Feb 16, 2012

Collected By: Bishnu Prd Neupane

Cross-national cooperation and agreements

Integration is a political and economic agreement among countries that gives preference to member countries to the agreement [1]. General integration can be achieved in three different approachable ways: through the World Trade Organization (WTO), bilateral integration, and regional integration [2]. In bilateral integration, only two countries economically cooperate with one and other; whereas in regional integration, several countries within the same geographic distance become joint to form organizations such as the European Union (EU) and the North American Free Trade Agreement (NAFTA). Indeed, factors of mobility like capital, technology and labour are indicating strategies for cross-national integration along with those mentioned above.

The World Trade Organization

The WTO is one of the most effective trade agreements among nations. The WTO replaced the General Agreement on Tariffs and Trade (GATT) in 1995 and has 125 member nations.currently 153 member are part of WTO. Many believe GATT initiated rampant liberalization in trade in 1947 and its move contributed to the expansion of trade all over the world by eliminating tariff and quotas. Moreover, WTO continued GATT's principle with more multilateral forum, which enables governments to settle agreements or to dispute them regarding trade.
Rapid growth of trade among nations has forced the agreement to be acknowledged as a fundamental basis for the member nations to follow certain rules and regulations as the signatories of the agreement. As a result, WTO expanded its mission to include trade in services, investments, intellectual property, sanitary measures, plant health, agriculture, and textiles, as well as technical baariers to trade.[3]
The European Union (EU)
The largest and most comprehensive regional economic group is the EU. It began as a free trade agreement with the goal to become a customs union and to integrate in other ways. The formation of the European Parliament and the establishment of a Euro the common currency make EU the most ambitious in comparison to other regional trade groups [2]. It progressed from being the European Economic Community (EEC) to the European Community (EC) to finally the European Union. Iceland, Liechtenstein, Norway, and Switzerland who decided not to leave European Free Trade Area are linked together with the EU as a customs union [3]. The EU comprises 27 countries, including 12 countries from mostly Central and Eastern Europe that joined since 2004. The EU abolished trade barriers on intra-zonal trade, instituted a common external tariff, created a common currency, the euro [3].
The implications of the EU for corporate strategy are:
Companies need to determine where to produce products.
Companies need to determine what their entry strategy will be.
Companies need to balance the commonness of the EU with national differences.
North American Free Trade Agreement (NAFTA)
NAFTA is designed to eliminate tariff barriers and liberalize investment opportunities and trade in services. NAFTA includes Canada, Mexico, and the United States, where went into effect in 1994. The United Sates and Canada historically have had various forms of mutual economic cooperation. They signed the Canada-United States Free Trade Agreement effective January 1, 1989, which eliminated all tariffs on bilateral trade by January 1, 1998. In February 1991, Mexico approached the United States to establish a free trade agreement. The formal negotiations that began in June 1991 included Canada. The resulting North American Free Trade Agreement became effective on January 1, 1994

International Business Model questions

Unit One: Exercise
1. Describe how international business has affected you in your daily life.  Think about who made the clothes you’re wearing, what type of food you ate for breakfast or lunch (muesli cereal, sushi, and Italian-style coffee), what type of cell phone you have and where it was made, where your car was designed and manufactured, where the components for your computer were manufactured, and so on.
2. Why (or why not) are so many of the products you use made abroad?  Which are the ones made abroad?  (Think about an integrated world economy vs. distinct national economies)
3. Describe the shifts in the world economy over the past 30 years.  What are the implications of these shifts for international businesses based in Europe?  North America? Hong Kong/Taiwan?
4. “The study of international business is fine if you are going to work in a large multinational enterprise, but it has no relevance for individuals who are going to work in small firms.” Evaluate this statement.
5. How have changes in technology contributed to the globalization of markets and production? Would the globalization of production and markets have been possible without these technological changes?
6. Why is there opposition to globalization of trade & integration of the world's economy? Access the major arguments for & against such globalization efforts.
7. What do you believe makes foreign business activities more complex than purely domestic ones? Explain with the help of suitable examples.
Chapter Two: Exercise
1. You are the CEO of a company that has to choose between making a $100 million investment in Russia or the Czech Republic.  Both investments promise the same long-run return, so your choice is driven by risk considerations.  Assess the various risks of doing business in each of these nations.  Which investment would you favor and why? Consider: political risks, economic risks, legal risks.
1.      Free market economies stimulate greater economic growth where as state-directed economies stifle growth. Discuss.
  1. How does socio cultural environment influence the business decision? Explain with example.
  2. How religion and culture affect the business decision making?
  3. "Success or failure of the business largely depends on socio culture of the country." Comment the statement.
5.      Define and explain political risk. How can we assess and lessen political risk in a country?
6.      Identify the socio-cultural components & explain the significance of socio-cultural environment for international business.
7.      Choose a country & a product & estimate the market potential of the product based on the economic & socio-economic dimensions. What other environmental forces should you investigate?
  1. Explain the four types/bases of legal system. How do they affect international business/marketing?
  2. Explain how internet is influencing the commercial, legal and marketing environment.
  3. Why does business fear sudden changes in government policies?
  4. Evaluate the significance of government stability & policy continuity on the promotion & development of international business.
  5. Analyze the complexity of the legal forces that confront international business.
  6. Explain some of the U.S. laws that affect international business operations.
  7. How does international law differ from national law? What are the sources of international law?
  8. What are the differences in practices between the legal systems in the United States & England?
Unit Three: Exercise
1.      Why nations (or companies in a nation) trade? What factors determine trade? How much and with whom should a nation trade?
2.      Why international trade theories are important in the study of international business?
3.      Describe mercantilism & explain why mercantilism has been argued to be a poor approach to use in order to promote economic development & prosperity.
4.      Explain the Adam Smith's theory of absolute advantage.
5.      Differentiate the Theory of Competitive Advantage from the Theory of Absolute Advantage.
6.      Describe Raymond Vernon’s product-life cycle theory.
7.      What are the four conditions in the Porter Diamond?  What are the limitations of the Porter Diamond in explaining countries' competitive advantages?

