Goldcrust goes abroad: Goldcrust plc runs 400 bakeries at home. Its board now wants to sell in Marovia, next door.
It plans to take two things
- Its packaged sliced loaf, sold in Marovia's supermarkets.
- Its bakery-cafés, where customers sit down with a coffee and a pastry.
A multinational from the first day: The day the first shop opens, Goldcrust becomes a multinational company (1.6.1): Marovia is its host country, and home is its home country.
The loaf and the café are two different kinds of thing to sell.
The loaf is a good: something physical you can touch, store and ship (tangible). Goldcrust can bake it in its home factory on Monday, drive it across the border on Tuesday and sell it on Wednesday.
The café is a service: something done for the customer that cannot be touched or kept (intangible). It is made at the moment the customer is served, by the person serving them, in the place where the customer is.
| The packaged loaf (a good) | The café (a service) | |
|---|---|---|
| Can you touch it? | Yes: a loaf in a bag | No: a welcome, a table, a wait, a way of being served |
| Where is it made? | Anywhere; in Goldcrust's home factory, then shipped | Only in Marovia, in front of the customer |
| When is it made? | Days before it is bought | At the moment it is bought |
| Who makes it? | Machines and bakers the customer never meets | The server the customer is talking to |
| Is every one the same? | Yes: the same recipe gives the same loaf | No: it depends on who serves, and how |
Most businesses sell both: The croissant on the café table is a good. The table, the coffee made to order and the person who brings it are the service.
So do not sort businesses into 'goods' and 'services' and stop there. Ask which part of what they sell is a good and which part is a service, because the two parts travel very differently.
That difference decides how much of its business Goldcrust can simply copy from home, and how much it has to change for Marovia.
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Start with the loaf. Goldcrust has two choices.
Standardisation
- Sell exactly the loaf it sells at home: the same recipe, the same size, the same bag, the same advert.
Adaptation
- Change the loaf, or the way it is sold, to suit Marovia.
What Goldcrust finds out about Marovia: Shoppers in Marovia mostly buy small, dark, seeded loaves, fresh most days. Goldcrust's best seller at home is a large white sliced loaf that lasts a week.
By law, every packet sold in Marovia must list its ingredients in Marovia's language.
Standardise: the same loaf
- One recipe and one bag for every country, so the home factory bakes more of the same loaf
- Lower cost per loaf, because the factory's costs are shared over more loaves (economies of scale, 1.5.3)
- One advert and one look, so the brand is recognised wherever it is sold
- Risk: Marovia shoppers may leave a big white loaf on the shelf
Adapt: a loaf for Marovia
- A smaller, darker, seeded loaf that fits what Marovia shoppers already buy
- More likely to sell, so more revenue from the new market
- Meets local rules and habits from day one
- Cost: a new recipe, new bags, a separate production run, so each loaf costs more to make
A mix of the two
- Keep the Goldcrust name, logo and quality promise everywhere
- Change the size, the recipe or the label where Marovia needs it
- Often called glocalisation: the brand is global, the details are local
Some changes are not a choice: Even a fully standardised loaf needs a Marovia label, because the law says so. Changing a product to meet a host country's laws is required, whatever the MNC would prefer.
The real choice is about everything else: the recipe, the size, the price, the adverts.
So the question for any good is a trade. Standardising keeps the cost of each loaf down; adapting makes each loaf more likely to sell. For a good, standardising is often possible, because a loaf is the same loaf wherever it is eaten. The next section shows why a service is different.
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Ninety seconds or an hour: At home, a good Goldcrust café serves you in ninety seconds. In Marovia, a café is where people sit for an hour.
At home
- Customers are served at the counter in ninety seconds.
- They like it: they are on their way to work.
In Marovia
- People sit for an hour.
- They expect to be served at the table.
- A server who brings the bill before it is asked for is being rude.
Good at home, bad abroad: The same service that counts as good at home counts as bad in Marovia.
Goldcrust can write the café's service down in a manual: greet within ten seconds, serve within ninety. It cannot ship the service itself. The service only exists when a person in Marovia serves a customer in Marovia. That makes a service much harder to standardise than a good.
Why the café is harder to standardise than the loaf
It is made where the customer is
The loaf can be baked in the home factory and shipped. The café's service has to be produced in Marovia, so Goldcrust must set up, staff and run it there.
