CASE ANALYSIS

Submitted To: Submitted By:

Dr. Mohit Maurya Ajaypreet Singh Sekhon

29005
 Company at a Glance

Starbucks Corporation is an international coffee and coffeehouse chain based in Seattle,

Washington. Starbucks is the largest coffeehouse company in the world, with over 16,858 stores
in 50 countries, including over 11,000 in the United States, over 1000 in Canada, and over 700 in
the UK. Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks,
coffee beans, salads, hot and cold sandwiches and Panini, pastries, snacks, and items such as
mugs and tumblers.

Through the Starbucks Entertainment division and Hear Music brand, the company also markets
books, music, and film. Many of the company's products are seasonal or specific to the locality
of the store. Starbucks-brand ice cream and coffee are also offered at grocery stores.

From Starbucks' founding in later forms in Seattle as a local coffee bean roaster and retailer, the
company has expanded rapidly. In the 1990s, Starbucks was opening a new store every workday,
a pace that continued into the 2000s. The first store outside the United States or Canada opened
in the mid-'90s, and overseas stores now constitute almost one third of Starbucks' stores. The
company planned to open a net of 900 new stores outside of the United States in 2009, but has
announced 900 store closures in the United States since 2008.

Starbucks has been a target of protests on issues such as fair-trade policies, labor relations,
environmental impact, political views, and anti-competitive practices.

Issue in hand as per the Case

Rapid International Expansion to be in gel with the Globalization

Globalization has created this world as a stage where different countries fight for its survival and
design techniques to gain competitive advantage over the others. The competitive spirit has been
infused in which is a boom for the customer on one side and bane for the companies on the
alternate side. This has opened up new markets for retailers that operate in quick food segments
or are a place for people to come together and relax and spend some quality time with oneself or
others. Although, globalization has brought the rise of similar young affluent people groups all
across the world, yet they differ from one another considerably in many aspects. Even though
they have to cater to the tastes and preferences of individual, also to understand the consumer
behavior.
Strategy Model For Expansion

1. Saturate the Market:

Starbucks strategy model is to saturate the market. The accepted business model at the time was
to spread out the location of your chain outlets so as not to cut the profits of one store from
another. Typically, stores would place their retail outlets in locations based on demographics,
traffic patterns, the location of competitors as well as the location of its own stores. However, the
Starbucks strategy went against the grain. Instead of following the trend, CEO Howard Schultz
had a different idea. He decided that the Starbucks strategy would be to blanket an area
completely.

Instead of worrying about stores eating up each other’s business, the Starbucks strategy focused
on heavily increasing the foot traffic in one specific part of town. Not only would this cut down
on the company’s delivery and management times, but also it would shorten the waiting lines for
customers at each individual store and hopefully increase overall traffic. Schultz knew that his
Starbucks strategy was a risk, but it was one he was willing to take.

2. Cluster analyses:

Clustering its stores in one area helped Starbucks quickly achieve market dominance. With over
20 million regular customers per week, no other American retailer can claim a higher frequency
of visiting customers. Since the company went public, sales have risen roughly 20% each year.
Even when the rest of the economy seems to be in a slump, loyal patrons keep returning to
Starbucks for their regular cup of Joe.

3. Word of Mouth:

What makes Starbucks strategy all the more amazing is the fact that the company spends less
than 1% of its annual revenues on advertising, versus the typical 10% of most other retailers.
Instead, the Starbucks strategy relies on word of mouth advertising. They believe that by creating
an intimate and welcoming environment in their stores, as well as providing a great cup of
coffee, patrons will not only keep coming back for more, but will tell all their friends and family
about it too.

4. Out of Box Thinking

The Starbucks strategy has always involved thinking outside the box. In addition to clustering its
outlets, the Starbucks strategy involves engaging in smart joint ventures with the right
companies, such as their successful alliance with Pepsi-Cola Co., and rolling out fresh, new
initiatives, including a new product line of hot sandwiches and breakfast food and new drinks
such as coffee liqueurs. The Starbucks strategy is now also expanding online, allowing
customers to pre-order and prepay for products via the Internet.

Starbucks continues to keep its customers happy and rely on non-traditional means of attracting
new customers; that is the Starbucks strategy.

5. Focus Groups

With different sets of intended customers that it intends to cater to. They give insights about the
preferences and interests about the customer segment. Focus groups also reveal informal rules
that a group follows.

Use of Frontal Assaulting on Competitors

As Starbucks will not be a pioneer in many new markets and a certain type of café-culture is
present in all the countries across the world. So, there will be competitors already operating in
the markets and it will have to go for a frontal attack and should be able to clearly communicate
its differentiated position to not only consumers but also its competitors. This kind of assault will
give it a more leveraged platform to build its brand equity in the minds of consumers in those
markets.

Focused differentiation

 Serve niche buyers better than rivals

 Buyers have distinctive preferences, special requirements, or unique needs
 Have unique capabilities to serve needs of target buyer segment
 Big enough to be profitable and offers good growth potential
 Costly or difficult for multi-segment competitors
to meet specialized needs of niche members
 Starbucks has resources and capabilities
to effectively serve an attractive niche
 Few other rivals are specializing in same niche

Expansion modes
1. Joint ventures

Like those done earlier with players like

  PepsiCo
 Dreyer’s Grand Ice Cream
 Jim Beam Brands

2. Acquisitions

 Hear Music
 Ethos Water

3. Strategic Alliances

With established players in order to cement its presence in the new markets and related
complimenting industries like Airports, Hotels, Plazas, Real Estate players to have premium
locations and ease of access to the intended customer base.