CASE STUDY

STARBUCKS:
GOING GLOBAL FAST
STRATEGY, MANAGEMENT & PLANNING
Professor Jorge Lengler

30TH APRIL 2012

AGENDA
STARBUCKS ANALYSIS MARKET ANALYSIS INTERNATIONAL STRATEGY RECOMMENDATIONS

STARBUCKS: GOING GLOBAL FAST

STARBUCKS ANALYSIS

BACKGROUND OVERVIEW MISSION PRODUCT LINE PRODUCT SUPPLY STORE AMBIENCE EMPLOYEE TRAINING 7S MODEL ANALYSIS

STARBUCKS: GOING GLOBAL FAST

BACKGROUND
Business started in 1971 as a retailer chain of coffee, tea and spices.
Managed by the chairman Howard Schultz and the CEO Orion Smith. PRODUCT/SERVICE Products Arabica coffees, exotic teas and dark-roasting beans. Experience Italian coffee culture: Employees greeted customers by name; People were in a comfortable and familiar atmosphere.

STARBUCKS
DIFFERENTIATING FACTOR

STARBUCKS: GOING GLOBAL FAST

OVERVIEW
Public company: NASDAQ SBUX Headquarters
Employees: 149,000 (2011) Revenues: $11,7 billion (2011)

Starbucks Corporation:
Leading roaster and retailer of specialty coffee in the world One of the largest chains of coffee shops More than 15,000 stores in 50 countries

United States, Japan, Canada, United Kingdom, China, Mexico, Australia, Germany
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MISSION

To inspire and nurture the human spirit one person, one cup and one neighborhood at a time.

STARBUCKS: GOING GLOBAL FAST

PRODUCT LINE
Coffee: High-quality bean coffees Arabica coffees.

Handcrafted Beverages: Italian-style espresso beverages and cold blended beverages - Frappuccino coffee.
Merchandise: Premium teas and complementary food items Coffee and teabrewing equipment, mugs and accessories.

Fresh Food: Baked pastries, sandwiches, salads, yogurt parfaits and fruit cups.

PRODUCT SUPPLY
Buys green coffee beans from coffee farms in Latin America, Africa and Asia. Custom roasts them to its standards. Takes it in ocean containers to the United States and Europe.

Sells their products throughout their own stores, grocery and warehouse club.
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STORE AMBIENCE
Thesis: "Everything matters

The store fixtures, the colors, the banners, the music, and the aromas are all blended to enhance the mood and ambience of the store.

EMPLOYEE TRAINING
Fast growth means specially train employees and store managers:

Employees - 2 to 4 weeks training;

Managers training. 8 to 12 weeks

Implant the company's values, principles and culture in each worker.

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7S MODEL ANALYSIS
STRATEGY Rapid store expansion strategy.

Concentration on core competencies.

Penetration in new markets and consolidate their positioning in existing ones.

STRUCTURE
Structure Strategy
Shared Values
Style Skills

Starbucks has a functional structure.

Systems

SYSTEMS Information system operations (IT). to support business

Extensively training staff. Starbucks has economies of scale by purchasing coffee directly from growers.
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Staff

7S MODEL ANALYSIS

STYLE Innovative, flexible, friendly and team-orientated. STAFF

Structure

Low employee turnover - Starbucks offers a motivating benefits package which includes base salary, health care benefits, stock option plan, among others. Employees training include 24 hour-training, star skills, coffee master program, servant leadership workshop, career power and career power for coaches workshop.
Starbucks has retail positions and management positions.

Strategy

Systems

Shared Values

Style

Skills

Staff

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7S MODEL ANALYSIS
SHARED VALUES Leverage the Starbucks experience;
Structure

Great work environment and take care of customers and employees with respect;
Diversity is encouraged; Positive contribution to communities and environment; Maintain the highest quality standards of products; The importance of profitability for future success; Understand environmental issues and share information with its partners (employees); Recognizing that fiscal responsibility essential to its environmental future. is

Strategy

Systems

Shared Values
Style

Skills
Staff

STRUCTURE Friendly staff; and well-informed

Non-retail operations; Coffee experience.

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STARBUCKS: GOING GLOBAL FAST

MARKET ANALYSIS

COFFEE INDUSTRY COMPETITORS PESTEL ANALYSIS

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COFFEE INDUSTRY
COFFEE BEANS PRODUCTION
Coffee is the second most traded commodity on worldwide markets, after oil. Coffee was an $80 billion industry by the late 1990s. The major consuming regions

were the European Union (35%), the United States (25%) and Japan (9%).

STARBUCKS AND COFFEE Starbucks belongs to the specialty retailers. During several years Starbucks has been active as an "ethical trader and in 2000 Starbucks began buying Fair Trade certified coffee .

Note: Fair trade coffees were coffees that were purchased directly from cooperatives of small farmers at a guaranteed floor price.

