Stratgic Management

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Whenever we want to have a cup of coffee, ‘Starbucks’ is always the name that people think of immediately. Starbucks coffee company is one of the largest international chain stores in the world. The spirit of the company is to make their customers feel the sense of belonging, customers will feel like in the heaven where they could leave their worries away. This could also be the place where you can make friends. Therefore, the attraction of Starbucks is not just the quality of the coffee but also the atmosphere in the store, the variety choice of products and services they provided Today, Starbucks stores are around the globe. It is operating in more than 50 countries with 17, 009 stores (as of January 2, 2011). (Starbucks (2011)) The success of Starbucks is not only about the high quality of the products, but also the attitude of their employees and the design in the stores which bonding with customers around a cup of coffee.

History of Starbucks

Back to the beginning, Starbucks was established in 1971 by three teachers: Jerry Baldwin, Zev Siegel and Gordon Bowker at Seattle in Washington.( Herve R. (2004)) It was a roaster and retailer of whole bean and ground coffee, tea and spices at the beginning of the business. In 1981, Howard Schultz, a Swedish maker of stylish kitchen and house wares noticed that Starbucks was placing orders of a certain coffeemaker. After Schultz first visited the stores, he found that Starbucks was more than a coffee shop where it had a soul, a passion and authenticity. Schultz realised if they do not plan on expansion, Starbucks would be eaten out by competition. In 1982, Schultz joined Starbucks in September. This year was the turning point of Starbucks.

However, Schultz left Starbucks in 1985 because he had different ideas on the management strategies from Baldwin and Bowker. The growing frustration is another reason made him leave Starbucks, then to start his own business. He established II Giornale Coffee Company. In 1987, Schultz won over a rival plan and acquired Starbucks in August, 1987. II Giornale Coffee Company was then changed into Starbucks Corporation. The company kept expanding over time. From the three-year domestic store expansion and “Starbucks everywhere” approach (i.e. cut down on delivery and management costs, shortened customer lines at individual stores, increased foot traffic for all stores in an area) to the international store expansion, creating a new subsidiary, Starbucks coffee international and expanded its consumer products channel in south Pacific region (i.e. sell Frappucino in Japan, Taiwan and South Korea). Under the Strategic management of Schultz, Starbucks had shifted from a small coffee shop chain to become a nation- wide company. Its international expansion started from 1995. Starbucks invested $1.5 million and established a subsidiary called Starbucks Coffee International in 1996 (ZhenJia Z. (2006)) The focus of this subsidiary was concentrated on the Asia-Pacific region to coordinated the expansion which started in Japan, Korea, Singapore, Philippines and Taiwan. The international expansion was based on two business approaches: joint venture and licenses.

Motivations of Starbucks’s international expansion

Apart from the traditional motivations (i.e. resources seeking motives and market-seeking behaviour) and the emerging motivations ( i.e. increasing scale economics, competitive positioning, scanning and leaning capability). The reason why Starbucks decided to take place in those countries was because the coffee shops competition had become very intense in America and Europe. Therefore, it took place in the Pacific Rim in order to gain momentum and strength. In the mid 1900s, the United States coffee shop market was becoming saturated. The fact that smaller coffee shops competitors would be eaten up by the bigger players. The store base of Starbucks was so mature that slowdown in the growth of their unit volume and the firm’s...
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