Starbucks’s International Strategy

Introduction

Coffee, initially only consumed by the upper class of society, was perceived as a luxury and only consumed within special coffee bars hidden in the shadows of western society, the first organisation which brought coffee outside of shadows and into the limelight was Starbucks during the later twentieth century. Even now, the company has evolved to be a household name and transformed the commodity of coffee from a luxury into an upscale culture phenomenon.

The very name Starbucks is practically synonymous with coffee. As opening the first location in 1971 in Seattle’s Pike Place, nowadays, Starbucks has become the largest specialty coffee store, with nearly 16,000 stores and more than 170,000 partners (employees) in 44 countries (Starbucks, 2007), and has already gone public in American and Japan market. Since 1992, its stock has risen a staggering 5,000 percent. The success of Starbucks lies in its ability to create personalized customer experiences, stimulate business growth, generate profits, energize employees, and secure customer loyalty-all at the same time (Machelli, 2006).

For Starbucks, their knowledge of where the finest coffee beans are grown, the knowledge of how best to prepare them in order to make the best cup of coffee and also the knowledge of how best to approach a foreign market as, of their industry competitors, they are the most successfully globalised. In this report, by implementing the PESTLE and Port’s Five Force analysis, to evaluate the international business strategy of Starbucks, compare to other company’s international strategy, and finally give some recommendations for improvement and development.

Literature Review

For over decades, globalization has been a key factor in decisions by many organizations seeking expansion and high profits (Allen and Raynor, 2003). Many corporations put their strategies around the assumption that will bring more opening of national markets, more cross-border capital flows, and more international cooperation in future. The success of Starbucks is sort of based on globalizations ideas. Starbucks has found the appeal of being global, even in tea drinking countries such as China and the UK.

To enter in a new market leads to opptunities for growth and expansion, once the business estabilished, the executives must considerboth internal and external factors. Internally, consideration needs to be given to the overall goals and objectives, technology, production line, location and size (Bradley 1991). Externally, are the factors such as the mrket size and growth potential, the market’s competitive structure and marketing infrastructure. As Starbucks, its operations are divided into retail and specialty divisions. The specialty division is a combination of many revenue avenues including foodservice, overseas licensing agreements and income created from collaborations started to develop or distribute Starbucks products (Euromonitor, 2006). The company’s objective is to establish Starbucks as the most recognized and respected brand in the world. Thus it need continue rapidly in expanding their retail opertations. Nowdays, Stabucks has many collaborations and inetrnational licensing agreements. Their international partners include Sigla S A, Marinopoulos Brothers S A, Lasino S A, Mei Da Cofee Co., Ltd and Maxim’s Caterer Ltd. Stabucks uses strategic partnerships and has aligned with airlines, hotels and bookshops.

The choice of market entry mode stratedy is depend on the level of control a business requirement, the financial risk it will to undertake, the desires returen on investment and business’ previous or current experice in international markets. The ideal foreign entry model is take little risk, lower costs but hign grades of control and returns. As the figure shows below:

Starbucks choose joint ventures, licenses and company-owned coprations as its most important foreign business strategy (Starbucks, 2008). As Bradley suggests that “international licensing arises when a firm provides for free or a royalty technology needed by another firm to operate its business in a foreign market.” This licensee has more control of the product dealing not just in its production but also it’s marketing. This proveides a low cost presence for the international firm