Starbucks International Business Strategy - Case Study Example

Starbucks International Business Strategy Name Institution Course Date Content 1. Introduction……………………………………………………….. 3 2. Current Environment………………………………………………4 3. International Strategy and Analysis………………………………..6 4. Conclusion…………………………………………………………….11 5. References……………………………………………………………..13 INTRODUCTION Starbucks Corporation is a company registered in the United States of America and was founded in the year 1971 in Seatle. The company is famous for roasting, marketing, and the retailing coffee world over. It has its businesses in at least sixty-two countries. Their products comprise of high-quality tea, coffee, a variety of food items as well as several other drinks. They also sell different types and tastes of tea as well as coffee products. Additionally they license their trademarks via other outlets such as licensed stores, grocery, and national foodservice accounts. Starbucks also trades and promote its products mix with other brand names within its group of firms. These firms comprises of Teavana, Evolution fresh, Tazo, La Boulange, Seattle’s Best Coffee, Starbucks Refreshers and Starbucks VIA, and Verismo. The first store started its operations on 30th March 1971. The name, Starbucks was derived from Moby Dick novel. The company got popularity for serving and supplying the tastiest coffee beverages using the best quality standards and observing carrying out responsible expansion activities and ethical trading. Starbucks has many achievements which range from being the best coffee in the food and beverage industry and fast refreshment groups and one of the most ethics compliance firms in the whole would. Its international recognition as a distinguished performance firm has improved over the time and therefore leading to the expansion of global operations. Prior to the global recession that occurred in the year 2007, Starbucks stock was trading at $ 38.41 and within two months the price had sunken to a meager $9.91. Turnaround for Starbucks began by reorganizing the management and this saw Howard Schultz, the former Chief Executive Officer, retake his previous position. Howard Schultz worked extra hard to put the company back on its success track. He ensured that the firm focused more on prime markets and using technological means to revive the sickening company. The firm got back on success track by putting more emphasis on improving customer service that was ignored during rapid expansion. The first location of Starbucks store outside the United States of America was in Japan in the year 1996 and later a very successful acquisition of the United Kingdom based Seatle Coffee Company. The expansion globally continued and moved on into Asian European and Latin American markets which made Starbucks become the largest coffee company in the world presently. Objectives of Starbucks Corporation is to maintain its standing as among the most respected and recognized brands in the whole world. To realize the best results in the market, the firm has been continuing with the responsible expansion of its global store base. The company has been establishing new stores in existing and developed countries like the U.S, and in newer, highly potential markets like China and Japan. Starbucks has leveraged experience that it has gained through their traditional mode of operation, they continue to provide customers new varieties of coffee and other products different forms. Starbucks Global Responsibility strategy, commitments associated with ethically looking out for high-quality coffee and making positive contribution to the societies they operate in, and being the most sought after employer contributes to its objectives. Current Environment Usually, businesses operate in a network and are interdependent due to various environments that have impacts on their actions and activities. The following factors both external and internal (macro and micro) environment that possess the capacity to influence Starbucks consists; legislation, political, economic, environmental, social, financiers, technological, competitors, suppliers, and customers. The United States of America being the home market of Starbucks' is crucial in understanding the internal and external environment that influences the company and its expansionary activities. Over the years coffee consumption in the US has tremendously increased and this has caused Starbucks to intensify its expansion plans. External Environment The PESTEL analysis aims at evaluating Starbucks exhaustively and understanding the Legal, Environmental, Technological, social, Economic and political issues that influence the company since it has little or no control over these factors. Political Influence Tariffs and International Trade Regulations Nations often form trade blocks, for instance, the G20. APEC, TICAD and most importantly CAIRNS GROUP for agriculture and the main objective is to minimize the impacts of tariffs. However, companies that operate internationally such as Starbucks are still feeling the effects since they are in many countries. This at times makes the company experience high tariffs that can have an effect on Starbucks reputation and capacity for sourcing high-quality coffee beans: which involves importing from various nations could be compromised, consequently affecting its global sales and competitiveness. Government Stability Countries that enjoy political stability attract investors since they guarantee the security of investments and a peaceful