 150 around Europe and the Middle East, Costa Coffee has been a brand to reckon with in that region. But compared to the global market leader  that entered China in 1998 and already has around 180 outlets in China, Costa Coffee entered the Chinese market in December 2006. Unlike Starbucks, Costa Coffee entered into a joint venture with the Yueda Group based in Jiangsu Province. The logic for such a partnership is quite simple - the Costa Coffee brand being a new entrant to the Chinese market would take a long time if it went alone but a partnership with a local company would allow Costa Coffee to leverage the partner's knowledge of the local market and customers. As attractive as it may sound, such partnerships do come with a price.

Costa's future in China will depend heavily on its partner. Currently, it is the Yueda group that will drive Costa's business. With its Italian image in Europe, Costa aspires to capture that very Italian aura in the Chinese market as well. But such a strategy raises a very crucial question about brand experience. One of the reasons that customers pay a premium to consume coffee at a cafe is for the experience. Chinese customers, especially in affluent cities such as Shanghai would aspire to identify with a global brand portraying a global image. Starbucks has been fairly successful in exploiting such a customer need.

Costa Coffee, with its Chinese partner, could face the risk of customizing the brand a bit too much. Such a step would jeopardize Costa's market aspirations. Even though the joint venture could allow Costa Coffee to understand the market faster, it would have to tread its path carefully.

It would be interesting to watch Costa's future path, given that Starbucks plans to expand in China very aggressively in the coming years and open thousands of new stores yearly. Who wins in the war between a global brand and a joint venture between a European brand and a Chinese company is ultimately for the Chinese customer to decide. But as long as Costa Coffee ensures that its brand essence and experience is not compromised, Starbucks can expect some competition.

• Cost implications of not meeting international agreements: If an organization such as WTO creates international agreements, it then has to set up a system of dealing with those who do not adhere to such agreements; so that where disputes between countries arise they can then be settled.

Settling disputes of trading countries and partners is at heart of the role of the WTO. Disputes within WTO countries are all about countries that have broken promises and not stuck to international trading agreements.

Put quite simply, a dispute arises when one country decides to adopt a form of trading that another WTO country feels is breaking a WTO agreement. The Uruguay Rounds introduced a structured way for dealing with such situations.

Settling disputes is all part of the responsibility of the Dispute Settlement Body, and this consists of WTO members. This body establishes panels of experts to consider a particular case. It then has the power to authorise retaliation which may have severe cost implications for a country that does not comply with ruling. There are two main stages:

• Stage 1: consultation for up to 60 days.
• Stage 2: up to 45 days for the panel to be appointed and 6 months for the panel to conclude.

At the end of the panel a final report is submitted to both sides in the dispute and then it is circulated to all WTO members. If the panel decided that the dispute does infringe an international trade agreement, then it will recommend what that country has to do in order to conform to the rules. If a country has done something wrong, then it is accepted that it needs to correct its fault. However, if it continues to break its agreement this may lead to trade sanctions, offers of compensation, loss of reputation or fines. All of these may have significant impact upon the ability of a country to trade.

• Opportunities created by increased international trade for the global community: Free trade exists when there are no barriers to trade. With free trade, individuals, organizations such as Costa Coffee and countries will specialise in the things they do best and will then sell the products of their labour. As we have seen, free trade is based on the principle comparative advantage, which states that “factors of production should concentrate on their best lines”. For example, the authors of a book concentrate on their writing and let accountants look after the accounts. This is because they are better at writing books than keeping accounts.

Some of the products imported into the UK should be produced in the UK (indeed, we might be better able to produce these goods than the countries we buy them from). However, it is far more sensible if we concentrate on producing those things we are best at doing, like scotch, whiskey or insurance services.

Under free trade, the argument goes that there is room for everyone to specialise in something. Less economically developed countries can specialise in growing the things their climate suits them for (such as sugarcane, tea, coffee and other products).

Trade liberalisation has improved economic situation for most countries. As tariffs and other barriers are removed, this provides some real trading opportunities for less economically developed countries in particular like Costa Rica and Colombia.

One argument for increasing international trade is that it creates jobs. Increasing exports to other countries as well as increasing imports from other countries helps to increase the supply of goods and services and this creates jobs both at home and overseas. If Costa opens a store in another country then they will need new managers and other employees, this will help the country in reducing their unemployment rate.

As we have seen, the principle of comparative advantage enables countries to buy goods and services more cheaply. It allows producers to sell such goods while at the same time freeing a country’s resources so that they can focus on doing what they do best. By doing this although trade may damage one industry such as textiles, what it might then do is provide many more advantages for another industry such as cars. So, although trade might damage a sector of an economy that is not that competitive, it provides many advantage and revenue-earning opportunities for other more efficient sectors of an economy.

