Chapter 8: Internationalization

Contents:

  • French Cakes
  • trade agreements
  • e-waste
  • circular business models – incorporating global production networks
  • fast-fashion – Shein
  • East India Company – why starting from the beginning helps in understanding the present
  • Error
  • Indicative solutions to questions concluding the chapter

French Cakes

This internet resource simplifies the process of thinking about entering new non-domestic markets. It provides opportunities to discuss the complexity or otherwise of products, the manufacturing and despatch (freezing products, for example) and sources of knowledge in new markets and the associated risk. Credit here to Tine Wade for excellent resources.

Trade agreements

The British Government, as part of the Brexit process, negotiated a free trade agreement with the EU. It was unusual because its focus was about divergence of standards, rather than convergence. This peculiarity was explained by Spanish Foreign Minister Arancha González in an interview on Sky News on 13 December 2020: https://tinyurl.com/4pfktyve

e-Waste

Peter Dicken writes extensively in his invaluable text, Global Shift, about the opportunities for e-waste as a commercial enterprise linked to extended value chains. Much e-waste is taken by developing nations for recycling. One of the reasons for this is the failure of consuming nations to insist that components are not only recyclable, but also safely recyclable.

A recent report in the Guardian newspaper discusses Australia’s advanced and sophisticated recycling scheme called the National Television and Computer Recycling Scheme (NTCRS). The scheme was established to prevent e-waste going to landfill. Researchers found that its governance is opaque and contradictory (observers/regulators also being recyclers, for example). It lacks accountability.

As countries electrify and embrace solar/photovoltaics, inevitably more e-waste is going to be generated. In Australia alone, an estimated  100,000 tonnes of solar panel waste will enter the country’s waste stream by 2035. Developed nations, it seems, do not have the necessary infrastructure to make this e-waste part of the butterfly/circular economy calculus. Investigators followed e-waste using GPS tracking devices. They found waste sites in the developing world (Thailand and Pakistan are named) stripping out some of the precious metals using toxic chemical processes. The rest was burned. One of the reasons for export is cheap labour and lax health and safety laws.

In terms of plastic, recycling, despite the PET recycling symbol, does not always happen. Much plastic waste is exported to developing countries. Likewise textiles. The recent sight of waste textiles being disposed of and burned in Chile’s Atacama Desert, illustrates the point. A good source for understanding the trade in waste can be found in a Bunker podcast called Wild, Wild Waste – How the West Litters the World in which Istanbul-based journalist, Ruth Michaelson talks to Jelena Sofronijevic about export waste.

Part of the innovation story is to develop ways to extract precious metals without the need for hazardous chemicals. The Guardian report discusses a process invented by a team at Flinders University, led by chemist, Justin Chalker.

A useful task for students is to consider a business model that supports a product or service and then “circularise” it. For example, smartphones, at the moment remain quite “degenerative” – using Kate Raworth’s terminology. Can students compare and contrast new and old? I have created a short worksheet that can be used in class to explore the possibilities.

Fast-fashion – the trend goes on. The case of Shein (pronounced She-in)

Shein is a Chinese fast-fashion retailer/tech company founded in 2012. According to a report by Rest of the World, it is the second biggest online retailer of clothes behind macys.com. In June 2021 it accounted for 28 per cent of all fast-fashion sales in the USA.

The company has a radical business model working with big data to optimise supply chains. It is a platform business established to be “born global”. It invests in influencers for its marketing, though it uses and spends big on more traditional routes to its website; namely, Google and Facebook.

The business model contrasts with that of Inditex (Zara) and H&M over a number of factors.

FactorInditex/H&MShein
Catwalk to store30 daysn/a – Tik-Tok/Instagram copies
Batches2000 items (30 days)As low as 100 in 10 days
Website listings53 per cent less-than one month70 per cent less-than one month
Estimated value (2021)$147bn (combined Inditex and H&M Forbes, 2021)$47bn (SupChina.com)
Product exclusivityHighLow/medium – factories supply to many outlets
Big dataSupply chain/retail/onlineSupply chain/online
MarketingAdvertising/influencers/designersGoogle/Facebook/numerous influencers/reality TV celebrities
Environmental and social impactCommitments to circularity/SDGsGlobal head of environmental and social governance appointed 2021
Exclusivity of business modelMedium – physical retail increasingly unattractiveLow – easy to copy by big tech (for example, Alibaba’s AllyLikes)

This raises a question about sustainability and responsibility. Only in 2021 did Shein appoint a global head of environmental and social governance. According to a Guardian newspaper report by Professor Dilys Williams writing in the Guardian on 10 April 2021, Shein produces 10k new products a day, ships to 250 countries (with all that entails in terms of emissions) and owns the most downloaded app in the USA. It is the purveyor of the fastest of fast fashion – ultra-fast fashion.

Often we are confronted with the idea that cheap clothing is for the masses, and particularly those from poorer socio-economic backgrounds. Williams reports on something interesting, however. Shein’s important customers are not from these backgrounds (though Williams provides not data in support of the claim). It is about fashion, it seems, not background, and certainly not about sustainability.

Bloomberg reports that “In December, it announced a $10 million fund to support global non-profit organizations focused on empowering entrepreneurs, supporting underserved communities, ensuring animal health and welfare, and promoting recycling.” 

The text is clear about the contribution of the apparel industry to greenhouse gas emissions in production, distribution and resource use more generally. Shein’s products are very cheap to buy, relying on low-cost labour in China and low-cost sourcing of materials. Is the business model itself sustainable? In light of climate change, should governments intervene in the market to limit fast-fashion, for example, through taxation or outright ban?

The East India Company – how its history explains the present



Error

Page 124 – “Slavery was once seen as a legitimate business and was legal. These practices have not been left behind in the preceding centuries”, should read “Slavery was once seen as a legitimate business and was legal. These practices have not been left behind in the ensuing centuries”.

Indicative solutions to questions concluding the chapter