STARBUCKS- GOING GLOBAL

FAST

Prof: Hamad alghadeer

Student: Aasem Alsayyed Soliman (201215004)

BACKGROUND

Starbucks Corporationis an American global coffee company

andcoffeehouse-chain based inSeattle, Washington.
The first Starbucks opened in Seattle, Washington, on March 30,
1971 by three partners that met while students at theUniversity
of San Francisco:English teacherJerry Baldwin, history
teacherZev Siegl, and writerGordon Bowker.
They sold beans and coffee makers.
Customers were encouraged to learn how to grind the beans and
make their own freshly brewed coffee at home.
Starbucks name came from a character in classic novel Moby
Dick, published in 1851, which takes place in sea.
Logo was chosen with the start of the company in the year 1971.
The founders wanted the logo reflects the historical relationship
between coffee and sailing traders.
In 1987, the original owners sold the Starbucks chain to former
employee Howard Schultz and quickly began to expand.

COMPANY GROWTH

Starbucks grew from 17 coffee shops in Seattle 15

years ago to over 20,891 outlets in 62 countries.
including 13,279 in the United States, 1,324 in
Canada, 989 in Japan, 851 in China, 806 in the
United Kingdom, 556 in South Korea, 377 in Mexico,
291 in Taiwan, 206 in the Philippines, 171 in Thailand
and 10 in India.
The company planned to open a net of 900 new
stores outside of the United States in 2009.
Since 1987, Starbucks has opened on average two
new stores every day.
The first store outside the United States or Canada
opened in the mid-1990s, and overseas stores now

SOME CHALLENGES FACING THE

COMPANY

Starbucks faces antiglobalization

movement.
-During the World Trade Organization talks in
November 1999, Starbucks was among the aims of
protesters , a symbol, to them, of free-market
capitalism.

Dropping Sales from ($10.4 billion) in

2008 to ($9.8 billion) in 2009, and
dropping in profits from $673 billion in
2007 to $582 billion and $494 billion in
2008, 2009 respectively.

SOME CHALLENGES FACING THE COMPANY

The firm closed 475 stores in the U.S. in

2009 to reduce costs.
Saturated market with over 10,000
stores scattered across the United
States and Canada. (there are still eight
states in the United States with no Starbucks
stores.)

self-cannibalization (opening stores in the

same area)

SOME CHALLENGES FACING THE COMPANY

- global expansion poses huge risks for

Starbucks, it makes less money on each
overseas store because most of them are
operated with local partners(it reduces the
companys share of the profits to only 20 percent to
50 percent).

Starbucks faces cultural challenges. After

riding the wave of successful baby boomers (who
born from 1946 to 1964) through the 1990s, the
company faces a hostile reception from its future
consumers, the twenty- or thirty-somethings of
Generation X (who born from 1960 to 1980)
cultural changes.

SOME CHALLENGES FACING THE COMPANY

The company facing employees

dissatisfaction (Dissatisfaction over odd
hours and low pay is affecting the
quality of the service and even the
coffee itself)feeling overworked and
underappreciated.

SOME CHALLENGES FACING THE COMPANY

Starbucks faces competition from

competitors such as Nestle, Dunkin Donuts
and McDonalds and their new McCafs .

Starbucks faces steep competition in

Japan, including Starbucks lookalikes.
-One of the most popular brands, called Mt. Rainier,
is emblazoned with a green circle logo that closely
resembles that of Starbucks.

STARBUCKS AROUND THE WORLD

QUESTION 1

Identify the controllable and

uncontrollable elements that Starbucks
has encountered in entering global
markets.

CONTROLLABLE

Product
-Hot and Cold beverages, pastries, snacks, etc

Price
- Starbucks charges a premium prices for their products

Promotion
-The Company has controlled its promotional strategy and has saved a lot of
marketing cost by mainly relying on worth of mouth and the company has good
brand name in national market as well as in overseas market.

Channel of distribution
- Starbucks have 20,891 outlets in 62 countries which shows that the company
has good controlled over the channel of distribution.

