I. Saturation of Home market and existence of Foreign Untapped markets Starbucks is a well respected brand of coffee that is known globally. As they dominate the market in United States, they have realized the potential growth in overseas markets and open its doors to going global. However, competing internationally is not easy for every company that’s why Starbucks has encountered certain challenges and issues as it enters foreign markets and grows globally. II. Problems
Employee discontent is very far from the image that Starbucks obtains or would like to uphold. Dissatisfied employees could greatly affect the service that they provide to the customers. The company is focused on enthusiastic, happy baristas and friendly service. If employee morale dropped it could have an extremely negative effect on Starbucks’ image and sales as well. As stated in the case, 470 California stores sued Starbucks for refusing to pay legally mandated overtime pay. This is due to overworked and underappreciated workers. The salary Starbucks provide doesn’t match the workload that is required by the company. The employees, especially the store managers feel exhausted and employee morale goes down. The employees are feeling less connected with the company mission and it affects the quality of service and products that they provide. Local challenges in Foreign Market Entry
The influence of economic and political environment to its entry and operation in foreign countries is one of the challenges it faces. As Starbucks continue to open up stores in foreign markets, it also faces different challenges as local imitators try to steal market share. In Japan, they expect loss for the full year. Aside from local competitors offering products with the same price, the economic depression in Japan affected the customer’s income and buying behaviour. As a result the company is losing rather than gaining profit due to coffee pricing. In addition to political environment, Starbucks need to adapt into France’s regulations and generous labour benefits which is legal and compulsory for them to enter the market. Another problem is the entry to foreign markets that has strong local coffee culture. The company is still in its stage of assessing the right strategy to enter markets like Italy. Since it is struggling on its food and non food items, the competition in this market will be difficult due to the existence of anti-globalization movement and strong national responsiveness of local consumers to its own products.
Specified Target Audience
Starbucks used the “Youth appeal” as a strategy to enter foreign markets and gained success, but in the home market attracting the next generation of customers seems to be an issue. The result of the market study made the company aware about the image that it has with its target customers. Younger coffee drinkers can’t afford to buy coffee at Starbucks or the reason they go there is not mainly because of coffee or its products but their peers working. The value associated with brand at some point doesn’t convince the young people in embracing the brand itself. It depicts a pretentious environment for social climbers or yuppies. Aside from trying to reach a specific target market, the company eventually ended up in different markets as it grows rapidly. Venture to Food and Non food items
To keep up with competition and increase sales, Starbucks should not solely rely on coffee as its main product but other products they can take advantage of as well. As Starbucks wants to continually increase sales, it started offering food and other non food items to sell inside their stores during the late 90’s but it seems to be a challenge because it still struggles in this area. The company started offering sandwiches and desserts, CD’s and packaged coffees but growth rate doesn’t seem to rise. The company still has to work on...