What Coffee Price?

Why might coffee businesses be described as multinational companies?

A multinational company is a company the operates in two or more countries. Coffee businesses aim to distribute their coffee all over the world, therefore they don't operate in only on country. To be recognized at a global level, coffee businesses will operate and set up their business in different countries. For example Nestle, as mentioned in the case study is one of the 5 businesses that dominates coffee production, is set up in different countries worldwide. It has many locations in the United States, UK, India, etc.

Explain reasons why multinational companies in the coffee business operate on a global basis.

Coffee businesses strive to becoming the leading producers of coffee in the market because, unlike other food or beverage products, multinationals in the coffee business are working in a market where they can make up to 26 percent in profit. Therefore all coffee businesses will try to be the most dominant business in the market like Nestle who is currently the most dominant coffee processing business controlling 57 per cent global share of the coffee business. Another reason why coffee processing multinationals operate on a global bases is to spread risks across the world. As mentioned in the case study coffee is grown mostly in developing countries. Since the weather or natural disasters can affect the growing process of coffee, multinationals will have to set up in different countries so they don’t have to rely only on one country. Coffee businesses operating at a global level are able to locate their business in different countries meaning lower costs of production. Coffee production might cost a lot less than what the consumers have to pay in certain countries, as we can see in figure 109.4 that the cost of getting the coffee from the Ugandan farm to the point where the business actually sells its coffee to its customers has increased by over 19 pounds. Coffee businesses also operate on global basis to increase their brand recognition and customer base. Coffee is a beverage that is highly demanded in almost every country across the globe and for coffee business to be selling their product globally means that they increase their customer base and their brand is highly recognized at a global level.

Examine the factors which have affected the globalization of this market.

Globalizations is the integration of the worlds economies in terms of economics, sociology, and politics but when a firm is producing globally they are efficiently producing and selling the same product simultaneously in different countries.The major factor that contributed to the globalization of the coffee market is the liberalization of trade barriers. As mentioned in the case study, Vietnam who barely registered on the worlds coffee markets has experienced an economic growth since trade liberalization was presented in the 1990s’. The liberalization of trade barriers meaning the removal of trade barriers allows coffee businesses to export their products without the intervention of protection methods such as tariffs and quotas. The removal of barriers allows the coffee producers to trade with countries, eventually leading to to the globalization of the market.

Analyze the effects of globalization on multinational coffee businesses.

Globalization has both positive and negative effects on how multinational coffee businesses operate.

Globalization increases the level of competition for the coffee market, thereby causing the different multinationals to compete against each other for their customers. When a business is producing at a globally level they have to meet the customer expectations and needs which becomes more demanding as the business grows. The leading businesses in a market that have established a global presence can benefit from economies of scale, in the case of the coffee multinational the factors of economies of scale which are more appealing would be land and labour because coffee production, as stated in the case study, is carried out mostly in developing countries. Multinational companies have a greater choice of location for their production facilities which is an important benefit because it allows the companies to set up their production facilities in areas that are better for coffee growing. Another benefit for multinational coffee businesses is that they can increase their customer base thereby increasing their brand recognition.

Evaluate the impact of the global coffee business on coffee farmers in developing countries.

After reading the case study and the reaction from William Nagaga of the Ugandan Coffee Development Authority, we can see that the presence of global coffee businesses has an impact on the coffee farmers in developing countries and on the country itself. One benefit of multinational coffee businesses to the host country is that it provides jobs for the many that are unemployed in developing countries. Successful multinational might offer more money to local workers compared to other local businesses but still pay less than what they would pay workers in a developed country. Coffee multinationals can also provide new technology for the local people that relates to coffee growing benefiting both the country and the multinational itself. In some countries, coffee producing multinationals can also increase competition with local businesses or other multinationals that being hosted by the same country. Increase of competition means that all companies will be producing at more efficient levels to attract more customers.

