UNITAR

INTERNATIONAL
UNIVERSITY

INTERNATIONAL BUSINESS (GSGM7333)

‘CASE STUDY ANALYSIS’

Growing Bing While Staying Small :
Starbuck s Harvest International
Growth

NAME : ROWENA SHARMAINE SYLVESTER

STUDENT ID : SB1506MD0047

SECTION : MC D10/PART TIME

NAME : AHMAD ASLAN BIN AB AZIZ

STUDENT ID : MC170604734

SECTION : MC D10/PART TIME

LECTURER: : DR SAFIAH RASHID

A case study analysis of Growing Big While Staying Small: Starbucks Harvests International
Growth by Richard Honack, Sachin Waiker, (2017). Starbucks is an American coffee
company and coffeehouse chain. Starbucks was founded in Seattle, Washington in 1971.
Initially Starbucks was opened by three college friends Gordon Bowker, Jerry Baldwin, and
Zev Siegl. The three college friends observing the growth in the specialty coffee market was
a rose steadily in the market despite the declining of coffee sales in 1960s to the mid-1980s,
then they startup a Starbucks Coffee, Tea, and Spice in Seattle’s in Pike Place Market in
1971. While, in early 1980s, Howard Schultz first meet Starbuck he was amazed by the three
promoters of Starbucks on their passions toward life and coffee business. Schultz was
attentive to Starbucks and decided to join their business. However, later until 1982 only
Schultz first join Starbuck as director of retails marketing. Later in 1987, Schultz become the
CEO of Starbucks as well as acquired Starbucks. Starbuck become the Starbucks
Corporation. Starbucks is an international company that operate in more than 30 countries.
Schultz had resigned as CEO of Starbuck in year 2000. In 2008 Starbuck announce that it
would close most of its Australian locations, having failed to connect with the local market
(Richard Honack, Sachin Waikar, (2017). Schultz planning to re-build Starbuck again.
Schultz stepping back in to Starbuck in same year Starbuck had declining their sales and lost
in Australian interest. In early 2009, Schultz found that Starbuck sales revenue dropped as
much as 97 percent due to variety of factors including falling of economic condition in the
US and faces increasing competition from McDonald’s and Dunkin Donuts.

Starbuck in Australia send a message that they cannot grow too fast in opening up a multiple
location. Starbucks failed to understand the coffee culture of Australia. According to Zhenjia
(2012). Starbucks ignore to understand the culture of Australian wary instead they focused on
opening store more too fast, as they put up high their title as the well-known coffee café in
the market. The closing down in Australia however did not make Starbucks stopping to
nurture in other countries, there were likely lesson to be learnt on how to run Starbucks
successfully in others international market. Each country Starbucks enter would have its
different mode of entry. The researchers discuss how Starbucks consider for going
international? What is Starbucks entry strategies plans alternative? How much the
competition amongst others brand affected Starbucks business in coffee segment.

How about Starbucks in Japan

There a few highlights for Starbucks in year 1996, they start to sell go-to-product which is
bottled Frappuccino. Starbuck sell their coffee drink through partnership North American
Coffee, the partnership between Starbucks & Pepsi-Cola North American. August In same
years, Starbucks opens stored in Japan (Tokyo’s Ginza) Tokyo’s Ginza marked the first
Starbucks in Japan and also the first Starbucks store opens outside North American.. Today,
Starbucks Japan has become the largest coffee chain in Japan with a market share of 48.0%.
Their store locations have grown by an average of 7.3% per annum over the past decade—
approximately 70 new stores a year, and now over 1000 stores in total. (Marie Rosszell, Aug
2016). Starbucks had gained enormous popularity in Japan, its open 5 stores in every 5 days.
Starbuck in Japan was a great success event. Adapting to culture in Japan was quite a
challenge for Starbucks as Schultz had hired a Japanese consultancy to help in design the
coffeehouse in Japan. However, at the time, the coffeehouse stylized was design provided by
Starbucks, Schultz and his team more rely and trust to their design chose to ignore most of
the consultant advice. Schultz ignorance consultant advise had made Starbucks in Japan a
success story.

Japan was the largest economy in the Pacific Rim, make it an ideal international country for
Starbucks to steep-foot in. As Japan is the third-largest-coffee-consuming-country in the
world, behind United Stated and Germany. Also, with the Japanese fast lifestyle, Japanese
people often drink coffee it was big influence for Starbucks to enter Japan market. On
opening day in 1995 the Japanese crowded into Starbucks, and as many as 200 customers
formed lines around the block to get a taste of Starbucks high-quality coffee (home)

Not only Starbucks had marked their footstep in Japan others international brands like
McDonald’s spread their wings too. Japan was also the seconds biggest international market.

