Starbucks and Internationalization: International Marketing Core Assessment - Term Paper Example

?Starbucks and Internationalization Introduction Starbucks has managed to change its operation and increased its penetration to the international markets. Several market opportunity exist in the international market that could be exploited by the restaurant firm and develop the necessary expansion strategies of the company. There are emerging markets for Starbucks. In the development of new marketing strategy, the targeting of the emerging and new market will encourage the development of new approaches. From the past trend, the company has expanded fast in America with greater repercussion. The reduction of the outlet performance due to overcrowding is evident is some parts of the US while in other towns it does not exist making the process complex because of reduced performance of the outlets. In fact, the creation of many outlets in an area reduced the incomes of the outlets by sharing the market among the outlets. The faster rate of growth was affected by the global financial crisis which affected the buying power of the consumers. The development of a strong brand presence and image improved its market share. The green and white package makes Starbucks product identification simple and attractive (Allen, 2010, p. 56). Some customers in the survey of the product indicated their purchase is based on package and not the contents. The provision of diverse range of beverage products offered a platform for growth and expansion. Consequently, the performance of the outlets has increased over the last decade making Starbucks the fastest growing brand in the market. The analysis of the company will cover issues of emerging markets, growth strategies, and regional economic and political integration. Likewise, the issues of culture in business performance will be addressed in the process to establish the best possible expansion criteria or process to be employed by the company. The use of expansion strategies such as mergers, acquisition, franchising and exporting will be evaluated to offer recommendations for change and development. Emerging markets After the global financial crisis experienced in 2007 to 2009, changes have been instituted in the financial and banking sectors. The revenue collection of the club was affected by the crisis resulting in the change of taxation. Increase in tax results, in reduction of profit margins of the company. The change in economic growth affects the performance of all the business firms regardless of the specialization. The financial crisis witnessed in the past two years led to closure and withdrawal of companies from initially entered markets. The financial crisis brought the need for financial regulation. Higher Interest rates affect the performance of the company by deterring investments. Economic change can have adverse change in the performance of any business. Inflation leads to increase in higher wages due to increased living standards (Shaw, 2011, p. 67). Strong currency conversion affects exportation of products. In the next three years, the company will face the entire economic factor at varying degree. The most significant one is the increasing inflation which leads to rising of the wage level thus increasing the production costs of the company. Despite the negative effect of inflation, it is worth mentioning that the financial report provided indicates, there will be an increase in the living standard resulting, in the increase in purchasing power of the population. The organization has a strategic review and planning will be able to benefit from the focused improvement in the national earnings. The strategic direction chosen by the management will facilitate growth because it takes into consideration the issues that can negatively affect the business performance. The global market is an external factor affecting the business. Yips global strategy frame work deals with the evaluation of the potential market and constraints of the global market. The frame work developed by Yip includes the analysis of position and resources of the business, globalization drivers, and the ability of the organization to implement the global strategy and the costs and benefits of the global strategy. The frame work of operation is influenced by external factors, such as, the financial position of the company leading to the development of efficient management methods. Starbucks has enjoyed expansion into several markets in the world; therefore, it is affected by the global market drivers. The drivers include international currencies market drive. Changes in the value of the currency of the host country will affect the performance of the company. For example, Starbucks Company intends to expand to Australia; the success of the entry in the country will depend on the stability of the market including the financial paper market. The market of the beverage will be affected if the cost of manufacturing the beverage is higher leading to increased product price. The competition in the global market is fierce with quality, availability and price determining the preference of the customers. The demand for the bolts and nuts is increasing because of the increase in automobile manufacture and other general fittings requiring the bolts and nuts. With the existence of several companies, dealing with the bearings, the competitive drivers a result of the globalization includes; high imports and exports, completion from other continents, and interdependence of countries. Internationalization The globalization of competition is a sign of the dire need for process optimization. The success of Starbucks is based on the ability to increase product visibility through the use of internationalization. The company has invested in countries located in other continents thus increasing visibility and competitive advantage over other beverage manufacturing companies. The company has opened units in US, Canada, and some countries in the European continent where the parent company is located. Additionally Starbucks Company intends to venture into the Romanian market as an expansion strategy. The success of internationalization of Starbucks Company is based on the favorable trade policies involving the government initiatives on trade policies. The specifications and product compatibility in the target market are also the issue in the government drives. The success of the company in the countries of operation is as a result of minimal interference in the sector because of private ownerships in the sector. The diversification of operations increases the success through geographical pricing, which encourages pricing based on the regional manufacturing costs. The company, therefore, has employed the Yip global framework strategy in the achieving the organizational objectives. The target of European countries is based on the perceived success in the market and the existence of privatization of the state owned companies. The global approach of the company failed in some countries because of the lack of planning on marketing strategy. The strategic management process undertaken by the management led to success in turning the club from collapse to profitability. These were as a result of implementation of a clear strategic plan that resulted in the growth and expansion of the business. The use of strategic business evaluation model result in the obtaining of review