Week 3 analyses to evaluate the challenges of expanding their chosen company's production to a foreign market.

timer Asked: Jul 2nd, 2018
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Question description

Purpose of Assignment

This week students will review and revise their Week 3 Research Analysis for Business Signature Assignment based on economic analysis and the feedback provided by their facilitator. Students will also expand their Week 3 analyses to evaluate the challenges of expanding their chosen company's production to a foreign market.

About Your Signature Assignment

This signature assignment is designed to align with specific program student learning outcome(s) in your program. Program Student Learning Outcomes are broad statements that describe what students should know and be able to do upon completion of their degree. The signature assignments might be graded with an automated rubric that allows the University to collect data that can be aggregated across a location or college/school and used for program improvements.

Assignment Steps

Resources: Tutorial help on Excel® and Word functions can be found on the Microsoft® Office website. There are also additional tutorials via the web offering support for Office products.

Revise your Week 3 assignment, Research Analysis for Business, using the feedback provided by your facilitator. This Week 6 report should only include one conclusion, so you will need to rewrite the conclusion you included in your Week 3 assignment, Research Analysis for Business.

Select a foreign market in which to expand your chosen product. If you wish, you may use one of the countries your team analyzed in their Week 5 Comparative and Absolute Advantage Assignment.

Prepare a minimum1,750-word report addressing the points listed below. The use of tables and/or charts to display economic data over the time period discussed is highly encouraged, you may submit any economic data in Microsoft® Excel® format in a separate file. You may use the U.S. Department of Labor's Bureau of Labor Statistics (BLS), U.S. Dept. of Commerce's Bureau of Economic Analysis (BEA), the Federal Reserve of St. Louis's FRED data, the CIA World Fact Book, World Bank data, and World Trade Organization, or other appropriate sources you might find on the Internet or in the University Library. The new sections of your report should:

  • Evaluate current global economic conditions and their effects on macroeconomic indicators in your selected country. Provide forecasts for population growth, gross domestic product (GDP) growth, GDP per capita growth, export growth, and sales growth.
  • Evaluate any competitors' existing production in the chosen country.
  • Assess sales forecasts in the selected country by using the Federal Reserve of St. Louis's FRED data, the CIA World Fact Book, World Bank data, World Trade Organization, or other appropriate sources you might find on the Internet or in the University Library.
  • Categorize the type of economy that exists in your selected country as closed, mixed, or market. What is the difference between these types of economies and how might this affect your expansion?
  • Assess how your chosen country's current credit market conditions, especially interest rates and the availability of financing, affect demand for your product or service and your planning or operating decision for your production in that country.
  • Analyze the role of the selected country's central bank on that country's economy.
  • Compare the availability, education, and job skills of the work force in the selected country. Discuss any additional challenges of international production, such as political stability, availability of government financing or other incentives, threat of capital controls, and exchange rate risks.
  • Explain any additional supply chain challenges you anticipate if attempting to make your product in your chosen country and selling the product in other countries.
  • Based on the data gathered and analysis performed for this report write a conclusion in which you:
    • Create business strategies, including price and non-price strategies, based on your market structure to ensure the market share and potential market expansions and explore global opportunities for your business in a dynamic business environment and provide recommendations.
    • Develop a recommendation for how the firm can manage its future production by synthesizing the macroeconomic and microeconomic data presented.
    • Propose how the firm's position within the market and among its competitors will allow it to take your recommended action.
    • Recommend strategies for the firm to sustain its success going forward by evaluating the findings from demand trends, price elasticity, current stage of the business cycle, and government.
    • Recommend any comparative advantages your company will have over competitors currently operating in that country, and defend your position, either for or against, expanding your company's production into your chosen country based on your research.

Integrate with the Week 3 Individual Assignment, and incorporate corrections and suggestions from the instructor's feedback. The final report should be a minimum of 2,800 words.