Local people deliver it
Goldcrust hires its servers in Marovia. They speak the language and know the habits, but they have to be trained, and no two servers do it exactly alike.
Local customers judge it
What counts as good service is set by local habits: how fast, how formal, whether you sit or stand. A service that ignores them feels wrong, however good it is at home.
Local rules shape it
Opening hours, staff breaks and hygiene rules differ between countries, and they change how a café can run its day.
Goods travel, services are rebuilt: A good can often be standardised: make it once, the same way, and ship it.
A service has to be rebuilt in each country, with local people, for local customers. So an MNC usually adapts a service far more than a good, even when it keeps the same name over the door.
Goldcrust's answer: keep the name, the logo, the pastries and the hygiene standards the same, and let the Marovia cafés serve at the table, stay open late and never rush the bill. The brand is standardised; the way the service is delivered is adapted.
In 1.6.2 you met what an MNC can bring to a host country, and what it can take away. Goldcrust's choices in this micro decide which of those Marovia actually gets.
What it can bring
- Jobs
- Skills
- Tax
- Investment
What it can take away
- Pressure on local businesses
- Profits sent home
- A loss of local character
| Standard loaf, shipped from home | Adapted loaf, baked in Marovia | Cafés in Marovia | |
|---|---|---|---|
| Jobs in Marovia | Very few: the bread is made at home | A bakery's worth: bakers, drivers, managers | Many: every café needs local servers and cooks |
| Local suppliers | None: the flour is bought at home | Local mills sell flour to the new bakery | Local milk, coffee and cleaning firms gain an order |
| Skills | Little passes to local workers | Local bakers learn Goldcrust's methods | Local staff are trained in service and hygiene |
| Local businesses | Local bakers face a cheap rival on the shelf | Local bakers face a rival that now bakes what they bake | Local cafés may lose customers to a well-known name |
| Where the profit goes | Home | Mostly home, after local wages and tax | Mostly home, after local wages and tax |
The pattern: The more of the business is made in the host country, the more the host country gains in jobs, skills and orders for local suppliers. A service must be made there, so a service MNC always brings some of these.
Adapting means competing: The more the MNC adapts to local tastes, the more directly it competes with the local businesses that already serve those tastes.
There is a quieter effect too. If every high street in Marovia gets the same Goldcrust café, the same sign and the same pastries, towns start to look like each other. A standardised service can wear away some of what made local places different; an adapted one keeps more of it.
Weighing it up for Marovia: Shipping the standard loaf from home gives Marovia a cheaper loaf and almost nothing else. Baking an adapted loaf there and opening cafés gives it jobs, trained staff and orders for local mills, but puts more pressure on local bakers and cafés.
Which is better for Marovia depends on
- How many jobs are created
- How many local businesses are lost
- How much of the profit stays
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How this comes up: When a case study features an MNC, expect short questions first, then a four-mark one, then longer ones.
| Question | Marks |
|---|---|
| Define standardisation or adaptation | 2 |
| Explain one reason why a service is harder to standardise than a good | 2 |
| Explain one advantage and one disadvantage for the business of standardising what it sells in another country | 4 |
| The longer questions on MNCs: their impact on the host country, where section 4 of this micro and 1.6.2 meet | Longer |
The four-mark pattern
- Name the advantage. One recipe and one bag everywhere, so each loaf costs less to make (economies of scale).
- Show it in the case. Goldcrust's home factory already bakes the loaf for 400 bakeries; shipping the same loaf to Marovia adds volume, not a new production line.
- Name the disadvantage. A standard product may not fit local tastes, so fewer people buy it.
- Show it in the case. Marovia shoppers buy small, dark, seeded loaves; a large white loaf that lasts a week may sit on the shelf.
Trap: law is not a choice: 'It must change the label' is not a disadvantage of standardising; every product sold in Marovia must do that. Pick a disadvantage that comes from keeping the product the same.
Trap: no case, no second mark: 'It lowers costs' is one mark. 'The home factory that already bakes for 400 bakeries makes more of the same loaf, so each loaf costs less' is two.
Explain one advantage and one disadvantage for Goldcrust plc of selling the same packaged loaf in Marovia as it sells at home.
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.