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Business Environment Factors

University: University of Westminster

  • Unit No: 14
  • Level: High school
  • Pages: 10 / Words 2442
  • Paper Type: Assignment
  • Course Code: N/A
  • Downloads: 8368

Table of Content

  1. Introduction


The business environment encompasses the internal and external factors influencing an organization's overall performance. When expanding into a new country, it's crucial for companies to consider these factors to ensure smooth growth. In today's globalized economy, macro-environmental factors such as political, legal, social, environmental, and technological elements play a significant role in business expansion. This report focuses on Starbucks, a coffee company based in Washington, United States, which is exploring opportunities for Foreign Direct Investment (FDI) and planning to expand into Belgium. It will provide background information on the macro-environmental factors in Belgium relevant to this expansion, analyze business scenarios in a global context, and address the main challenges faced by the company, along with recommendations for addressing these issues.

Background Information on Starbucks

Starbucks is an American corporation which was founded in Seattle, Washington, U.S. In 1971. It is one of the most renowned retailer roasters and deals in specialty coffee across the globe. Starbucks operates in 28,218 locations in the world. As per data of 2016, the company employs 2,38,000 people in all its outlets across the globe. Globally, the stores of company offer a range of beverages such as hot and cold drinks, Frappuccino beverages, caffe lattes, instant coffee called VIA, Evolution Fresh Juices, espresso, and Teavana tea products. Also, the outlets have La Boulange pastries along with snacks inclusive of chips and crackers to serve customers well. Besides this, the enterprise also offers certain items including beverages, pastries and snacks that are either seasonal or exclusively available in selective locations. Also, many stores also offer pre-packaged articles, sandwiches (hot and cold) and also drinkware like coffee tumblers or mugs. Exclusive locations of the company also provide alcoholic beverages inclusive of beer, appetizers as well as wine. The company's bottled drinks, ice cream along with coffee are also available at grocery stores globally. Starbucks is the prime representative for 'second wave coffee' which helps the entity in differentiating itself from other big coffee brands in terms of quality, experience gained by customers, and taste in order to make dark-roasted coffee famous in the marketplace.

Starbucks follows a corporate structure which helps the company in facilitating the operations of business across the globe. Enterprise makes use of its organizational structure so as to ensure growth and development of company along with overall coffee industry. Company's corporate has an effective impact on various areas of function like incorporating change, execution of growth and expansion along with daily management of activities. Company ensures that its structure is specific to needs of entity. For instance- in the past, the company modified its corporate structure so as to carry out expansion of business by acquiring companies like Ethos Water and Seattle's Best Coffee. These adjustments give a strategic edge to company and assists in easier expansion of entity across different parts of world.

Being a well renowned brand across different parts of world, company keeps in consideration satisfaction derived from customers. The brand focusses upon creating such an experience for consumers that they place trust in company and remain loyal towards brand. They believe in recognising the importance of human resources within (staff) and outside the organisation (customers). As a result of this, the corporate image and position of Starbucks, over years, has been quite high in market and can be seen to the extent that company earned revenue of US$22.387 billion in 2017.

Background Information on the Business Environment in Belgium

Starbucks is a famous coffee brand with various outlets across the globe. Company is considering to explore the option of Foreign Direct Investment (FDI) in Belgium so as to expand its operations there. The company offers a wide variety of high quality snacks, appetizers and beverages. Starbuck's major aim is to sell coffee and associated products of finest quality so as to derive a positive customer experience and ensure widespread acceptability from public worldwide. Top management of company recognises the need for reaching the customers spread across different parts of world so that it can become the leading brand in coffee and relative products industry.

Company's core competency values are based upon effective management of human resources along with building healthy and strong relationship with suppliers such that company can easily enter a new market and enjoy the benefit of its large scale networking. Also, the destination chosen by company for expansion is Belgium wherein company by way of foreign direct investment will carry out expansion of its operations. For this, manager of Starbucks has conducted PESTEL analysis. This is a strategical tool which helps an entity in assessing the external environment of business so that entity can move in to a new place feasibly. The PESTEL analysis of Starbucks in relation to expanding into Belgium is as follows:-

Political Factors

These factors determine the extent of government intervention in operations of company. Political factors include aspects like government policies and legislation including tax and employment laws. Belgium is situated in Western Europe. The political conditions of country is stable and the regional as well as community governments there enjoy the power to take decisions and make policies in relation to water, education, transportation, public health, environment, industrial policies, cultural values etc. The Belgium government has entered into an agreement with Alibaba Group with an aim to facilitate promotion of trade and foreign direct investment covered under Electronic World Trade Platform (eWTP) initiative. Also, government encourages new foreign investment as a source for creation of employment opportunities. Thus, political conditions as well as initiatives by government will help Starbucks in easily carrying out the expansion of business operations there. Also, favourable support from Belgium government will assist enterprise in feasibly conducting its activities and enhancing its sales and profitability in the country.

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Economic Factors

Such factors include the aspects related to economy of a country and includes factors like inflation rate, interest rate, disposable income of people etc. Belgium is an immensely developed market economy and is an essential part of Organization for Economic Cooperation and Development (OECD) which is a group of industrialized democracies that are leading across the globe. Belgium is considered as one of the world's highest industrialized country and was the first location that underwent an industrial revolution across Europe. This helped Belgium in creating an excellent channel of distribution and a well managed transportation and infrastructure system consisting of railways, ports, canals and highways to facilitate integration of economy with neighbouring places. This will help Starbucks in entering into foreign direct investment so as to carry out expansion of operations in the country.

