Case 1-1 Starbucks - Going Global Fast

When Starbucks first became a Public Traded Company in 1992, there were only 165 stores open at that time. The company set a goal for growing 125 stores per year and rapidly expanded until reaching 11,000 U.S. stores in 2008 (Starbucks website). When Starbucks first opened, it focused on the experiential. At its best, the coffee giant truly represented the ‘”third place” between home and work where a customer can chat with the barista, order a drink to his specification, then settle in for conversation, socializing, and relaxation (Wikipedia). People were not paying $3 per latte because it tasted that much better than Starbucks’ competitors. They were paying it because they could go into a Starbucks and get that European café feeling and then take the

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).”

Starbucks along with the rest of the world was hit hard with the worldwide recession beginning in 2008. They were forced to change the way in which they operated. Starbucks is a rapidly expanding company and it is imperative through the leadership of Howard Schultz that they continue to evolve.

in the specialized coffee industry, Starbucks cemented its hold on the market by hosting free wireless

Starbucks’ lead in the specialty coffee industry exemplifies the result of deftly executing a well-planned business strategy. Moreover, Starbucks is well positioned for what is expected to be a continuing rise in the popularity of specialty coffee products. The question before Starbucks’ leadership, however, is what avenues will lead to Starbucks’ goal of remaining true to its core, the highest quality coffee products while providing a “total coffee experience” for its customers?

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.

business model may seem, there is plenty of hard work invested and financial risks taken to grow

First, Starbucks has effectively applied the product differentiation strategy. To achieve it, the company has specialized in different product mixes, aligned its business locations to a specific ambiance that suits the context, and varied the customer experience, thus resulting in a higher customer service satisfaction. Further, Coskun, Basligil, and Baracli (2008) note that Starbucks prides in having their customers enjoy a premium service. Therefore, the company’s signature strategy has worked well thus far, as competitors find it difficult to imitate. Second, the enterprise has coordinated its acquisition and portfolio strategy, thus consolidating the market. As discussed in the background chapter, Starbucks has a portfolio network of eight brands under its stable. Third, Starbucks’ international expansion strategy has worked well, with a presence in 70 countries (Starbucks, 2017). These factors, coupled with its financial capability, offer Starbucks an edge over its

In general the coffeehouse industry in the United States was experiencing an increase in coffee consumption per capita due to the “Starbucks effect”. At this time Starbucks was operating approximately 20,000 stores in the United States and was living a fast expansion strategy worldwide.

Although, customers are not able to influence product prices, they do obtain some power. If Starbucks drastically raise their prices, customers will substitute their products for a cheaper one.

Starbucks have shown in the past that they are very good at taking advantage of opportunities. In an strategy alliance with Hewlett Packard, customers could create their own music CD within a Starbucks coffee shop. Thus the company could look for these kind of opportunities to seize. In addition, new markets for coffee are emerging such as India and the Pacific Rim nations, also Europe which is getting more and more accustomed with the brand name “Starbucks”. Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential.

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.

Following its success in the United States, Starbucks ventured overseas and quickly became a globalization icon. With its rapid globalization strategy, Starbucks expanded from about 5000 stores to an estimated 15,000 stores in 2000 (Groth, 2011). By mid-2000s, Starbucks’ supply chain faced many issues, resulting with challenges of having to fulfill expansion strategies yet minimizing escalating operation expenses. By 2008, Starbucks’ stocks fell by 42% (Schultz, 2011). The rapid expansion took a toll on the sales growth and stretched the limits of the existing supply chain, which then rippled down to erode the customer-valued ‘Starbucks experience’ (Gibbons, 2011).

Factors in the global environment provide both opportunities and strengths for Starbucks. Opportunities such as increased revenues, further expansions, and achieving their goal of becoming the most respected brand worldwide. Starbucks also faced threats. These threats include dealing with growing antiglobalization overseas and their huge risk of less return on each overseas store, this deriving from overseas operations being run by local partners instead of Starbucks

Starbucks’ retail entry model in the United States does not have the same strategy as their international model. In the states Starbucks holds great control as a corporation, but in international territory, country partnerships, cultural, government laws and politics play a very important role in Starbucks’ entry strategy. Starbucks has set it sights globally since the coffee market has come close to saturation in the U.S. which will give them the opportunity to continue to expand without fierce competition. Starbucks has looked to countries like India and other emerging markets with great growth potential to set down new roots. Starbucks recognizes India as a great choice to expand business internationally but also recognizes the complexity in the same market after several attempts to enter without success.