Expanding Starbucks Coffees to Trinidad & Tobago - Case Study Example

GO/NO GO DECISION REPORT on Expanding Starbucks Coffee’s to Trinidad & Tobago Table of Contents Introduction 3 Findings 5 Culture 5 Cultural attitudes toward women and children 7 Education level of workers in the country 8 Values and Attitudes 8 Religious Customs 9 Physical Environment 9 Labor 9 Labor conditions and Safety and fairness 10 Labor laws 10 Availability of skilled and unskilled workers 11 Conclusion and Recommendations 11 Work Cited 12 Introduction This report involves the external environment analysis of Trinidad & Tobago, so as to conduct a feasibility study for recommending Starbucks Corporation, whether to enter the markets of Trinidad & Tobago or not. The scope of this report is to conduct an in-depth cultural analysis of the country and also evaluate the labor conditions, so as to understand the business environment of the country. Moreover, an economic, political and competitors analysis will be done, so as to estimate the level of competition within the Specialty Eateries industry. Starbucks Corporation is a US based company and is engaged in the business of purchasing and roasting whole coffee beans. It is regarded to be one of the premier brands of specialty coffee retailing in the world and operates in more than 50 countries of the world (Starbucks Corporation, 2012). So in order to further expand in Trinidad & Tobago, Starbucks Corporation has to conduct a feasibility study of its expansion plans, to eliminate the risks of expansion to this country and explore the probable opportunities for expansion. In this section we would be first evaluating the political and economic condition of Trinidad & Tobago. The country became independent in the year 1962. The prime minister of the country is regarded as the head of the government, who is selected by the president. However, the official head of the states is the president. The political environment of the countries is dominated by two major parties, namely People National Movement, and the United National Congress (UNC), or the ruling party. In the year 2010, UNC won the elections in 21 seats and the new prime minister was Kamla Persad-Bissessar. Trinidad & Tobago maintains peaceful relationship with the neighboring Caribbean countries and it is also an associate of the Caribbean Community (Caricorn), United Nations, and Organization of American States (OAS). The country has also signed mutual trade contract with few Latin American countries, Canada, US, and Caricorn as well. The new government has developed a framework for sustainable development and growth of the country. It has planned to expand its tourism and energy sectors, support the agricultural segment further for growth, and increase the employment opportunities in the country. Government has also given priority to the education, health care and social security segment of the country. Further plans have been also developed to provide incentives to the small and medium enterprises for raising capital through the stock exchange. Corporate tax too is to be reduced. Next we move on to the economic environment of Trinidad & Tobago, which is mainly subjugated by the industrial sector. This sector contributes 59 percent to the GDP of the country. The energy segment dominates the industrial sector. The economy of the country is highly dependent on the energy sector, and due to changing prices of oil and gas in the global market, the economic condition of the country has also become vulnerable. So Trinidad & Tobago is looking for economic diversification, so that the economy of the country does not depend on one particular sector. The focus is especially on construction, financial and agricultural sectors. The GDP of the country during 2001 to 2008 grew at an average rate of 7.6 percent, but it was reduced by 3.5 percent in the year 2009 and further in 2010 by 0.6 percent. In the year 2011 the economy recovered by registering 1.1 percent GDP growth, due to the hike in the prices of the energy products like fuel (Economy Watch “Trinidad and Tobago Economy”). The inflation increased to 12.1 percent in the year 2008, which fell to 7.2 percent in the year 2009. There was an intense drought which affected the agricultural sector of the country badly and increased the rate of inflation to 10.5 percent in the year 2010. Similarly the rate of unemployment was about 10 percent during 2000 to 2005. Though a good thing was that, the rate of unemployment was reduced to 4.6 percent in 2008. It can be said that the global economic crisis affected the country badly and weakened the economic foundation of the country, by increasing the unemployment rate further to 5.7 percent in 2010 (Artana “Trinidad & Tobago: Economic Growth in a Dual Economy”) If we analyze the competitors we would come to know that the competition from the local coffee chains is more than the international coffee