business environment. Political stability is key and companies should consider it since other factors may indicate that a given nation is favorable for investment and later things rapidly change when the country experience political heat, for instant Syria. Political instability ha a potential of causing great damage in a company's business activities and strategy or in worst case be driven out of operation due to war like it happened in Israel as a consequent of hostilities between Israel and Palestine. Closure of its stores in Israel was a major blow to the firm since it unfavorably impacted on its expansion strategy. In this case, political influence is unsuitable and it is a major threat to Starbucks. Economic Influences Exchange Rates Dynamics in exchange rates do influence the market either positively or negatively. Falling dollar rates in comparison to other currencies affects imports. Most of Starbucks' important supplies such as milk, sugar, and coffee beans are affected by these dynamics because they are imported, and therefore incur a higher cost as a result of the weak dollar. This, as a result, may make the firm consider passing on the extra cost to consumers and subsequently make its products more costly. Income Distribution Economic crises like the one that occurred in the year 2007 led to job losses and consequently the levels of unemployment rose. This affect income distribution making it unequal. As a result, consumers who previously had the capacity to afford Starbucks' expensive specialty coffee saw it as a luxury, therefore, leading to low sales in many of its outlets. This eventually affected the company's expansion plan. In this case economic influences has an unfavorable impact. Social Influences Changing Tastes In the recent years, consumers in the USA have been recording changes in their tastes. As a result, many people are consuming more specialty coffee. This has an impact on Starbucks because it provides an opportunity to exploit this market and obtain a larger market share in the coffee market. In some countries such as China and India tea is still the most preferred beverage over coffee and therefore Starbucks might have to reconsider its strategy in these markets. This may not be cumbersome to the company given the success of the ‘Americanization' trend across the developing world. Health Consciousness The great emphasis that western countries governments have put in healthy eating to avert lifestyle diseases such as diabetes and obesity might lead to some firms such as Starbucks update their menu to include new product mix and healthier alternatives to be consumed along with coffee. This shows that social influences are good and capable of presenting an opportunity to Starbucks. Technological Influences Wave of Technological Trends Advancement in technology has been so fast that the companies have to consistently follow the trends and take advantage of any opportunities that may result and implement any change needed. For instance, Starbucks have adopted the new phone payment system which has helped cut long queues that are common at peak times. Membership of social platforms and networks is tremendously growing, for instance, Facebook has over five hundred million users and each of these members has an average of a hundred and thirty friends. According to Facebook.com, time spent on the platform is an upward of seven hundred billion minutes every month. Taking advantage of this trend provides firms such as Starbucks an avenue to interact and share new ideas with consumers. Economics.com alludes that Starbucks has already used social networking avenues such as Facebook and its own run platform, to engage and interact with consumers and societies. Therefore technology has a favorable impact for Starbucks. Environmental Influences Environmental Pressure Groups Politically independent organizations and civil society groups possess immense capacity to coerce firms into reconsidering their practices. They ensure that their voice is heard through lobbying and boycotts. Such measures mostly affects a firms’ intangible assets which commonly involves damaging a company's reputation and consumer confidence. Relating with the "Fair-Trade Movement" and the recognition that accompanies such association greatly promoted Starbucks' image, hence environmental impact is favorable for Starbucks since it may help it in bettering their operations to meet consumer needs. Legal Influences Some countries do not welcome multinational firms to try and protect their domestic firms from unfair competition and takeover. Legal issues like monopoly and national protectionists' laws have affected Starbucks because of its size and its plan of expansion. For example countries such as India protect their domestic firms against such trends with a legislation that bars external companies from owning more than 51% in a merger. The more this occurs in other nations the more Starbucks expansion plan is restricted. Thus legal influences are unfavorable for Starbucks. SWOT ANALYSIS Strengths Brand Image Starbucks is among the few firms that have successfully been able to create awareness about its products in the market and provoke interests of consumers in specialty coffee and preserving brand dominance. The company's keenness on constantly delivering satisfactory consumer experience puts emphasis on the point about consumer visits to its cafes being an ‘Experience' rather than just seeing it as another coffee maker. Starbucks Logo proves that its customers