Case Study: Starbucks – Going Global Fast
- Identify the controllable and uncontrollable elements that Starbucks has encountered in entering global markets.
According to the description of the case study there are different controllable and uncontrollable elements in different countries for Starbucks (Cateora, Graham & Gilly, 2013). In Japan, there are two main uncontrollable elements that are faced by Starbucks. First is the competition between it and its rival shops in there. The competition is tough and it is not a factor that can be controlled by Starbuck in an outside country. The second is the economic depression that exists there.
In Italy Starbucks is facing some controllable elements. The price in Italy is an issue. In America the price for a coffee is 1.5 dollars while in Italy the price varies between 55 and 67 cents which is much cheaper than what Starbucks would really want to charge its customers. In addition to the price issue, Italian coffee bars also offer Italian food which is struggling with at the moment. Having said that, Starbucks can still control this situation and introduce some competitive prices. They can also make some arrangements to offer food alongside coffee at their coffee houses.
In Vienna, Starbuck faces some uncontrollable elements. The first is the culture of Vienna that is totally different than USA. But it has also been mentioned that the youth of Vienna is always welcoming to new things so Starbucks may look for their chances in this regards. They might want to reach out to the youth and introduced their coffee and try to win over these youths from the already existing coffee shops. These youths may be attracted to Starbucks due to the fact that they are new in the market.
- What are the major sources of risk facing the company and discuss potential solutions.
There are many risks that are faced by Starbucks. The first is the issue of saturation. They have had a great presence in the US and international market and they might have reached the maximum number of outlets that they should have. They have more than 4000 outlets in the world which is too many. This
Another risk that has been discussed in the case study is the fact that they worry about losing customers. The reason behind this fact is that there are only a few options available to the customers on Starbucks menu. They might need to expand their menu a bit to attract more customers and retain the already loyal customers. This issues can be addressed by focusing more on increasing the quality of the product and not just the number of the outlets that are there. In the global market there is still enough room for them and they can expand for some time before reaching the upper limit in my opinion.
The third risk that has been discussed is case study is that global expansion is not making the expected profits for Starbucks. They have to partner with other businesses and people in the international market to be successful. This would mean a sharing of profit with these individuals or businesses. This could make the whole idea of expanding internationally useless for Starbucks in my opinion. It is a fact that businesses want to expand to generate more profits not to decrease their profit margins and share the profits with others. This issue can be overcome by an efficient adjustment of SRC and keeping it away in business decisions making. Another factor that should also be controlled in the business decision making is the ethnocentrisms while expanding to international markets.
- Critique Starbucks’ overall corporate strategy.
There is no doubt that Starbucks has been really successful in the US market for some time now. But now they are facing losses due to the lack of proper corporate strategies. There is a gap between the customer expectations and a business strategy. A gap between consumer expectation and the overall business strategy has been reported to cause a mistrust between the customers and the business they are involved with (von, Nitzko, & Spiller, 2015). In my opinion Starbucks may not have their customers as a primary concern when they are making their business strategies.
The other issue that I notices is the fact that Starbucks has an extreme focus on some states in the US while other states have no Starbucks. For example Montana and N.D does not have a Starbucks yet. The customer targeting also needs to be re-evaluated as Starbucks is currently focusing only on the older generations with a non-differential pricing strategy.
Starbucks may also look into their advertisement spending which is extremely low. They are only spending around a 1% of their total revenue on advertisement. They might need to increase this spending to more or less 10% as this is what other companies are doing to build their brand in the overseas. Starbucks marketing and advertisement strategy needs to be more aggressive than what it is now. They need to reach out to more customers inside the US and outside of it. They also need to reach out to the younger generations and not just the older citizens to expand their customer base.
- How might Starbucks improve proﬁtability in Japan?
Japanese people are less conscious with the price they have to pay for a cup of coffee. They are more concerned with spending their time in an efficient manner and are not that much aware about spending time on leisure activities. They also seem to be interested in learning English. What Starbucks can do to increase its profitability in Japan is introduce an online ordering system that would make it possible for the Japanese citizens to order a Starbucks coffee online. This will save them time and let them have a cup of coffee while working.
Japanese can also be attracted by different cultural events at Starbucks. For example they can arrange some events to introduce English language to the Japanese youth. This would definitely attract them to Starbucks. This could prove to be an effective way to reach out to more Japanese customers.