Research Analysis Starbucks Thaddeus S Starkey ECON 561 June 14 2018 Mr. Paul Loreto 2 Research Analysis Starbucks Starbucks is a publicly traded company that roasts, markets and retails coffee. The company sells first-class packaged coffee together with prepared coffees, teas and other beverages. The company’s portfolio includes Tazo tea, Seattle’s best coffee and Starbucks VIA ready brew. The objective of the firm is to uphold the company’s brand of being the highly esteemed brands in the world. It is also committed to balancing profitability and social responsibility (Kolk, 2005). The sources of revenue for the company is from license stores, company-operated stores and consumer packaged goods as well as foodservice operations. Starbucks operates in a monopolistic market environment. Within the market, many consumers and producers exist, the products and services being offered are diverse but the companies are able to set apart their products. The company is a monopolistic competitive firm operating in an industry characterized by many vendors, little barriers to entry and slight product differentiation. It understands the market structure and how it works consequently giving the company substantial profits over the years. Starbuck’s success has been achieved through customer loyalty, high-quality goods and services to consumers, and sufficient knowledge of the labor market. The company also provides consumers with the benefit of diversity in the world of coffee (Chen, & Hu, 2010). The company’s market share of the US coffee chain industry stands at 39.8%. Starbucks faces stiff competition from both local and international coffee companies. Some of the company’s direct competitors include Costs Coffee, McDonald’s McCafe, Dunkin Donats and Café Coffee Day. Other indirect competitors include independent fast food chains and bakeries, McDonald's, and KFC among others. To gain a competitive advantage in the industry, Starbucks is committed to strategic pricing that ensures that customers are willing to 3 pay the prices due to customer satisfaction and quality services. The company is strict on the quality of its product by providing maintenance of high quality coffee. The company has also established a coffee-ordering platform that enables customers to escape the urban life and feel sophisticated in enjoying their coffee. The company also provides drive-through services for its customers. The company has therefore differentiated itself from its competitors. The barriers to entry into the specialty coffees industry include the economies of scale with significant companies having national and international distribution channels enabling them to transport their coffee at lower costs as compared to new entrants. The big companies also utilize the economies of scale in marketing and building brand names as well as in negotiating long-term contracts with coffee farmers. Product differentiation has pushed companies to ensure convenience in location of stores and pricing models (Reinecke, Manning, & Von Hagen, 2012). Companies have had to progress towards providing an ambiance of their stores, company social responsibility, and customer loyalty. These factors have become barriers to new entrants in the market. Starbucks is a mature company that has existed over a period of forty years as reflected in the company's current stage of the business cycle. The company has been able to shape the lifestyles of its consumers. The company has over 25000 stores and continues to stay in line regarding revenue earnings potential. Increased revenue of Starbucks has had an overall positive impact on the Real Gross Domestic Product (GDP) due to an increase in taxes. An estimated 70% of consumer income is spent on the purchase of goods and services. Customer spending on Starbucks may be considered an up-to-date consumer confidence indicator in the US. 4 Low pricing strategies of Starbucks has allowed for increased purchasing power among consumers thus ensuring consumer sustainability which has consequently reduced the amount of money circulation in the economy. The price of coffee has increased from $1.42 per pound in 2010 to $2.18 per pound in 2015, accounting for 53% increase. Consumers, however, find enough disposable income for their consumption allowing the company to lower or raise their prices consequently reducing the company's labor and commodity inputs. The employment rates in the United States for the years 2014, 2015 and 2016 are 6.6%, 5.7%, and 4.9% respectively. The rates are decreasing over time. Starbucks recognizes the menace of unemployment and has initiated ventures that allows for the employment of individuals in its operations either in part-time or full-time basis. The programs also include internship opportunities and training programs. The federal funds rate is a critical rate that affects the borrowing ability of Starbucks. The US federals fund rate remain at 0.75%. The prime rate, which refers to the rate commercial banking system offers loans to consumers is at 4.75%. The rates also affect the purchasing power of the company's potential customers and consequently the company's revenues and profitability. Specialty coffee consumption has been increasing over the years in the United States. The increase in the global demand for coffee was reflected in the 8% increase in net revenues for the second quarter of 2018 when compared to the same period in 2017. The income as at 2nd April 2017 was$3,372.4 million and $4,003.5 million as at 1st April 2018. The company’s quarter one reports indicated an increase in the net revenues by a 7% growth as compared to the quarter one results of 2017. As at 1st January 2017, the net income was $ 3,991.4 as compared to 2018's results of $4,265.8 million. A analysis of the company's annual financial reports indicates a continuous rise in revenue for the three year period between 2015 and 2017. In the year ended 5 September 27th, 2017, the company's net revenues were $17,179.3 million which increased to $16,344.1 million in the year ended 2nd October 2016 and rose further to $17,650.7 million in the year needed 1st October 2017. The prices of coffee beans are volatile leading to the shifts in demand and supply of the product. The factors affecting these shifts may include climate changes, changes in consumer tastes and preferences as well as consumer incomes (Lewin, Giovannucci, & Varangis, 2004). Changes in these factors will change the equilibrium price of the commodity causing an upward or downward shift of the demand curve. The specialty coffee market in the US is in its maturity stage. Starbucks should invest the capital in other international markets outside the region as part of its expansion move. Such a move would act as a catalyst for the company’s innovation. Instead of segmentation strategy, the company can focus on a reward program which offers discounts to the company’s frequent customers which will consequently enhance customer loyalty. To continually possess a competitive advantage in the industry, Starbucks should commit to continuously improving the quality of its coffee through the analysis of its brewing systems and necessary renovations. The company could also ensure and commit to its resolve to environmental friendliness operations. 6 References Lewin, B., Giovannucci, D., & Varangis, P. (2004). Coffee markets: new paradigms in global supply and demand. McConnell, C., Bure, S., & Flynn, S. (). Economics (20th ed.). Retrieved from https://phoenix.vitalsource.com/books/1259822400/epubcfi/6/26[;vnd.vst.idref=prf8]!/4/8/2@0:5. 43. Reinecke, J., Manning, S., & Von Hagen, O. (2012). The emergence of a standards market: Multiplicity of sustainability standards in the global coffee industry. Organization Studies, 33(5-6), 791-814. Chen, P. T., & Hu, H. H. (2010). The effect of relational benefits on perceived value in relation to customer loyalty: An empirical study in the Australian coffee outlets industry. International journal of hospitality management, 29(3), 405-412. Kolk, A. (2005). Corporate Social Responsibility in the Coffee Sector:: The Dynamics of MNC Responses and Code Development. European Management Journal, 23(2), 228-236.