CONTROLLABLE

Research and development

-The Company has also controlled over its research and
development process such as in 800 locations it has installed
automatic espresso machines to increase the speed of
service and it has also offered the prepaid card which
clerks swipe through a reader to deduct a sale, thus the
company cuts transaction times in half.
- Starbucks launched Starbucks Express its boldest experiment
yet, it blended java, Web technology, and faster service, At
about 60 stores in the Denver area, customers can preorder and prepay for beverages and pastries via phone
or on the Starbucks Express Web site.
-They just make the call or click the mouse before arriving at
the store, and their beverage will be waiting.
-Starbucks continues to try other fundamental store changes. It
announced expansion of a high-speed wireless Internet

UNCONTROLLABLE

Economic Forces.
-Economic conditions.
-localprice range of commodities

Competitive Force.
-Local competitors.
-Imitators Coming in to grab the market share.
-Coffee is a beverage that has a worldwide appeal. Starbucks entering
the
global market might face stiff competition from local coffee brands in
different countries. While Starbucks may hold an advantage in terms
of
brand recognition worldwide, local brands can hold an advantage in
terms
of local appeal and cultural familiarity.

UNCONTROLLABLE

Cultural Force.
-Different cultures.

-Capturing the local cultural appeal of different countries may prove

to be
challenging especially to a brand going global. There has to be a
certain amount of
standardization while applying the right localization.

-The solution is to overcome cultural challenges by studying

And researching on coffee consumptions habits of locals.

Political/legal Force.
-Different laws and regulations in different countries.
-Starbucks had a lot of issues regarding overworked but
underpaid employees as it continues its growth globally and
dealing with local rules and regulations.
-For example, France has very generous labor benefits as opposed to what

QUESTION 2

What are the major sources of risk

facing the company and discuss the
potential solutions?

RISKS

Saturation of United States market.

-There are still eight states in the United States with
no Starbucks stores.
-Prevent Self-Cannibalism----Stores must be
strategically located.
-Starbucks have to Offer new food and other noncoffee items
-Market research should be carried out before
investing a new store and realize the fact that the
market can become saturated.
-Go global. it will have to depend on overseas
growth to maintain growth rate.
-Licensing and franchising for foreign investors.

ANSOFFMATRIX

RISKS

Problems of changing generation.

-Consumers 35 years and older tend to consumer coffee more
often than the 18 - 25 age group
-Market research should be carried out to study consumptions
habits for younger consumers.
-Starbucks should offer innovations such as wireless networks
to its customers to overcome challenge in order to attract the
next generation of customers.

Dissatisfaction of odd hours and low-pay.

-Positive reinforcement which leads to higher feelings of job
satisfaction
- Improve the employee satisfaction. So, the quality of service
as well coffee increases

QUESTION 3

Critique Starbucks overall corporate

strategy.

FAULTS

Eight cities in U.S. remained untapped.

Relying on word of mouth, Starbucks spends
just 1% of revenues on advertising.
Low payment to employees.
predatory real estate strategypaying
more than market-rate rents to keep
competitors out of a location.
-Not only it is claimed as an unfair attempt to drive
out small, independent competitors who could not
afford to pay inflated prices for premium real estate,
this also leads to monopoly and then leaves
customers annoyed with fewer choices.

FAULTS

Stores Expansion in the U.S.

-Growing continuously rapidly, Starbucks has
done clustering several locations in a small
geographical area. Doing so eventually will
inevitably act to cannibalize existing
locations same store sales.
Stores Expansion Globally
-Stores expansion in other countries too rapid
to concern the real preferences and habits of
local consumers and competitors.

FAULTS

Predatory real estate strategy

-Buying out competitors' leases
-Not only it is claimed as an unfair
attempt to drive out small,
independent competitors who could not
afford to pay inflated prices for
premium real estate, this also leads to
monopoly and then leaves customers
annoyed with fewer choices.

FAULTS

Labor Disputes & Involvement in

Lawsuit.
-Because of Starbucks payment and
policies toward its part-time and fulltime employees do not compatible with
working hours and duties.
- 470 Frustrated store managers sued
Starbucks in 2001 for allegedly refusing
to pay legally mandated overtime.

QUESTION 4

How might Starbucks improve

profitability in Japan?

IMPROVING PROFITABILITY IN JAPAN

Reduce Price / Increase Benefits.

-targeting mid-income levels were frequent buyers and grew
substantially.

Offering new beverages according to the Asian or

Japanese culture and provide wider range of
different tea or soft drinks Tea drinks will increase
popularity because their perceived value of healthy benefits.

Offering special, Japanese food in Starbucks stores,

Japanese candies, cakes or sweets or even snacks
Starbucks may become more Japanese!
Following the health conscious trend by reducing
caloric and fat content .
Online, phone ordering and drive-through service for
busy Japanese.

QUESTIONS
&
ANSWERS

THANK
YOU