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COMPETITORS

Starbucks does not have a group defined of competitors STARBUCKS HAS LOCAL OR REGIONAL
COMPETITORS

Nationwide coffee manufacturers

Coffee shops and restaurants

COMPETITORS STRENGTHS
Range of products Quality of products and service Affordable price Location

COMPETITORS WEAKNESSES
Number of the stores available less than Starbucks

COMPETITORS OPPORTUNITY
Merger of some local and regional chains bigger and better position
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PESTEL ANALYSIS
FACTORS POLITICAL & LEGAL ECONOMICAL MAIN ISSUES TO TAKE INTO ACCOUNT Industry specific regulations, such as employment law, health and safety regulations, consumer protection; Government policy changes; Degree of governments intervention (for example, extent to which it subsides firms and its priorities in terms of business support); Relationships between coffee producing nations and US; Frances case: arcane regulations and generous labour benefits. Economic indicators: interest rates, taxation changes, inflation, exchange rates, economic growth; Income growth: changes in disposable income may influence the consumers buying power and consequently the purchase levels.

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PESTEL ANALYSIS
FACTORS MAIN ISSUES TO TAKE INTO ACCOUNT

SOCIAL

USAs case: consumer behaviour after the September 11;

Demand for food and beverages; Variances in consumer preferences: it can shift from coffee to other beverages;

Outside the U.S: diversity in culture and behaviour;

Austrias case: the youth is enthusiastic in embracing new things.

TECNOLOGICAL ENVIRONMENTAL

Equipment integration in business processes: the use of technology can improve operational efficiencies;
Technological implementation in all stores: wifi; Technological developments: better systems such as security, purchasing, bar coding, among others. Environmental regulations: for example, energy taxation and water limits; Global warming: may have an impact on beans quality; Eco-friendly products.
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INTERNATIONAL STRATEGY
CONTROLLABLE & UNCONTROLLABLE INTERNATIONAL MARKETING MANAGEMENT MARKET-DRIVEN VS. MARKET-DRIVING

INTERNATIONAL MARKETING STRATEGY

PRODUCT LYFE CYCLE IN INT. MARKET MARKET ENTRY OBJECTIVES MARKET/COUNTRY SELECTION MARKET ENTRY STRATEGIES BUILDING A GLOBAL BRAND CASE ANALYSIS: ASIA & JAPAN
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CONTROLLABLE & UNCONTROLLABLE

ELEMENTS COUNTRYS NAME COUNTRIES WITH A STARBUCKS COFFEE SHOP

CONTROLLABLE
In local word of mouth; 1% of revenue on advertisement of new launches

Promotion

Price ITALY
Product

Italian coffee is cheaper than US java

Italian coffee bars prosper by serving food as well as coffee, an area where Starbuck still struggles; and Italian coffee is seen as being better

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CONTROLLABLE & UNCONTROLLABLE

ELEMENTS COUNTRYS UNCONTROLLABLE (FOREIGN ENVIRONMENT)

FRANCE

Political/legal forces Competitive forces Economic forces Competitive forces

Arcane regulations and generous labour benefits

Political/legal forces Economic forces Competitive forces

Rivals offer similar fare

Economic depression

JAPAN

Level of technology
Structure of distribution Geography and Infrastructure Cultural forces

ENGLAND

Imitators popping left and right to steal market share

AUSTRIA

The youth is enthusiastic in Cultural force embracing new things, Starbucks is considered to be hip
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INTERNATIONAL MARKETING MANAGEMENT

EPRG Schema

Starbucks customizes its products and marketing towards different national conditions. Creates a maximum of local responsiveness. Polycentric orientation and Multidomestic approach Polycentric Orientation develops Starbucks subsidiaries autonomy and creates a better understanding of local needs and demands.

Orientation to international marketing strategy

Strategic Orientation

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INTERNATIONAL MARKETING MANAGEMENT

Starbucks does not use global market concepts in marketing decisions Starbucks-Global marketing management Each foreign market requires its own culturally adapted marketing strategy

Parts of the Starbucks strategy cannot be copied because they are innate to the brand.

ADAPTATION
STRATEGY

For example people in China tend to use Starbucks as a gathering place, where they sit and chat, often over curry puffs and moon cakes. Starbucks adapts - green tea Frappuccino in Asia, the division into men-only and family areas in the Middle East.
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MARKET-DRIVEN VS. MARKET-DRIVING

VERSUS

STARBUCKS MARKET DRIVING STRATEGY Redefined coffee in North America, through the concept of the coffee bar, reeducating about coffee and is increasing a coffee culture. Only the Starbucks coffee is the best in the world.
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INTERNATIONAL MARKETING STRATEGY

The company targeted for a narrow market.

It differentiates from competition.

