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However, in mid-1990s, with the growth rapidly make the local markets reaching saturation, Starbucks should expanding abroad markets to maintain its growth and boost instead of focusing and depend on the U.S. market. With only five stores in operation at the time, all within close proximity to one another, many questioned both the abrupt move 2000 miles away to Chicago and the international expansion into Canada. (Shultz, 1997) At beginning of expansion the coffeehouse were chosen the Vancouver, Canada in 1987. It took place between countries with a similar degree of industrialization (Leontief, 1953) and not between nations with different factor advantages. However there is actually belongs to regional expansion in Northwest of the Pacific rather than the global expansion. Till in the 1995, Starbucks formed Starbucks Coffee International, expanding the company’s abroad area. In 1996, Starbucks entered Japan and over the years it expanded into South-East Asia, Europe, and the Middle East. By March 2011, Starbucks had 16000 stores (23% of its total stores) from outside countries and cities all over the world. Starbucks decided to firstly enter the Asia Pacific Rim markets. There are growing consumerisms to imitate Western lifestyles among the younger generation in the Asia Pacific so that Starbucks attract these countries people and share their marketing quickly.
In Doole and Lowe (2001) , for example, the decision about which national markets to enter is dependent on the following criteria: accessibility, profitability and market size. ã€€
Starbucks choose Asia as the first stop of overseas expansion: Asian market will help Starbucks to expand market share; Asia eras could become a source of Arabica beans quality; Starbucks will be easily getting the PR advantage. In the priority market section we analyzed different markets for Starbucks in Asia Pacific.
Japan market: Japan is the highest per capita income in Asia. They are the third-largest coffee consuming country in the word. Japanese customers are very fond of drinking quality coffee. Japanese love to think of themselves as westernization. In Japan, the operating cost is very high.
Singapore market: The symbol of Singapore is known as the lion state, it has an 11% of the market’s high growth rate. There are one of the best living conditions in Asia. Many people live in a diversified group of Singapore. The local people are very addicted to the foods and coffee drinking. There are a lot of competitors in the specialty coffee of this region. But the market is becoming increasingly crowded cafes.
China market: China has a lot of potential customers. They are an emerging economy with the demand for coffee. They basically tea consuming country, is one of the world’s smallest coffee market.
Indonesia: Indonesia has a per capita income in Asia, they have a high standard of living. They are the world’s fourth largest producer and third largest coffee exporter. The Starbucks security in Asia, Indonesia imports large part. They are one of the best of the best Arabica coffee beans manufacturers, and provides a lot of baking equipment. Starbucks has been a positive response when they launched their first in Indonesia. The Asian market is still in the development stage, therefore, we have the opportunity to become a leader in this emerging industry for Starbucks.
Indonesia market: Indonesia has very well per capital income in Asia as well as has a high living standard. They are the 4th of largest producer and the 3rd of largest exporter of coffee in the world. Starbucks import a large part of coffer for Asia from Indonesia. They are one of best producer of finest Arabica coffee beans and provide a great roasting facility.
In a word, the Asian market is still in the development stage, so we have the opportunity to let the Starbucks becoming a leader in this emerging industry. From the initial decision to choose Asia because we believe that mature coffee market in Europe is very difficult to entry successfully and there will be no great changes in the few years.
However, the Starbucks did not to give up to enter the Europe market because that : There are a strong coffee culture in Europe market, the relaxed coffee passengers make the coffee operators rarely thinking about the change and the revolution of modern business philosophy, which could provide market access to Starbucks.
Schultz selected UK as his first markets to enter Europe coffee business. The tea is the most favorite drinking than coffee in British. The British always regard their afternoon tea as a means of communication. Starbucks the slogan: “afternoon coffee and afternoon tea play the same effect”” tea and coffee will make the British life more colorful. “They want to firstly take over the markets in UK, combine the tea to the coffee make British customers accepted quickly.
The second goal in Europe is Switzerland; Switzerland is neutral countries, with tourism as a pillar industry, having little xenophobic minds. So Starbucks opened its first stores in the international city of Zurich, and the response is excellent. With Switzerland gap opened soon, Starbucks set up a chain in France, Germany, Belgium, Spain, Luxembourg and the Netherlands.
The last bastion is Italy in Europe, Starbucks plans to enter Europe makes the Italian coffee fortune more tension, The Coffee Company Trieste Italy’s most prestigious and even formed a “coffee Alliance” to protect the coffee industry in Italy, and work together to boycott Starbucks plundered site. Strongly resisted in the face of Italy, Starbucks need more patient entre and establish the chain around the country.
Uppsala Pattern explained is that firms enter new markets with successively greater psychic distance. Psychic distance is defined in terms of factors such as differences in language, culture, political systems, etc., which disturb the flow of information between the firm and the market (Vahlne and Wiedersheim-Paul, 1973 ). The pattern is explained by the fact that firms enter markets with a successively greater psychic distance. The psychic distance concept was defined by a group of researchers in Uppsala in the early 1970s as: Factors preventing or disturbing the flows of information between firm and market. Examples of such factors are differences in language, culture, political systems, level of education, level of industrial development, etc. (Johansson and Wiedersheim-Paul, 1975,p. 308 Johansson, J., ). The factors identified in the study of Ho¨rnell et al. (1973) .were level of industrial development, differences between the home market and the foreign market in terms of the level of industrial development; level of education, differences in the level of education; business language, cultural differences, language; and the existence of relationships between the home market and the foreign market. These criteriacan be used to compare a company’s compatibility with different countries and to classify national markets in accordance with a nation’s attractiveness (Harrell and Kiefer, 1993; Doole and Lowe, 2001).
