StarbucksGoing Global Fast

Group 1

Group member

• 1. Nguyễn Thị Minh• 2. Nguyễn Thành Được• 3. Nguyễn Đăng Hạt• 4. Lê Thị Thúy Linh• 5. Lữ Vân Phan Nhớ• 6. Trần Thị Ngọc Quyên• 7. Phạm Thị Hồng Phượng• 8. Đoàn Giang Sơn

I. Starbucks Case Study Summary

II.Starbucks in Japan

III.Discussion

Outline

Starbucks Case Study Background

Summary

• In 1971, Jerry Baldwin, Zev Siegel, and Gordon Bowker opened the first store in Seattle.

• In 1987, Schultz bought Starbucks and expanded outside the pacific northwest into Chicago

StoresReported highest annual revenue ever: $11.7 billionEnded fiscal 2011 with more than 17,000 stores in 55 countries.Planing to open 800 net new stores in 2012

(Source : Starbucks 2011 annual report)

Summary

• MissionTo inspire and nurture the human spirit— one person, one cup, and one neighborhood at a time

• Objective To establish Starbucks as one of the most recognized and respected brands in the world.

The cornerstone value of Starbucks is “to build a company with soul”

Starbucks in Japan

First store: 1996 in TokyoNow increase to 722 stores

Competitors

Secondary coffee providers:

Discussion

Question

1. Identify the controllable and uncontrollable elements that Starbucks

has encountered in entering Global Market.

2. What are the majors sources of risk facing the company and discuss

potential solutions.

3. Critique Starbucks’ overall corporate strategy.

4. How might Starbucks improve profitability in Japan.

Question 1 : Identify the controllable and uncontrollable elements that

Starbucks has encountered in entering Global Market.

The controllable and uncontrollable elements that Starbucks has encountered in different markets

Country Controllable Elements Controllable Elements

Japan Competition among rival shops in Japan.

France Political and legal bindings. (France’s arcane regulations and generous labor benefits).

Italy Price (Italian coffee bars prosper by serving food as well as coffee, an area where Starbucks still struggles. AlsoItalian coffee is cheaper than Americans pay about $1.5 for an espresso,on the other hand northern Italy the price is 67 cents, in the south just 55 cents.

Vienna Culture (young are always enthusiastic about new and they embrace the new. So,Starbucks will get positive advantages in expanding their business in Vienna compared to existing coffee shops there).

Question 2 : What are the majors sources of risk facing the company

and discuss potential solutions.

What are the major sources of risk facing the company and discuss the potential solutions?

• Saturated market condition in USA.• Loosing customers, customers that grow

annoyed because fewer options are available.• The young generation (Generation X) feels

about Starbucks

Potential solution

Base on the risks faced by Starbucks, the solutions we suggest are:• One of the risks that they faced in USA-the risks of market saturation can

be over come in focusing on international or global marketing. They may focus on to increase the quality of service and coffee for which they are well known.

• As they were facing ominously hostile reception from its future consumer (Generation X), they should reposition their product according to customers need.

• As coffee is the core product of them to serve they should give more focus on improving the quality of coffee. They may make arrangement for some other items beside coffee as well.

Question 3 : Critique Starbucks’ overall corporate strategy

Critique Starbucks overall corporate strategy

Starbucks are incurring losses for mismatch between their corporate strategies and

the customer’s expectations. Those are described below:• When Starbucks is blanketing some specific cities for dominance, still eight states

in the United States are with no Starbucks stores. Starbucks free cities are - Butte, Mont., and N.D.

• They believe that the more the outlet the more the sale. Basing on this strategy they are increasing their outlets day by day in their domestic region as well as abroad. Without satisfying the customers need, by increasing the numbers they will not be able to succeed in their mission.

• Starbucks’s target customers are the Baby boomers or older generation, it has no

differential pricing for the Generation X or younger generation.• Though Starbucks fully control its business in the USA, but it has franchisee

outside the USA. Depending on the franchisees undermines the strength of Starbucks outside the USA.

Critique Starbucks overall corporate strategy (Cont’d)

• Starbucks is about to become a global company. But its spending does not match

with its status. Starbucks only spends 1% of its revenue as advertisement;

whereas most companies its size spend at least 10% revenue. Low spending on

advertisement prevents Starbucks’s brand building outside the USA.

• By aggressive marketing strategy they have created entry barrier for the

competitors through “predatory real-estate strategy”.

• Starbucks pay does not come close to match the work load of their employees that

created dissatisfaction among them.

• Schultz should be more cautious to various cultural and ethnic affairs. As a Chair of

Starbucks and having market in Muslim dominated regions , he can not make any

scathing comment against Palestinian.

Question 4 :How might Starbucks improve profitability in Japan.

Starbucks in Japan

• Starbucks and its competitors in Japan are providing the same fare competitors can easily eat up Starbucks’s share.

Therefore: Either reduce the price or increase benefits in Japan. Introduce US style online system in Japan, so that busy

Japanese can provide their order in the internet. Introduce various cultural campaign or entertainment

campaign in Japan, so that Japanese youth feel attraction to come Starbucks. In times of economic recession extra activities are necessary to boost up sales.

For attracting the Japanese market in addition to coffee, arrangement of internet facility and other amenities should also be provided.

Starbucks in Japan• Invest in extensive R&D efforts to develop new flavors, blends, or even

roast fusions start by providing free samples for a limited period of time to introduce the novelties to the market

• Offering new beverages according to the Asian or Japanese culture wider range of different, delicious teas or soft drinks

Starbucks in Japan

• Offering special, Japanese food in Starbucks stores Japanese candies, cakes or sweets or even small snacks – Starbucks’ may become more Japanese

• More healthy options of food, natural ingredients • Other fast foods apart from pastries like burgers, burritos, tacos, sushi,

snack food

• Creating new benefits for customers bonus programs, member cards (birthday presents, special promotions, cheaper products), additional accessories related to the coffee consume

• Lowering the input prices chance to reduce the prices of special coffees to be more competitive compared to other coffee chains in Japan

Starbucks in Japan

Thank you for your attention