Even though coffee multinationals have their benefits they also have costs to the host country. When multinationals set up in host countries they increase employment and competition but if the local companies cannot handle the competition they are forced to shut down or are in danger of a takeover, therefore causing unemployment. Mr. William Nagaga also mentions that the multinational are too powerful and that “ five men sitting in a room deciding the fate of 25 million coffee farmers around the world.”

Multinational Companies

1. Define a multinational company?

a multinational corporation is a business organization that operates in two or more countries.

2. Define a holding company?

a holding company is a company that does not produce goods or services but owns shares in other businesses.

3. What are the similarities and differences between the 2?

4. Virgin Airlines

a) In the early 80's Richard Branson was well known for his music record Virgin Records. he later on started his own airline Virgin Airlines which in the first decade flew over 1 million passengers.

In the 90's Richard Branson sold Virgin Records and invested all his money into Virgin Atlantic. they spent most of the 90's buying new planes and sold a 49% stake to Singapore Airlines valuing Singapore Airlines at 1.225 billion english pounds.

b) the core business areas of Virgin Atlantic are travel, entertainment, and lifestyle.

c) Virgin is a very diversified company, owning a lot of different business from travel to mobile phones, games to beverges. Regardless of how diversified they are Virgin does not move far away from thier core business which is travel.

d) By diversifying, Virgin will have some control over the market they are working in and if they decide to change thier goal from travel to entertainment they will not have to start from the begining because they have already established a business in that market.

e) New York

f) 14 members on their board of directors.

question 6

Describe barriers to growth for LEDC's ?

Barriers to economic growth exist in LEDC's, which are poorer countries that have found it difficult to grow, and these barriers act as a restraining force for business that want to expand overseas. some barriers that make it difficult for a country to achieve economic growth are found when a country had a lack of infrastructure, which is communication and transport networks such as road systems, schools, hospitals, housing and basic electricity.

a lack of technical knowledge and labour force can also act as barriers for a country. if there is a rapid population growth the country will find that there are too many people to feed. when a country suffers from high foreign debt repayments it is left with very little money for domestic investment and growth.

question 5

How can the labour force of a country change?


Changes in the labour force can be caused by,


Change in demography: a fall in birth rate in developed countries, people choosing to start work later for educational reasons and retiring early because of rising income are reasons that will reduce the size of the workforce.

Changes in participation rates: a higher participation rate can be caused by government incentives such as lower rates of income tax. due to an increase in the number of women that are returning to or starting work has also increased participation rates in different regions of the world.

Changes in net migration: this refers to the difference between immigration and emigration. if the net migration is positive then the size of the workforce will increase.

question 4

How does growth occur via improved quality of factors of production?



Growth via improved quality of factors of production requires an investment in key resources of the economy such as,



Capital Goods: the greater the level of investment, the higher economic growth tends to be.



Education and training: if the workforce is trained better and more educated the workforce will become more productive.



Health technology: health care helps ensure the health of the workers and a healthy workforce is likely to be more productive. this can also prevent workers from taking time off or retire because of their illness.

question 3

Explain 4 ways businesses can cope with a recession.



Cost reduction:- there are methods such as finding alternative suppliers who offer the product you need at better prices or moving to a cheaper location should help cash flow during a recession.



Price Reduction:- during a recession people become more aware of prices so lower prices will be more attractive to the public.



Branding:- can help during a recession because customer who are loyal to the brand will continue purchasing its products regardless of price change helping the brand maintain its sales.



Outsourcing:- the cost of production might be lower overseas so this could help a business gain a competitive price advantage and increase its profits. this will help reduce the impact of any recession in the country's market.

Economic Growth Exercise question 2

2.