Unit Four: Exercise
1.       What are non-tariff barriers? What are their merits and demerits?
2.       What did WTO evolve and how is it contributing to international business expansion? Explain.
3.       Explain different tariff and non -tariff barriers that influence international business.
  1. What are some reasons that business people should be aware of important international institutions?
5.       Firms involved in international business bear a risk of fluctuation in exchange rate. Explain different risks associated with exchange rate.
6.       What do you understand by exchange rate? Explain the methods and trends in exchange rate systems.
7.       What are the implications of regional grouping of nations for international business? Should international business promote or fight the creation of such regional groupings?
8.       Examine the role of WTO in regulating international trade. How WTO is different from GATT?
9.       How did the WTO come into existence? What purpose does it serve? Would bilateral trading agreement work better than the multilateral WTO approach?
10.   What are the various forms of regional and international groupings of free and preferential trade?
11.   What are the currency exchange controls? Why are they imposed? What effect do they have in the country imposing them & elsewhere?
12.   How does exchange rate system affect international business? How can it be managed?
13.   Some argue that the World Trade Organization is the third pillar of global business. Do you agree with this argument?
14.   What is the significance of the balance of payments (BOP) to international managers?
15.   What is the impact of EU on international business?
16.   Identify the major organs of the United Nations, their general purpose & their significance to the international business.
17.   Describe the role of international financial institutions for the promotion of international business.
18.   Discuss the role played by the International Monetary Fund (IMF) and the World Bank in international business.
19.   Discuss the role of World Trade Organization (WTO) in international trade.
  1. Explain the role of International financial system (i.e. exchange rate, exchange control & trends of exchange rate systems) for the enhancement of international business.
21.   The role of World Bank is important in global business". Explain
22.   Discuss on the objectives of WTO.
23.   Is globalization desirable? Give your arguments
24.   Write short notes on:
a.       Asian Development Bank
b.      Regional Economic Integration
c.       WTO
d.      The World Bank
e.       Main objectives of IMF
f.       ASEAN
g.      Tariff and non-tariff barriers.
h.      Role of WTO in regulating international trade.
i.        NAFTA

Unit Five: Exercise
  1. What is international strategy, & why is it important?
  2. What is the difference between strategic planning conducted in domestic companies & that conducted in international companies?
  3. Describe the different forms of strategy & their significance in international business.
  1. What are the main strengths & weaknesses of each of the competitive strategies? Under what circumstances might each strategy be more or less appropriate?
  2. Describe the major steps in the global strategic planning process.

Unit Six: Issues of International Business
Write short notes on:
1.      Issues in business-government relations
2.      Globalization, the operation of MNC & problems inherent
3.      Regional economic integration
4.      Modes of entry into a  foreign market
5.      Emerging market concern

Feb 15, 2012

Dupont: Marketing of “Disappearing” Products

Imagine how tough it would be to be responsible for marketing a “disappearing” product. That’s the challenge faced by a group of marketers at DuPont, a company with a portfolio of brands that, for the most part, reach final consumers only as ingredients in finished products. Teflon non-stick coating, Lycra fibers, Freon refrigerant, Kevlar bullet-resistant fabric, Stainmaster carpet—these well-known DuPont products share the distinction of being used in the manufacture of products that ultimately bear some other company’s brand.

Jamie Murray, the person in charge of managing what people think of the overall DuPont brand, doesn’t mind marketing products that can’t be found on store shelves or ordered from catalogs. “We are the youngest 200 year-old company you will ever meet. We are always out there searching for those needs that we can invent something to satisfy.”

The company’s slogan, “better things for better living,” hints broadly at the variety of needs DuPont has satisfied over the years. When the computer industry required new forms of insulation for smaller and smaller electrical components, or the aerospace program needed stronger material for satellite tethers, or firefighters wanted fire-retardant suits, DuPont researchers headed to the laboratory. The company owns almost 2,000 trademarks and markets them in 200 countries around the world.

The challenges DuPont faces in marketing its ingredient brands are no less daunting than the challenges it faces in inventing them, so the company has developed five key principles to guide its actions. The first is personality management—controlling what the brand stands for and means to consumers. Gary Johnston, national marketing communications manager for nylon furnishings, says that, for DuPont, it’s “science, business savvy, and a moral core.” The second principle is visibility management, which entails creating awareness and familiarity for the invisible ingredients through integrated marketing communications.

The third is target management, which Johnston says involves “very clearly defining who it is that you need to connect with.” For a brand such as DuPont, that includes not only the end consumer, but also the many constituencies in the manufacturing or value chain. The fourth principle is marketing management, which has to do with understanding the dynamics of the marketplace so the company can fashion the best connections with its target. Finally, there is reputation management, which is a proactive approach to helping people understand what the company is and what it is about.

