© n8n photo/Alamy
Chapter 4Entrepreneurship, Small Business, and New Venture Creation95 tain its spirit and continue to grow in the dynamic online world. The team at BTR spirit of the organization. For example, each month all employ- ees, regardless of their official position, spend some time completing orders in the fulfillment centre. The core message of this approach: “You may be a marketer or an accountant but without these orders and the ultimate satisfaction of the end consumer, there is no business. Never forget who we are.”
THE FUTURE
In the next few years, Beyond the Rack will surely experience new chal- lenges and will need to secure additional financing to reach its objectives.
Despite BTR’s 13 million members the company has yet to make a profit.
While it is true that many internet (and most social media) companies have taken years before becoming profitable (e.g., Facebook) it is still the most important long-term metric. In addition, initial success inevitably brings more competition which further complicate matters. For example, Amazon launched MyHabit.com a couple of years ago to compete with companies like Gilt and BTR. What does the future hold for Beyond the Rack? That is unclear. However, the brief history of the firm is impressive.
For these internet entrepreneurs, future success, as is the case for more traditional companies, will be based on their ability to satisfy the needs of their brand suppliers and consumers alike, and of course, eventually generate substantial profits for themselves and for all of the investors that have backed them financially and shown faith in the concept.
QUESTIONS FOR DISCUSSION
1. Entrepreneurs are vital for the success of a free-market economy.
Highlight the entrepreneurial process and describe some of the key entrepreneurial characteristics as they relate to this case.
2. Describe some of the major challenges that the entrepreneurs behind Beyond the Rack face.
3. What does this case reveal about the importance of financing a successful growth-oriented start-up business?
ucts do not come to the premises unless member orders are placed.
Beyond the Rack has created an efficient win-win-win scenario: (1) cus- tomers get designer products at great prices; (2) the designer brands have an efficient way to dispose of excess end-of-season items (from a branding point of view this approach is favourable—it’s better to sell to this private club than to have expensive brands sit in cluttered racks in stores like Winners, for example); and (3) BTR earns an attractive margin as the facilitator. It’s quick, it’s efficient, and it’s online.
FINANCING
Successful entrepreneurs need more than a good idea; they also require the willingness to take a risk and the energy to work hard, as well as access to financing. If you are opening a small mom-and-pop store, you may need to dip in to your savings or take out a loan to buy equip- ment and build a storefront. However, when your goals are set high, like becoming the premier online shopping club in North America, you need to be creative and you must convince individuals and organiza- tions to provide major financing to support growth. This is exactly what Yona Shtern and his team have done. In their first six years, BTR had already managed to attract more than $75 million in financing from major investors and organizations such as BDC Venture Capital Inc., Export Development Canada, Highland Capital Partners LLC, Oleg Tscheltzoff and Oliver Jung (two European internet entrepreneurs), Montreal StartUp (a venture fund), and David Chamandy (an “angel investor”).
GROWTH AND EXPANSION
In only its second year of operation, BTR acquired selected assets of New York–based BeautyStory.com. This move added to the solid base of members (a key figure for BTR’s growth and bargaining power) and strengthened the already successful beauty division. This was yet another important milestone in its brief history. However, as companies grow and structures are put in place, the entrepreneurial spirit of an organization runs the risk of being smothered by bureaucracy. Its trade- mark creativity, flexibility, and passion will be necessary for BTR to sus-
Rawpixel/Fotolia
Not My Cup of Tea
05
China is famous for its love of tea. Over thousands of years, tea has been the beverage of choice. This, however, did not deter Starbucks from entering one of the fastest- growing consumer markets in the world. The company’s global expansion actually began when Starbucks opened its first store outside the United States in Vancouver back in 1987. Today there are over 21 000 locations in 66 coun- tries, including more than 7000 in the United States and over 1000 in Canada.
Winning over customers in Canada, with a recipe that works in the United States, is a bit easier than winning over diverse global consumers. Starbucks has clearly managed to learn a few lessons along the way and understands the process better than most. Starbucks opened in Taipei, Taiwan, in 1998 and the first mainland store was opened in Beijing in 1999. By 2015 there were over 1500 loca- tions in 90 Chinese cities and over 25 000 employees in the country.
LO
AFTER READING THIS CHAPTER, YOU SHOULD BE ABLE TO:LO-1 Describe the growing complexity in the global business environment and identify the major world marketplaces.
LO-2 Identify the evolving role of emerging markets and highlight the importance of the BRICS nations.
LO-3 Explain how different forms of competitive advan- tage, import–export balances, exchange rates, and foreign competition determine how countries and businesses respond to the international environment.
LO-4 Discuss the factors involved in conducting business internationally and in selecting the appropriate levels of international involvement and organizational structure.
LO-5 Describe some of the ways in which social, cultural, economic, legal, and political differences act as barriers to international trade.
LO-6 Explain how free trade agreements assist world trade.
Starbucks analyzed the Chinese market and found that their brand was valued, not only for their food and beverage offerings, but also for the atmosphere. Chinese consumers enjoyed the opportunity to meet with friends and business
The Global Context of
Business
CHAPTER
<<<
Starbucks has made a name for itself in China and the com- pany is integrating into the Chinese landscape.