Tutor Answer

School: Cornell University


Running Head: WEEK 3 ANALYSIS


Week 3 Analysis
Institutional Affiliation



Current Economic Conditions and its Effects
Germany is the country selected for foreign expansion. Germany is ranked the fourth
largest economy in the world behind the United States, China, and Japan. In 2016, the GDP of
Germany was worth 3466.76 billion US dollars. The GDP value of Germany represents 5.59 %
of the world economy. According to World Bank data, the averaged Germany GDP was 1902.72
US billion dollars from 1970 until 2016 (World Bank, 2018). World Bank data reports that
Germany economy reached all time high of 3880 US billion dollars in 2014 and a record lowest
of 215 US billion dollars in 1970. Over time decades, Germany has attracted many multinational
companies to venture into the lucrative market.
The economic growth of Germany is expected to remain solid. The solid economic
growth is backed by booming labor market, robust world trade, and investment. Consumption
growth has stagnated somewhat because of higher inflation that has curbed real wage growth.
Growing housing demand, high capacity utilization, and low interests rates are cornerstone for
the growth of the country and investment (World Bank, 2018). The low interest rates fuel
business growth in the future. The current account surplus is anticipated to slightly fall on the
back of strong domestic demand that supports imports. The lucrative economic growth supports
the operations of companies in the country.
According to OECD data report of May 2018, the growth rate of Germany is 0.4% and
the projected GDP growth rate is 2.1%. This can be directly linked to positive growth in
agriculture sector, stable political environment, and increasing labor force (OECD, 2018). The
tax on personal income is 10.0% of the GDP. The unemployment rate is 3.7% of labor force.
According to OECD, fiscal policy of Germany is mildly expansionary, but strong cyclical

revenue growth that will make the country’s budget in surplus. Higher subsidiaries for families
and reductions in social security contributions are highly anticipated but the timing remains




According to the CIA World Fact Book, top personal income rate stand at 47.5% this
includes 5.5% surcharge. The federal corporate rate stands at 15.8%. The low corporate rate is
lucrative to Starbucks because it will enable the company to register higher profit margins. The
overall tax burden represents 36.9% of the total domestic income (CIA, 2018). Over the past 3
years, the government spending is approximately 44.2% of the GDP, and budget surpluses on
average are 0.6% in the 3 years. High government spending is important because it boost
economic growth and development.
The table below summarizes the economic forecasts for Germany for the next decades.
This is in addition to medium-term anticipation for short-term market predictions and the next
four quarters affecting the next the Germany economy (ECD, 2018).
GDP Growth Rate










GDP Annual Growth Rate
USD Billion
GDP Constant Prices
EUR Billion
Gross National Product
EUR Billion
Gross Fixed Capital
EUR Billion
GDP per capita
GDP per capita PPP
























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