The Starbucks may have rebounded from less-than-stellar sales in the United States, but the chain’s grab-and-go philosophy still isn’t gelling with European customers. Following lagging sales and a failure to meet targets in Europe, Starbucks is embarking on a multi-million dollar campaign that will involve making over hundreds of stores and adjusting drink recipes to suit regional differences.
Getting Europeans on board won’t be easy for the mega-chain. Most of the continent has a firmly entrenched café culture of its own-and it’s one that doesn’t include disposable cups or watered down “Americanos.”( Sarah Korones , 2012)
“The New York Times” reports on the economic and cultural challenges Starbucks faces:
After eight years spent setting up 63 French Starbucks stores, the company has never turned a profit in France. And even in the parts of Europe where the company does make money, sales and profit growth lag far behind results in the Americas and Asia. Europe’s debt crisis and sluggish economy are a factor. So are high European rents and labor costs, which impinge on profits more than in any other region in which Starbucks operates. But the biggest challenge may lie in tailoring the Starbucks experience to appeal to a variety of European tastes money, sales and profit growth lag far behind results in the Americas and Asia. Europe’s debt crisis and sluggish economy are a factor. So are high European rents and labor costs, which impinge on profits more than in any other region in which Starbucks operates. But the biggest challenge may lie in tailoring the Starbucks experience to appeal to a variety of European tastes ( Liz Alderman, 2012) .
The coffee market is divided into the family drinking market (such as the instant coffee, baking and grinding coffee) and non-family drinking coffee market (like Starbucks’ coffeehouse). Consumers vary greatly coffee taste preferences in different countries.
For example, Sweden and Switzerland are two largest coffee consuming country. Instant coffee is very unpopular for the Sweden consumers, only 9% of the total retail sales, while the 35% of those are the Swiss purchased .At the same time ,the largest difference of consumption and purchases coffee is the Italy, 96%of Italians buying the roasted and ground coffee ,only 4% of the instant coffee.
Starbucks most directly interested in some countries consumers are happy to enjoy their coffee outside. Non-family drinking coffee consumption in Switzerland, Spain, Sweden and France, which consumption of coffee (per capita annual coffee consumption in cups to calculate) is absolutely large. In many emerging markets and countries, such as Mexico, Chile, Russia and Thailand, non-family drinking coffee consumption is quite low , this is a severe test to the business model in Starbucks.
Starbucks most directly interested in some countries consumers are happy to enjoy their coffee outside. Non-family drinking coffee consumption in Switzerland, Spain, Sweden and France, which consumption of coffee (per capita annual coffee consumption in cups to calculate) is absolutely large. In many emerging markets and countries, such as Mexico, Chile, Russia and Thailand, non-family drinking coffee consumption is quite low, this is a severe test to the business model in Starbucks.
The Coffee Company frustration, the decline in consumption in developed countries, and the markets need turn to developing countries. It is estimated that the Coffee Addicts (enjoy l or more cups of coffee a day) have consumption accounts for 65% of the total coffee consumption, but they represent only 17% of the world’s population. Contrary, the coffee tasted (enjoy a week less than a cup of coffee) accounted for 57% of the world’s population, but their consumption is only 2% of the total coffee consumption. Even though the Starbucks could target for them, hoping to guide them become coffee hobby, this task is very arduous. Because Most countries where coffee tasted consumers have no special experience of gourmet coffee.
Starbuck’s growth future markets
However, There are few overseas markets percolated by Starbucks. Its operating margins in Asian are more than double that of Europe. That is the good example that operating margins came in at 34.6% of the first quarter in China; there are more than 5 times that of Europe. That is because that there are cheaper labor, rent and utilities in China. The major market for Starbucks is China in Asia, because that operates more than 500 stores in China. The Starbucks chairman, Howard Schultz, thought the Chinese market is “the most profitable in the world”.
So that Starbucks have some space for growth in the Asian region. The coffeehouse should have plans for aggressive expansion in the region of China.
Starbucks also has its sights set on Asia’s other emerging economic giant, India. Starbucks also has its sights on other emerging Asian economic powers areas, such as India. It recently announced an $80 million 50/50 joint venture with Tata Global Beverages to bring its coffees to India. Starbucks announced they cost $ 80 million to joint in a 50/50 venture for coffee India Global Beverages in the recently. Because the coffee market definitely has a growth development in India. While Starbucks make a relationships with Tata Coffee in order to enter into share the Indian coffee market. Starbucks will collaborate with local area to providing training to local coffer, technicians and agronomists, aim to improve coffee-growing and milling skills.
Indian consumers have always easy accepted change when the coffee comes to their taste buds. Starbucks believed that starting coffeehouse have been successful developed in India longer than anywhere in the Arabian Peninsula.
There need an opportunity for Starbucks to enter the Italian market. Even though, Italian market is definitely a desired market for Starbucks .It has a high potential marketing in Italy. Not only because a cup of Starbucks is not just a cup of coffee but a way of expressing identity. Italian enjoys their life style, so the Starbucks does the Italian passion for coffee. So the Starbucks are not only just products a cup of coffee but expressing their culture in the coffee.
Since the basic idea of the Starbucks Corporation finds the Italian coffee drinking habits. There are good idea to help Starbucks to entering the Italy by creating a joint venture with a local entrepreneur. However the pressure for this progress is very high. Starbucks select the appropriate local Italy partners which have more domestic experience and know-how. In additional, paying careful attention to the appearance should be fit for Italian taste such as the personnel in terms of clothing.
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