Starbucks - Final Presentation (2)

CASE STUDY

STARBUCKS: GOING GLOBAL FAST

STRATEGY, MANAGEMENT & PLANNING

Professor Jorge Lengler

30TH APRIL 2012

AGENDA

STARBUCKS ANALYSIS

MARKET ANALYSIS

INTERNATIONAL STRATEGY

RECOMMENDATIONS

STARBUCKS: GOING GLOBAL FAST 2

BACKGROUND

OVERVIEW

MISSION

PRODUCT LINE

PRODUCT SUPPLY

STORE AMBIENCE

EMPLOYEE TRAINING

7S MODEL ANALYSIS

STARBUCKS ANALYSIS



BACKGROUND

Business started in 1971 as a retailer chain of coffee, tea and spices.

Managed by the chairman Howard Schultz and the CEO Orion Smith.

Products – Arabica coffees, exotic teas and dark-roasting beans.

Experience – Italian “coffee culture”:

― Employees greeted customers by name;

― People were in a comfortable and familiar atmosphere.

PRODUCT/SERVICE

STARBUCKS‘ DIFFERENTIATING

FACTOR


OVERVIEW

Public company: NASDAQ – SBUX Headquarters

Employees: 149,000 (2011)

Revenues: $11,7 billion (2011)

United States, Japan, Canada, United Kingdom, China, Mexico, Australia, Germany …

Starbucks Corporation:

Leading roaster and retailer of specialty coffee in the world

One of the largest chains of coffee shops

More than 15,000 stores in 50 countries


MISSION

To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.


PRODUCT LINE

Coffee: High-quality bean coffees – Arabica coffees.

Handcrafted Beverages: Italian-style espresso beverages and cold blended beverages - Frappuccino coffee.

Merchandise: Premium teas and complementary food items – Coffee and tea‐brewing equipment, mugs and accessories.

Fresh Food: Baked pastries, sandwiches, salads, yogurt parfaits and fruit cups.

PRODUCT SUPPLY

Buys green coffee beans from coffee farms in Latin America, Africa and Asia.

Custom roasts them to its standards.

Takes it in ocean containers to the United States and Europe.

Sells their products throughout their own stores, grocery and warehouse club.


STORE AMBIENCE

Thesis: "Everything matters“

The store fixtures, the colors, the banners, the music, and the aromas are all blended to enhance the mood and ambience of the store.

EMPLOYEE TRAINING

Fast growth means specially train employees and store managers:

― Employees - 2 to 4 weeks training;

― Managers - 8 to 12 weeks training.

Implant the company's values, principles and culture in each worker.


7S MODEL ANALYSIS

STRATEGY

Rapid store expansion strategy.

Concentration on core competencies.

Penetration in new markets and consolidate their positioning in existing ones.

STRUCTURE

Starbucks has a functional structure.

SYSTEMS

Information system to support business operations (IT).

Extensively training staff.

Starbucks has economies of scale by purchasing coffee directly from growers.

Shared Values

Structure

Systems

Skills

Staff

Style

Strategy


STAFF

Low employee turnover - Starbucks offers a motivating benefits package which includes base salary, health care benefits, stock option plan, among others.

Employees training include 24 hour-training, star skills, coffee master program, servant leadership workshop, career power and career power for coaches’ workshop.

Starbucks has retail positions and management positions.

STYLE

Innovative, flexible, friendly and team-orientated.

7S MODEL ANALYSIS

Shared Values

Structure

Systems

Skills

Staff

Style

Strategy


SHARED VALUES

Leverage the Starbucks experience;

Great work environment and take care of customers and employees with respect;

Diversity is encouraged;

Positive contribution to communities and environment;

Maintain the highest quality standards of products;

The importance of profitability for future success;

Understand environmental issues and share information with its partners (employees);

Recognizing that fiscal responsibility is essential to its environmental future.

STRUCTURE

Friendly and well-informed staff;

Non-retail operations;

Coffee experience.

7S MODEL ANALYSIS

Shared Values

Structure

Systems

Skills

Staff

Style

Strategy

COFFEE INDUSTRY

COMPETITORS

PESTEL ANALYSIS

MARKET ANALYSIS



COFFEE INDUSTRY

COFFEE BEANS PRODUCTION

Coffee is the second most traded commodity on worldwide markets, after oil.

Coffee was an $80 billion industry by the late 1990s. The major consuming regions

were the European Union (35%), the United States (25%) and Japan (9%).

Note: Fair trade coffees were coffees that were purchased directly from cooperatives of small farmers at a guaranteed floor price.

STARBUCKS AND COFFEE

Starbucks belongs to the specialty retailers.

During several years Starbucks has been active as an

"ethical trader“ and in 2000 Starbucks began buying

Fair Trade certified coffee .