All of these principles are evident in DuPont’s marketing of Lycra. To connect with consumers worldwide, Lycra management started a global campaign in 1994 to make customers familiar with the Lycra name and icon. To emphasize what the product does, the company used the tagline “Nothing moves like Lycra,” which they added to in 1996 with the line “Clothes that move the way you do.” As a result, more than 50 percent of consumers recognize the brand name and, more important, ask for garments made with Lycra. And it’s rare when customers ask for a fiber by name.

To reach consumers, however, Lycra must be marketed to manufacturers of garments and retailers. This requires careful cultivation on the part of Lycra management. An example is the successful Wool Plus Lycra program initiated in 1995. For this venture, Lycra management teamed with the International Wool Secretariat to produce woven fabrics made with wool and lycra. This union is particularly noteworthy because it is the first time that two fiber groups have joined to promote a product globally. It works because the union provides value to both groups. The venture gives wool a new value-added feature by leveraging recognition of products off the well-known Lycra name. DuPont can market Lycra beyond its traditional markets in areas where it has little expertise. Moreover, because the program was sponsored evenly by the two partners, working together means that each group has to expend fewer funds. As a result, each side gets increased promotional awareness and market visibility for fewer dollars.

Understanding the dynamics of the marketplace has led DuPont to invest in research to develop a newer, softer Lycra product. As the baby boomer market ages, it also gains a few pounds, sags a little, and moves up to a larger size despite diets and exercise. Consequently, these consumers are looking for more support, lift, and control in bodywear, undergarments, and activewear. The new product, Lycra Soft or Type 902C, has higher elongation that almost doubles the stretch qualities and gives it a consistent level of pressure for all-over control, and it has significant recovery force—all important characteristics to aging boomers.

By developing new products such as Lycra Soft, DuPont not only helps its own profit line, but also that of its immediate customers. Firms such as Wacoal Japan, a Kyoto-based innerwear giant, have begun using Lycra Soft in the Far East in a control brief called “Magic Pants.” According to Alan Fisher, vice president of merchandising at the Wacoal America unit, “It’s a premium fiber … (and) it certainly has the stretch advantages of all-over fit and function, and less yardage is used. Prettier, more feminine-looking shapewear items can be made.”

Firms in the United States are not missing out on this opportunity. Maidenform is already into wear-test trials with it, so U.S. consumers may soon see these products in stores around the country. One store, in particular, where they may find garments containing Lycra Soft is Macy’s, which is negotiating for use of the product in garments sold through Federated Stores.

Some manufacturers are even willing to tie their names to that of Lycra. A case in point is Liz Claiborne, a giant in women’s clothing. The new line, called Liz and Lycra, includes leggings, pants, turtlenecks, a crewneck, an A-line dress, an A-line wrap skirt, and two jackets. All pieces will have a special Liz and Lycra hangtag.

The decision to launch Liz and Lycra was made based on information from Europe, which showed stretch items increasing in popularity, and on market research in which the company found that women wanted versatility, comfort, and durability in a garment. The products were wear-tested by staff at Claiborne headquarters, who found that Lycra eliminated the bagging which generally occurs at the knees on leggings and stretch pants. Given these good results, the new line kicked off in Macy’s Herald Square in March 1996 with in-store events, following a New York Times ad on the preceding Sunday. The ads and instore visuals featured American Ballet Theater principal dancer Julie Kent photographed by Jose Picayo. Thus, the creation of Liz and Lycra benefited not only Liz Claiborne and DuPont, but also Macy’s, which is considering adding its own products that include Lycra. Association with the American Ballet Theater is also a plus for all parties. ABT adds cachet to the Liz, Lycra, and Macy’s brands and also creates a positive association between each brand and the ballet—a sort of good citizenship status. The ballet gets promotion at no charge to it.

High standards are required of all the partners with whom DuPont enters into arrangements. “One of the most serious challenges any ingredient brand faces is [that] when your brand becomes very popular and very strong, lots of companies want to use it,” says Mary

Kopf, brand manager for Kevlar and Nomex. “Unfortunately, not all of those companies have high ethical standards, so you might run into what we call counterfeiters. These are companies who either don’t buy any of your product at all, or companies who may use a tiny bit of it, or use it sometimes and other times not. But they label the product as if it contains our ingredient, and what we have to do as responsible trademark owners is make sure that we pursue those counterfeiting situations.”

Enforcing the proper use of its ingredient brands is well worth the cost to DuPont, which sees those brands as the source of the company’s success during its almost 200-year history. To enforce the Lycra name, DuPont has a toll-free number in the United States (1-800-64-Lycra) for customers and final consumers to report any suspected infringement or counterfeiting. It also runs campaigns stating that Lycra is trademarked, and its staff continually tests garments for Lycra brand authenticity worldwide. When labelled products that do not contain the Lycra brand are identified, the company takes steps—frequently legal steps.

“Your competition may try to imitate you technically, they may try to imitate you with service, but one thing they can’t imitate is your brand,” Kopf says. In this case, the appropriate use of the Lycra brand protects not only DuPont, but also Liz Claiborne, the International Wool Secretariat, Macy’s, Maidenform, and any of DuPont’s hundreds of partners. They all benefit from the value added by the Lycra name.

Questions for Discussion
What are the markets for Lycra?
How does the “selling-buying” relationship that occurs when Liz Claiborne wants to team up with Lycra differ from that in which a consumer purchases a garment that contains Lycra?
What type of buying situation occurs when Liz Claiborne wants to team with DuPont to obtain Lycra for the Liz and Lycra line?
Why would Liz Claiborne want to use Lycra rather than some other elastic-type product that might be less expensive?
DuPont spends tens of millions of dollars for consumer advertising for Lycra and for tracking down counterfeiters. Does it make sense for the company to spend money advertising to a market that it does not sell to directly? Does it make sense to track down counterfeiters?

