Case1-1: Starbucks-Going Global Fast
Q1) Identify the controllable & uncontrollable elements that Starbucks has encountered in entering global markets. A1) There are several controllable and uncontrollable elements that Starbucks has encountered in entering the global market. To begin with, some of the controllable elements are somewhat similar to them growing in the domestic market. Some of the factors include the 4 P’s (Product, Price, Placement and Promotion). Starbucks has the advantage of being a global brand-it is recognized by millions around the world and is thus able to market according to its value. In addition, Starbucks can easily adjust to the different cultural sets and shift their prices according to the competitors in the region (without making much of an impact to their profit). As a result of being a global brand, Starbucks can market themselves as they wish to as well. An appropriate example would be the coffee in Italy-which is relatively cheaper than Starbucks regular coffee. An espresso in Northern Italy is around 67 cents whereas in the south it can fall close to 55 cents. Meanwhile, Americans pay around $1.50 for their espresso-for such reason, Starbucks would have to lower the prices if they wish to enter the Italian market for the simple reason to be able to compete in such an environment-basically going back to the point of controlling their prices as their competitors do. Starbucks have faced uncontrollable elements as well-mostly to do with foreign markets. To begin with are the issues that the brand might face trying to balance between domestic and international markets. There are several different elements of risk that they face when entering a foreign market such as competitive forces, technology levels, distribution structures, the nation’s infrastructure and other forces that add in such a cultural, political and legal. All these elements tie in with how Starbucks runs its business in an international market. Moreover, as Starbucks continues to expand, it will have to be increasingly sensitive to cultural challenges. One example could be Starbucks facing grave challenges with Japan’s ‘chilled coffee’ market with many lookalikes rivalling with the corporate brand making it more difficult for them to compete overseas. Being a global brand, Starbucks has mastered their skills to expand to other international markets-as long as they keep in check their controllable elements and try and resolve the uncontrollable ones. Q2) What are the major sources of risk facing the company? Discuss potential solutions. A2) Being such a major international brand-Starbucks is likely to face certain risks. To begin with, Starbucks has managed to saturate most of its market in United States. According to sources, there is a Starbucks for every 9,400 people in Seattle. Blanketing areas with their stores is not necessarily an advantage for Starbucks, it has even led to consumers being frustrated with the low level of choice and causing a great dislike towards the global brand all together. Another risk facing Starbucks is the new, younger generation. Today’s 20 and early thirty year old consumers are not ready to pay the high prices for their daily coffee. Due to the recession, much of this generation was brought up on less costly brands such as McDonald’s McCafe, and is unlikely to shift to Starbucks or any other major brand even once recession has worn off. Consumer risks are not the only ones troubling Starbucks-the global brand also faces internal issues with employee burn out rate increasing over the years. Dissatisfaction over being over worked and under paid is starting to become synonymous with the Starbucks name causing frustrated store managers and a higher percentage of employee turnover. An example of this internal risk was when a lawsuit caused Starbucks a good $18 million, leaving them with decreased profit share. Analysts state that Starbucks can only maintain about...
Please join StudyMode to read the full document