Multinational corporations' impact on north and south relations- in the case of Starbucks

Introduction

Multinational Corporations (MNC) have really affected the relationship between developed countries and developing countries. This is because of the types of impact which MNC posts on both developed and developing countries all over the world. MNC’s may therefore impact the relationship between developed and developing countries either positively or negatively. On the other hand, most MNC’s have consequently impacted developing countries positively, a thing has really helped in improving the relations between developed and developing countries. However, there are MNC’s which have also impacted both developed and developing countries negatively, a move which has led to differences between developed and developing countries. MNC’s are supposed to strengthen the relations between the north and the south, and it is required of the companies to strive in order to strengthen this relations.

Starbucks has been on the forefront in making sure the company is able to maintain a good relationship between developed and developing countries (Sen, Bhattacharya & Sen, 2016). This is consequently because, the company has really improved the condition of most developing countries, a move which has consequently motivated developed countries to start trading with such countries. In addition, Starbucks is offering coffee farmers from developing countries loans, whereby they can be able to repay the loans in form of coffee beans (Gillespie & Hennessey, 2011). This has really helped the coffee producing nations to be able to grow economically. Moreover, the company works with coffee producing countries, in order to make sure that they produce the best coffee. In so doing, Starbucks is able to provide high quality coffee to its customers, a thing which consequently attracts most customers.

In a country such as Ethiopia, which is a developing country, and at the same time it is also one of the coffee producing countries, Starbucks has been able to work with the country, thus enabling it to be able to grow economically (Sen, Bhattacharya & Sen, 2016). Coffee exports in the country constitute 31% of the country’s foreign exchange. This therefore means that Ethiopia earns a lot of foreign exchange through the export of coffee with its main marketing partner Starbucks. In the previous year, the country exported 206,654 tons, where it earned $879.6 million (Gillespie & Hennessey, 2011). It is estimated that the number will double this year, due to the increasing demand of the product.

The economy of the country therefore heavily depends on trade of coffee (Dhanda & Young, 2013). Out of Ethiopia’s total population, it is estimated that about 15 million people are involved in the coffee business, either directly or indirectly. Provision of farm loans by Starbucks to such countries is therefore very significant, as it enables the country to be able to grow its economy, hence impacting the lives of its citizens positively. In addition, Starbucks offered to support the Ethiopian Intellectual Property Office (EIPO), in coming up with a national certification system. The national certification system therefore aims at enabling farmers in being able to protect their coffee, and to also be able to market their own coffee (Gillespie & Hennessey, 2011). This comes after the Ethiopian government realized that middlemen tend to rob off farmers their coffee, through buying the coffee at very low prices and selling them at very high prices to companies such as Starbucks. This move will therefore help in protecting the farmers from being robbed off, their coffee, hence they will be able to reap huge gains from their hard work (Brock, Thomas & Raby, 2012).

Starbucks has therefore enabled the country to be able to deal with the problems which it hard been earlier on facing (Gillespie & Hennessey, 2011). Moreover, due to providing a good market for the Ethiopian coffee and also coffee from other countries such as Brazil and Vietnam, the countries have been able to get along with developed countries, whereby they have stroked deals which have helped the developing countries to move forward (Sen, Bhattacharya & Sen, 2016). In addition, countries such as China are working with these countries in order to provide them with farm machineries, thus increasing the yields. Furthermore, Ethiopia has been able to come up with the standard gauge railway, which has really helped to ease transport and communication in the country. Farmers can therefore be able to transport their farm produce from their farms to the airport for export, through the use of the railway.

Ethiopia stroke a deal with China, whereby China sponsored the construction of the Standard Gauge railway in the country (Dhanda & Young, 2013). This move was majorly undertaken by the country in order to be able to improve its trade. The movement of coffee to the airport is now smooth, and farmers can also be able to enjoy the developments that the country has after the development of the transport and infrastructure system in the country (Gillespie & Hennessey, 2011). The relations between Ethiopia and China have therefore been strengthened, since the country has been able to partner with China in order to improve the flexibility of coffee produce from the farms to the market. The key player in this developments and relations therefore is Starbucks, even though the company was not been involved directly in the deal between China and Ethiopia.

More investors have also started moving to Ethiopia, due to the improvements in the transports systems, thus making the country an economic hub. The country has now started growing due to the number of investments in the Ethiopia (Sen, Bhattacharya & Sen, 2016). For instance large motor vehicle assembling companies have moved into Ethiopia, since the company has shown the capability that it has when it comes to developments. Ethiopia also entered into the Common Market of Eastern and Southern Africa (COMESA), which is a marketing block (Gillespie & Hennessey, 2011). Ethiopia can now be able to negotiate with developed countries on the trade of different commodities through the trading block.

Starbucks has not only impacted the relationship between Ethiopia and developed countries, but it has also impacted the relations between developing countries and developed countries (Gillespie & Hennessey, 2011). Brazil, which is the leading producer of Coffee in the world, trades with Starbucks. Starbucks has therefore put the country in the world map, whereby each and everybody who drinks Starbucks coffee, asks where the coffee is from. The answer is usually, Brazil, Ethiopia or even Vietnam. Most developed countries have also started exporting coffee from Brazil, with China being one of the Brazilian coffee exporters (Brock, Thomas & Raby, 2012). In addition, when developed countries start trading with developing countries, this brings about trade agreements between different countries (Dhanda & Young, 2013). For instance, China started exporting Brazilian coffee, after which it realized that Brazil also produces dairy products. The two countries then stroke a deal whereby China exports coffee, dairy products, and steel from Brazil. On the other hand, Brazil exports vehicles, electronics and technological equipment’s from China (Bair, 2009). This move, which was brought about by Starbucks when it started exporting coffee from Brazil, has therefore made China and Brazil to be very good trading partners.