Starbucks Competition amongst others international brands

Starbucks is known for its premium quality coffee and top excellent customer service. Being
a coffee producer was a challenging path as Starbucks is not the solely coffee producer in the
market. Starbucks been fighting with its top competitors – McDonald’s and Dunkin’ Donuts.
McDonald’s is longed known as a successful fast food restaurant, then McDonald’s started
emerge into coffee business, as what they saw Starbucks can be successful why not us.
McDonald’s introduced McCafé in January 2008. It was a brilliant business strategy for
McDonald’s to boost up their sales revenue, as the existing store they already have they only
need to ram up new facelift in the existing store to open their new McCafé. The ideas were
great, McCafé does speed less in opening as well as introduce the brand into the market. With
fiscal year 2017 revenues of $22.82 billion, McDonald’s outperformed Starbucks. Initially,
McDonald’s is expanding their menu for customers to choose variety.

Dunkin’ Donuts – by the early 2000s, the company had introduced its first specialty coffee
line. In 2006, Dunkin' upped the ante and declared war against Starbucks when it launched its
"America Runs on Dunkin'" ad campaign. While Starbucks has created an intentionally chic
and upscale environment, Dunkin' Donuts already represents itself as an All-American brand.
The tactic helped bolster Dunkin's Q3 2018 earnings, but the company's $350 million in
revenues still fell significantly short of Starbucks' $6.3 billion that quarter. By November
2018, Dunkin Donuts operated 11,300 locations to Starbucks' 29,000.

Starbuck Strategies in picking up and managing key alliances with other brands

Japan was an excellent success for Starbucks – mark Starbucks first foot-step outside
America. Japan have a strong culture and Starbuck need to adapt itself to the Japanesse
market. How did Starbucks manage to enter Japan? Starbucks entered the Japanese market
through a joint venture with Sazaby Inc which are the Japanese clothing and furniture retailer
Sazaby Inc. The joint venture, Starbucks Coffee Japan Ltd., is equally owned by Starbucks
Coffee International Inc., an operating division of Starbucks Corp., and Sazaby, with total
capitalization of 500 million yen (about $4.6 million).

In 2012 it created a joint venture in India market equal joint venture with Tata Global
Beverages. Tata also own other group company such as Tata Coffee and Taj Catering. For
instance, Tata plans to sell its mineral water brand Himalayan at Starbucks outlets in markets
outside India. This joint venture between Starbucks and Tata Global Beverges benefited each
other.
Apart from Japan-Starbucks success story China too is Starbucks’ fastest-growing market
outside of the United States in terms of store count approximately 1,300 Starbucks stores in
Shanghai and Jiangsu and Zhejiang Provinces. Starbucks form a long-term joint venture
partners Uni-President Enterprises and President Chain Store.

How did Starbucks determined who to be partner with? What is the criteria for Starbucks to
choose their strategice alliances? Starbucks knew that selecting a strategic partner it is
important that the criteria extend beyond just on how the two company can help each other in
the industry. Starbucks believe that, every partnership they form must able to enchance both
their profits. Most importantly, both need to be aligned in terms of goals and cultural
compatibility. Furthermore, one of the major key to perform a strategic partnership is based
on strong business relatinships.

Strengths

Starbucks is the largest coffeehouse chain operating in the world. is that it is the market
leader in the coffee industry, and that it has 16,858 stores as of the end of the fiscal year in
2010 (Starbucks Corporation, 2010). Starbucks had already spread out through 50 countries.
On top of that, Starbucks had rapidly growth, not only in it home country but manage to go
and setup internationally. Starbucks strategicaly choose to enter a country that is a marketable
country in the industry. Starbucks is also financially sound which was proven during the
financial crisis in 2008 and 2009. Its stock price might have fallen, but its profits barely took
a hit (Starbucks Corporation, 2010).

Starbucks had build their brand accross the world, everyone know Starbucks. Starbucks is the
premium quallity assurance of coffeehouse. Starbucks had become such a strong market
position and their brand recognition accross the world, had give the company to such a
competitive advantage (as well as many rivals in the industry continuely increase).

In entering a internatinal market country, Starbucks carefully choose the most strategic place
in the country to setup a coffeehouse there. They targeted a premium places, high activity
places such near the office buildings, universities. Under this reason, Starbucks able to place
their brand awarness to the eyes of the coffee-person. In other words, location is very
important in to setup a Starbucks coffeehouse.
Employees is place a number one priority in Starbucks. Employees or the staff work in
Starbucks is the back-bones of the company. Starbucks focus invest to the employee training,
the company want their barista to have the high knowledge. The employees of Starbucks are
being provided in may kind of benefit as to retain the best staff rather than loose the potential
staff. The human resoure management in Starbucks, they tried to be at their best for the
employees.