chains because it is a small country with comparatively volatile economic condition, so generally international retailers are apprehensive while choosing such markets. Although Trinidad & Tobago has an energy supported economy, it cannot be considered an underdeveloped country, but still various international companies try to focus on those markets where the consumer base is wide. Trinidad & Tobago is a small country with a small but diverse population, so this could be the probable reason why international coffee chains are less. Dunkin Donuts operates through franchisee system, so it had its shops in Trinidad & Tobago, but they no more exists, or it might have been taken up by Baskin-Robins, the ice-cream shop with whom Dunkin Donuts paired up to conduct business. Local Café Chains like Rituals Coffee House or Café Trinite is popular in the country, but others are all the local coffee shops within the country (Rituals Coffee House “Locations”; The Caribbean Coffee House “About Us”). Findings The company chosen for a feasibility study is Starbucks, which is a coffee chain mainly and also offers delicious meals to its customers along with high quality coffee. It is very important to conduct an in-depth analysis of two aspects before opening up coffee shops in new countries; first is the socio-cultural environment of the country and second is the labor conditions. These two aspects are chosen because coffee shops not only serve coffee, but these are also points where people meet, cultures meet. Culture For setting business relationship with the companies in Trinidad & Tobago, it is not only important to identify rooms for doing business, but also to understand the cultural norms of the country, so as to grab attention of the customers and gain their trust for the brand. To better explain the cultural aspects of Trinidad & Tobago, the Hofstede’s cultural dimension model has been explained below: Figure 1 Source: (Hofstede “Trinidad”) Power Distance: Trinidad & Tobago has a low score in this dimension, as in this country the employee are consulted and involved in managerial decision-makings. The relationship of the subordinates with the managers is informal and they are addressed on first name basis. The way of communication is participative and direct, so the scope for strict hierarchy is not there. However the American corporate culture is formal and employees are not always consulted before taking decisions. Starbucks has to be lenient in this situation and also give importance to the employees in taking managerial decision if it operates in the country. Individualism: The employees as well as the employers believe in long-term relationship building. Loyalty is rooted in the culture here and employees take the responsibility for their fellow participants or members. Employees are treated as family and moral decisions are taken. Nonetheless in Trinidad & Tobago Starbucks cannot simply lay off its employee because of reasons like low productivity or low performance, because here employees are like family and they are not hired only to generate profits. People believe in long-term relationship, so if Starbucks fires employees at short-notice, then they would not be regarded as a sustainable or trusted employer. Masculinity / Femininity: Trinidad & Tobago is a masculine society and in this type of countries the citizens are workaholic. The emphasis is generally on competition, performance and the conflicts are solved not by avoiding them, but by facing them. The employees here are competitive, so Starbucks would receive a hard-working work force, but they cannot be made to follow American way of working professionally. Uncertainty avoidance: The country has a high probability of avoiding uncertainty by maintaining strict beliefs and codes. In Trinidad & Tobago punctuality and precision is important. Security is also an important issue. However, innovation is not so important but emotional needs and hard work is valued. The concept is punctuality is not given much importance in the country, so Starbucks cannot make the employees punctual just by levying punishments or salary deduction. They have to look for some unprofessional yet effective way of making the employees punctual. Long term orientation: The long term orientation aspect is strongly associated to the tradition of Confucius and can be understood as dealing with search of the society for good value (Hofstede “Trinidad”). Cultural attitudes toward women and children Since unemployment rate is high in Trinidad & Tobago, along with the economic volatility, so it has been a common phenomenon in the country to ill treat women and children. Apart from a hand full of educated and sophisticated people in the country, majority of the male counterparts’ abuse and even misbehave with women in the family and children suffer a similar fate. A culture of violence prevails in Trinidad & Tobago. About approximately 