are aware of its products since they are able to identify with the Logo. Unique Strategy Starbucks has been using a unique strategy of capturing prime locations and opening stores in close proximity to each other. This ensures that stores that do not meet set objectives are closed down. Therefore only the most profitable stores that maintain high sales, and retain the most customers survive. This strategy ensures that all outlets are profitable and can be able to stand on its own. Valued and motivated employees The café industry is greatly dependent on front house staff, their attitude and their ability to create and maintain customer loyalty. Starbucks operates in an environment that encourages collaboration, team building, and teamwork. Its managers strictly adhere to firms’ motto of ‘hire the personality, train the skill'. Due to excellent services, customers become loyal to its products. According to workforce.com, Starbucks has one of the lowest staff turnover rates in food and beverage industry. This ensures that the firm has an excellent and experienced workforce. Weaknesses Over-reliance on home market Starbucks heavily relies on American, home, market and this exposes it to unpredicted changes that may occur in such a market. For example, recession affects disposable income for customers and consequently profits. Aggressive Expansion Starbucks has been labeled the ‘Tesco of coffee' due to the acquisition and takeover of local community coffee houses and buildings. This trend has led to boycotts and increase in the number of members of sites such as ihatestarbucks.com. Many people see the aggressive expansion of Starbucks operations as an erosion of their local environment and culture. Entry into new markets Multinational companies often seek for favorable locations with expansion opportunities. In an attempt to increase its international presence, Starbucks has started a chain of stores and has its operations in more than sixty countries. This expansion is favorable due to countries being friendly to investors. Growth in coffee market American consumers' taste of coffee is moving towards the more expensive organic coffee. This provides the company with an opportunity to spread its customer base with the possibility of higher profit margins as a result. Threats Competition Although the competitive threat from the specialty coffee sector is minimal, competition from other sectors such as restaurants and other big coffee shops is still live. Entry of strong competitors such as Dunkin donuts is a threat to Starbucks in that there is a greater risk of having a number of its loyal customers shift their loyalty to the competitors. Conclusion Starbucks is an internationally recognized firm in food and beverage industry. Its reputation has been consistent over time due to its extinguished supply and service. Its management is excellent and has overseen the tremendous growth since it opened its doors. The firm has its stores in major economies such as USA, Japan, China and India. The company’s unique strategy in spreading its wings across the world made it possible to successfully enter into new markets outside America. In conclusion, having considered the evidence regarding Starbucks· decision to be global, the external and internal business environment and its effect on the firm, it is justified to make a conclusion that the firm is in a better position to spread its wings given that it has successfully scaled through the impacts of the financial instability while adopting new strategies to be effective and efficient in its operations. After looking at all the markets that Starbucks has an upper hand in, it is undisputed that India ought to be the next big market for its expansionary mission. This is because it gives a very suitable opportunity for a huge customer base hence promising high profitability. It also leads to increased market share and strategic placement in terms of resources for Starbucks. The general attractiveness of food and beverages industry and competition is becoming stronger each day that passes. The industry is growing at an increasing rate and there are no indications that it is going to slow down any time soon. With strong marketing, innovation and global expansion, the coffee industry is on the track to experience major breakthroughs. The forces that drive industrialization as well as disposable income will enable coffee industry to grow and provide new and more challenging market opportunities. Competition within the industry is high and requires a lot of hard work and determination as well as proper marketing strategy from the participants in the specialty coffee industry. The ever increasing coffee prices will greatly influence the expansion of coffee industry for a period of over ten years to come. It is therefore evident that the overall specialty coffee industry is strong and has the capacity to expand and flourish. Starbucks is undoubtedly a strong company and its future is set to be very bright. This firm has a very unique strategy both quantitively and qualitatively. Its plans are implemented with an objective of improving their brand. The financial status of the firm is sound and this was clearly evidenced when the U S economy experienced a financial upheaval that saw many companies collapse, but Starbucks emerged strong only experiencing minimal decline in its profits. References 1. Starbucks 2013 10-K Form for FY ended on September 29th, 2013 2. http://interbrand.com/en/best-global-brands/2013/Starbucks Read More