COMPETITORS

Starbucks does not have a group

defined of competitors

STARBUCKS HAS LOCAL OR REGIONAL COMPETITORS

Nationwide coffee manufacturers

Coffee shops and restaurants

• Range of products

• Quality of products and service

• Affordable price

• Location

COMPETITORS’ STRENGTHS

• Number of the stores available

– less than Starbucks

COMPETITORS’ WEAKNESSES

• Merger of some local and regional chains – bigger and better position

COMPETITORS’ OPPORTUNITY


PESTEL ANALYSIS

FACTORS MAIN ISSUES TO TAKE INTO ACCOUNT

POLITICAL

&

LEGAL

• Industry specific regulations, such as employment law, health and safety regulations, consumer protection;

• Government policy changes;

• Degree of government’s intervention (for example, extent to which it subsides firms and its priorities in terms of business support);

• Relationships between coffee producing nations and US;

• France’s case: arcane regulations and generous labour benefits.

ECONOMICAL

• Economic indicators: interest rates, taxation changes, inflation, exchange rates, economic growth;

• Income growth: changes in disposable income may influence the consumers’ buying power and consequently the purchase levels.


PESTEL ANALYSIS

FACTORS MAIN ISSUES TO TAKE INTO ACCOUNT

SOCIAL

• USA’s case: consumer behaviour after the September 11;

• Demand for food and beverages;

• Variances in consumer preferences: it can shift from coffee to other beverages;

• Outside the U.S: diversity in culture and behaviour;

• Austria’s case: the youth is enthusiastic in embracing new things.

TECNOLOGICAL

• Equipment integration in business processes: the use of technology can improve operational efficiencies;

• Technological implementation in all stores: wifi;

• Technological developments: better systems such as security, purchasing, bar coding, among others.

ENVIRONMENTAL

• Environmental regulations: for example, energy taxation and water limits;

• Global warming: may have an impact on beans’ quality;

• Eco-friendly products.

CONTROLLABLE & UNCONTROLLABLE

INTERNATIONAL MARKETING MANAGEMENT

MARKET-DRIVEN VS. MARKET-DRIVING

INTERNATIONAL MARKETING STRATEGY

PRODUCT LYFE CYCLE IN INT. MARKET

MARKET ENTRY OBJECTIVES

MARKET/COUNTRY SELECTION

MARKET ENTRY STRATEGIES

BUILDING A GLOBAL BRAND

CASE ANALYSIS: ASIA & JAPAN

INTERNATIONAL STRATEGY




COUNTRY’S NAME ELEMENTS

CONTROLLABLE

COUNTRIES WITH A STARBUCKS’ COFFEE SHOP

Promotion

In local word of mouth; 1% of revenue on advertisement of new

launches

ITALY

Price Italian coffee is cheaper than US java

Product

Italian coffee bars prosper by serving food as well as coffee, an area where Starbuck still

struggles; and Italian coffee is seen as being better



COUNTRY’S

ELEMENTS

UNCONTROLLABLE (FOREIGN ENVIRONMENT)

FRANCE Political/legal

forces

Arcane regulations and generous labour

benefits

JAPAN

Competitive forces

Rivals offer similar fare

Economic forces

Economic depression

ENGLAND Competitive

forces

Imitators popping left and right to steal

market share

AUSTRIA Cultural force

The youth is enthusiastic in

embracing new things, Starbucks is

considered to be hip

Political/legal forces

Economic forces

Competitive forces

Level of technology

Structure of distribution

Geography and

Infrastructure

Cultural forces

Orientation to

international marketing strategy

Polycentric orientation

and Multi-

domestic approach

Strategic Orientation

EPRG Schema Starbucks customizes its products

and marketing towards different national conditions.

Creates a maximum of local responsiveness.

Polycentric Orientation develops Starbucks

subsidiaries autonomy and creates a better

understanding of local needs and demands.



ADAPTATION STRATEGY

For example people in China tend to use Starbucks as a gathering place, where they sit and chat, often over curry puffs and moon cakes.

Starbucks adapts - green tea Frappuccino in Asia, the division into men-only and family areas in the Middle East.

Parts of the Starbucks strategy cannot be copied because they are innate to the brand.

Each foreign market requires its own culturally adapted

marketing strategy

Starbucks does not use global market

concepts in marketing decisions

Starbucks-Global marketing

management




MARKET-DRIVEN VS. MARKET-DRIVING

STARBUCKS – MARKET – DRIVING STRATEGY Redefined coffee in North America, through the concept of the coffee bar, re-

educating about coffee and is increasing a coffee culture. “Only the Starbucks coffee is the best in the world”.

VERSUS

Starbucks: Going Global Fast 23

INTERNATIONAL MARKETING STRATEGY

The company targeted for a narrow market.

It differentiates from competition.

Offers different lines of coffee and tea product to coffee loving customers for a premium price.

Starbucks sells coffee but does it in a different way that others do.


