STARBUCKS

GOING GLOBAL FAST

Starbucks are incurring losses for mismatch between their corporate strategies and the
customer’s expectations. Starbucks is about to become a global company. But its spending
does not match with its status. Starbucks only spends 1% of its revenue as advertisement;
whereas most companies its size spend at least 10% revenue. Low spending on advertisement
hampers Starbucks’s brand building outside the USA. When Starbucks is blanketing some
specific cities for dominance, still eight states in the United States are with no Starbucks
stores. Starbucks free cities are - Butte, Mont., and N.D. They believe that the more the outlet
the more the sale. Basing on this strategy they are increasing their outlets day by day in their
domestic region as well as abroad. Without satisfying the customers need, by increasing the
numbers they will not be able to succeed in their mission. Starbucks’s target customers are
the Baby boomers or older generation, it has no differential pricing for the Generation X or
younger generation.
Though Starbucks fully control its business in the USA, but it has franchisee outside the
USA. Depending on the franchisees’ undermines the strength of Starbucks outside the USA.
By aggressive marketing strategy they have created entry barrier for the competitors through
“predatory real-estate strategy”. They have focused on the product concept which myopic
attitude in making corporate strategy.

Basically Starbucks faced three major risks at domestic region. One of which was saturated
market condition (USA). Another risk is losing customers, because fewer options are
available for the customer. And third risk is less but not the least the young generation
(Generation X) feels comfortable.

SOLUTIONS:
One of the risks that they faced in USA-the risks of market saturation can be overcome in
focusing on international or global marketing. They may focus on the fact of reducing
employee disruption to increase the quality of service and coffee for which they are well
known. As coffee is the core product of them to serve they should give more focus on
improving the quality of coffee. They may make arrangement for some other items beside
coffee as well. They should reposition their product according to customers need, so that they
find can the $3 they are paying for a cup of coffee is reasonable. They can also change their
pricing strategy. As Starbucks is going abroad to expand its business with local partners of
that region their risk of SRC and ethnocentrism. It can be over come through proper
adjustment keeping SRC and ethnocentrism away in decision making.