Case 1-1: Going Global Fast
Case Study 1-1 Starbucks- Going Global Fast Starbucks is one of the world’s largest success stories when it comes to the business world. What began as a little shop in Seattle has turned into more than a house hold name; it’s a name that everyone everywhere can associate with. Even if you have never stepped foot in a store, or don’t drink coffee at all you know the name. Starbucks has spread into global markets in the last few years, and with its U. S. ventures has been received very well, even in cities that weren’t forecasted to have open arms for the corporate giant.
There really is nowhere for the company to go but up, especially at this time, Starbucks survived the recession, and along with a few other businesses all across the world they are holding their heads high, saying we are still here and ready to serve you. With the expansions to foreign markets Starbucks has been met with many uncontrollable elements, most of which is anticipated by marketers and can be met head on and worked out by using controllable elements. Expanding to any foreign market is a complicated task, let alone to do it on such a mass level as Starbucks has, and in such a short amount of time.
They are now taking up market shares in 44 different countries (if not more), and doing so with an average profit of thirty percent each year. While the uncontrollable elements the corporation has faced are diverse depending on the country in which you are analyzing, they share allot of similar characteristics. Some of the uncontrollable elements found in different countries that Starbucks inhabits are listed below, along with the controllable elements that can be used to solve them: * Economic forces- the company has to take into consideration the nature and direction of the economy in a particular country.
When planning its strategy for a particular location Starbucks has to take consumption patterns into consideration. Starbucks has overcome this problem by saturating the market, overloading cities with shops, just the same as they have done in the U. S. * Legal and Political Forces- In 2001 Starbucks settled a lawsuit with its California employees, for not paying its employees overtime, while this took place in the U. S. it isn’t unlikely that a similar legal matter could arise in any of its foreign market.
Starbucks could also face problems in the future if import laws were to change, since they import all of their coffee beans. If this were to happen the price of the coffee beans may go up, then the chain would have to increase prices, which could ultimately drive away customers. * Competitive forces- While Starbucks has completely saturated the coffeehouse/special eatery business, and outnumbers any competitors by leaps and bounds. And they have to be especially careful of these competitors in places that don’t have as many Starbucks shops taking up residency.
More small corporations and even privately owned companies are popping up every day, and these places are taking notes from Starbucks, increasing their food quality and drink specials to keep up or even get ahead of the huge chain. Another competitive force to look at when speaking of foreign markets are the long standing coffee shops and bistros found in countries like Italy, a lot of people find it hard to believe that residents are going to just up and leave their favorite coffee bar/bistro just to switch to the new mainstream Starbucks in town.
In order to compete and prevail with the long standing private shops, their best bet is to use a marketing mix of controllable elements such as product, promotion, and price. If Starbucks offers products that these other shops don’t have, promote the missing products well, and use pricing that is reasonable, they have a better chance of being accepted well by residents. Structure of distribution- In the beginning the company was very cut and dry, to get a cup of coffee or an espresso you went to your local Starbucks shop, but in 1988 they started offering a mail order catalogue, where a customer could special order coffee beans, machines, and other accessories. This has further more expanded today to a huge branch of products being sold everywhere from your local coffee shop, grocery store, to even convenience stores; coffee beans, Tazo tea, CDs, coffee mugs, coffee machines, energy bars, Frappuccino (the chilled pre-bottled kind), energy drinks, and much more.
The distribution elements of these products may vary from country to country, statistics show that much of Japans coffee market is sold in to-go form via convenience stores or even vending machines, more so than here in the states, so to accommodate Starbucks has upped the amount of vending machine and convenience store distribution in Japan, therefore leaning on their controllable element of channels of distribution to do so. Some may say that a company as large and successful as Starbucks no longer faces risks, but that is nowhere near the truth, in every form of business there is risk, whether it be an established usiness or a starter business. I’m sure as the company continues to grow more risks will be taken, but I am also sure that Starbucks has the correct business strategies in place to help them avoid the not so good risks, and even profit from some of the risks. For example one risk that comes to mind is that with the large growth percentages that we see in the past and estimate in the future for this company, who is to say that eventually there will be no more international markets to consume, that Starbucks will be on every street corner in every major city across the World?
This could easily happen, and in the companies eyes hopefully will. But then what else will they do where will they expand? What they should and probably will do once they reach that point of global saturation is to start opening shops in smaller cities and towns across the world. They can also use research and development to come up with new lines of product to interest different markets, like a line of kid’s drinks and snacks, so that whole families could experience a Starbucks treat.
Another risk that they may face is as I stated before, the import of excellent coffee beans from other countries. If things were to get bad with the World Trade Commission (as so many people assume they will) the prices Starbucks pays for their imports could substantially rise, or could even cease. The company would have to look into buying land and growing their own coffee, which in turn could open yet a whole other market for the company to take over and flourish in.
I personally feel that Starbucks corporate strategies are amongst some of the best in the world, I have used them many different times as examples of how a corporation should be run. My biggest kudos goes to how, still after all this time see their employees as their number one asset to the company. There really is something to say about a company who puts its employees first, many small private businesses don’t even do that.
Another business strategy they use which I highly favor is their complete saturation of a city with stores, while this technique can sometimes hurt another existing Starbucks store in a similar location, the advantages and profits are there to prove that it is a very well thought out strategy. You don’t ever see this strategy with other businesses, and yet it has been one of the main keys to the multi-billion dollar company’s success. Lastly I have to say that what really impresses me about Starbucks is that they have truly stuck to their original vision establish Starbucks as the most recognized and espected brand in the world. That is a huge vision to begin with, and I believe it is safe to say they have not only met that vision but exceeded it, and will continue to exceed it. In order for Starbucks to improve their profitability in Japan, they are going to have to come up with a whole new marketing strategy. It has been proven that the Japanese work more hours for less pay, working hours and only receiving pay in increments that you and I would never find acceptable.
Starbucks is on the right track by selling prepackaged energy drinks in vending machines and convenience stores, as I talked about earlier. But a market I would look into is the energy shots; this is a huge market in Japan. Not only does it give extra boosts of energy for multiple hours, which is what these citizens working two to three jobs to support their families need, but the price of one energy shot is substantially lower than a cup of coffee or even an energy drink sold out of a machine.
So if Starbucks was to start utilizing the energy shot market share, they could sell more product at a lower price, and expect to see the same amount of profit that they are currently seeing by selling less of a higher priced product. Works Cited * http://www. academicmind. com/unpublishedpapers/business/marketing/2002-04-000aag-catching-the-starbucks-fever. html * http://www. businessweek. com/globalbiz/content/jul2008/gb2008072_462789. htm * http://marketingteacher. com/swot/starbucks-swot. html