A prime opportunity created through trade is to satisfy demands through imports. Importing allows other countries to supply consumers with goods that are cheaper to buy than if they were produced domestically. Importing allows consumers to eat bananas from Central America, eat kangaroo meat from Australia, wear Italian designer suits and drive Japanese cars. All of these products help provide consumers with greater choice and a higher standard of living.

The global community also benefits from trade as the process of trade and international specialisation reduces prices. Imports help to reduce inflationary pressures, allow industries to become more productive.

A key feature of globalisation is the trend towards a free flow of trade within a global economy. Globalisation reduces barriers and borders and expands economic freedom as well as raising and the standard of living of consumers.

For less economically-developed countries globalisation of trade offers organizations the opportunity to access foreign capital. It also enables them to access foreign technologies and the opportunity to break into global export markets.

Since the founding of GATT more than fifty years ago the world economy has grown six-fold and the level of global trade has expanded by more than sixteen times. In doing so, globalization has provided the opportunity for countries to improve the lives of their inhabitants across the world.

• The dangers of increasing international trade: Where there are many foreign competitors, it can be very difficult for infant industries to develop their market presence. In the area of new-technology goods these organizations may have considerable value for an economy, but simply find it impossible to compete because of foreign competition.

Sometimes foreign companies and organisations may receive benefits that UK companies might not have. For example, they may have subsidies or other government benefits and this distorts their ability to compete fairly.

Where an organisation exports a product at a lower price than it normally charges for the product on the home market, this is called dumping. The problem with the dumping of products on overseas markets is that it can damage domestic industries.

One pervasive problem throughout the world that distorts international trade is that of child labour. The main reason why children work is because of poverty. They serve as major contributors to the income of their families in less economically developed countries. Work is often seen as preferential to sending them to school, particularly where there are very few schools or a lack of quality education. In many instances, children work for long hours and for very little pay. Their working conditions are often very poor and provide them with a limited and difficult environment in which to live and work.

There are a number of arguments that emphasise the negative effects of globalisation upon the environment. For example, it is argued that:

• If businesses are allowed to locate anywhere in the world they will choose less economically developed countries where environmental standards are at their lowest.
• Where countries have attracted large overseas businesses to locate, they will not want to upset them by strictly enforcing environmental standards.
• As oil refineries, chemical plants and other factories locate themselves all over the world; this will lead to the build up of greenhouse gases and ozone-depleting chemicals.
• Countries are stuck with contradicting actions. They want to encourage investment and develop industries, but they also want to maintain their environment.
• Less economically developed countries do not show the kind of respect for the environment that more economically developed countries do.

12.4 Examine and evaluate the growth and influence of multi-national operations: This report on different firms form part of the series of case studies, which explores business practices across a variety of disciplines and business sectors. It looks at how the coffee company plans to grow further in both the UK and abroad, despite the threat of economic slowdown, by focusing on creating an authentic coffee experience and an ethical business structure. Key reasons to purchase this title:

• Gain insight into the methods used by important industry players to give them a competitive edge
• Identify specific areas for operational improvements
• Capitalize on the knowledge of experienced companies when entering a new niche or market

In the 1980's, the economist John Dunning developed a theory that explains why companies would invest abroad and become multinational corporations (MNCs). This theory was named the eclectic theory. However, today it is more widely known as the OLI model, due to the three factors that are thought to spike foreign investments:

1. Organizational Advantages
2. Location Advantages
3. Internalization Advantages

1. Coca-Cola is an example of a company with a significant organizational advantage. Its trademark is well-known and enough to sell soft-drinks in numerous countries across the world. According to , a professor in geographical economics at the University of Washington, organizational advantages also cover company specific factors such as product quality, delivered price, marketing sophistication, distribution networks, low-cost inputs and superior production technology.
2. Natural resources in Greenland are becoming easier to access. Mining companies locating there, such as Nuukfjord Gold, have a location advantage. Low wages, local tariffs and other trade barriers are also factors that would make it sensible to locate in a foreign country.
3. Internalization, i.e. owning foreign operations, is sensible when a company seeks to retain all expected profits or wishes to control the quality, marketing and local growth strategies. Being represented and taking responsibility abroad may also make it easier to sway local decision makers. Finally, according to the economists Jeff Madura and Roland Fox, having a presence in several countries can increase the knowledge of and access to new financing and investment opportunities.