Offers different lines of coffee and tea product to coffee loving customers for a premium price.
Starbucks sells coffee but does it in a different way that others do.
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Starbucks: Going Global Fast

PRODUCT LIFE CYCLE IN INTERNATIONAL MARKETS

PRODUCT LIFE CYCLE CHANGES OVER TIME

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MARKET ENTRY OBJECTIVES

Considering Starbucks The strategy chosen is market seeking because it is a company that ventures into new countries to become international, because it is looking for new markets, actively seeking customers worldwide, but the company achieves the efficiency seeking strategy as well.

MARKET SEEKING EFFICIENCY SEEKING RESOURCE SEEKING

MARKET
ENTRY OBJECTIVES

MARKET
OPPORTUNITY

ASSESSMENT

Starbucks actively collects information which means Starbucks selects the market proactively .The company does not wait for an unsolicited order.

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MARKET/COUNTRY SELECTION

FRANCES CASE The French seem to be ready for Starbucks sweeter taste Frances arcane regulations and generous labour benefits ITALYS CASE Italian coffee VS Starbuck Food + coffee

Country Attractiveness Market size (total and segments) Market growth (total and segments) Competitive conditions Market uncontrollables (cultural, legal and political environments)

Competitive strength of the company Market Share Market ability and capacity Product and positioning fit Quality of distribution service
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STARBUCKS: GOING GLOBAL FAST

MARKET ENTRY STRATEGIES

In the US market, Starbucks never allowed any type of franchising or partnership. However, the companys international strategy consisted in the following market entry strategies:

JOINT VENTURES
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LICENSING
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MARKET ENTRY STRATEGIES

JOINT VENTURES
In 1994, PepsiCo and Starbucks entered into a joint venture arrangement to create new coffee-related products for mass distribution through Pepsi channels, including cold coffee drinks in a bottle or can. In 1995, Starbucks partnered with Dreyers Grand Ice Cream to supply coffee extract for a new line of coffee ice cream made and distributed by Dreyer's under the Starbucks brand. In 2008, Starbucks Coffee International and Grupo Vips, through the joint venture Starbucks Coffee Portugal, Lta., opened the first store in Portugal.

LICENSING
In recent years Starbucks begun to enter into a limited number of licensing agreements for store locations in areas where it did not have ability to locate its own outlets. Marriott Host International: operate Starbucks retail stores in airport locations Aramark Food and Services: put Starbucks stores on university campuses and other locations operated by Aramark United Airlines: have Starbucks coffee served on all United flights All licensed stores had to follow Starbucks' detailed operating procedures All managers and employees who worked in these stores received the same training given to Starbucks managers and store employees

BUILDING A GLOBAL BRAND

Starbucks brand can

be defined as its products, its people

and its in-store

experience

Starbucks had spent very little money on advertising It prefers to build the brand cup by cup with customers, depend on word-of-mouth and the appeal of its storefronts. The company spends just $30 million annually on advertising, or roughly 1% of revenues.
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CASE ANALYSIS: ASIA & JAPAN

WHY ASIA, WHY JAPAN? Emergent markets with a significant economy growth. Consumers disposable income is increasing.

Coffee consumption growth rates in Southeast Asia are increasing.

WHAT WERE THE MAIN BARRIERS STARBUCKS FACED WHEN IT ENTERED IN THE JAPANESE MARKET?

Profit from the Japanese venture did not happen for several years. Operating costs being extremely high, like rent and labor. Costs of coffee shipment from its roasting facility in Kent to Japan was high.
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CASE ANALYSIS: ASIA & JAPAN

HOW WOULD STARBUCKS IMPROVE ITS PROFITABILITY IN JAPAN?

Focus on product innovation concerning beverages and food, expense reduction initiatives and new store openings.
Awareness to their customers needs and expectations. Innovate by giving a local touch to its products.

Internet facility or introduction of various cultural/entertainment campaigns.

Starbucks can introduce US style online system in Japan, so that busy Japanese people can provide their order through the internet. Open a roasting plant in Japan in order to cut shipment costs. Finding partnerships to help Starbucks grow faster. Starbucks should start to consider their pricing strategy. Encouraging domestic competition and greatly expanding the market for coffee chains.

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RECOMMENDATIONS

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RECOMMENDATIONS
Increase their products line:
Pastry: sell a typically bakery of each culture in each country. Beverages: sell more natural juices because they have too many bottled juices.

Add fresh bread to their products line.

Create and sell healthier products in their stores. Enhance their control over beans quality due to global warming, climate change, etc. Invest more in IT to apply in their stores. Continue rising living standards and production areas.

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RECOMMENDATIONS
Continue to expand globally to invest in joint ventures and licensing.
Make the connections through the value chain more efficient. Be more selective in the recruitment process regarding the employees passion. Increase concern about

environmental issues. Create more individual areas with appropriate infrastructure to

work/study.
Higher investment in marketing.
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THANK YOU!
MAFALDA ANJO MARTA ROTARU NRIA CRUZ

GROUP 4

OLESEA ROTARU

MSC.BA
STARBUCKS: GOING GLOBAL FAST

SNIA AZEVEDO
TELMA CABRAL
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