Business Ethics: Holiday Cheer or Ethical Dilemma?

Williams had joined Star Corporation, one of the leading consumer electronics company, only a few days back as the Purchase Manager and he was going through the employees conduct manual. He was attracted by the clause, prohibiting acceptance of gifts by the employees of the purchase department. It read as follows:

“Purchase department employees shall not accept gifts from vendors. This is to ensure that no vendor is given any special treatment and the employees work only in the best interest of the firm at all times. Any deviation from the above would be dealt with severely and could mean dismissal from the firm.”

Williams remembered his experience with his previous firm, Maple Corporation, where he had worked from 2000 for six years as purchase head prior to joining the Star Corporation.

It was only six months since he was with the Maples when it was New Year. With the New Year came some inconsequential gifts like ball pens and key chains. The rule in the firm was that an employee could accept no gift worth more than 25 USD. One day one of the vendors brought three wall clocks, one for the MD, one for the GM, and one for Williams. The vendor explained that as his firm had purchased the clocks in bulk they cost only 25 USD each and as such there should not be any hesitation in accepting the same. He added that in any case he is going to accept the Maple’s calendar and dairy for his firm in return. Williams found it hard to believe that the clocks were only worth 25 USD. He decided to take the matter to the MD of the firm.

The MD had one look at the clocks and called his secretary to take one of the clocks meant to be given to the MD to be placed on the wall in his office and told Williams to distribute others as desired by the vendor explaining that in bulk the clocks would cost about 25 USD only. Williams had taken the clock and given to his wife and it became the center point in their living room. In later years with the Maples he had taken gifts of dubious value always proclaimed worth less than 25 USD. To keep his conscience clear he would make sure to give some gift from his firm to the vendor’s salesman in return. Williams in fact stopped feeling any remorse on receiving the gifts and in fact he started looking forward to the festive season in anticipation of some nice gifts. (In his heart he knew that none of the gifts could be of less value than 3000 USD.)

Now again it was festive time and in the new firm he was not sure how he should react to the gifts, which had become such a part of business calendar in nations corporate world. He was musing on the matter when Riz the Executive Assistant to the MD walked in. Riz wanted to know if any gifts had started arriving or not. He confirmed that it has been the practice with the previous purchase manager also to accept the gifts and distribute them to the important persons of the firm like himself. He added that not a word about the matter should be discussed with the MD; otherwise there was every chance of that being thrown out of the firm. But if he did not accept the gifts, he would annoy quite a lot of his colleagues.

Williams was wondering if this was just a ploy of the MD to test his integrity, as the MD’s secretary would be in the MD’s confidence. At the same time Williams could not risk taking a chance of annoying a large number of his new friends in the firm.

Sure enough, next day a vendor came with ten baskets, each having three bottles of scotch whiskey, return air tickets for four to any destination in Malaysia with four nights five star hotel stay thrown in. The total value of each of the gift baskets was nearly 50000 USD. His secretary told Williams that this was just the beginning and the gifts were also quite cheap compared to gifts from other vendors. Williams wondered if his predecessor was thrown out of the firm on account of the gifts he was receiving from the vendors, which were amounting to large amounts and were practically bribes. Williams had no one to guide him at the moment.

Questions to Discuss:
Please give your sincere advice to Williams in his hour of predicament?

Case Study: The Collapse of Enron

Enron is a company that operates in the energy sector. Later it expanded its operations to Gas Bank, electricity sector, water, metal, broadband and newsprint. In 2002, the company used to be the number 5 of the top 500 fortunes companies but later on after facing an accounting scandal, the company started to collapse.

Enron has transformed its company from being an old economy company focusing on hard assets to a new economy firm focusing on a strategy of creating new markets HFV (Hypothetical Future value). Enron’s strategy to differentiate in the market was through reducing physical assets, keeping key assets (peak demand generators) and developing a core competence of risk arbitraging. With its core competency on risk management, managing the risk of commodities through purchasing electricity at a fixed price with suppliers and then sell electricity to customers with the new price, Enron was able to increase its profits, some thing Enron called M2M (Marked to Market Accounting).

Now the question is how Enron has collapsed? The collapse of Enron was the largest bankruptcy in the US history. The stock’s price dramatically collapsed from $80 per share to 30 cent per share. The collapse was mainly due to the management’s fraudulent practices. Enron lied about its profits and when the deception was unfolded, investors and creditors pull back their financial resources, which finally cause the company to face bankruptcy. Over expansion and excessive borrowings have also contributed to the company’s eventual demise. The finances were a disaster, this happens because of poor management and due to intentional deception and fraud. Poor management, we referred this as a systemic corporate governance failure.

