GROUP ASSIGNMENT COVER SHEET

STUDENT DETAILS

Student name: Nguyen Minh Hạnh Student ID number: B1112015459

Student name: Trần Phạm Bảo Phương Student ID number: B1112025098

Student name: Phạm Như Quỳnh Student ID number: B1112025077

Student name: Trần Hà Khánh Tâm Student ID number: B1112016740

Student name: Ngô Lê Quỳnh Hân Student ID number: B1112016462

UNIT AND TUTORIAL DETAILS

Unit name: International Business Unit number: IB-T221-WSB-4

Tutorial/Lecture: Session 12 Class day and time Friday, 12:00p.m
Lecturer or Tutor name: Mr. Adam Briffett
ASSIGNMENT DETAILS

Title: GROUP WRITTEN REPORT _ MNC REPORT

Length: 4335 words Due date: 20/08/2021 Date submitted: 20/08/2021

DECLARATION

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✓ I hereby certify that no part of this assignment or product has been copied from any other student’s work
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I hereby certify that no part of this assignment or product has been submitted by me in another
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Student’s signature: Minh Hạnh

Student’s signature: Bảo Phương

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Student’s signature: Như Quỳnh
Student’s signature: Khánh Tâm
Student’s signature: Quỳnh Hân
Note: An examiner or lecturer / tutor has the right to not mark this assignment if the above declaration has
not been signed.

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 STARBUCKS COMPANY
INTERNATIONAL BUSINESS WRITTEN REPORT
GROUP 4
CLASS: IB - T221 –WSB – 4
COURSE LECTURER: MR. ADAM BRIFFETT

3|Pae
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 TABLE OF CONTENT

1. EXECUTIVE SUMMARY __________________________ 6

2. INTRODUCTION AND OBJECTIVES __________________________ 6
2.1. Company background
2.2. Market overview
2.2.1. Products and services
2.2.2. Market share
2.3. Starbucks’ Mission
2.4. Starbucks’ Vision
2.5. Starbucks’ Value
3. ANALYZE CURRENT STRATEGY __________________________ 8
3.1. Global Expansion, Profitability, and Profit Growth
3.2. Entry mode
3.3. Business Strategy and organizational structure
3.1.1. Low cost pressure
3.1.2. High pressures for local responsiveness
3.1.3. Vietnam market
4. IDENTIFY ISSUES IN VIETNAM MARKET ___________________________11
4.1. Macro - environment analysis (PESTLE Analysis)
4.1.1. Political forces
4.1.2. Economic forces
4.1.3. Social forces (Geographic and demographic influence)
4.1.4. Technology forces
4.1.5. Legal forces
4.1.6. Environmental forces
4.2. Micro - environment analysis
4.2.1. Company
4.2.2. Competitors
4.2.3. Consumers
4.2.4. Suppliers and distributors

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5. RECOMMENDATIONS FOR VIETNAM MARKET ___________________________ 18
5.1. Recommendation 1: Localizing and updating menu
5.2. Recommendation 2: New entry mode: Applying joint venture
5.3. Recommendation 3: Organizing charitable community campaigns
6. CONCLUSION ___________________________ 20
7. REFERENCE LIST ___________________________ 21
8. APPENDIX ___________________________ 26
Appendix A: Starbucks’s ordering and making coffee process guideline
Appendix B: SWOT analysis
Appendix C: High-end, medium-end, low-end customer analysis table

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1. EXECUTIVE SUMMARY

Starbucks is widely regarded as the world's leading specialty coffee roaster and retailer.
This report primarily concentrates on analyzing its current strategy, which is localization,
particularly the entry mode, global expansion, profitability, and profit growth. One thing to keep
in mind is that in Vietnam, Starbucks employs a transactional strategy. Moreover, Vietnam will be
taken to analyze its micro and macro environment in order to identify any market-related issues.
Furthermore, recommended solutions to the main issues in the Vietnamese market will be
provided. This paper also included appendixes of SWOT analysis and customer level analysis.

2. INTRODUCTION AND OBJECTIVES

2.1. Company background

Starbucks corporation, headquartered in Seattle, Washington, is the world’s largest
multinational coffeehouse chain and roastery reserves. Founded by Jerry Baldwin, Gordon
Bowker, and Zev Siegl, its first store was opened in Seattle’s Pike Place Market, in 1971. Sixteen
years subsequently, Howard Schultz, the company’s former head of marketing, purchased the
company and merged all of his operations under the Starbucks brand. Following that, the company
entered a fleeting period of expansion that began after the company opened in 1992. Since 1996,
the China-Asia Pacific region has been its target market, with its first store outside of North
America opening in Tokyo's Ginza district. Until recently, Starbucks continued its global
expansion, reaching 32,646 stores, including 60 in Vietnam.

