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

STARBUCKS ANALYSIS
BACKGROUND
OVERVIEW
MISSION
PRODUCT LINE
PRODUCT SUPPLY
STORE AMBIENCE
EMPLOYEE TRAINING
7S MODEL 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.
PRODUCT/SERVICE
 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.
STARBUCKS‘
DIFFERENTIATING
FACTOR

OVERVIEW
 Public company: NASDAQ – SBUX Headquarters
 Employees: 149,000 (2011)
 Revenues: $11,7 billion (2011)
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
United States, Japan, Canada, United Kingdom, China, Mexico, Australia, Germany …
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
Structure  Starbucks has a functional structure.
Strategy Systems
SYSTEMS
Shared  Information system to support business
Values operations (IT).
Style Skills
 Extensively training staff.
 Starbucks has economies of scale by purchasing
Staff coffee directly from growers.

7S MODEL ANALYSIS
STYLE
 Innovative, flexible, friendly and team-orientated.
Structure
STAFF
 Low employee turnover - Starbucks offers a
Strategy Systems
motivating benefits package which includes
base salary, health care benefits, stock option
Shared
plan, among others. Values
 Employees training include 24 hour-training,

star skills, coffee master program, servant Style Skills
leadership workshop, career power and career

power for coaches’ workshop. Staff
 Starbucks has retail positions and management
positions.

7S MODEL ANALYSIS
SHARED VALUES
 Leverage the Starbucks experience; Structure
 Great work environment and take care of

customers and employees with respect; Strategy Systems
 Diversity is encouraged; Shared

Values
 Positive contribution to communities and
environment; Style Skills
 Maintain the highest quality standards of
products; Staff
 The importance of profitability for future

STRUCTURE
success;
 Friendly and well-informed
 Understand environmental issues and share
staff;
information with its partners (employees);
 Non-retail operations;
 Recognizing that fiscal responsibility is
essential to its environmental future.  Coffee experience.
MARKET ANALYSIS
COFFEE INDUSTRY
COMPETITORS
PESTEL 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%).
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 .
Note: Fair trade coffees were coffees that were purchased directly from cooperatives of small farmers at a guaranteed floor price.

COMPETITORS
Starbucks does not Nationwide coffee

have a group manufacturers
defined of
competitors
STARBUCKS HAS LOCAL OR REGIONAL Coffee shops and

restaurants
COMPETITORS
COMPETITORS’ STRENGTHS
• Range of products
COMPETITORS’ WEAKNESSES
• Quality of products and service • Number of the stores available
• Affordable price – less than Starbucks
• Location
COMPETITORS’ OPPORTUNITY
• Merger of some local and regional chains – bigger and better position
PESTEL ANALYSIS
FACTORS MAIN ISSUES TO TAKE INTO ACCOUNT

• Industry specific regulations, such as employment law, health and safety
regulations, consumer protection;
POLITICAL • Government policy changes;
& • Degree of government’s intervention (for example, extent to which it
subsides firms and its priorities in terms of business support);
LEGAL
• Relationships between coffee producing nations and US;
• France’s case: arcane regulations and generous labour benefits.
• Economic indicators: interest rates, taxation changes, inflation, exchange
rates, economic growth;
ECONOMICAL
• 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

• 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
SOCIAL beverages;
• Outside the U.S: diversity in culture and behaviour;
• Austria’s case: the youth is enthusiastic in embracing new things.
• Equipment integration in business processes: the use of technology can
improve operational efficiencies;
TECNOLOGICAL • Technological implementation in all stores: wifi;
• Technological developments: better systems such as security, purchasing,
bar coding, among others.
• Environmental regulations: for example, energy taxation and water limits;
ENVIRONMENTAL • Global warming: may have an impact on beans’ quality;

• Eco-friendly products.

INTERNATIONAL STRATEGY
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

ELEMENTS
COUNTRY’S NAME
CONTROLLABLE
In local word of mouth;
COUNTRIES WITH A
1% of revenue on advertisement of new
STARBUCKS’ COFFEE SHOP Promotion
launches
Price Italian coffee is cheaper than US java
Italian coffee bars prosper by serving food as
ITALY well as coffee, an area where Starbuck still
Product
struggles; and Italian coffee is seen as being
better

ELEMENTS
COUNTRY’S
UNCONTROLLABLE (FOREIGN ENVIRONMENT)
Arcane regulations
Political/legal
FRANCE and generous labour Political/legal forces
forces
benefits
Economic forces
Competitive
Rivals offer similar fare Competitive forces
forces
JAPAN Level of technology
Economic
Economic depression
forces Structure of distribution
Imitators popping left Geography and
Competitive
ENGLAND and right to steal
forces Infrastructure
market share
Cultural forces
The youth is
enthusiastic in
AUSTRIA Cultural force embracing new things,
Starbucks is
considered to be hip

INTERNATIONAL MARKETING MANAGEMENT
EPRG
Schema Starbucks customizes its products
and marketing towards different
national conditions.
Strategic Creates a maximum of local

Orientation Orientation
responsiveness.
to
international
marketing Polycentric Polycentric Orientation
strategy orientation develops Starbucks
and subsidiaries autonomy
Multi- and creates a better
domestic understanding of local
approach needs and demands.

