Starbucks was originally op?n?d to s?ll coff?? b?ans
and coff??-making ?quipm?nt. Th? curr?nt
C?O of Starbucks join?d th? company in 1982. And aft?r
his trip to Italy, h? b?cam? ?nthusiastic
about introducing th? coff?? cultur? in th? Unit?d
Stat?s. How?v?r, th? pr?vious C?O at th? tim?
was not too ?nthusiastic about th? id?a. As a r?sult,
Howard Schultz op?n?d his own stor? nam?d
II Giornal? Stor?s.
In 1992, Howard bought th? Starbucks stor?s and
r?nam?d his original stor? to Starbucks. Th?
Starbucks Company w?nt public in 1992 and du? to
incr?asing saturation of th? mark?tplac?,
Starbucks b?gan to ?xpand its outl?ts outsid? of North
Am?rica and into th? Far ?ast and Middl?
?ast r?gion. Today, Starbucks has grown to ov?r 17000
stor?s in 56 countri?s worldwid?.
COFF?? INDUSTRY
In th? 13th c?ntury, coff?? was discov?r?d in Y?m?n
and ?thiopia and by th? 16th c?ntury, its
discov?ry had ?xpand?d in parts of Middl? ?ast Asia,
Turk?y, P?rsia and North?rn Africa. It
?v?ntually ?xpand?d into ?urop? and Indon?sia. By th?
17th c?ntury, Coff?? hous?s which was
alr?ady popular in ?urop? b?gan to op?n in th? Unit?d
Stat?s.
By th? lat? 1990s, th? industry account?d for $80
billion in Sal?s with ?urop?an Union gaining
35%, 25% for th? Unit?d Stat?s and 9% for th? Japan?s?
mark?t.
CONSUMPTION
According to
int?rnational coff?? organization, “Du? to th? struggling ?conomy, consumption
of
coff??
dropp?d from 33.4-26.7gallons/capita in 1970” and as at 2009/2010, coff??
consumption also f?ll by 1% and this was as a r?sult of:
1) Th? 2008 ?conomic r?c?ssion.
2) M?dia r?ports about th? n?gativ?
?ff?cts of coff?? on h?alth.
3)
Most
important factor in this drop was th? incr?as? in pric?s ?xp?ri?nc?d as a
r?sult of th? cost ?ff?ct in th? supply chain at th? tim?.
CAS? STUDY ANALYSIS
QU?STION 1: How did th? pac?, rhythm
and scop? of Starbuck’s int?rnationalization in th? coff?? industry aff?ct its
p?rformanc??
PAC? OF
INT?RNATIONALIZATION
Most notic?abl? tr?nd in th? pac? of
int?rnationalization is th? n?gativ? slop? b?tw??n th?
Starbucks int?rnational ?xpansion and its ?ff?ct on
its p?rformanc?. In most situations, it can b?
conclud?d that th? slop? for its for?ign ?xpansion had
a substantial ?ff?ct on th? p?rformanc? of
Starbucks compar?d to its dom?stic ?xpansion.
Starbucks b?st p?rforming y?ars can b?
attribut?d to th? slow?r pac? adopt?d in th? y?ar
2004-2007. Th? opposit? can b? attribut?d to
th? y?ar 1993 to 1997.
1)
1993- Mod?rat? ?xpansion-Low R?turn on Ass?t.
Starbuck had a 155% incr?as? in firm’s ass?t du? to
th? op?ning of th?ir s?cond roasting plant.
2) 1997&1998-
High ?xpansion -Mod?rat? R?turn on Ass?t
Starbuck acquir?d th? S?attl? Coff?? Company in th?
Unit?d Kingdom along with its 65 stor?s
which was alr?ady g?n?rating r?v?nu? at th? tim?.
Th?r?for?, Starbucks was abl? to tap into th?
r?v?nu?s. This acquisition is said to hav? ?nabl?d
Starbucks to ?xpand at a fast?r pac? in th?
Unit?d Kingdom without th? loss of p?rformanc?.
3)
2001- High
?xpansion-Abov? av?rag? R?turn on Ass?t.
R?ason li? in Starbucks announc?m?nt to “?xpand its
r?tail busin?ss to incr?as? its mark?t shar?
in th? ?xisting mark?t”. Th? sam? y?ar, Starbuck
op?n?d additional 337 n?w stor?s in Unit?d
Kingdom (75%), Thailand (25 stor?s) and Australia (18
stor?s). This thr?? stor? account?d for 90%
of Starbucks ?xpansion in th? y?ar alon?.
RHYTHM OF
STARBUCKS’ INT?RNATIONALIZATION
1)
1994-1997 and 1998-2001: High volatility in int?rnationalization r?sulting to
low?r
p?rformanc? in th? p?riod.
2)
1994 and 1997:
Dom?stic ?xpansion was v?ry r?gular but was offs?t by th? for?ign
?xpansion to a larg?r ?xt?nt. R?ason in this cas? was
b?caus? th? countri?s Starbucks ?xpand?d
into happ?n?d to b? countri?s wh?r? th? company fac?d
high?r cultural diff?r?nc?.
3)
2002-2005 and
2006-2009: L?ss Volatility r?sulting
to high p?rformanc?.
Starbuck at this point slow?d down its growth
?xpansion and focus?d on improving its
p?rformanc?.
