Starbucks' cultural adaptation in International Operations

Topics: Starbucks, Coffee, Seattle's Best Coffee Pages: 5 (1449 words) Published: November 22, 2004
Starbucks has become one of the most recognised brand in the world, known for selling highest quality coffee products. The company discovered that there was a potential in beverage retailing and today operates 8337 stores worldwide. The founder, Howard Schultz started in Seattle with a concept of high quality product in a relaxed atmosphere. But a new market is always a new challenge and carries an amount of risk for a company.

This assignment is going to analyse the company's international expansion through local culture and guidance notes will be given.

Starbucks international strategy was to develop the brand and its strengths in a variety of countries. In 1996, the first country "invaded" was Japan, and even though there was a 1000 years tea history, the company successfully managed to grab customer's attention to a new concept.

The strengths from the American market were exported worldwide, to give an image of a product that suits everyone. But the operation strategies differed; Starbucks decided to operate through a number of joint ventures and licensing arrangements with prominent retailers to gain an easier access to new markets and dominate it, before moving further to new potential markets (differing from American approach where the stores are largely company-owned). The reason was that when entering a new market, major factors where important such as the local competition and issues related to price and cost. Starbucks had to conform itself to the economic scale already present in specific market and result to a cost disadvantage (resulting in production, marketing, research and development constraints), consequently the company acquired in 1998 the Seattle Coffee Company in the UK to access a new market easily. The idea is that an experienced local partner can help identify locations, sift through tax issues and give Starbucks stores more community appeal.

Starbucks understood their brand image was going to be a major selling point and when entering a new market, their goal was to introduce their diverse product line while at the same time acquiring a large portion of market share through the creation of customer loyalty and a "special" relationship (offering the added value of venues with a cosy feeling and good atmosphere where guests can relax while sipping their favourite Starbucks coffee). Starbucks understood that by creating customer fidelity, consumers would not mind paying extra money for a cup of coffee.

But problems arose when the company faced local competition such as stores offering coffee stands with them (e.g. Borders), regional speciality coffee companies (e.g. Costa and Coffee republic in England), espresso stands and whole-bean coffee sales.

Starbucks endured fierce competition in Japan such as Doutor Coffee Company and the Pronto Corporation which are well established chains. Furthermore, their access to local culture was done through partnership and the profits were reduced (share of 20% instead of 50%).

On the other hand, Starbucks understood that they had a competitive advantage over local chains, with the ability to access raw materials of high quality and employee/ employer relationship with a belief that a satisfied employee contributes a great deal in a successful company. Furthermore, the company's mission statement established by Howard Schultz states that employees should treat each other with respect and dignity, while working in a great environment. The company also stated that it embraces diversity and contributes to local communities and environment .

Those values helped the company to sell a part of the "American Life" and a new luxury notion of coffee retailing to customers (while they cannot afford a luxury car, they can still afford a luxury coffee) with the obstacle that in poor countries people will prepare coffee at home rather than buy it on their way to work.

The target in Europe is the young generation because they see Starbucks on television...
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