Starbucks- International Business Paper

Only available on StudyMode
  • Download(s) : 324
  • Published : November 7, 2010
Open Document
Text Preview
Starbucks Coffee: International Business Practices

Starbucks is undoubtedly an international brand. The history of coffee traces back to Ethiopia, Africa, India, Arabia, and Europe, and has been traded abroad since the 11th century. Understanding the demand and widespread market for coffee, Starbucks has triumphantly capitalized both the domestic market, and the varied international markets as well. Possessing about 6,500 retail sites worldwide, Starbucks’ net is spread across thirty countries and has been found as one of the most recognized brands all over the globe in equality to McDonalds and Toyota. This organization’s ability to build an international brand has been unprecedented- particularly since it represents a specialty beverage chain and the menu is relatively small. Starbucks has more than 1,000 retail locations in the Asia-Pacific area, and over a hundred in Europe, Middle East, and Africa. This paper will outline on a high-level the international business practices of Starbucks Corporation, and identify both learnings and successes the company has picked up along the way to becoming a world-wide, globally recognized brand.

The Market, Demographics, & Socio-economical Impact
Initially, the Starbucks-targeted demographic was young, urban, college-educated adults with above average incomes. However, the targeted demographics have evolved. Starbucks has found that it can locate in diverse neighbourhoods, which might not include the initial targeted demographics. Over the years, the Starbucks experience was adopted by a far wider range of customers than the initial upscale 25-44 female white collar coffee lover. This is in part due to Starbucks' universal appeal, since the soothing atmosphere provides a safe haven for anyone wanting to take a break. Also, the vast range of beverages paired with the high-level of customization gives way to an impressive variety, served fresh on location and available to suit almost anyone's taste. As a result, sales of beverages have escalated to 77% of total sales while a decade earlier the distribution was equal to that of coffee beans (Treacy, 1992, 82-93). Generally, Starbucks is proud to have a high approval rate among employees and "partners" (with 80-90% claiming to be satisfied with their employment). They firmly believe that a satisfied partner is the key to having satisfied customers. This has mostly paid off, with consumers appreciating the high quality of the products, service, and atmosphere. However, more recent market research shows a decline in customer satisfaction, with speed of service being the main issue in most cases. As a result, an extra $40 million is planned to be injected to make sales quicker and more efficient. As of now, there is debate regarding this becoming a profitable management move, and whether it would truly add substantial customer value in the end. Additionally, coffee has a high inelasticity, meaning consumers are more willing to pay for premium coffee. By charging $2-$5 for a cup of coffee, Starbucks generates sufficient cash flow - something they could not do with a cheaper product.

Socio-Economic / Socio-Demographic Impact
It can be said that in Metropolises abroad and large cities people find a fast-serving coffee shop extremely appealing, as large crowds and rush hours demand convenient service, and for many customers is a prerequisite to their visiting places like Starbucks. In places that are not of central or key location, fast service might not be ranked as highly as friendliness of staff, and customers might also spend a longer time in a store than one on the way to the office (Keller, 2000, 1).. Furthermore, it can be safe to assume that in areas or seasons where or when it is cooler, a warm cup of coffee or other beverage might be especially inviting, more than somewhere where it is unusually warm year-round.

With coffee drinking being conceived as an indulgence of the socially elite, it nowadays...
tracking img