Starbucks tried to enter India way back in 2006. In its first attempt Starbucks formed a joint venture called New Horizons, which is a 51:49 between Starbucks Indonesian franchisee VP Sharma and Future Group CEO Kishore Biyani. Foreign investment board of India has asked for further amends to the plan which Starbucks did not like. It quashed its India plans because of Indian bureaucracy. With coffee retail chains growing in India, Starbucks is finding it hard to ignore a lucrative market. After all once you get past the bureaucracy there riches are waiting in the form of Arabian wine.

Now Starbucks is looking for a new plan and a new partner.  It is rumored that Starbucks is in talks with Jubilant Group controlled by Shyam and Hari Bhartia. Jubilant Group is also the Indian franchisee for Domino’s pizza.

Why India and why Coffee?

Enough research has been done on why India is a great place to be. So I will stick to Coffee. The sector is believed to be at $150 million a year growing at 30% CAGR. India’s coffee consumption has increased to 94,000 tons a year from 55,000 tons in 1991 as per Coffee Board of India. Tea consumption is at 810000 tons in 2008 up from 520000 tons in 1991.

India is brimming with disposable income and hanging out in a Coffee joint is the latest fad which will not fade away anytime soon. People don’t go to a Coffee Day for a coffee but to have a conversation.

Competition

Indian market is dominated by Cafe Coffee Day, Barista Lavazza and Costa Coffee. Cafe Coffee Day leads with more than 1000 outlets, Barista has 200 outlets and Costa Coffee has 40 outlets.

Cafe Coffee Day, owned by entrepreneur VG Siddhartha has over 1000 outlets and plans to double it to 2000. Coffee Day hugely benefits from its 10, 000 acres of coffee plantations which provide 25,000 tons of coffee to its chain of cafes. There are around 120 CCD outlets in Bangalore itself.

Barista owned by Italian chain Lavazza bought a controlling stake in the coffee retailer from C Sivasankaran. It operates 200 outlets which heavily concentrated in the metros.

UK-based Costa Coffee for which RJ Corp — owned by Pepsi bottler Ravi Jaipuria — is the exclusive licensee operates close to 50 outlets and wary about its expansion plans. It wants to be only in metros.

Starbucks plans

The initial plan is to set-up shop in Delhi, Mumbai and Kolkata. South Indian cities like Bangalore, Chennai and Hyderabad are missing in its scheme of things. They should be on the list. Not because I live there but because you can’t leave out states/cities which produce the maximum coffee. Common sense says that leading coffee producers will be coffee consumers too. There are also plans to have Tea varieties available.

So Starbucks shouldn’t worry too much in getting their combination of tea or coffee right. It just has to get the location right, and pricing too.  

It is about time the organized coffee retailing in India got some stiff competition.

As a result of becoming a multi-national organizations receive a number of advantages:

• They are protected against the risks and uncertainties of the trade-cycle within their own economy. By spreading their sphere of influence, they are thus able to spread risks.
• They benefit from the growing world market for goods and services. This is part of the process of globalization (the rapid growth of similar goods and services produced and distributed by MNEs on a world scale).
• They can respond to increased foreign competition and protect their world market share. When other foreign multi-nationals start to compete in a particular MNE’s market, then it is time to expand into new markets.
• They can reduce costs. By setting up operating units close to foreign customers, it is possible to reduce transport costs (e.g. setting up soft drinks, bottling and confectionary manufacturing plants in other countries).
• They can overcome tariff walls by serving a foreign market from within. This is the major reason why so many Japanese car manufacturers have set up in the UK. This enabled them to operate within the European Union.
• They can take advantage of technological expertise by making goods directly rather than allowing others to do so under license. A typical licensing contract lasts for about seven years and gives the licensee access to patents, trademarks, etc. in exchange for a fee or a royalty. However, if instead the multi-national produces goods directly, the company will be closer to emerging technological development, enabling it to adapt new ideas itself.

Disadvantages include:

• Trade restrictions imposed at the government-level
• Taxes or tariffs imposed on imports from other countries
• Limited quantities (quotas) of imports
• Effective management of a globally dispersed organization
• Slow down in the growth of employment in home countries.
• Destroy competition and acquire monopoly.
• Technology designed for MNC's is for worldwide profit maximization not for the social welfare or development of economy.
• They could cause fast depletion of some of the non renewable natural resources in the host country.
• In order to alley the fears of host countries they need to:

• provide employment
• train managers
• provide products and services that raise the standard of living
• introduce and develop new technical and managerial skills
• increase productivity

Multinational companies (MNCs) are not without benefits, which may be to the government, the economy, and the people or even to itself. Cole (1996) stated that the size of multinational organization is enormous; many of them have total sales well in excess of the GND of many of the world's nations. Cole also stated that World Bank statistics of comparison between multinational companies and national GNPs shows, for example, that large oil firms such as Exxon and Shell are large in economic terms that nations such as South Africa, Australia and Argentina are substantially greater than nations such as Greece, Bulgaria and Egypt.