Starbuck's case study


  1. What are some of the challenges associated with Starbucks’ aggressive growth strategy?
  2. Could an unanticipated change in coffee consumption patterns disrupt Starbucks in the same way that it paved the way for the company’s growth in the 1980s?
  3. What problems might arise from Starbucks’ efforts to expand rapidly into nations such as India.
  4. Comment on the pricing strategies of Starbucks.
  5. How would you see the competition of Starbucks in India, with players like Costa Coffee, Mc donalds, Barista and Café Coffee day. Draw out a competitive strategy for Starbucks.
Starbucks was founded in 1971 in Seattle, by Gordon Bowker, Jerry Baldwi and Ziv Siegl. By 1982, Starbuck had five retail stores and was selling high quality whole bean and ground coffee products to restaurants and espresso stands in the Seattle area. In the same year, Howard Schultz joined Starbucks to manage retail sales and marketing. After convincing the firm to open a down town Seattle coffee bar in 1984, which was successful, Schultz left Starbucks to open his own coffee bar, II Giornale, which served Starbucks coffee. Schultz acquired Starbucks in 1987, and locations were opened in Chicago and Vancouver. The company published its first mail order catalog in 1988. in 1991, Starbucks became the first U.S. based privately held company to offer stock options to all employees. The company went public in 1992.

Today, Starbucks coffee shops and Kiosks can be found in a variety of shopping centers, office buildings, bookstores, and other outlets. Starbucks is capitalizing on taste changes that predate the company’s founding. In the early 1960’s, American adults consumed on an average of three cups of coffee each day. Today, consumption has declined to less than two cups, with only half of American adults as coffee drinkers. During this time, decaffeinated coffee sales soared. In addition, a new category of intensely loyal coffee drinkers was born. This group of adults consumes “specialty” or “premium” coffees, including regular and decaffeinated versions with a variety of origins and flavors. Sales of specialty coffee have climbed from about $45 million annually to more than $2 billion today, accounting, for about 20 percent of all coffee sales.

Because Starbucks markets whole beans and coffee beverages, its competition comes from two distinct groups of firms. A number of regional coffee manufacturers distribute premium coffees in local markets, while several large national coffee manufacturers such as Nestle, Proctor & Gamble, and Kraft General Foods market and distribution specialty coffees in supermarkets. Coffee beverages are distributes by restaurants, grocery stores, and coffee retailers. Seattle’s Best Coffee is a fierce competitor.

Chairman Howard Schultz projects that Starbucks will grow from its present 6,000 stores to more than 20,000, 75 percent of which are in the Unites States. The company added 280 intentional locations in 2001 and is targeting an additional 650 stores in Europe by 2004 and 900 locations in Latin America predominantly Mexico by 2005, Starbucks is also moving into China. Retail stores account for more than 80 percent of revenues, with specialty operations accounting for the remainder.

American coffee consumption had been on the decline for more than a decade when Seattle entrepreneurs Jerry Baldwin, Gordon Bowker, and Zev Siegl opened the first Starbucks in Seattle’s Pike Place Market in 1971. By the 1970s, the country’s major coffee brands were engaged in a bitter price war that forced them to use cheaper beans in their blends to reduce costs, resulting in a dramatic decline in the quality of America’s most popular coffees. Accompanying this decline in quality was a decline in coffee consumption, which had peaked at 3.1 cups per day in 1961. As Americans gradually became disenchanted with the store brands, java enthusiasts—concentrated primarily on the West Coast—began experimenting with the finer coffees of Europe that offered richer, fuller flavors.

To harness the potential of the gourmet coffee trend in the Seattle area, the founders of Starbucks experimented with the new concept of a store dedicated to selling only the finest whole-bean coffee and coffee brewing equipment. At the time, Starbucks coffee was not brewed in-store, but rather by consumers themselves after they took the whole beans or grounds home. This emphasis on quality whole-bean coffee retail was fairly unique; only a handful of American cities had stores like Starbucks up to that point. Such a store would satisfy the demand of Seattle’s gourmet coffee enthusiasts for high-quality coffee products that could previously only be obtained through catalogs from companies in Europe. Starbucks also sought to convert Seattleites who had never experienced gourmet coffee to break away from traditional brands and integrate the finer European coffee blends into their daily lives.

From the start, Starbucks placed quality as its top priority. The Starbucks founders recognized that if they wanted to enhance Seattle’s appreciation for fine coffee, they had to provide the best ingredients and brewing equipment to ensure that customers had the most enjoyable coffee experiences possible. The Starbucks management dedicated a great deal of their time and financial resources to establishing strong relationships with coffee growers from around the world. To distinguish their coffee from the bland and tasteless store brands, Starbucks only purchased Arabica beans from a carefully selected network of suppliers across the globe; including places like Sumatra, Kenya, Ethiopia, and Costa Rica. Arabica beans were selected because the bean’s chemistry could withstand high roasting temperatures, resulting in a richer flavor. Starbucks also sought vendors who sold products that would protect, and even enhance, the Arabica’s flavor. This required the formation of partnerships across the globe with coffee brewing equipment suppliers who provided products that captured the essence of the coffee brewing tradition. Simplicity was valued over advanced technology because the machines Europeans and others had been using to brew coffee for centuries often proved the most effective in delivering the richest flavors.

Starbucks Reinvented

It was not until Howard Schultz, Chairman and Chief Global Strategist of Starbucks, came to the company in 1982 that a vision for expanding the scope and reach of the Starbucks brand came under serious consideration. Schultz realized the powerful business opportunities that lay ahead of the company if he could preserve Starbucks’ core values while exposing a wider range of people to the brand. The fledgling company had seen great success in converting its small group of loyal Seattle customers into coffee enthusiasts, but Schultz recognized that the conservative business plans of early Starbucks management hindered the company from reaching other potential coffee lovers. Schultz saw that the next logical step for Starbucks was to begin serving freshly brewed coffee by the cup in every store. This realization came to Schultz following a trip to Italy, where he witnessed the bustling café culture where people stopped to socialize at various points throughout the day, always with a fresh cappuccino or espresso in hand. He reasoned that Americans would embrace the concept of consuming fresh coffee in a sociable coffeehouse atmosphere.