Brazil exports vehicles and electronics from China, a move which has made other developed countries such as the US to strike trading deals with the country. The relations between Brazil and developed countries has therefore been further strengthened, and more countries are moving into Brazil in order to invest in the country (Sen, Bhattacharya & Sen, 2016). Moreover, different countries such as Germany have also moved to Brazil, whereby they have promised to work with the government in order to improve technological advancements in the country hence improving the production of coffee (Gillespie & Hennessey, 2011).

There is no doubt that due to Starbuck’s success, most developed countries which trade in coffee have been able to depend on the sale of the product (Dhanda & Young, 2013). This is consequently because the company has been able to create a very wide market for coffee, thus making most of the coffee producing countries to be able to benefit. In addition, the company has therefore seen the rise in Gross Domestic Product (GDP) of most of its coffee trading partners rising, due to the huge tons of coffee that the company exports in order to be able to cater for its customers in different parts of the world. Due to the rise in the GDP in these countries, most developed countries have therefore invested in such countries due to the availability of cheap labor (Gillespie & Hennessey, 2011).

Most developed countries are now investing in developing countries, since developing countries have been able to grow economically thus creating a market for manufactured goods (Herring, 2015). Motor vehicle assembling plants from developed countries have not been set up in these countries. In addition, due to the huge market which Starbucks provides for coffee producing countries, this consequently helps in allowing the countries to be able to increase their supplies (Sen, Bhattacharya & Sen, 2016). Increase in supplies consequently leads the countries to corporate with developed countries, in order to get market for their increasing supplies. This move therefore allows developing countries to be able to   enhance their relations with unions such as the European Union, whereby the countries can be able to get a very huge market for their products (Gillespie & Hennessey, 2011).

In addition, Starbucks stroke a deal with its coffee producing nations, whereby it wanted the countries to produce more coffee in order to reduce the prices of coffee in the world (Dhanda & Young, 2013). This is another way through which developing countries can seek support and advice from developed countries, in order to be able to boost their production. This therefore leads to talks between developed and developing countries, whereby developing countries can be able to come up with the farming techniques which can enable the developing countries to be able to boost their production of coffee, hence leading to a drop in the price of coffee all over the world (Gillespie & Hennessey, 2011).

Starbucks, often makes developing countries to strive in order to be able to produce high quality coffee, since the company has multiple supplies from different parts of the world. This consequently makes its supplying countries to conduct a lot of researches in order to make sure that the quality of their produce remains the same regardless of the climatic conditions (Sen, Bhattacharya & Sen, 2016). These researches are usually conducted with the help of developed countries, whereby they help in providing farm mechanisms and in coming up with drought resistant varieties of Arabica coffee (Brock, Thomas & Raby, 2012). Developing countries therefore benefit from such deals, since the countries can now be able to avoid losing money due to droughts and harsh climatic conditions. A good example is Brazil, which was hit by drought, but the country was able to conduct a lot of researches and within no time, it was able to control the situation (Gillespie & Hennessey, 2011).

Starbucks also allows developing countries to be able to improve the living standards of its citizens, and in so doing it leads to developments in the country (Dhanda & Young, 2013). Most coffee producing countries such as Vietnam which trade with Starbucks, have been able to also look for other means of sustaining their economy. Vietnam has therefore really invested in agriculture, since the country is not very much industrialized (Gillespie & Hennessey, 2011). Investing in agriculture has consequently enabled the country to be able to trade with developed countries through exporting its farm produce to developed countries.

Conclusion

Starbucks has really helped in improving positive relations between the north and the south. This is through putting the coffee producing nations on the map, hence making developed countries to invest in such countries. In addition, most countries such as Brazil and Ethiopia have been able to increase their market for coffee and other products in developed countries. Moreover, Starbucks has provided these countries with a very good market for their produce, a move which has consequently helped in improving the GDP of these countries. Most countries such as Ethiopia have been able to improve their transport and infrastructure systems, hence being able to transport their farm produce from the farms into the airport within the shortest time possible. In general, Starbucks has really helped in strengthening the relationship between developed and developing countries all over the world.

Reference

Sen, S., Bhattacharya, A., & Sen, R. (2016). International perspectives on socio-economic development in the era of globalization. Hershey, PA, USA: Business Science Reference.

Dhanda, K. K., & Young, S. T. (2013). Sustainability: Essentials for business. Thousand Oaks, Calif: SAGE Publications.

Gillespie, K., & Hennessey, H. D. (2011). Global marketing. Mason, OH: Cengage South Western.

Brock, D. R., Thomas, M. P., & Raby, R. (2012). Power and everyday practices. Toronto: Nelson Education.

In Herring, R. J. (2015). The Oxford handbook of food, politics, and society.

Bair, J. (2009). Frontiers of commodity chain research. Stanford, Calif: Stanford University Press.