Case study: Starbucks-going global fast
- Identify the controllable and uncontrollable elements that Starbucks has encountered in entering global markets.
At all times, there are some elements occurred to be an uncontrollable elements to Starbucks organization itself in entering global market. The political, economy and cultural issues in the foreign countries can occurred at any time(sudden) and therefore, these are few elements which take into consideration when Starbucks trying to adapt into the foreign market. At any time, the foreign countries governments may change their fiscal and monetary policies which caused sudden change in Starbucks operation and with so, this given a big impact on Starbucks. As an example, during economic depression country like Japan, revised in customers' income and pulled down which caused Starbucks in losing instead of gaining profit or sales due to the coffee pricing. Besides, the increasing competition among rival shops in and natural disasters like SARS, H1N1, and etc disaster Japan might put Starbucks in risky business development. Fluctuations in world currency rates are one of the factors when Starbucks transform their profit to their home base market currency. In country such as France, Starbucks have to adapt into France's regulations and generous labor benefits which is legal and compulsory in order to enter into France market. In country like Vienna, their culture is different from any other country and this is due to the high number of young population who are always enthusiastic about the new things which appear around them and embrace the new. Therefore, the expansions of business of Starbucks in Vienna tend to be positive advantages.
Controllable elements altered in the long run business in the foreign market. In common, the controllable elements usually are the marketing mix (4P's) which consist of price, place, products, and promotion. These elements face the same problems or almost similar with Starbucks domestic market. As the name - ‘STARBUCKS' and its logo can be adjusted in order to adapt into one cultural tastes and expectation. Pricing of their products are reasonable with the foreign current rates and also their overall country income. The progress of market research is to understand and determine the right international locations which can fit in Starbucks products. Besides providing foods and drinks, Starbucks also provide the experience for customers in all around the world. As an example in China, customers in this country prefer to have tea rather than coffee. In this case, Starbucks have to adapt into their country's culture and thus originated some other drinks which can fulfill the needs and demand for customers in China.
- What are the major sources of risk facing the company and discuss potential solutions.
One of the risks is due to the limitation products choices which restricted the business growth and customers may get bored of it and tend to switch to others. Secondly, the market concentrations are more to United State and Canada. Back to 15 years ago, 17 coffee shops in Seattle grown to over 16,000 outlets in 44 countries and amazingly, over 11,000 stores scattered across the United State and Canada itself and there are only 8 states with no Starbucks stores.
Therefore, as Starbucks going abroad, they should focus not only to their core products but also finding ways to improve the quality of their coffee and also the services as well as the environment. Bringing in some other new products helps in fulfill the current demand help in business growth. Market saturation in United State and Canada can be overcome when Starbucks put more concentration into their international market instead of their domestic market. Besides, by avoiding self-reference criterion (SRC) and ethnocentrism during decision making will not influence an evaluation of the appropriateness of a domestically designed marketing mix for a foreign market. In other words, proper fine-tuning are needed so that less mistake which can cost the chances of lost in profitability, reputation and also trust by customers can be minimized.
- Critique Starbucks' overall corporate strategy.
Starbucks saturated their market in United States. However there are still frappuccino-free cities which included Butte, Montana and Fargo, North Dakota. This is because the saturation in big cities and the more outlets in big cities will help in increasing the sales but without maintaining the good services and meet the demand in the current market, the ideas are just wrong to be adapted in the global corporate strategy.
Like any others brand such as McDonalds who is one of the strong competitor of Starbucks in Malaysia came out with ‘special' menu with price and quantity differentiation which is mainly for kids' meal. These are likely to attract and widen their target market where by customers feel that this will be much more reasonable and the importance of them to McDonalds. Starbucks not only must put more concentration on their adult target market, but also have to care for the kids who might be following parents there for a break or accompany parents for coffee sipping.
Some other issue which appear to be mismatch where Starbucks only advertise with one percent spending of its profits. Low expenditure on advertisements are likely to slow down the brand building of Starbucks in foreign market.
- How might Starbucks improve profitability in Japan?
If were to compare, customers in country like Japan and China, Japanese who are customers of Starbucks are less likely to be aware about the pricing due to their rich country. Once the products satisfied the needs of them, they are likely to stick and thus it eventually created product loyalty in customers. For that reason, Starbucks were have to conscious in things like the strategic location of the stores, whether it conveniences customers and easily to be find or not. The location is one of the important factors. Secondly, Starbucks were have to create the environments where customers can spend most of their time at the same place in comfort, supply WIFI system where everyone can online for their own entertainment, studies or even spaces for business discussion. These are likely to generate friendly environment where the target market will be widen.
Due to the rival shops competition in Japan, Starbucks would have to study the pricing of their coffees products so that the price of a cup of coffee and the environment will be reasonable and customers will feel the worthiness rather than feeling expansive and switch to any other competitors of Starbucks in Japan market.