Transforming Starbucks from a coffee retailer into a café business resulted in several important competitive advantages. First, it increased quality control because the coffee was brewed by its own knowledgeable employees. Second, Starbucks captured the business of Seattle’s business community who loved high quality coffee, but had hectic schedules. Starbucks made enjoying good coffee convenient, thereby enabling the entire community to enjoy all the brand had to offer. Lastly, incorporating a coffee service aspect into the business differentiated Starbucks from its coffee retail competitors, who were quickly growing in Seattle and in other major American cities.

With the coffeehouse model as the primary focus of the company’s retailored business plan, Schultz began to concentrate on reshaping Starbucks’ brand identity. As the company entered a period of explosive growth through market expansion it needed a reinvented image that captured the elegance of European coffeehouse culture, but was familiar enough to appeal to a broad range of Americans. Schultz’s previous coffeehouse, Il Giornale, had acquired Starbucks in 1987, but Schultz recognized that keeping the Starbucks name was pivotal to the brand’s success. It was already familiar to Seattleites, patrons of the nationwide mail order business and was more memorable than Il Giornale. The name was inspired by Starbuck, a deckhand in the classic American novel Moby Dick. For this reason, the logo included an image of a mermaid done in a woodcutting style. The Starbucks name captured all the aspects of Schultz’s innovative coffeehouse concept; it was bold yet not overwhelming, mysterious yet not foreign, and romantic yet not impractical.

Creating a Look

Starbucks needed to shape the look and feel of the environment of its stores to reflect the synergy of Italian elegance and American informality that Schultz envisioned for his unique coffeehouse model. First, the original Starbucks logo was updated to appear more contemporary and the color was changed from the original earthen brown to the green used by Il Giornale. Next, each of the original Starbucks stores was redesigned so that they echoed the romantic atmosphere of Italian coffee bars.

Rich browns in the wooden fixtures and vibrant green logos on the detailing and packaging formed the primary color scheme of Starbucks store design. This palate was selected to represent the company’s emphasis on European romance and elegance coupled with casual American warmth. In addition to selling only “best-of-class” coffee, Starbucks worked to fill its stores with only the highest quality of everything—from the coffee-making equipment to the fixtures and furnishings to the music and artwork. In Schultz’s words, each Starbucks store “is carefully designed to enhance the quality of everything the customers see, touch, hear, smell or taste.” Schultz envisioned that the Starbucks store would become a “personal treat” for its customers, whether they saw it as a convenient stop on the way to work, a refreshing break in their day or a place to relax at night. Starbucks was to be, for its clientele, a “Third Place,” a comfortable, sociable gathering spot bridging the workplace and the home. Designing a warm, inviting environment was essential to Schultz’s objective of making Starbucks symbolize not just a coffeehouse, but a pleasurable coffee-centered experience.

Investing Ahead of the Growth Curve

This focus on developing creative solutions for solidifying a rich brand identity complemented the Starbucks executive team’s philosophy of “investing ahead of the growth curve.”Constant reinvention—critical to developing a healthy Starbucks brand—could only be accomplished by making fundamental changes to the structure of Starbucks management and by investing in innovation. As Schultz assumed the role of CEO of the new Starbucks, he recognized that although he possessed keen entrepreneurial skills and vision to lead Starbucks in this period of immense growth and brand redevelopment, he would also need the support of experienced professionals to set his vision into motion. Schultz assembled a dynamic management team from some of the country’s most successful and innovative corporations such as Nike, Deloitte & Touche, and Macy’s. Each executive joining the Starbucks team brought years of experience and fresh creative perspectives.

Investments in Starbucks infrastructure and process efficiency were equally as crucial to building the brand. Schultz’s team of executives identified the need for state-of-the-art facilities (namely roasting and packaging plants) that would allow Starbucks to continue producing the highest quality products on a nationwide, and eventually a global, scale. In 1989, Starbucks invested in high-speed coffee roaster and packaging equipment that would meet the needs of the growing business for at least 10 years. The company later implemented an advanced computer information system to keep track of sales across the hundreds of stores that would be opening within the first decade of expansion. Between 1990 and 1991 alone, Starbucks raised $18.5 million in venture capital to fund this expensive internal development.

Innovation to Support Growth of the Brand

As Starbucks began focusing on a nationwide growth strategy, the problem of how to protect the freshness and flavor of coffee during shipments to distant Starbucks locations became a pressing issue. In the time it took to ship fresh roasted beans thousands of miles across the country to store locations in Atlanta or New York, for example, the quality of the coffee would decline dramatically. Therefore, significant time and resources were invested to develop a vacuum packaging system that prevented harmful air and moisture from seeping into the coffee. After the roasting process, coffee would be sealed in “FlavorLock” bags that would remain unopened until ready for use in stores. Such an investment allowed Starbucks to preserve its quality, while saving the company from the significant costs entailed in building roasting plants in every new Starbucks market. Innovations such as the FlavorLock bags highlight the flexibility that Starbucks leveraged in order to adapt to new business climates.

Starbucks Core Values

The new Starbucks management strengthened many of the same core values that the company founders had established in the early years and reinvented others to meet the unique challenges it faced as a high growth brand. To communicate these core values, a diverse group of employees contributed to the development of the Starbucks Mission Statement. In drafting the mission statement, the Starbucks executive team listened to the views of employees at all levels and incorporated their beliefs into company policies. Consensus on company values among the diverse group of Starbucks employees was imperative for Schultz’s vision of a unified team.