65 percent of the women in the country suffer from HIV or are under the risk of having so. These statistics also points out that the women in the country are the victims of racism, poverty, gender discrimination, violence and malnutrition. When the women are in such condition, then children too would be suffering from similar risks (World Bank “Trinidad and Tobago: Poverty and Unemployment in an Oil-Based Economy”). Starbucks has to follow the culture of the country, but at the same time can preach to present the coffee house as a place to sit, talk and solve issue, not to fight with women and care and love children. A subtle way of presenting emotions would help Starbucks to gain good position. Education level of workers in the country Education in Trinidad & Tobago is compulsory and free till the age of 16. It follows a British model of education. The literacy rate of the country is 98 percent, so it is considered to be among the most educated countries. However, the literacy figures of the country are contradictory with the all round development reports and the social condition of women and children in the country. So it can be depicted that most of the workers or population has only pre-school and primary education and few have degree from college or universities. Social initiative of educating family members of employees would assist Starbucks to win the confidence of its employees and this in turn would also spread goodwill in the market. Values and Attitudes The People in Trinidad & Tobago are not strict in terms of punctuality. The men in the country have a general habit of ill treating women verbally or physically, but a woman on the other hand is not allowed to reply for such behavior. Very formal or professional behavior is not always appreciated, especially at social gatherings. The culture of silence and a strong sense of safety prevail among the people, so here the citizens are unwilling to report against crime or criminals. The criminals in the country are fearless and law and order in the country is not organized enough to safeguard the right of the citizens (Tidwell “Trinidad and Tobago: Customs and Issues Affecting International Business”). Starbucks have to design its coffee shop differently in Trinidad & Tobago. Raw, vivid, colorful and casual sets of furniture, design and ambience would be welcome change for the customers or coffee drinkers in Trinidad & Tobago. Religious Customs Trinidad & Tobago is regarded as a very spiritual country in West Indies, and it is also known for its religious diversity. Religions like Roman Catholic, Hinduism, and Anglican are generally practiced. Muslims are also found in Trinidad & Tobago in large number. The festivals of the different religions are celebrated and their places of worship are also there in the country. The people here have beliefs in spirits and ghosts. Government holidays are there for special religious festivals of Christians, Hindus, Muslims, or Afro-Christians, etc. Funeral is an important occasion for the people here and special rituals are followed for the same. Since majority of the population in the country is Muslim, so the employees in Starbucks too would be needing breaks to pray. They should be allowed that time and at the same time, the non-Muslim employees can work in their place. Even during the different festivals the interior should be re-decorated with that theme and snacks should be offered based on the specialty of that festival in the shop along with beverages. Physical Environment The physical environment consists of the social and cultural norms that are practiced in the society. As this has been already discussed and evaluated that the society in Trinidad & Tobago is not balanced because gender discrimination is at its highest. The women in the society are ill-treated, and tortured. They are the victims of violence and unhealthy living conditions. The criminals in the country freely walk on the streets and the citizens are least bothered, as illegal bureaucratic control acts as barriers. It can be depicted that poverty, increasing unemployment in the country and low social status of the women in the society of Trinidad & Tobago are the major drawbacks of the country. Labor It is also important to appoint the workforce from the same country where Starbucks is expanding. This would assist the company to gain quick popularity, understand the culture of the country, attract customers and make them feel at home, and assist in creating employment in the country. Already we can see that the rate of unemployment in Trinidad & Tobago is about 6.40 percent, so creating employment opportunities would be a good idea. As already said, Starbucks cannot treat its employees the way it does in other parts of the world such as US, or UK. Here the people are poor, but emotional and sentimental. They do not care about professionalism, so if the management of Starbucks adopts the