Peak or Boom
Economic activity at highest, Consumer expenditure, investment and export earnings, unemployment will be low, consumer and business confidence will be high, possible increase in wages, business have very good cash flow


Recession
Declining aggregate demand, lower investment expenditure, falling export sales, rising unemployment,


Slump or Trough
High level of unemployment, very low levels of consumer spending, investment and export earnings, poor cash flow


Recovery or Expansion
GDP rises, national income begins to increase, consumption, investment, and employment will also increase

Skoda Case Study

a) two stakeholders in Skoda would be employees and managers and directors



b) the conflict in the case study is between the employees and the managers/directors or shareholders. the employees were on a strike because they were concerned about their wages and benefits. this would've been caused due to a pay-cut or cancellation of a benefit they had. if Skoda had increased the wages of their managers and directors the wages of the employees would be effected. Shareholders might have demanded more profit which resulted in a pay-cut from the employees salary, enabling the company to give more to their shareholders.



c) the conflict can be minimized by Skoda working on getting the employees to end the strike and start working again. they could do this by giving them their salary and no more pay-cuts. after this is done, i believe that if Skoda increases staff motivation this will encourage the employees to increase their production level which will lead to profit. this way Skoda will gain the money they lost and in the long run make more profit, and the shareholders will also be pleased because they will be making more money. if Skoda didn't want to publicize the strike that occurred they could also employ a good public relations firm. this would help Skoda recover by publicizing the positive work they are doing. they could do this by communicating frequently with their stakeholders such as their employees and the local commuity.

Franchise Case Study

1) Setting up and running a business and franchise have their similarities but are very different. when starting up a business you start it with the hope of success but nothing can really guarantee whether the business will be successful or not. there is also a huge risk when starting up a business financially, depending if its started under a limited or unlimited liability. if the business were to fail this could have a large impact on the owner. although this is the case in businesses it is a whole different case with franchising. when franchising the buyer of the franchise known as the franchisee is buying a franchise from the seller known as the franchisor. in most cases franchisees purchase a franchise whose franchisor is already running a successful business. therefore there is a guarantee on the business being successful. By selling off a franchise the franchisor will gain from a larger economy of scale but it also means it would be difficult for the frachisor to control the activities of all its franchisees. Running a franchise is similar to running a business but there is a huge risk for the franchisor in selling off its company name and logo to a franchisee because if franchisees do not follow the franchisors protocols or do not meet expectations it could result in harming the reputation of the franchise.

2) Whether a team has the best players or the average players doesn't determine the success of the team. Using the Forbes website and the Business of Baseball website, the Washington Nationals, which were known as the Expos, are most likely to be sold to a rival bidder. The teams overall statistics are not very impressive. By looking at Forbes we can also see that the Washington Nationals also generate the lowest revenue in the league. Another team which is not doing very well in the league are the Tampa Bay Devil Rays, but if we were to compare the two teams we can see that the Tampa Bay Devil Rays generate $110 million in revenue which is greater than what the Washington Nationals make, putting them in a worse position. the other statistics of the Washington Nationals are average but because of their revenue, they are most likely to be bought by a rival bidder. Revenue can be increased through selling team products such as t-shirts, mugs, hats etc. and charging other fees around their stadium. Due to the revenue they generate, the Washington Nationals are the most vulnerable team to be sold to a rival bidder such as Portland Oregon.



3)

a) the Premier League can use their position to expand their franchise in different countries. just as how there is an English Premier League they can expand the Premier League such as the Irish Premier League and the Indian Premier League for example. they both do not have English soccer teams but are still part of the Premier League franchise. By opening different premier leagues all over the world the Premier League franchise can expand their brand.



b) the football clubs in the original premier league which is the English premier league are known all over the world because of the expansion of the Premier League and different broadcasting stations in different countries. this basically will act as a reputation boost for the clubs in the Indian and Irish premier league. The clubs in the Indian and Irish premier league will also be known by the English premier league but the franchising of the premier league will act as an increase for the reputation of the English soccer clubs.

Ethical Objectives and Corporate Social Responsibility

1) define

a) Ethics: are the moral principles that guide decision making and strategy.

b) Morals: are concerned with what is considered to be right or wrong, in society's point of view.

c) Corporate Social Responsibility: are responsibilities of businesses that act morally towards thier stakeholders such as thier employees and the local community.

d) Social Auditing: is a way to ensure that socially responsible objectives are being implemented.



2) Give three examples of unethical business behavior.

