Starbucks : International Expansion Attempts

The Starbucks former strategy was centered in offering a high quality product to a narrow consumer segment (coffee lovers), therefore, a

Starbuck 's has become a staple of American culture and for the most part, if you are in your 20 's, you have grown up with it and this has become what you expect coffee to be. Who can blame you, it is everywhere, so "wake up and smell the coffee"! I plan to tell you about the strategies that this giant uses, that have taken it from humble beginnings to a worldwide phenomenon. I also intend to explain how Starbucks is taking China by storm, mainly because marketer / entrepreneur Howard Schultz 's vision and mission statement is shared by everyone in the company!An excerpt from the London Financial Times published in February 2006 states the following in regards to Starbucks entering the Chinese market; "Mr Schultz said the company was

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.

1. Where did the original idea for the Starbucks format come from? What lesson for international business can be drawn from this?

a space for consumers to enjoy a cup of coffee away from home or work. Starbucks created the “Third

Though coffee houses throughout Europe have a self-explanatory function of meeting point, discussion area and recreational facility, this concept has only recently been explored in North America, and is gaining in popularity and social recognition as we speak, and is only expected to increase over the course of the next few years.

It could also be argued that Starbucks Australia has been, and still is to some degree, what Porter would define as ‘stuck in the middle.’

I am fully disclosing and giving proper credit to any outside assistance received in its preparation;

Starbucks used many tactics to reduce its distance from foreign markets. Firstly, Starbucks conducted extensive research in each country. They used focus groups, and quantitative analysis, to evaluate local cultural sensitivities and preferences. But it also used specific local adaptations. For

Analysis: Starbucks’s international expansion strategy is to use, licensing or joint-venture partnerships to enter new markets. Starbuck uses the local partners to negotiate local regulations and other country specific issues, which has made this company successful in expanding into foreign market.

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).

With its Thailand expansion, the company entered the market with a licensing agreement with ‘coffee partners’ a local Thai company. It set its target to open more than twenty odd Starbucks outlets within a span of five years. But the company failed in its attempt as they found constraints in raising enough funds for the expansion. Starbucks then took over coffee partners in 2000. The licensing agreement did not work for the coffee company as they found restrictions in their expansion and growth. They turned the licensing to other mode of operations. By 2007, they managed to expand up to one hundred and three outlets in the region, just in 7 years time they had 5 times their target of Starbucks outlets. Similar to the Thailand market, the Starbucks expanded in Britain. It went ahead and bought the Seattle coffee company in 1998 which was originally a Britain based coffee shop operating similar to that of the American Starbucks. They followed a format similar to that of the American one. They had 60 retails outlets and Starbucks with the same format acquired the outlets from this widely known company and employed its expertise in the field to provide the customers with its range of products and services to the one similar to north America. But Starbucks did not have to struggle in Britain, as the culture in both America and Britain were similar and its was easy for the company to follow the same format and also the original company, Seattle coffee had expanded across Britain,

Starbuck’s global-level strategy, according to the case, is referred to as the Starbucks way. In the case it is stated that “the company finds local business partners in most foreign markets… It tests each country with a handful of stores in trendy districts, using experienced Starbucks managers.” The case further states that Starbucks “then sends local baristas to Seattle for 13 weeks of training. Then it starts opening stores by the dozen.”

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.