MARKET ENTRY STRATEGIES OF STARBUCKS

Presented by, Anvi Shrivastava Dimpy Agarbattiwala Gaurav Mevawala Vidhi mavani
Bhumik Gada Dipesh Diwan Rishabh Agrawal

Coffee Market Globally

Coffee is the highest consumed beverage in the U.S and major European countries Its the second most traded commodity in the world. China and India are witnessing increased consumption of coffee.

Starbucks Earlier
1971- Starbucks tea, coffee and spice store in Seattles pike place market 1982- Howard Schultz joined Starbucks

1986-Howard Schultz established II Giornale coffee company 1987- II Giornale acquired Starbucks and changed its name into Starbucks Corporation 1992- Starbucks decertified the union and made IPO

Starbucks Now

Starbucks is the largest coffeehouse company in the world. It has international presence in Africa, North and South America, Asia and Europe. Operates 16,635 stores in 50 countries, including 11,068 in US and Licensees and franchise include more than 7,800 worldwide. The higher prices are a direct result of their ingenious marketing strategy. They are currently leading the retail coffee market selling their coffee at a premium price thus increasing their profitability. They have made an annual sales of dollar 10 billion as of April 2010.

Starbucks International Strategy

Three primary strategies in its international expansion Joint Ventures in Japan, Taiwan and Germany Licensing in Malaysia, New Zealand, Philippines and Switzerland Wholly Owned Subsidiaries in Canada Employee, Training and recognition System to recruit, hire and train baristas and Store managers Training Programs Store Ambience Concept of Everything matters Sticking to its firm principles Assessment of standards

Continue

Real Estate, Store design, Planning and construction High Traffic ,High visibility store locations Wi-Fi Availability Buying out Competitors leases Intentionally operating at a loss Clustering several locations in a small geographical market

Why Globalize

Saturated Home market Reaching Brand maturity stage in Home country Growth Opportunities in newer markets Maintaining Growth

International Expansion: Japan

On October 25, 1995, Starbucks Coffee International signed a joint venture agreement with SAZABY Inc to develop Starbucks retail stores in Japan. Japan was an essential part of Starbucks international expansion plan because the nation was the third largest coffee consuming country in the world, behind the U.S. and Germany. Another reason why company picked Japan for its first big overseas venture because it is the third-largest coffee-consuming country in the world, provided a major opportunity for Starbucks' specialty drinks. Demand for coffee blends in Japan doubled during that time and specialty blends were the fastest growing segment of the industry. Starbucks almost doubled the number of its outlets in 2001 to 289 and it expects to open more stores in Japan.

International Expansion: Europe

Starbucks opened its first store in England in 1998. Earlier analyst felt that strong coffee drinking culture in Europe posed challenges and opportunities for Starbucks. Even the cafes in France, Vienna and Espresso bars in Italy created a strong drinking culture across the continent. Executive at Starbucks said that Europe use to make great coffee but by late 1990s the taste hade gone away. Hence along with England, Starbucks expanded its presence in Switzerland, Germany and Greece

International Expansion: China

China was predominant in tea-consuming and one of the smallest coffee markets in the world. It had a large number of potential consumers and an emerging economy but low demand for this product. Starbucks inaugurated its first outlet in the World Trade Center in Beijing, China in January 1999. It proceed with less pace than it was used to. Starbucks in China catered mainly to urban working people and thus its outlets were located in commercial areas. Although a challenging task, the company was determined to carve a niche for itself in Chinas beverage market.

Issues

International joint Venture Culture Market saturation Cross cultural management issues Compete with cheaper local competitors based on product innovation

Starbucks Risks and Difficulties

Intensity within the industry Bargaining power of customers Country risk Operational risk

Key Success for Starbucks

Starbucks well-established brand name

Quality of the product.

Market Research
Careful study of the market conditions of the country prior to market entry. Gaining knowledge on local market from partners. Testing the market with a few stores before full-fledged expansion.

"Localizing" product portfolio by adding additional product, ex. Green Tea Frappucino, to suit local tastes. Leveraging the American culture/lifestyle
Understanding their market in general and segmenting/targeting accordingly (e.g., appealing to the youth)

Consistency in key business practices (e.g. "NO Smoking" rule) and customer experience (size of store, ambiance, coffee drinks wait lines)