INTERNATIONAL MARKETING MANAGEMENT
Starbucks does not

use global market
concepts in marketing
decisions
Starbucks-Global
marketing
management
Each foreign market
requires its own culturally adapted
marketing strategy
Parts of the Starbucks strategy cannot be

copied because they are innate to the brand.
For example people in China tend to use

ADAPTATION Starbucks as a gathering place, where they sit
STRATEGY 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.
MARKET-DRIVEN VS. MARKET-DRIVING
VERSUS
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”.
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.
Starbucks: Going Global Fast 23

PRODUCT LIFE CYCLE IN INTERNATIONAL MARKETS
PRODUCT LIFE CYCLE CHANGES OVER TIME

MARKET ENTRY OBJECTIVES
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
MARKET SEEKING seeking strategy as well.
MARKET MARKET
EFFICIENCY SEEKING ENTRY OPPORTUNITY
OBJECTIVES ASSESSMENT
RESOURCE SEEKING
Starbucks actively collects

information which means
Starbucks selects the market
proactively .The company
does not wait for an
unsolicited order.
25
STARBUCKS: GOING GLOBAL FAST
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
Quality of distribution service
environments)
In the US market, Starbucks never

allowed any type of franchising or
partnership.
However, the company’s

international strategy consisted in
the following market entry
strategies:
JOINT VENTURES LICENSING

JOINT VENTURES LICENSING
In 1994, PepsiCo and Starbucks In recent years Starbucks begun to enter into
entered into a joint venture a limited number of licensing agreements for
arrangement to create new store locations in areas where it did not have
coffee-related products for ability to locate its own outlets.
mass distribution through Pepsi
channels, including cold coffee • Marriott Host International: operate
drinks in a bottle or can. Starbucks retail stores in airport
locations
In 1995, Starbucks partnered • Aramark Food and Services: put
with Dreyer’s Grand Ice Cream Starbucks stores on university
to supply coffee extract for a campuses and other locations
new line of coffee ice cream operated by Aramark
made and distributed by
• United Airlines: have Starbucks coffee
Dreyer's under the Starbucks
served on all United flights
brand.
In 2008, Starbucks Coffee All licensed stores had to follow Starbucks'

International and Grupo Vips, detailed operating procedures
through the joint venture
Starbucks Coffee Portugal, Lta., All managers and employees who worked in
opened the first store in these stores received the same training given
Portugal. to Starbucks managers and store employees
BUILDING A GLOBAL BRAND
Starbucks’ brand can

be defined as its
products, its people
and its in-store
experience
Starbucks had spent very little money on

advertising
It prefers to build the brand cup by cup with
customers, depend on word-of-mouth and the
appeal of its storefronts.
The company spends just $30 million annually on

advertising, or roughly 1% of revenues.
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.

THANK
YOU!
MAFALDA ANJO
MARTA ROTARU
NÚRIA CRUZ
OLESEA ROTARU
GROUP 4
SÓNIA AZEVEDO
MSC.BA
TELMA CABRAL

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CASE STUDY

STRATEGY, MANAGEMENT &

30TH APRIL 2012

STARBUCKS: GOING GLOBAL FAST 2

STARBUCKS: GOING GLOBAL FAST 3

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

 Experience – Italian “coffee culture”:

― Employees greeted customers by name;

― People were in a comfortable and familiar atmosphere.

STARBUCKS: GOING GLOBAL FAST 4

 Public company: NASDAQ – SBUX Headquarters

 Employees: 149,000 (2011)

 Revenues: $11,7 billion (2011)

STARBUCKS: GOING GLOBAL FAST 6

 Buys green coffee beans from coffee farms in Latin

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

STARBUCKS: GOING GLOBAL FAST 8

Structure  Starbucks has a functional structure.

STARBUCKS: GOING GLOBAL FAST 9

 Employees training include 24 hour-training,

leadership workshop, career power and career

STARBUCKS: GOING GLOBAL FAST 10

 Great work environment and take care of

 Diversity is encouraged; Shared

 The importance of profitability for future

STARBUCKS: GOING GLOBAL FAST 12

COFFEE BEANS PRODUCTION

STARBUCKS AND COFFEE

 Starbucks belongs to the specialty retailers.

 During several years Starbucks has been active as an

STARBUCKS: GOING GLOBAL FAST 13

Starbucks does not Nationwide coffee

STARBUCKS HAS LOCAL OR REGIONAL Coffee shops and

FACTORS MAIN ISSUES TO TAKE INTO ACCOUNT

STARBUCKS: GOING GLOBAL FAST 15

FACTORS MAIN ISSUES TO TAKE INTO ACCOUNT

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

STARBUCKS: GOING GLOBAL FAST 16

CONTROLLABLE & UNCONTROLLABLE

STARBUCKS: GOING GLOBAL FAST 17

STARBUCKS: GOING GLOBAL FAST 18

STARBUCKS: GOING GLOBAL FAST 19

Strategic Creates a maximum of local

STARBUCKS: GOING GLOBAL FAST 20

Starbucks does not

Parts of the Starbucks strategy cannot be

For example people in China tend to use

STARBUCKS – MARKET – DRIVING STRATEGY

 The company targeted for a narrow market.

 Offers different lines of coffee and tea

Starbucks: Going Global Fast 23

PRODUCT LIFE CYCLE CHANGES OVER TIME

STARBUCKS: GOING GLOBAL FAST 24

Starbucks actively collects

Country Attractiveness Competitive strength of the company

In the US market, Starbucks never

However, the company’s