Page 332 - Cambridge IGCSE Business Studies

Cambridge IGCSE Business Studies Section 6 External influences on business activity

CASE STUDY Globalisation – the growth of Starbucks

Starbucks, a global retailer of speciality coff ee, first opened in 1971 with a single store in Seattle, USA. In 2013, the
company had about 18,000 stores spread across 62 countries around the globe. Its growth strategy in 2013 aimed at
opening about 1,300 stores worldwide, with about half of them planned to be opened in China.
In a survey done by American Express/SAP in 2013, Starbucks was ranked 49th among the top 100 global retailers.
Source: www.starbucks.com; www.forbes.com/sites/walterloeb/2013/01/31/starbucks-global-coff ee-giant-has-new-growth-plans

TASK
a How has Starbucks benefited by opening stores in other countries?
b What sort of problems might Starbucks have faced while expanding internationally?
c Why do you think China seems to be an attractive market for Starbucks (it is planning for China to be its second largest
market)?
d How might the opening of a new Starbucks store affect the local coffee shops in a host country?

Why governments introduce import tariffs and quotas
Globalisation offers consumers a wider choice of products and services, but
this may cause problems for businesses in the host country. Multinational
TOP TIP
companies can often supply products and services at cheaper prices than local
Free trade agreements can help
improve trade between countries. businesses. Smaller businesses sometimes cannot compete and may have to
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Tariffs and quotas, on the other close down, with the loss of jobs. If multinationals start to take over the trade
hand, help control the trade in a in the host country, this can have a damaging effect on the local economy. As
country.
local businesses and shops close, there will be less choice for consumers and
unemployment may rise. For these reasons, governments often try to control
the amount of international trade. Two of the main ways they use are tariffs
and quotas.

Tariff s

KEY TERM A tariff is a type of tax that is paid on goods that are imported and exported.

A government may place a tariff on imports so as to reduce imports into the
Tariff : a tax applied to the value

country. Th e tariff increases the cost of the imported goods, and businesses then
of imported and exported goods.

have to sell the goods at a higher price. This reduces local demand for the goods and

benefits local businesses as they have less competition.
Governments may also put tariffs on the export of essential items such as

foodstuffs to ensure that the country has enough of them. In the past, China has
placed export tariffs on many major grain products.

Balance of payments: see
Restriction on imports and exports is important because every country’s
Chapter 24, page 299.

economic objective is to have a positive balance of payments. The import tariff also
earns revenue for the government.
Quotas
KEY TERM A quota is a physical limit on the quantity of goods that can be imported

and exported. Quotas on imports benefit local producers as there are less
Quota: a physical limit on the
foreign goods in the market and they face less competition. However,
quantity of goods that can be
imported and exported. customers might be disappointed as there are limited supplies of
popular products.