Case 1-1: Going Global Fast

* Starbucks has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time.

Since Starbucks entered the coffee retail business, the company has made many trade-off business decisions. The first major trade-off was made when Howard Schultz wanted to acquire present day Starbucks from three entrepreneurs Baldwin, Siegel and Bowker. Therefore, Schultz prior to the acquisition made the trade-off to open his own coffee bar in 1986 instead of staying at Starbucks as the manager of retail sales and marketing. A bold feat, Schultz was able to replicate success and was offered to buy Starbucks for $4 million. At the time of the acquisition, many investors, including the former Starbucks owners, would not expect that the American consumer would pay a premium for coffee products. Schultz, after calculating the opportunity cost, was convinced that Starbucks would become a large coffee chain not only in the United States but internationally too. Reflecting this approach, Schultz’s trade-off worked. Starbucks, according to our book has revenue exceeding $13 billion and nearly 200,000 employees. The company has also expanded to 40 countries with 17,000 stores (Hill et al., 2015).

Starbucks is not immune to the same risks that plague any other consumer driven company. The most glaring risk that Starbucks would face upon the launch of a new product is the reception that the company would receive from the consumer. It is a simple equation – if the consumer does not respond well to the product they will not make future purchases of the product. This would lead to a large financial hit to Starbucks. There are, however, many ways in which Starbucks can mitigate this risk. Firstly, Starbucks would do an immense amount of market research and consumer testing. According to Cleverism (2015), getting to know the customer and keeping updated on changes in their needs and preferences is critical in knowing if the product launch is something that will be well received. Conducting periodic market research will help minimize this risk. It would also be a good idea to involve a specific group of customers as your source of feedback. Starbucks would be wise to

starbucks Corp., an international coffee and coffeehouse chain based in Seattle, Washington, has expanded rapidly since its opening in 1971. These outrageous success was due to its well-developed strategy vision which lay out the company's strategic course in developing and strengthening its business. Starbucks is a global corporation that sells authentic coffee in 30 countries, reporting revenues of nearly $5.1 billion in 2006. The main goal of Starbucks is to embrace diversity by applying the highest standards of excellence. Starbucks strives to perfect the relationship with the working class by making the service as fast as possible because they believe that every customer has their own personal rate. One

2) Garthwiate, Craig; Busse, Meghan; Brown, Jennifer; Merkley, Greg “Starbucks: A Story of Growth” Harvard Business Publishing, July 2012.

Many multinational corporations in the coffee industry have succeeded tremendously such as Starbucks. Each of these corporations has strategies that helped them continue to expand to nations of different cultures, ethnicities, governmental practices, and locations.

Starbucks is known for their Frappuccino’s; unfortunately they are on a downward spiral in sales due to competitors such as McDonalds. In 2008 Starbucks admits to its losses due to their competitors. “Company executives now freely admit that such thinking is largely to blame for the woes that led to Tuesday’s announcement that Starbucks will close 600 U.S. stores and eliminate thousands of jobs. The coffee giant’s missteps have come at a spectacularly bad time, hitting as the economic slump deepens and consumers are seeing their discretionary spending eaten up by rising gas prices and grocery bills (Linn).”

When Howard Schultz launched Starbucks, its main targets were the competitors and the customers. Schultz’s brand aimed at gaining dominance in the coffee industry in addition creating a Italian coffee shop feel in the United States (Buchanan & Simmons, 2009). The strategy of Starbucks was based on new products, listening to customers wants and ensure future expansion (Buchanan & Simmons, 2009). In creating convenience for customers, Starbucks created stores almost on top of eachother. They hinged on the idea that, they did not want to lose out on a sale if a line was too long. This action, of placing stores in heavy populated areas, basing need on projected growth of an area caused some decline in sales during economic trouble with the economy. The 2007 recession, failure of subprime mortgages, increased competition from McDonald 's McCafe brand, and Dunkin Doughnuts all led to a decline in sales for Starbucks in the fourth quarter of 2007 (Buchanan & Simmons, 2009). To attempt to regain market share and recover after the

Starbucks’ shares have grown more than 1500% over the past decade. Financially, it has been an oak tree in an ever changing economy with customers that have ever changing demands. However, there has been increased concern for the financial viability of the coffee shop a recently announced plan to close down over 600 stores that were said to be underperforming domestically. That means that more than 1,000 jobs will be eliminated. As scary as that is on the local front to top management, the executive staff feels that it is the only way to recover from it’s shocking $108.7M loss for the 2nd quarter this fiscal year.

Starbucks’ success depends significantly on the value of their brands and failure to preserve their value, either through their actions or those of their business partners, could have a negative impact on their financial results. Brand value is based in part on consumer perceptions on a variety of subjective qualities. Business incidents, whether one-time or recurring and whether originating from Starbucks or their business partners, that weaken consumer trust, such as actual or perceived breaches of privacy, contaminated food, recalls or other potential incidents discussed in this risk factors section, particularly if the incidents receive considerable publicity, including rapidly through social or digital media, or result in litigation, can significantly reduce brand value and have a negative impact on their financial results.

The threats to the Starbucks Corporation are associated with competitive rivalries in the coffee market, rise in price of raw materials, cultural and political factors related international business.

According to Exhibit 5, Starbucks’ entry into Japan in 1996 was the first time that Starbucks opened its store outside of North America. Until 1995, Starbucks was mostly relied on North American market, which is its home market. Since Starbucks did not have international experience, its entry into Japan was a right choice. Japan’s advanced, organized business infrastructure and environment might help Starbucks to smoothly adapt to international business. Moreover, as the market that has the second-largest economy, the Japanese market had huge potential to be profitable. Starbucks chose a joint venture with Sazaby, the Japanese restaurant

Starbucks dates back from 1971 and is based in Seattle, Washington. The company was founded by Gordon Bowker, Jerry Baldwin and Zev Siegl and it

The greatest threat of them all at this particular moment for Starbucks, or any other company for that matter, is the global economy crisis. In particular the source of the crisis, this lays in its home country the U.S. So if more than ¾ of the companies growth is depended on the U.S. then the

This case assignment discusses the history of Starbuck’s accomplishments as they entered the American coffee culture heritage. In 1983, The chairman and CEO Howard Schultz traveled to Italy and had a dream to carry the Italy coffeehouse ritual back to the United States. Schultz was focused on creating an environment meeting company that makes good coffee but also be a social experiment. Starbucks today opened more than 19,000 stores functioning in 62 countries. Starbucks has numerous rewards that globalization has offered and they have significantly benefited from it, while in the coffee industry. Starbucks has a wide-range in marketing strategies to benefit the customers. During the different obstacles that Starbucks has encountered, they must stay reliable in quality and uphold to adjust to different customer values.