Guo qichang/Imaginechina/AP Images
97
Part 1Introducing the Contemporary Business World98
brought its long tradition of com- munity involvement to China.
Through a $5 million grant to the Starbucks China Education Project, it aims to give students and teachers in rural areas more access to clean drinking water, and provide relief from natu- ral disasters like the Sichaun earthquake. Starbucks has demonstrated that long-term commitment and sensitivity to international market conditions are the keys to success.
Finally, the lessons learned around the world inspire new products and new opportunities back home. A few years ago, Starbucks bought the Teavana retail brand along with their 300 retail stores for over US$600 million. Currently, the brand has locations only in the United States, Canada, and Mexico; but for the next few years, it at least has an asset to battle growing local North American tea brands (like David’s Tea here).
partners in a comfortable loca- tion and appreciated the upbeat music and sleek interiors. While kiosks have become popular in the United States and Canada, some Chinese Starbucks loca- tions are as large as 350 square metres.
Starbucks has custom- ized its product offerings by introducing products like the Green Tea Frappuccino
®Blended Crème. However, not all Chinese consumers are fans.
Cheng Xiaochen, an English teacher who likes to meet stu- dents at Starbucks, exclaims,
“It’s a good place to meet peo- ple, but the coffee is so bitter it tastes like Chinese medicine.”
Responding to Mr. Cheng and others like him, the company offers mint hot chocolate and
red bean Frappuccino. Food offerings have also been customized to the Chinese market, with Hainan chicken sandwiches and rice wraps.
Starbucks is constantly looking to uncover needs and adapt to local tastes. It recently partnered with Tingyi Holdings (China’s #2 soft-drink seller) to manufacture and distribute ready-to-go drinks. Tingyi has an existing, highly developed distribution network that can reach across the entire nation (rural and urban). In addition, Tingyi provides real insights into local consumer tastes.
Starbucks acknowledges that employees are at the centre of its success and makes a considerable investment in training, developing, and retaining these employees.
However, it faced a challenge in an achievement-oriented Chinese culture, where parents aspire for their children to take jobs in traditionally successful fields such as financial services and banking. In response, it launched a family forum, which provided stories from managers who have worked their way up the career ladder with the company.
Starbucks has worked to extend every component of its corporate culture into its expansion. The company has
As we will see in this chapter, global forces—business as well as political—affect each and every one of us daily. As you begin your business career, regardless of whether you see yourself living abroad, working for a big company, or starting your own business, the global economy will affect you in a variety of ways.
Exchange rates for different currencies and global markets for buying and selling are all of major impor- tance to everyone, regardless of their role or perspec- tive. As a result, this chapter will better enable you to (1) understand how global forces affect you as a cus- tomer, (2) understand how globalization affects you as an employee, and (3) assess how global opportunities and challenges can affect you as a business owner and as an investor. You will also gain insight into how wages and working conditions in different regions are linked to what we buy and the prices we pay.
We begin with an exploration of the major world marketplaces and trade agreements that affect inter- national business. We will examine some of the social, cultural, economic, legal, and political factors that affect international business. We will highlight several factors that help determine how countries and busi- nesses respond to international opportunities and challenges. We will also describe some of the deci- sions managers must make if they intend to compete effectively in international markets.
HOW WILL THIS HELP ME?
Mocker bat/Fotolia
Chapter 5The Global Context of Business99 The total volume of world trade is immense—nearly $19 trillion in
merchandise trade each year.1 The world economy is increasingly transforming into a single, interdependent system in a process called globalization.
Even so, we often take for granted the diversity of goods and services available as a result of international trade. Your tablet, smartphone, cloth- ing, and even the roast lamb on your dinner table may all be imports—
that is, products made or grown abroad, but sold in Canada. At the same time, the success of many Canadian firms depends on exports—prod- ucts made or grown domestically and shipped abroad.
Major companies like McDonald’s, Apple, and Bombardier have found international markets to be a fruitful area for growth. But firms sometime stumble when they try to expand abroad. Home Depot closed most of the stores it opened in China, for example, because labour costs are so low there few homeowners are interested in do-it-yourself proj- ects. Similarly, Best Buy closed its stores in China because consumers there tend to buy their electronics goods at lower prices from local or online merchants.2
And the impact of globalization doesn’t stop with firms looking to open locations abroad or having to close locations that fail. Small firms with no international operations (such as an independent coffee shop) may still buy from international suppliers, and even individual contrac- tors or self-employed people can be affected by fluctuations in exchange rates.
International trade has become increasingly central to the fortunes of most nations of the world, as well as businesses. In the past, many nations followed strict policies to protect domestic companies, while today most countries are aggressively encouraging international trade.
They are opening their borders to foreign businesses, offering incentives for their own domestic businesses to expand internationally, and mak- ing it easier for foreign firms to partner with local firms through various alliances. Today, it is not simply a question of Western nations push- ing trade abroad. China is making major inroads and increasing its eco- nomic and political influence in Africa with major deals with Nigeria, South Africa, Ethiopia, and Zambia. China is now the largest trading partner in the region with trade totalling more than $114 billion, just ahead of the