PRODUCT LIFE CYCLE IN INTERNATIONAL MARKETS

PRODUCT LIFE CYCLE CHANGES OVER TIME

MARKET ENTRY

OBJECTIVES

MARKET

OPPORTUNITY ASSESSMENT

Starbucks actively collects information which means

Starbucks selects the market proactively .The company

does not wait for an unsolicited order.

RESOURCE SEEKING

EFFICIENCY SEEKING

MARKET SEEKING

Considering Starbucks – The strategy chosen is market seeking because it is a company that ventures into new countries to become international, because it is looking for new markets, actively seeking customers worldwide, but the company achieves the efficiency seeking strategy as well.


MARKET ENTRY OBJECTIVES


MARKET/COUNTRY SELECTION

FRANCE’S CASE “The French seem to be ready for Starbucks’

sweeter taste” France’s arcane regulations and generous

labour benefits ITALY’S CASE Italian coffee VS Starbuck Food + coffee

Country Attractiveness Competitive strength of the company

Market size (total and segments) Market Share

Market growth (total and segments) Market ability and capacity

Competitive conditions Product and positioning fit

Market uncontrollables (cultural, legal and political environments)

Quality of distribution service

In the US market, Starbucks never allowed any type of franchising or partnership.

JOINT VENTURES LICENSING

However, the company’s international strategy consisted in the following market entry strategies:



JOINT VENTURES LICENSING

In 2008, Starbucks Coffee International and Grupo Vips, through the joint venture Starbucks Coffee Portugal, Lta., opened the first store in Portugal.

In 1994, PepsiCo and Starbucks entered into a joint venture arrangement to create new coffee-related products for mass distribution through Pepsi channels, including cold coffee drinks in a bottle or can.

In 1995, Starbucks partnered with Dreyer’s Grand Ice Cream to supply coffee extract for a new line of coffee ice cream made and distributed by Dreyer's under the Starbucks brand.

In recent years Starbucks begun to enter into a limited number of licensing agreements for store locations in areas where it did not have ability to locate its own outlets.

• Marriott Host International: operate Starbucks retail stores in airport locations

• Aramark Food and Services: put Starbucks stores on university campuses and other locations operated by Aramark

• United Airlines: have Starbucks coffee served on all United flights

All licensed stores had to follow Starbucks' detailed operating procedures

All managers and employees who worked in these stores received the same training given to Starbucks managers and store employees


It prefers to build the brand cup by cup with customers, depend on word-of-mouth and the appeal of its storefronts.

Starbucks had spent very little money on advertising

The company spends just $30 million annually on advertising, or roughly 1% of revenues.

Starbucks’ brand can

be defined as its

products, its people

and its in-store

experience


BUILDING A GLOBAL BRAND

WHY ASIA, WHY JAPAN?

• Emergent markets with a significant economy growth.

• Consumer’s disposable income is increasing.

• Coffee consumption growth rates in Southeast Asia are increasing.

WHAT WERE THE MAIN BARRIERS STARBUCKS FACED WHEN IT ENTERED IN THE JAPANESE MARKET?

• Profit from the Japanese venture did not happen for several years.

• Operating costs being extremely high, like rent and labor.

• Costs of coffee shipment from its roasting facility in Kent to Japan was high.



HOW WOULD STARBUCKS IMPROVE ITS PROFITABILITY IN JAPAN?

• Focus on product innovation concerning beverages and food, expense reduction initiatives and new store openings.

• Awareness to their customers’ needs and expectations.

• Innovate by giving a “local touch” to its products.

• Internet facility or introduction of various cultural/entertainment campaigns.

• Starbucks can introduce US style online system in Japan, so that busy Japanese people can provide their order through the internet.

• Open a roasting plant in Japan in order to cut shipment costs.

• Finding partnerships to help Starbucks grow faster.

• Starbucks should start to consider their pricing strategy.

• Encouraging domestic competition and greatly expanding the market for coffee chains.



RECOMMENDATIONS



RECOMMENDATIONS

Increase their products line:

― Pastry: sell a typically bakery of each culture in each country.

― Beverages: sell more natural juices because they have too many bottled juices.

― Add fresh bread to their products line.

― Create and sell healthier products in their stores.

Enhance their control over beans’ quality due to global warming, climate change, etc.

Invest more in IT to apply in their stores.

Continue rising living standards and production areas.


RECOMMENDATIONS

Continue to expand globally – to invest in joint ventures

and licensing.

Make the connections through the value chain more

efficient.

Be more selective in the recruitment process regarding

the employees passion.

Increase concern about

environmental issues.

Create more individual areas with

appropriate infrastructure to

work/study.

Higher investment in marketing.

GROUP 4

MSC.BA


THANK YOU!

MAFALDA ANJO

MARTA ROTARU

NÚRIA CRUZ

OLESEA ROTARU

SÓNIA AZEVEDO

TELMA CABRAL

Starbucks - Final Presentation (2)

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