Social Factors

These are the factors related to customer preferences and trends that are persisting in marketplace. These include aspects like attitude and behavioural pattern of people, population growth rate, demographical situations, age groups, choice and preferences, trends and technologies, culture, norms and values of people etc. Belgium is a country situated in Western Europe which constitutes various ethnic groups with diverse set of languages and religions. It consists of three regions, namely: The Brussels Capital Region, Flanders and Wallonia. Also, as the people are becoming increasingly aware of health consciousness factor, they prefer coffee over other beverages. Also, millennials have a trend that consumes coffee more than tea nowadays. Thus, the social conditions of Belgium as well as the latest trends and preferences of people will facilitate easier expansion of Starbucks in the country and assist the company in gaining widespread acceptability from public there.

Technological Factors

With rapid evolution of time, there have been significant and massive changes in technology that need to be considered by every business entity to stay ahead of its competitors. Belgium was the first country to undergo industrial revolution and highly encourages the use of technological advancements in business organisations. Thus, this creates opportunity for Starbucks to utilise extensive technology in its operations so as to increase the pace of its operations and gain widespread acceptance from public. Company may face threat from home use specialty coffee machines as this will increase the chances of substitution of Starbucks products with other food articles or beverages. Company can also consider bringing improvements in its mobile application so as to become popular in Belgium. This will help Starbucks in reducing the barriers to enter a new market and enhance the sales and profitability of company in Belgium by aid of foreign direct investment.

Environmental Factors

These factors define the extent to which business entities operate in response to increasing environmental concerns and extinction of natural resources, Business organisations are required to indulge in sustainable development and other environment friendly practices so that there is no legal intervention in functioning of enterprise. Over years, Starbucks have also indulged in eco-friendly practices, revaluation of dipper well system to avoid excess use of water along with recycling of waste and Starbuck's C.A.F.E. Practices so as to work in public interest towards environmental and natural resources conservation. Starbucks should continue using sustainable practices in Belgium so that it can easily expand in new market without any hindrance from law, statutory bodies or local communities.

Legal Factors

These are the factors that ascertain the various types of laws and legislations made by government or statutory bodies within which business has to conduct its activities. It includes laws related to health and safety, employment, tax, customs, trade barriers, tariff etc. For easily carrying out expansion in Belgium by way of foreign direct investment, it is essential that Starbucks takes into account all the laws and regulations prescribed for business entities operating in Belgium. Also, it is imperative that company follows all these legislations so as to facilitate easy functioning without any legal intervention. Besides this, company is also required to stay alert in response to policies introduced by government and heath authorities that are associated with production and consumption levels of caffeine. By complying with all such regulations, company can easily expand in Belgium markets.

Environmental Factors

These factors define the extent to which business entities operate in response to increasing environmental concerns and extinction of natural resources, Business organisations are required to indulge in sustainable development and other environment friendly practices so that there is no legal intervention in functioning of enterprise. Over years, Starbucks have also indulged in eco-friendly practices, revaluation of dipper well system to avoid excess use of water along with recycling of waste and Starbuck's C.A.F.E. Practices so as to work in public interest towards environmental and natural resources conservation. Starbucks should continue using sustainable practices in Belgium so that it can easily expand in new market without any hindrance from law, statutory bodies or local communities.

Analysis of the Business Scenario

Starbucks is considering to expand by entering into Belgium through Foreign Direct Investment. Companies are easily attracted towards investing in Belgium is due to its strategic location in Western Europe and its competitive position in terms of high quality infrastructure, communication, transportation, multilingual and skilled workforce, logistics channels and high purchasing power of people.

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There are various positive aspects that need to be considered by company while investing in Belgium. This country offers a wide range of perks to investors as this was the first country to undergo industrial revolution. Also, the population of Belgium comprises of immensely skilled, productive and multilingual workforce with a wide base of knowledge. Also, the country has high quality infrastructure and other necessary facilities for business entities to freely operate in the country. Also, the country is highly open to international trade and commerce. Besides this, government take initiatives so as to promote foreign direct investment into country as this reflects high level of employment opportunities. Furthermore, people in Belgium possess high purchasing power and the standard of living of country is also quite good.

Even though there are various opportunities for investors while investing in Belgium, yet there are certain drawbacks that need to be taken into account by company for easy expansion of operations in country. Corporate tax levied upon businesses in the country is high. Also, for any entity that wishes to invest in Belgium, it is highly dependent on economic conditions of Euro Zone. Besides this, cost of employment in Belgium is quite high which is adverse for investors. Also, constant strain between Flander and Wallonia is a matter of concern for companies who want to enter into the marketplace. As there are various ethnic groups present in the country, there is high need for business enterprises to emphasize upon labelling and marketing strategies.

Thus, both these aspects need to be focussed upon by Starbucks so that it can easily enter into the new market and conduct its operations freely without any intervention from government. Also, stressing upon these factors will help the company in ascertaining the areas which can help Starbucks in easy expansion of business operations.

Competitive rivalry or competition with Starbucks coffee company

Company faces a high competitive rivalry in industry of food services and coffee house. In porters five force model analysis, this force concentrates to the impact of competitors on each other as well as environment of industry in Belgium. Here in case of Starbucks company, there are various external factors that contribute to strong force of competition which are Various numbers of firms, moderate variety of firms and switching costs which are low. Starbucks of Belgium uses two different strategies to give responses to their competitive rivals which are Starbucks corporation strategy and intensive growth strategies.


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