Pivotal to the values asserted in the mission statement was a continued commitment to investing in both Starbucks employees and customers. Schultz and his colleagues observed that the company had become too product oriented; Starbucks had to focus on people to achieve healthy organic growth. The key to the company’s success and widespread appeal had always been the employees, whose knowledge and dedication attracted customers to continue returning to the store.

Schultz firmly believed that his business could not grow without the strongest team possible at all levels of the organization. Starbucks could only attract loyal customers if employees were skilled in delivering the highest quality service possible. The Starbucks work force deserved a disproportionate amount of company resources because they were essentially the key component in the revenue generating functions of the company. Therefore, under Schultz’s leadership, Starbucks management adopted several policies that focused on recruiting and retaining a strong team of “partners”—the company’s term for employees.

The first and most important policies concerning the development of a strong team of partners regarded the company’s commitment to training. Starbucks spent more money on training than marketing, a fact that highlights the crucial role Schultz assigns to his employees—that of fostering positive customer relations so as to engender widespread word-of-mouth publicity. Starbucks also developed several policies regarding partner compensation and benefit packages to attract and retain a competent work force. These benefit packages included full health insurance coverage for all employees and the Bean Stock program, which awarded every partner between 12 percent and 14 percent of his or her annual base pay in Starbucks stock options. In extending equity to employees, Starbucks hoped to communicate that every employee would benefit as the company grew and performed well, providing an incentive for partners to work as a unified team toward achieving business objectives.

New philosophies were also adopted regarding Starbucks commitment to customers. The original company believed that they should educate the customer to appreciate coffee the way Starbucks liked it. Then-president Howard Behar and other top executives argued that the company needed to become more customer focused and serve coffee the way customers like it. Behar proposed a different model that called for Starbucks to “do whatever it takes to please the customer as long as it is moral, legal, and ethical.” Although the “customer is always right” philosophy made sense to Schultz, he also recognized that it posed a threat to the integrity of Starbucks products. Schultz wondered how much flexibility should be given to customer demands when they compromised the traditions that the company’s products were based on.

When health conscious customers began to request skim milk as an option in place of the cream used in various coffees, Schultz was forced to tackle this issue of flexibility head on. While at first he remained steadfastly committed to preserving the authenticity of his coffees by forbidding the use of skim milk in recipes, Schultz finally conceded, recognizing that “a lost customer is the most powerful argument you can make to a retailer.”If Starbucks wanted to maintain its loyal following, it had to listen to customer feedback. Compromise had to be integrated into Schultz’s decisions regarding product development. As long as Starbucks could continue to deliver the highest quality products possible, flexibility would be favored over dogmatic adherence to tradition.

Growing the Brand

Geographical Market Expansion

Starbucks’ carefully planned its expansion of specialty coffee stores into new markets throughout North America and eventually worldwide. The first phase of the expansion strategy secured a major foothold in the Pacific Northwest while experimenting in other key markets that were farther away such as Chicago, Los Angeles, San Francisco, New York, and Washington, D.C. Each of these new markets had its own strategic purpose for the company’s market expansion program. In 1996, Starbucks International successfully launched Japan’s first store in Tokyo’s Ginza business district, proving that the coffeehouse concept even had cross-cultural appeal. Success with the original Starbucks in Tokyo led to 25 new stores in Japan by 1998.

The Starbucks management team agreed at the beginning of the company’s massive expansion program that all stores would be owned and operated by the company instead of pursuing a franchise model like many other successful American food service companies. Although franchising offered advantages for some companies—a source of capital, an inexpensive means of rapid entry into new markets, and a guaranteed commitment by franchisees to the financial success of the business—it posed potentially negative consequences for brand development. In building a strong brand, Schultz recognized that he and his executive team needed complete control over the brand to cultivate an unparalleled image of quality. In too many other companies, franchisees did business their own way, which could potentially sacrifice Starbucks’ commitment to excellence in order to turn higher profits. Schultz could not risk compromising the brand’s image and kept the brand under the control of the Seattle headquarters to foster healthy growth.

The success of the expansion program rested on investment in extensive word-of-mouth publicity campaigns that created brand awareness even before the first Starbucks arrived to a new market. Local consumers were excited about welcoming Starbucks to their towns because of the attraction of having a trendy cafe environment for relaxation and personal enrichment. Grand openings became community events that encouraged local consumers to experience the new cultural dimension that Starbucks brought to their communities. Once a new Starbucks opened, highly skilled “baristas” (or servers) and managers would further strengthen the positive brand image by delivering the highest level of service possible.