Challenges face by Starbucks

Increase of rivals: One of the main challenges faces by Starbucks being in international
market is the increasing of many imitation by others international brands. The others
international brands like McDonald’s and Dunkin Donuts had become Starbucks biggest
threat in the coffee producer market. As the two company also open up a coffee product in to
the market. How does Starbucks imbrace their rivals, they started to put more effort in the
marketing strategy for brand awarness to outnumber McDonald’s and Dunkin Donuts. Do a
promotional campaign and showcased its policy of selecting only the top 3 percent of beans,
then roasting them until they popped twice. “if your coffee isn’t perfect....... you must not be
in a Starbucks,” boasted outdoor advertising posters.

Adapting to foreign country culture: Adjusting to culture in foreign country is often a

challenges faces by Starbucks. The failure Starbucks in Australian had illustrate how
challengging it was for them to adapt into foreign country culture. Australia story had
become an lesson learnt to Starbucks. As Starbucks enter to Japan market, they emerge with
the local company for joint venture (joint venture in other international market too)

Employess disatisfaction: Starbucks is facing backlash from its baristas who say they’re
overworked, understaffed, and underpaid. Starbucks rapidly growth and they also feature new
menu, more customize coffee drinks, which had become complicated - hard to make drinks (
the standard operating procedure need ten or more steps), increasing baristas workloads,
barista becomes stress. Thus, many store face understaff, Starbucks taken their employees
into consideration, employees is very important to them. They give more benefit to the
employees including employees get a 30 percent discount on in-store and online purchases, as
well as one free pound of coffee, a box of K-cups, or packs of tea a week. One of the
interesting benefit Starbucks had to offer to their employees was the “bean stock program” it
an opprotunites for staff to purchase Starbuck stock through the program.
What makes the Starbucks brand successfull today

Starbucks are ensure that their staff is well trained and knowlegable. The investment for staff
traning is for the customer sake. Starbucks believe that a happy staff drive to a happy
customers. The company focus much on the customer services until they quoated “We’re not
a coffee company serving people; we’re people company serving coffee.” Starbucks took
care of their staff – staff trained to serve the excellent service to their customer on board.
People recognize Starbucks to being such an excellent player in customer services, that why
customer like to board with Starbucks.

Advertisement for Starbucks also major contribute to their successfull today. Starbucks
drived to build its brand awarness. They spread their brands to the customers by offering
customers a relaxing and enjoyable experience (every stores design in same pattern – in
accordance to the country culture). By offering a relaxing and enjoyable experience to
customers, alternatively Starbucks had successfull in customer service (focusing the
customers)

While in China, the success for Starbucks took many years, they were not success in early
years. "It took a number of years for us to get traction and gain success and loyalty. There
were many people, some inside the company and certainly outside the company that said
Starbucks would never succeed in China.” Said Schultz. As years past by after the first day
Starbucks enter China market, many multi-natinal companies had enter to China market.
Thus, Starbucks target market segment change over-time and they target the multi-national
worker to hope become their customers. Challenges Starbucks in China was, they have to
teach them towards coffee (China is the major tea-consumer)

Opportunities for Starbucks

Starbucks can continues to expand it market internationally. By far Starbucks had made
success story in many countries, recently Starbucks had emerge into India market also
through a joint venture entry. Therefore, opportunities for growth become greater in
expanding their business trading with other developing country.

Starbucks can expand it product into the market, they can offer variety choices of menu (yet
not complicated as not to burdern the staff workload). As today, Starbucks had already
introduce to customer their featuring in Tea and fresh juice. This enhance Starbucks more
opprotunites in the market.

Today we saw in store Starbucks already sell its packed coffee products also merchandicez.
This is an opportunies for Starbucks to expand it retails operations and introduce to retails
market. A great future for Starbucks to put their brand recognition to people not just in store
but also expansion throught out retails market.

Lesson Learnt

To be a successfull growth in international market, Starbucks needs to have the ability to

adjusting culture in foreign country. Australian market give Starbucks a great blow, merely
not everyone can accept the culure of that Starbucks tried to brought in. Starbucks takes
Australia journey as teacher for future emerge in international market. Starbucks learn their
lesson and continue to expand for future.

Customer services always been a focus to Starbucks, customers experience and satisfaction is
their weapons to attract customers, satisfied customer create a loyal customer. However,
Starbucks must improvised the customer experience cause others brands also hope to switch
Starbucks loyal customers as their’s. Therefore, innovation of product mix is essential for
Starbucks to survive and rapidly become well establish company in coffee segment.

Starbucks successfull joint venture stragegy had shows that even a large and succesffull
company need helps from others in order for to achieve business goals and mission. It is
already seen Strabucks become succesffull in foreign country through a strategic
partnerships with the local brands. In Japan, Starbucks had partnered with Japan-based
retailer Sazaby. Starbucks was right to choose a local brands to become their partnered,
Starbucks was able to achieve its business objectives, increase it number of stores, increase
its profits and becomes successfull company. Strategic partnerships help to enhance
Starbucks and be a tough competitor for other international brands and able to help Starbucks
to keep pace in the market.