culture of the country, they can survive in Trinidad & Tobago. Labor conditions and Safety and fairness In Trinidad & Tobago, trade unions are very powerful and they safeguard the interest of the labor force in the company. The pay is very good in the energy sector. Those they get one-third of wages compared to a labor in US, but it is better than the wages of any other developing or under developed countries. A sense of job security prevails and even sick pays are paid to the labor force. The agricultural sector is however, less lucrative, so people generally take less interest in agriculture. The overall working condition is satisfactory according to the labor force of the country. The safety of women and children labors is a matter of doubt because of the culture that prevails in the country. However, for men there is ample amount of safety. Labor laws The labor regulations of Trinidad & Tobago are based on collective bargaining. This means that trade unions are legally encouraged. The labor regulations are governed in the country by the Government and International Labour Standards (ILO Conventions). The state employees include the teachers, civil servants, and the members of defensive services such as prison, fire or police. The terms and conditions of these workers are ascertained based on the Civil Service Acts for the civil servants, Police Service Acts, Education Acts for the teachers, etc. The privately owned companies have to follow the system of collective bargaining and abide by the laws of stated under the Labor Laws. Moreover, they also have their own human resource department to handle labor issues (Rahim “National Labour Law Profile: Trinidad and Tobago”). Since the labor unions are strong, Starbucks cannot forcibly try to incorporate the regulations of its home country in Trinidad & Tobago. The company might not only face losses, but also get caught into several legal issues related to labor laws. Availability of skilled and unskilled workers The total labor force in Trinidad & Tobago is 636,800 million. The migration of skilled labor force to other countries is increasing the difficulties of the small countries. They are also migrating due to the slow pace of development within the country and the prevailing societal conditions. Employees are finding themselves under the pressure to perform due to the growing competition in the market. So Trinidad & Tobago is facing shortage of both unskilled as well as skilled labors. The labors are getting a higher wage rate in countries of Europe, US or UK. So they are moving on to lucrative destinations (Trinidad & Tobago News Day “Labour Pains Growing”). Conclusion and Recommendations The study was based on the external environment analysis of Trinidad & Tobago. The emphasis was mainly on the evaluation of the culture and the labor conditions of Trinidad & Tobago. It was found that though the country is a blend of diverse culture and religion and lives in harmony, there are societal imbalances such as gender discrimination, poor health conditions, and a male dominated society. The literacy rate is high, but employment rate is also increasing. The economy is volatile as it mainly depends on the energy sector. Labor conditions are satisfactory and the pay is good because trade unions are strong and labor laws are based on collective bargaining. So from the perspective of Starbucks, it would be recommended that Starbucks should not venture in Trinidad & Tobago. Since Starbucks does not cater or target low income group, so it would face losses in Trinidad & Tobago because in this country the masses are not going to prefer the culture of Starbucks. Moreover, Starbucks cannot handle the employee well in Trinidad & Tobago; because their work culture is absolutely different and the company would face difficulty is adopting the new culture of the country for recruiting the work force from Trinidad & Tobago. Work Cited Artana, Daniel, et al. “Trinidad & Tobago: Economic Growth in a Dual Economy.” IDB Research Project. 2007. Web. 7 November 2012. Economy Watch. “Trinidad and Tobago Economy.” Stanley St Labs. 31 March 2010. Web. 7 November 2012. Hofstede, Geert. “Trinidad.” National Culture. n. d. Web. 7 November 2012. Rahim, Avril. “National Labour Law Profile: Trinidad and Tobago.” International Labour Organization. 17 June 2011. Web. 7 November 2012. Rituals Coffee House. “Locations.” 2007. Web. 7 November 2012. The Caribbean Coffee House. “About Us.” Caribbean Coffee House Limited. 2007. Web. 7 November 2012. Tidwell, Charles H. “Trinidad and Tobago: Customs and Issues Affecting International Business.” Andrews University. 28 June 2001. Web. 7 November 2012. Trinidad & Tobago News Day. “Labour Pains Growing.” Daily News Limited. 8 May 2008. Web. 7 November 2012. World Bank. “Trinidad and Tobago: Poverty and Unemployment in an Oil-Based Economy.” Poverty Reduction & Equity. 2011. Web. 7 November 2012. Read More