Starbucks Market Environment - Research Paper Example

Starbucks College: Starbucks Introduction Starbucks is an American international coffee company that now stands as the largest in the world. The company owns over 20891 stores in 62 countries across the world and is in the process of expanding its market operations to other countries. Since the time the company was found in 1971, the company has remained active in the market through its unique differentiation strategies. However, the dynamic nature of the market has brought about new market characteristics that have demanded a different approach in the market. Competition and market saturation has pushed the organization to look for optional market entry strategies to approach new market segments within its international strategy. The only way for the country to overcome the threats emerging in this market depends on its ability to redesign is market strategy to remain relevant and unique with the new business environment. The purpose of this research is to investigate and identify the potential market environments that Starbuck Corporation can target in their move to reinvent their business wheel. By undertaking a quantitative and qualitative research approach, it is possible to identify possible markets that Starbuck can consider launching their business operations in. A quantitative approach will be used to survey the statistical information on 10 new markets, and this data will be used to identify the 2 best market environments. In the qualitative perspective of the research, the research team will compare the political, cultural and competiveness aspects of the two markets to help narrow down the choice to one target market. The information so obtained will help to recommend the best market entry strategy and identify the best approaches to satisfy the consumer tastes and preferences. Consequently, the research will provide a direction for the next step that Starbucks should follow in globalization strategy. Starbuck Company History Starbuck Company started back in 1971 when it was a retail company in the US market majoring in the sale of coffee bean. Since then, the company has experienced a series of business transformations in terms of expansion, product differentiation and global development. The organization has utilized the value of mergers and acquisition in building the synergy to invest and expand business operations. The first acquisition occurred in 1984 when Jerry Baldwin acquired a company by the name Peet’s. This was a reaction after the company management realized that the coffee market was falling and this was a threat to the development of the company. As such, the organization required to launch a strategy to increase its power to invest (Starbucks, 2013). After this acquisition, the company invested in specialty coffee and this was one of the best strategies that the company undertook. The company sales increased by 10% by 1989 and this promised a bright future for the company. In 1987, Baldwin and his colleagues sold the company to Howard Schultz who rebranded the company and launched new expansion strategies. The new owner opened new stores at Waterfront station, Columbia and Chicago and this expansion formed the first phase of Starbucks business expansion. By the year 1992, the company had expanded to 140 outlets and had increased its revenue from US$1.3 million to US$73.5 million (Starbucks, 2013). At this time, the total market value of the company had reached $271 million and the company launched its first initial public offer (IPO). The company launched its international strategy in the year 1996 when the company acquired a coffee company in the UK retail market. This market entry strategy helped the organization to quickly learn the market culture and suit the customer tastes and preferences. In 2002, the organization expanded its business operations to Mexico, one of the best performing stores in the company today. The organization utilized different approaches to enter into different market niches. For instance, in Russia, the company opened a store in 2007, through a different trademark. Recently, the company opened it stores in Vietnam and continue to search for other avenues that they can invest in (Starbucks, 2013). Expansion into new market is one the superior strategies of the organizations that have helped it to attract more customers into its business and consequently more profits at the end of each consequent year. The company has also expanded its product diversity to reduce competition in the business environment. Apart from the primary product, coffee, the company has ventured in the sales of hot and cold drinks, sandwiches, snacks and pastries. The organization sells beer and alcoholic drinks, a strategy that was launched in 2010, due to the demand of the public as they visited the company’s hotels. In 2013, the company has launched its plan to develop juice products that are coffee flavored, a strategy that is yet to be rolled out (Cardenal, 2012). Differentiating the company product has helped the organization to reduce it’s over dependence on coffee which at times is unreliable due competition in the market. However, the organization has exhibited a number of weaknesses in its business strategy. Over time, the company has faced a strong competition from Costa Coffee, Nestle, Caribou Coffee Company and the Coffee Roasters. This competition has been accelerated by the poor pricing strategies that Starbuck continues to use over its history. The company’s weakness exists in its inability to effect positive price reduction strategies in markets where price is a major influence of demand (Cardenal, 2012). High prices of products have given the company a bad reputation and promises to be limiting factor in the future of this company. Another weakness emanates from the company’s dependence on coffee as the primary profit reaper. The company has little influence on the coffee prices and the fact the price of coffee is unstable makes the company profits fluctuate. For the company to excel in its business operation it requires reducing its dependence on this product. The purpose of this research is to provide a different approach to business. In the competitive business environment, there is need for every company to design a strategy to attract customers from different market segments. Identifying a potential market for Starbucks will help the company to develop and increase their customer pool, and hence the profitability of the organization. References Cardenal, A., (2012). Starbucks SWOT Analysis: A Tasty Coffee Stock. Retrieved from: < http://beta.fool.com/acardenal/2012/11/09/starbucks-swot-analysis-tasty-coffee- stock/16100/> Starbucks, (2013). The Starbucks Company Profile. Retrieved from:< http:// globalassets .starbucks.com/assets/F62C45CD8A8B4699BEFC60A2618F0431.pdf> Read More