Starbucks also employed a “hub” market strategy where its coffeehouses entered a new market in a clustered group. For each new region, a large city would serve as the hub where teams of professionals trained to support new stores were located. In the large hub market, the goal would be to rapidly open 20 or more stores within the first two years. From the established hub, Starbucks stores then spread to new “spoke” markets. These spoke markets consisted of smaller cities and suburban locations with demographics similar to the typical customer mix. This deliberate saturation strategy predictably resulted in cannibalization of almost 30 percent of own store sales by virtue of the introduction of a near-by store. This drop in revenue was offset, however, by efficiencies in marketing and distribution costs, and an enhanced image of convenience.
Source: MBA Knol

Feb 9, 2012

छिट्टै डिजिटल हस्ताक्षरको सुरुवात

साईवर अपराध बढिरहेका बेला सरकारले अब छिट्टै डिजिटल हस्ताक्षरको सुरुवात गर्ने भएको छ । विज्ञान तथा प्रविधि मन्त्रालय अन्तर्गतको प्रमाणीकरण नियन्त्रक कार्यालयले तयार पारेको डिजिटल हस्ताक्षरको साँचो हस्तान्तरणका क्रममा प्रधानमन्त्री डा. बाबुराम भट्टराईले यस्तो संकेत गरेका हुन् ।
प्रधानमन्त्री भट्टराईले नेपाल पुलिस क्लवको हलमा भएको कार्यक्रममा सूचना र प्रविधि विकासको अभिन्न अङ्ग भएकाले यसको विश्वसनियता र सुरक्षाका लागि सरकारले डिजिटल हस्ताक्षर लागू गर्ने कार्यमा पहल चाल्ने बताएका छन् । सूचना र प्रविधिबाट हुने अपराधिक कार्यले प्रविधि प्रतिको विश्वसनियता माथि प्रश्न उठिरहेका बेला डिजिटल हस्ताक्षरले आम नेपालीको विद्युतीय कार्य सम्पादन सुरक्षित र भरपर्दो हुने प्रधानमन्त्रीको विश्वास रहेको छ ।
सोही कार्यक्रममा विज्ञान तथा प्रविधि मन्त्री कल्पना धमलाले सूचना प्रविधिलाई व्यवस्थित गर्न डिजिटल हस्ताक्षरको आवश्यकता रहेको बताएकी छन् । मन्त्री धमलाले डिजिटल हस्ताक्षर लागू गर्ने भन्दा पनि यसलाई प्रयोगमा ल्याउनु महत्वपूर्ण भएको बताएकी छन् । उनले डिजिटल हस्ताक्षरलाई सर्वसाधारणको पहुँचसम्म पु¥याउँदै जीवन व्यवहारमा परिवर्तन ल्याउनु आवश्यक रहेको बताइन् ।
विज्ञान प्रविधिलाई बुझ्ने र यसलाई अपनाउने साँघुरो चेतनास्तर र यसले पैदा गरेको अपर्याप्त पूर्वाधारको कारण यसलाई लागू गर्ने सवाल एक चुनौतीको रूपमा उभिएको पनि मन्त्री धमलाले बताइन् । उनले भनिन्–“यद्यपी यावत समस्याका बावजुद पनि हामी यो महत्वपूर्ण कार्यमा दृढतापूर्वक अघि बढिरहेका छौं ।” तर यसको प्रयोगका लागि राजनितिक दल र सरकारको पूर्ण सहयोग र समर्थन चाहिने उनले स्पष्ट पारिन् । प्रमाणीकरण नियन्त्रक कार्यालयले एक वर्ष लगाएर तयार पारेको डिजिटल हस्ताक्षर लागू भएमा इन्टरनेट तथा विद्युतीय माध्यमबाट हुने सम्पूर्ण कार्यहरू सुरक्षित र भरपर्दो हुनेछन् । प्रमाणीकरण नियन्त्रक राजनराज पन्तका अनुसार “डिजिटल हस्ताक्षर भनेको कापीमा गरेको हस्ताक्षरलाई स्क्यानिङ्ग गर्ने होईन ।
विधुतिय कोड नम्बरलाई डिजिटल हस्ताक्षर भनिएको हो ।” सोझो अर्थमा डिजिटल हस्ताक्षर भनेको आफूले गरेका कामलाई बैधानिकता दिने प्रविधि हो । पन्तका अनुसार डिजिटल हस्ताक्षरको प्रयोगले सूचना पाउने व्यक्तिसम्म पुग्दा सूचना पूर्णतः सुरक्षित रहन्छ । अर्थात् बिचैमा सूचना ह्याक गरेर अर्कोले हेर्ने, सूचना गायव हुने या परिवर्तन गरीदिने सम्भावना हुँदैन । डिजिटल हस्ताक्षर प्राईभेट र पव्लीक गरी दुई प्रकारको हुन्छ । प्राईभेट साँचो नम्बर सम्बन्धीत व्यक्तिलाई मात्र थाहा हुन्छ भने पव्लीक साँचो नम्बर अरूलाई पनि थाहा हुन्छ । प्राईभेट साँचो मार्फत पठाइएका सूचना पव्लीक साँचोले खोल्न मिल्छ भने पव्लीक साँचोबाट पठाईएका सूचना प्राईभेट साँचोले खोल्न मिल्छ । जसले गर्दा सूचना जसले पाउने हो उसैले सुरक्षित पाउँछ ।
सूचना र प्रविधिको विकासले दैनिक कार्य सम्पादनमा सहजता ल्याए पनि इन्टरनेट मार्फत हुने बिभिन्न अपराधिक कार्यले प्रविधिप्रति विश्वस्त हुन सक्ने अवस्था अझै पनि छैन । बिभिन्न अपराधीहरूले विद्युतीय सूचनाहरू चोर्ने, ब्ल्याकमेलीङ्ग गर्ने, सूचना गायव गरीदिनेलगायतका कार्य गर्ने गरेका घट्ना हाम्रा सामु ताजै छन् । जसले गर्दा विद्युतीय माध्यमबाट हुने कारोबार र सूचना आदान–प्रदान कार्य अझै पनि नेपालमा सुरक्षित बन्न सकेको छैन ।
Source: Dainik Smachar paper/ by Anil Shahi