SCOP? OF
STARBUCKS INT?RNATIONALIZATION
By 1993-1995, Starbucks had not y?t ?xpand?d int?rnationally,
how?v?r, in 1996 wh?n it b?gan
its ?xpansion, it b?cam? cl?ar that th? mor? countri?s
Starbucks ?xpand?d into, R?turns on Ass?t
and p?rformanc? suff?r?d.
To conclud?, Starbuck aggr?ssiv?ly pursu?d
int?rnationalization at th? ?xpans? of th?
p?rformanc? of its curr?nt stor?s. And b?caus? it was
unabl? to control both asp?ct of its
strat?gy, it fail?d to achi?v? maximum p?rformanc? and
growth. Asid? from its low?r
p?rformanc? in r?lativ? to ?xpansion, Starbucks
lik?wis? fac?d various ?xt?rnal factors such as
comp?tition, rising suppli?r pric?s and fair trad?
which aff?ct?d th? ?ntir? industry.
QU?STION 2: Was Starbucks too
aggr?ssiv? in its int?rnationalization?
1)
Y?s,
Starbucks was ?xtr?m?ly aggr?ssiv? in its int?rnationalization. Growing too
fast at a
pac? that did not ?nabl? th?m to r?-ass?ss th?ir mark?t
position ?v?ntually had a n?gativ?
?ff?ct on its ov?rall p?rformanc?.
2)
It
lik?wis? mad? Starbucks vuln?rabl? to ?xt?rnal factors such as comp?tition,
changing
custom?rs’ n??ds and cultural factor. In th? fac? of ?xtr?m?
int?rnational ?xpansion,
constant r?ass?ssm?nt of its country ?xpansion portfolio
should hav? b??n don? in ord?r
to id?ntify th? profitabl? and unprofitabl? inv?stm?nts
mad?.
QU?STION 3: How should Starbucks
approach int?rnationalization going forward?
1)
Most important factor in approaching
int?rnationalization is Balanc?. Starbucks’ should
?nd?avor to slow th? pac? at which th?y ?xpand so as
to build a strong foundation in th?
mark?t th?y ?nt?r into.
2)
Starbucks should also consid?r tapping into
th? rural mark?ts. Pric? is a factor in this
mark?t and th?r?for?, Starbucks can consid?r
accommodating th? low-mid incom?
?arn?rs as part of th?ir targ?t group. ?sp?cially as
comp?titions such as McDonalds and
Tim-Horton gaining a lot of mark?t shar? with th?ir
low-pric? coff??. Th? disadvantag? in
this how?v?r, is its ?ff?ct on th? brand imag?.
Starbuck prid?s its?lf as b?ing a luxury,
th?r?for?, to us? this r?comm?ndation would b? to
r?ass?ss how it would maintain th?
brand imag? whil? also ?xpanding its mark?t to
accommodat? this n?w s?gm?nt.
3)
Anoth?r factor to consid?r is th? us? of
social m?dia. Comp?titors such as McDonalds
hav? utiliz?d this m?dium ?xtr?m?ly w?ll to th?ir
advantag?, th?r?for? Starbucks should
id?ntify ar?as in which it can utiliz? th? social
m?dia platform in cr?ating awar?n?ss on a
mor? dom?stic and int?rnational platform.
4)
With th? population g?tting mor? h?alth
conscious, it is advisabl? that its off?ring cat?r
to this s?gm?nt of th? mark?t. – McDonald and Tim-
Horton has adopt?d this tr?nd in
th?ir off?ring by informing custom?rs about th?
calori?s in th?ir off?rings.
5)
Th? ?m?rging mark?t such as china also show
significant opportuniti?s. Th?r?for?,
Starbucks could b?gin looking into this mark?ts to
id?ntify wh?r? th? opportuniti?s li?.
Th? k?y is to strat?gically ?xpand and not just bas?d
on th? numb?r of outl?ts th?y can
op?n but on building a strong comp?titiv? brand imag?
that w?ath?rs th? cultural factors
that might imp?d? its growth.
6)
Starbucks should looks for ways to incr?as?
custom?r loyalty wh?th?r it is through
product off?rings or th? s?rvic?s it provid?s for th?
custom?r. Th?r?for?, if r?ducing pric?s
is not an option, a b?tt?r way would b? to focusing on
improving its p?rformanc? and
product/s?rvic? off?rings.
L?SSON L?ARN?D
1. For organizations to ?xpand into th? int?rnational
mark?ts succ?ssful, ?xt?nsiv?
r?s?arch into th? mark?t, its ?conomic stability and
cultural diff?r?nc?s and
pr?f?r?nc?s that might hav? an impact on th? busin?ss must
b? conduct?d.
2. Using th? information d?riv?d to analyz? how your
organization can b?tt?r position
its?lf to achi?v? maximum ?ffici?ncy and ?ff?ctiv?n?ss by
acc?ssing not just th?
?xt?rnal factors but lik?wis? th? int?rnal factors such as
its str?ngths and w?akn?ss?s.
Conclusion:
In the light of the assembled data it can be
said that the application of wholly owned subsidiaries licensing and joint
ventures are the three modes of entry that is applicable to the current
operations, standard, mission, vision and goals of starbucks. From the
discussion, it shows that the pace, rhythm and scope of Starbucks’
internationalization affected the company’s performance in years previous to 2009
but the company created significant efforts to continuously evolve to the
current level
