Case Starbucks – Going Global Fast
1) Identify the controllable and uncontrollable elements that Starbucks has encountered in entering global markets.
As internationally operating company, Starbucks is familiar with entering new markets. As seen in the case, a foreign market entry always involves as well uncontrollable as controllable elements. The controllable aspects are:
• channels of distribution
In Vienna Starbucks, usually known for low marketing costs, had a gala opening for the first store all over Austria. A big marketing campaign is not what Starbucks stands for. It got popular mainly by word-of-mouth recommendations, but in Austria it was decided to adapt the promotion and introduce Starbucks with a gala, because over there Starbucks had to defend a very modern reputation. In North- America already regarded as ordinary, Starbucks still attracts a lot of people in Europe, especially of the younger generation. Adapting the price level is a possible step to simplify the expansion into another country. In general the coffee in Italy is much cheaper than Starbucks´ coffee. An espresso in northern Italy is offered for approximately 67 cents; in the south just 55 cents. By that reason Starbucks would have to lower the prices, entering the Italian market. Italian coffee experts also consider Starbucks coffee of a low quality. Therefore an adaption of the taste needs to be made by changing the coffee making process or using different beans. The channels of distribution are controllable, as well as the location of new a store, considering infrastructure. As already mentioned before, entering a foreign market is always connected with uncontrollable aspects. In Japan Starbucks encountered two uncontrollable elements of the international marketing task. On the one hand the economic and on the other hand the competitive forces displayed an obstacle for Starbucks. As Starbucks entered the Japanese market, profits were high. But the recent development shows that due to the depressed economy the financial situation will deteriorate. Along with it, competitors offer a similar concept. The same thing is happening in England. Imitators are coming up, stealing market share of Starbucks. The competitive factor also displays an uncontrollable problem in Italy. 200,000 coffee bars, therefore the European epicentre of coffee culture, is a lot of competition and would complicate foreign efforts. In France the political and legal forces seem to be an impediment for Starbucks. Mysterious regulations and high labour benefits are completely different to American standards. Although the French might be ready for the Starbucks taste, a market entry needs to be well prepared because of the local circumstances. Another uncontrollable element, the most important and challenging one, when entering foreign markets, is the cultural force. Chief Executive Howard Schultz has had some first-hand experience in Israel discussing the Middle East crisis. An unfavourable statement created some trouble with the Palestinians. In order to reduce its negative effect on the Starbucks stores located in this area, Schultz withdraw his statement. Here it becomes obvious that the cultural aspect is an important one because it does not only play a role entering a new market but also in unexpected situations.
2) What are the major sources of risk facing the company and discuss potential solutions.
• Global expansion poses huge risk for Starbucks
Starbucks has to consider the local circumstances in every region/city where a store is placed. For almost every new store, detailed research needs to be done to minimize the risk that results from the uncontrollable elements. As a lot of domestic markets are saturated, Starbucks is not only willing but also forced to enter new, foreign...
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