Starbucks Global Strategy Essay Example

international expansion are growing. The US coffee giant has big plan overseas, but where it assumes more risk, and foreign outlets’ narrowing profits margins.

This paper discusses various risk factors and performs SWOT analysis to evaluate Starbucks’ penetration in global markets. It also outlines steps which will help Starbucks develop the same iconic image it has in the US. SWOT Analysis Starbucks has significant strengths in coffee business. It is the current market leader with over 17000 stores worldwide. It has no debt and uses internal cash flow for expansion. Also since all of its stores are company-owned, it is able to maintain the image and quality.

It also spends very less amount on advertising and marketing, and relies primarily on the word of mouth. Starbucks also has strong brand recognition by consumers. It is known for its high quality products and its consumer friendly environment. Starbucks primary weakness stems from the pricing of its coffee in comparison to its competitors. Since Starbucks makes 75% of its profit from coffee (unlike the McDonalds and Dunkin’ Donuts which make most profit from food), it is exposed to rising coffee-bean costs and stepped-up competition from lower-priced competitors.

There are plenty of opportunities which exist for Starbucks in the international markets. In countries with growing economies, such as the BRIC nations (Brazil, Russia, India and China), there are growing upper and middle classes that want to spend money on specialty coffee. Some of these countries are traditionally “Tea Drinkers” that are expanding their tastes to include coffee. The next part is to evaluate the current and future threats Starbucks is facing. In the event of

another economic downturn, coffee may be something that some customers will not find it as a need.

Though the current economy has somewhat improved but there are still people without jobs and incomes and may curb their spending on coffee. The other threat comes from the competition it faces with other coffee retailers and McDonalds. Some of them sell coffee at cheaper prices and try to imitate the “Starbucks” environment. Also globally McDonalds can open McCafes at their existing stores without much additional investment, while Starbucks would have to invest a lot of money and share profits with their partners. Still Starbucks has a unique environment that it provides to its customers which none of its competitors have.

It still needs to uphold and maintain its standards in order to succeed. Risks There are significant amount of risks that Starbucks faces when operating in different countries. The challenge of doing business overseas still comes down to two things: presenting a consistently high-quality product no matter where you sell it, and choosing the right people to work with. Starbucks' international strategy - in which it forms joint ventures or licenses other companies to own and operate Starbucks stores - differs from its domestic approach, where the stores are largely company-owned.

The idea is that an experienced local partner can help identify locations, sift through tax issues and give Starbucks stores more community appeal, said Peter Maslen, president of Starbucks Coffee International. But operating in volatile political or economic situations could introduce a lot of risk for the company, experts said. Starbucks, in a joint venture with an Israeli company, had to close its

six stores in Tel Aviv amid continuing conflict between Israelis and Palestinians.

Starbucks stores in Lebanon, owned and operated by its partner, retail giant Alshaya, were boycotted by those who oppose the U. S. led war on Iraq - despite the fact that Alshaya was Arab-owned. Starbucks’ chairman Howard Schultz maintains that based on the company's strong international growth, customers are voting with their wallets and buying Starbucks. "We're not taking our success for granted," Schultz said. "We also understand that the burden of proof at times is on us given the fact that a lot is being written and there's more sensitivity than ever before about America and American companies. " Meanwhile, the company's dramatic growth, along with workforce changes over the past decade, has affected employee morale, motivation, and burnout.

For many years, Starbucks was one the most admired companies to work for and had the lowest employee turnover. But more recently employees are discontented due to long working hours and other company policies. For Starbucks the employee attitude could be detrimental in meeting the original mission of superb customer service and treating them like family. The management needs to urgently figure out the cause of low morale and issues with workload and pay. Unless it is fixed, Starbucks’ planned growth could be jeopardy. While working in different countries, Starbucks has to be sensitive to the culture and language of the country.

Ignorance about it may cause embarrassing situations and long-term viability of doing business. In Spain, for example, where Starbucks has more than a dozen stores, nearly every shop has menus written in both Spanish and Catalan. Also Italy

has strict quality standards and business regulations covering beverage retailers and food importers, said Uscategui. Other observers have also noted that Italians typically pay less than a $1 for a cup of strong coffee, and that Starbucks has to decide whether it can compete effectively by offering its grandes and ventis at nearly twice that price.

Some countries present more challenges than others. Any international partners chosen to work with Starbucks spend 13 weeks in Seattle. The goal is to create a consistent experience for Starbucks customers, whether they're in Saudi Arabia or Peru. Starbucks understands that making coffee is not that complicated. It is hard for other countries to understand the company culture and values that it Starbucks is known for. Conclusion Overall, Starbucks has more strengths than weaknesses and more opportunities for business than threats.

After an in-depth analysis, it looks that Starbucks has solid strategy and plans to propagate and expand its brand. Since Starbucks has a very competent CEO and is very strong financially, it will be able to handle the challenges and mitigate any risks in the international markets. Starbucks is poised to ramp up its burgeoning international business through disciplined store growth, improved operations, targeted innovation, local relevance in product and store design, and one-voice marketing.

Our company performance over the past two years has positioned Starbucks for the significant international opportunities ahead and the acceleration of our global growth strategy,” said Howard Schultz, chairman, president and chief executive officer, Starbucks Coffee Company. “Today we are successfully executing our multi-brand, multi-channel strategy and we believe the leadership and organizational moves announced today will optimize our speed

and focus going forward. ” On July, 2011, he restructured Starbucks to move to a new three-region (China and Asia Pacific, Americas, EMEA) organizational structure.

A president for each region will oversee the company-operated retail business, working closely with both the licensed and joint-venture business partners in each market. With nearly 7,000 stores in 54 countries outside the U. S. , it is clear that the affinity for the Starbucks brand is remarkably strong in every market and that the Starbucks Experience truly translates globally. Starbucks has the ambition and capability to bring great coffee to more people in more parts of their lives than ever before. The company believes there is a significant, untapped opportunity still ahead. ?