• financial dishonesty: delibratly misenterpretating a business to make money
• environmental neglect: harming the environment
• exploitation of workforce: mistreatment of staff

3) What are the disadvantages and advantages of businesses who behave ethically?

Advantages of behaving ethically are:

• having an improved corporate image:- enahanced image and reputation of business
• increased customer loyalty:- customers are more likely to be more loyal to businesses that do not act immorally or unethically.
• cost cutting:- possible to reduce certain costs of production through ethical behaviour
• improved staff motivation:- ethical and moral behaviour can boost employee motivation and by doing so increase productivity and loyalty.
• improved staff morale:- ability to recruit high quality staff who are motivated to work for businesses that behave ethically and morally.

Disadvantages/Limitations of ethical behaviour are:

• compliance costs:- refers to high costs of acting ethically
• lower profits:- if the compliance costs can not be charged to the customer using the product then profitability will fall. can also be referred to ethical dilemma.
• Stakeholder conflict

4) How does CSR help a business compete?

Businesses that act in a a socialy responsible way gain a better image as a business and so do thier products. this means that it will result in people buying more of thier products, Ex. The Body Shop. Due to the businesses success the business will then get more investors.

5) Why is a social audit undertaken by business?

Businesses undertake a social audit to make sure thier objectives as a socially responsible business are being met. the social audit is an assessment of how the businesses objectives are affecting the society.

Fullers case study

Task 4:

Fullers is a large brewery, ehich earns more capital than local breweries, and buying small breweries would benefit the stakeholders or wouldn’t hardly affect them. The impact on the stakeholders will vary due to the popularity of the beer. If the brewery Fullers bought had well demanded beer, then it is highly likely that Fullers will earn a lot of money from it. However if the brewer was not demanded then an acquisition would either not harm the stakeholders or affect them and the company. Gales was a highly demanded beer by the locals, all the pubs and markets, therefore Fullers buying Gales brewery was a good decision and has increased profits made by the company and more capital for the stakeholders. Because Fullers has gained a lot more profit due to this acquisition, the stakeholders will also receive a larger amount of money. However, in the long run the stakeholders could be affected because Fuller has closed down Gales brewery and moved productions to Chiswick. This could change the taste in the beer and decrease the demand for the beer, or the price of beer might increase due to transportation costs or other factors.

Fullers case study

Task 3:

Economies of Scale would be the best reason for the acquisition because through the acquisition the company can expand its product sales and make more of the product than they were producing before the aquistion. When a firm acquires another firm it is gaining a larger scale of operations, such as more labor and more equipment. In Fullers case, buying Gales has helped expand production and gain a larger margin of profit for the company.

Michael, Mehul, Talal, and Faisal. Fullers case study

Task 2:

· Capacity is relevant to this case study because fuller has increased the amount of beer that its selling by buying the Gales brewery. Gales brewery has been selling its beer to the local pubs and markets, when Fuller bought Gales brewery they started selling Fullers beer to the same pubs and markets. The local pubs will, most probably, not stop selling beer because of the buy-out. In theory, Fuller has increased its capacity because of the firm's capital assets. By buying Gales brewery, Fuller now owns another business that sells its product enabling it to expand its capacity.

· Economies of Scale can be relevant to this case study because Fuller scale of production/operations has increased due to the acquisition. Because Fuller now owns Gales brewery it has more people working and more equipment for production. Economies of scale are the advantages of larger scale production that results in lower cost per unit produced. Fuller in this case has gained economies of scale from their acquisition, and the acquisition has been proven to be good. As of September 2006, its profit has increased by a third to 10.9 million euros. This can also help Fuller to compete against other top beer brewers in its region.

· Fuller buying Gales brewery has given it access to supplies and distribution networks. Meaning that they don’t need a new mean of distribution for their beer in the local region. If Gales brewery was transporting the beer using trucks, or a specific transportation route, Fuller will be able to use the same route for distributing its beer. The beer that was being provided to the local pubs will now be changed, but the pubs have to sell beer meaning that they will be forced to sell Fullers beer.