Other large multinational companies include General Motors, British Petroleum, Ford and International Business Machine (IBM). Some of the benefits of multinational companies are:

1. There is usually huge capital investment in major economic activities.
2. The country enjoys varieties of products, services and facilities, brought to their door steps.
3. There is creation of more jobs for the populace.
4. The nation's pool of skills is best utilized and put to use effectively and efficiently.
5. There is advancement in technology as these companies bring in state-of-the-art-technology for their businesses.
6. The demand for training and retraining and advancement in the people's education becomes absolutely necessary. This will in turn help strengthen the economy of the nation.
7. The living standard of the people is boosted.
8. Friendliness between and among nations in trade i.e. it strengthen international relation.
9. The balance of payments of nations in trade are improved on

In the words of Cole (1996), he stated that the sheer size (and wealth) of multinationals means that they can have a significant effect on host country. To Cole, most of the effects are beneficial and include some of the above or all. The Electronic Library of Scientific Literature (1996) explained the benefits of MNCs under a theory known as 'The Theory of Externalities'. The theory considers the benefits of MNCs from the point of view of those who maintain the importance of Foreign Direct Investment (FDI) as part of the engine necessary for growth. In the contribution of Davies (1989), he gave some theories on the benefits/advantages of multinational. Davies (1989:260) tagged this 'Economic Theory' and the multinational where he took a comprehensive and critical look at the benefits of MNCs.

More benefits came along with these people's theories and some are:

1. There is significant injection into the local economy in respect to investment.
2. Best utilization of the country's natural resources.
3. They help in strengthening domestic competition.
4. They are good source of technological expertise.
5. Expansion of market in the host country

Problems/Challenges facing multi-nationals

There is no company without problems it is facing. Whether an organization is big or small, there will certainly be some sort of problems or negative factor/influence militating against its survival or continuity. Weihrich and Koontz (1994) states that the operation of multinational companies needs to be weighed against the environmental challenges and most of the challenges being faced by multinational companies are:

1. There is usually acute shortage of manpower – people with lack of managerial and technical skills.
2. The challenge of unfriendly business environment.
3. There is usually the problem of conflicting interest among the three parties - the government, the MNC and the general public.
4. There may be huge cost of labor in the host country, at least to get the expatriate managers from home country or somewhere else.

Conclusively, the above mentioned authors have given all round and comprehensive note on the benefits of MNCs to the host country where they operate and as well highlighted the derivable benefits to the MNCs themselves from the host country. Likewise, in spite of the challenges and the problems being faced by these MNCs, they still continue to survival and waxing stronger.

Conclusion:

This assessment is on two international business one with global presence and other wit European presence. The businesses I have chosen are Costa Coffee and Coffee Aroma both being of the coffee industry. A description of legal format one being public limited company and the other being private limited company, type of business both being B2C businesses, target market, business sector and product range of both Costa Coffee and Coffee Aroma has been provided. Identification of aims and objectives with a proper description has been provided. Comment on both the business’s similarities and differences have been given. Reasons why both businesses have become multi-nationals have also been provided. There are comments on whether or not the businesses meet their aims and objectives by being international.

Identifications of objectives which have led Costa Coffee to become international. Comparative Advantages achieved by Costa Coffee. Effects of Costa Coffee on the host country, considering customers, competitors and suppliers. Identification of the incentives and limitations of the host country to Costa Coffee.

Evaluation of how EU and WTO affect Costa Coffee. Explanation of how memberships of these organizations help and limit trade for Costa Coffee has also been included.

Case study with explanation of why businesses become multi-national is also provided. Explanation on impacts of Costa Coffee on host countries with advantages and disadvantages to stakeholders has been included. Description of how the wealth of multi-nationals influences host countries.

Bibliography:

• Marketing Management– Philip Kotler
• Applied Business Student Book for AS-Level for Edexcel– Collins Educational 2005
• Business Studies Fourth Edition 2008– Dave Hall, Rob Jones, Carlo Raffo and Alain Anderton
• Business Studies for A-level Third Edition– Ian Marcousé
• Costa Coffee–  and
• Coffee Aroma–