Starbucks Case Study

#1) Identify the controllable and uncontrollable elements that Starbucks has encountered in entering global markets:

The controllable factors that Starbucks has encountered entering the global market are similar to those in their domestic market. These factors include product, price, place and promotion. The Starbuck's name and image connect with millions of consumers around the globe. Internally, Starbuck's is able to make adjustments to fit a county's cultural tastes and expectations regarding their product, it's price, where it is available and how it is marketed. Starbuck's is also able to take part in market research to be sure their product has the right fit for each of its international locations. According to the company's website, they maintain a high level of success internationally by choosing international partners who share their values and commitment to bringing the Starbuck's experience to customers worldwide. The controllable elements can be altered in the long run and, usually, in the short run to adjust to changing market conditions, consumer tastes, and corporate objectives.

The uncontrollable factors that they have encountered have been tougher yet, according to the article. The French appear to be ready for Starbuck's, however; will Starbuck's be able to maintain profitability with what is considered France's arcane regulations and generous labor benefits? In Italy, there is will be greater competition with local coffee houses. Italian coffee bars prosper by serving food as well as coffee (an area where Starbuck's still struggles). Italian coffee is also less expensive than U.S. coffee and is also considered by locals to be superior. Another uncontrollable element is a nation's economy. At the writing of this article, Japan had been experiencing a depressed economy and Starbuck's Japan profits were down 14%. Competition is another factor. In England, for example, imitators are popping up left and right to steal market share. Profits at Starbuck's Coffee Japan fell 70% because of growing competition from rival coffee chains. Tensions between opposing counties is also an obstacle. Starbuck's has locations in Israel as well as in Palestinian outlets in Kuwait, Lebanon, Oman, Qatar and Saudi Arabia. As tensions mount in these areas, Starbuck's position must be to remain neutral or they could lose market share from either side. These are considered extreme cultural challenges and Starbuck's will have to be increasingly sensitive to such challenges to maintain market share. Moreover, a successful strategy in one country can be rendered ineffective in another by differences in political climate, stages of economical development, level of technology, or other cultural variation.

#2) What are the major sources of risk facing the company and discuss potential solutions.

One major risk that I feel faces Starbuck's is its ability to maintain profitability with opening such a large number of stores in such close proximity to each other. According to the

Page 2

article, "Starbuck's is at a defining point in its growth. Its reaching a level that makes it harder and harder to grow, just due to the law of large numbers." Even Starbucks admits that while its practice of blanketing an area with stores, helps achieve market dominance, it can cut sales at existing outlets. Starbucks has also continued this practice internationally. This may be more detrimental overseas because most stores are operated with a local partner and this dramatically reduces the company's share of profits. Starbuck's may want to consider slowing this expansion in order to maintain profitability. Another risk facing Starbuck's on an international level is the large number of "copy-cat" businesses popping up in every international market. In order to maintain market share, Starbucks will have to continue to prove to be a superior establishment with a superior product. It does appear that Starbuck's chooses wisely when selecting foreign partners and this also appears to be a strong advantage for the company. They need to continue their activism in environmental issues and concern for what affects their international partners. Another risk facing the company is that of poor corporate image, or one that has "Pac-Man" type qualities, looking to gobble up market share on both the national and international front and leaving no room for the competition. The mere appearance of global domination may be a turn off to consumers at home and abroad. This has already appeared to hold true in the U.S. Again, according to the article, the company faces an ominously hostile reception from its future consumers of Generation X. Not only are the activists among them