of the strategic plan implemented. The organization’s strategic model ensured that the brand image and positioning was improved through changes in service delivery and outlet restructuring. The increase in market share and revenue is a pointer to the success of the strategic management changes that have taken place. These changes are prominent in the business as they shape the strategic direction of the company. Additionally, the change from own shops to franchising resulted in the reduction of distribution costs. Culture and internationalization Internationalization and cultural practices influence the operation of business essentially making them vital in the process of business expansion and acquisition. Different countries have a different approach to issues in business and marketing. Culture in business affects the operation, focus and the hierarchy of leadership. The role of culture in business has been massive because they determine the mode of operation and facilitates the development of the operational culture. Culture defines the development of relationships between suppliers and customers as well the development of a marketing plan and objectives. The culture of the countries differs significantly especially when interested in venturing into countries in the Latin America. The historical and socio-cultural difference must be factored in during the process, to facilitate the faster understanding of the negotiation, thus, making it possible for a win -win solution (Nykiel, 2004, p. 45). The key to successful communication between different cultures is knowledge. The understanding of the problems affecting cross cultural communication and working towards overcoming the problems will ensure successful business acquisition and management. There are four factors that affect cross cultural negotiation namely; use of time, individualism versus collectivism, role orderliness and conformity, and patterns of communication. Use of time differs from culture to culture. Most of Citizens from America, Swiss, Germans and Australian are fast paced and precise with their approach to time (Allen, 2010, p. 89). There is a tendency of negotiators from these countries to keep time on the planned schedules. In other countries, time keeping especially when dealing with officers holding higher ranks in the society. A delay of two months, for a project in the Latin America will be considered normal, while in Europe, it will be considered abnormal. The approach used in the employee participation in management may be collective, or individualistic depending on the cultural diversity. The use of in the representative participation is prevalent in the US while in other country scored a lower grade in the scale developed by Dutch researcher Geert HOFSTEDE. The approach in the Latin America is that of group participation. The American approach is individualistic as witnessed by American structure, which uses a prize system. In Brazil emphasis is on the group contribution to the decision making process is rife making it essential for all employees to be told the essence of the takeover. For the team to reach an agreement there must be buy-ins from all members of the negotiating team. Therefore, in the Latin America it is natural to have several members at the negotiation table. Additionally role orderliness and conformity is a cultural factor affecting business operations. In cultures that practice orderliness, emphasis is vested on the structure or form of behaviour than on content. The way activities are done is paramount. The Brazil culture emphasizes the need for developing a relationship with the counterpart so as to facilitate orderliness and predictability during the negotiation process. The Patterns of communication is a factor affecting the business operations in Brazil. The variation in the encoding and decoding of message across different culture may affect the negotiating process by either weakening of emphasis points or highlight of minor points in the business management. The difference in perception between the sender and receiver results in variation of information. These variations may be so immense that there is a serious breakdown on the communication (Armstrong, Cools, & Sadler-Smith, 2011). This problem is common during international negotiation creating a need for the use of middle men in the negotiation process. The use of middlemen will facilitate easier communication between the negotiating parties thereby faster conclusion of the process. Etiquette in diversity is not easily maintained without knowledge of the customs and etiquette of the negotiator. It is necessary for managers to know what is expected as part of etiquette during business operation process (Bowdin, 2010). For example, Brazilian social etiquette is remarkably different to the westerners. Physical contact in Brazil is minimal; therefore, body language and movements should be controlled. The manager must appear calm, formal, attentive, and portray self-control and respectability. The etiquette in gift giving must also be understood. In Brazil, accepting gifts from people the first meeting is improper; so accepting a gift the first time indicates haste and makes a person appear aggressive. Understanding the etiquette of dining is crucial to avoid problems in case of meal sharing during the business process (Armstrong, Cools, & Sadler-Smith, 2011, p. 56). The style of serving and orderliness is maintained. The Brazilians practice self-service which follows the level of seniority, as such, the process must be observed to ensure the creation of trust and friendliness, during the process thereby facilitating the negotiation process. Conclusion Internationalization of businesses is affected by culture. Cultural differences can influence business performance. Brazil’s culture is different from Germany which in turn affects business culture. Transparency is a value practiced in Germany, but in Brazil corruption mars the value of transparency (Marquis & Huston, 2009). Team building in Brazil depends on the creation of relationships, but in Germany the situation is a different team can operate without developing interpersonal relationships. In addition, dressing, etiquette and orderliness can affect business operation if misunderstood. Cultural diversity must be incorporated in the management system to facilitate the development of harmony. International operation will be facilitated by the development of integrated culture that will encourage participation of the locals in business management. Leadership and management training of the organization leadership must be inclusive of the Brazil culture to facilitate organizational management. Reference Allen, J. (2010). Marketing Your Event Planning Business: A Creative Approach to Gaining the Competitive Edge. London: John Wiley & Sons. Armstrong, S., Cools, E., & Sadler-Smith, E. (2011). Role of cognitive styles in businessand management:reviewing 40 years of research. International Journal of Management reviews, 1-25. Bowdin, G. (2010). Events Management. London: Routledge. Marquis, B. L., & Huston, C. J. (2009). Leadership Roles and Management Functions in Nursing: Theory and Application. Philadelphia: Lippincott Williams & Wilkins. Nykiel, R. A. (2004). Handbook of Marketing Research Methodologies for Hospitality and Tourism. London: Routledge. Shaw, S. (2011). Airline Marketing and Management. London: Ashgate Publishing Ltd. Read More