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The Starbucks Experience: Marketing Strategy of the Coffee Chain

By JWJWOKOK Nov 12, 2013 1394 Words
Introduction

Starbucks is the name of a chain of coffee company, established in 1971, is the world's largest coffee chain, its headquarters is located in Seattle, Washington, United States.In addition to coffee, Starbucks also has tea, pie ,the cake and other commodities.Starbucks has nearly 12,000 stores in the world, throughout North America, South America, Europe, the Middle East and the Pacific area.For a long time, the company has been committed to the customers provide the best quality coffee and services, create a unique "Starbucks Experience" to people.

1.Why does Starbucks rely on license for most of its international operations? Does the firm risk the dissipation of its managerial or technological advantages?

Starbucks is a prominent enterprise in the world now, it has its own unique marketing strategy in home and abroad.Starbucks through the permission management to expand the products to the overseas market. License is a legal contract, it point out the right to use of the technology transit to the assignee in certain conditions, and the licensee shall pay the licensing fee contract.At the same time,licensing is very helpful for the corporations which develop in other country.

1.1.1 Low cost
First of all, Starbucks rely on licensing operations to enter a new market, it not only can reduced its own cost but also reduced the risks.In the new market,Starbucks exert the capital leverage greatly and reduced the expansion action to the company financial statements of adverse effects.By H & Q Asia Pacific, United Group, Maxim's Caterers partners, Starbucks not only invest a small amount of money can pass their own brand to the target audience in entering the Chinese market early, and also receive brand franchise fee, advertising fees from Mei Da Coffee, President Starbucks and Maxim Starbucks.(2009, Li).In the consumption cost ,Starbucks does not need to too much investment,and the financial statement would not affected by the action of entering the Chinese market.

1.1.2 Expanding quickly
Because Starbucks do not subject to capital limitations.Starbucks can expanding scale rapidly when it enter the market.Since 20 years ago,it has been successfully set up more than 570 stores throughout 48 city in China. With this development momentum, Starbucks plans to set up 1500 stores in China.(2012, Jim). Starbucks growth rapidly by a snowball way, it depends on its business model.According to the person who in charge of Starbucks,Starbucks business model is based on three old raising a new store.(Tang, 2004).The expanding means the profit point growth, at the same time the affection of scale to reduce the cost. Due to more and more profits and not subject to the capital limitations,Starbucks can expanding scale rapidly,this expansion is very astonishing. 1.2 Risk

The business license has certain risk, especially in the management and technical advantage. The licensed business operating in different from the franchise, franchising doesn't need to put their patent and the technology to others, so that can be beneficial to protect their own patent and technology. Therefore, the licensed business operating has certain risk to loss their technology.Fortunately, Starbucks foreign policy has been take retail mode and have a good management idea, so it greatly reduces the risk.All over the world company cannot join in Starbucks ,they Adhere to the regular distributors company.(chelsea,2012).On the one hand Retail mode can keep the quality of the chain, on the other hand it put forward to Starbucks in expansion capital requirements. Starbucks not only has the good business model, and also has good management technology.All Starbucks retail market partners, whether full-time or part-time , as long as a year they working hours reach or exceed 360 hours in total, can have the Starbucks coffee beans stock.(Wang,2012) .Thus, it can not only improve the enthusiasm of the employees, and also can steady staff and reserved talents. Starbucks can reduce a certain risk of the management and technical advantage, mainly by retail mode and management technique.

2.Can you ague that Starbucks is a global company regardless of the stronger dominance of its home region in terms of its locations and sales. Explain?

Starbucks is not a global corporations . Because of global corporations is not just sale or sell product in other countries .Global corporations have its own conditions.There are two important factors to make Starbuck cannot meet the global corporations completely.

2.1 Locations
Compared with the general multinational corporations, the global companies improve the degree of globalization greatly, the index of multinational is more than 50%.The overseas business inflection is importance to the home business gradually,more and more company resources is transfer to overseas.Conference on trade and development data show that in 1994, the global 100 big multinational companies multinational index more than 50%,it has 43 companies; it only has 16companies more than 70%. Some company's equity also highly globalization, such as Nokia shares more than 80% from Finland(Zhang, 2008).But Starbucks pay attention to home business,the index of multinational does not exceed the global company's requirements.Although it is direct management foreign markets,the head office to control all shops.So Starbucks is not a global company.

3. What accounts for the discrepancy between percentage of foreign locations and percentage of foreign net revenue.

Each corporation's purpose is save money,Starbuck is no exception.In order to make more profits,Starbuck constantly overseas expansion.Unfortunately some factors prevent the overseas development of Starbuck.

3.1 Substitutes
First of all, coffee is not the main drinks in each country, different places have different main drinks, such as: China main drinks is tea.Starbucks entering this country which has different culture in drink,it must do better.Otherwise it would be replaced by substitutes.But many people cannot give up their used to,.so Starbucks entering a new market is a difficult thing.Drinking company 85C defeated Starbucks, amount of shops beyond Starbucks in Taiwan (China Daily, 2009).Due to many competitors in the market,people have many choose,it will effect the market share of Starbucks directly.

3.2 Excessive expansion
Second, the excessive expansion.Starbucks expansion speed is very quick in overseas,Although the expansion is good for dominate the market,it need to has great strategies can keep the high profits.According to the person who in charge of Starbucks,Starbucks business model is based on three old raising a new store(Tang,2004).Starbucks expanding constantly in order to dominated the market,but it do not considering the market popularity and saturation problem.So that it loss more profits and make the profits and shops are not in proportion.

4. What are some of the reasons why Starbucks choose to retain operational control of its domestic operations?

Retain operational control have some advantages for Multinational company

4.1 Easy to manage
Starbucks choice retain operational control of its domestic operations,it can control its domestic business management and technological advantages greatly. Head office thinks that it is good for professionalization of staff’s capabilities and establish prefect corporate image (Yuan, 2008). They can directly manage the store and directly training staff in domestic market.It is very convenience to develop in domestic market.

4.2 Rise awareness
Starbucks choice keep its domestic business operation control to make many scattered branch can deep into the hinterland of consumers to expand sales, accounting for the market. In mass production system and large amount of consumption market conditions, the retail chain operation system is links mass production, large amount of consumption of new circulation system. Only in this way, Starbucks can through the spread of customers to improve their awareness. Starbucks still use this way to improve his own popularity, up to now. So it is very important to Starbucks maintain the quality of its products, to improve their own profits. Therefore, Starbucks should choose to keep its domestic business operation control.

4.3 Largest market
Because Starbucks does not belong to the global company, it is multinational company, so it is pay more attention to the domestic market.Starbucks is beginning for the United State,so the United States is Starbuck's biggest market and the United States income occupy the major source of income.Starbucks in the United States occupy about 85% of the total revenue income each year, the United States market share more than other countries several times larger.(Jim,2012).Market share is very important to each companies.The Starbucks sales volume in the United States is the largest,so Starbucks should choose to retain operational control of its domestic operations.

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