On January 31, 2013, the first Starbucks’s store in Vietnam was opened in the heart of Ho
Chi Minh city, following an expanded long-term relationship with Hong Kong Maxim’s Group.
This marked the beginning of Starbucks entry into Vietnam, which is a dynamic environment
(Starbucks’ stories & news, 2013).

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 2.2. Market overview
2.2.1. Products and services
Starbucks is known for its high-quality coffee, premium tea and delectable treats.
Furthermore, Starbucks also provides an exceptional, one-of-a-kind drinking environment, which
can be considered premium customer service. As its core business value is not only serving coffee,
but also serving the feeling of connection (Our Heritage | Starbucks Coffee Company, 2021).
Starbucks has a great ordering and making coffee process guideline (Appendix A) for their
“partners” to maintain high quality service.

Starbucks product portfolio in almost all markets, including the Vietnamese market, not
only boasts a broad concept of western’s favorite taste, but also localize relevant flavor reflected
in items such as the Parisian Baguette and Eggnog Latte, Gingerbread Loaf (Starbucks’ stories &
news, 2013).
2.2.2. Vietnam market share
Despite being the only remote brand among Vietnam’s top five coffee chains in terms of
revenues, Starbucks remained in third place, trailing two domestic competitors, Highland coffee
and The Coffee House. Moreover, since its entry into Vietnam in 2013, it has only 60 outlets in
four localities, occupying a small market share in comparison to its main competitors (Starbucks
struggles to beat Vietnamese coffee chains - VnExpress International, 2021).

2.3. Starbucks’ Mission

The major mission of Starbucks is to uphold the human spirit, quality of coffee:

(Starbucks, 2021)

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 2.4. Starbucks’ Vision
In order to achieve success, Starbucks follows their vision to bring Starbucks’s
experiences for their customers:

(Our Heritage | Starbucks Coffee Company, 2021)

2.5. Starbucks’ Value

Starbucks follows its special values not only to maintain quality of their products and
services but also to strengthen the connection with their “partners”:

(Starbucks, 2021)

3. ANALYZE CURRENT STRATEGY

3.1 Global expansion, profitability, and profit growth:

According to research by Thompson (2020), Starbucks Corporation expands its international
operations using a generic approach that emphasizes the uniqueness of its goods. To maximize
Starbucks' competitive advantage for firm performance and prospective success through broad
differentiation, the intense growth plans must align with the general strategy. For instance,
Starbucks innovates its ethical and well self-managed supply chain to fulfill its general plan

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through constant search for the most sustainable and finest ingredients. They acquire high-quality
coffee beans from thousands of farmers all around the world who contributed to Starbucks' success,
notably from the equatorial belt region, that produces the most coffee beans. Starbucks' supply
chain has a unique selling feature in that all shipments are traced using a GPS monitoring device
to avoid mistreatment (Cobb, 2017). Furthermore, Starbucks places a greater emphasis on growing
its worldwide market presence as well as providing high-quality, value-added goods. A strong
sense of customer satisfaction, merchandising, and retailing, all of which are inherent strengths,
combine to provide a fantastic ‘third place' experience (Saxena, 2018).

Moreover, Starbucks uses market penetration to maximize profits and growth in their present
areas by adding more company-owned stores or licensed café locations. Specifically, Starbucks
utilizes a combination of market development, which generates revenues in new markets or market
segments by offering the company's current product mix of food and beverages, and product
development, which adds to business revenues by developing new products or variants. According
to Michael Zakkour (2017) Starbucks has methodically structured its operations in China since
those early days around three fundamental components (family, community and status) of Chinese
society by serving local items on its menu combining with an environment specifically based on
China's family customs and desire for social standing.

3.2 Entry mode:

Starbucks' strategy includes three approaches: fully owned subsidiaries, joint ventures, and
licensing (UKEssays, 2018). When Starbucks intends to expand quickly in a specific nation, the
licensing method is employed, which is applied in New Zealand and Malaysia. Starbucks utilizes
a joint venture approach to introduce its business methods to the local market, for example the
Hong Kong and Taiwan market. When Starbucks has market expertise of the market in which it
operates, such as the United States, the UK and Canada, the wholly owned subsidiaries strategy is
applied. Starbucks refuses to franchise, limiting the company's ability to divert earnings from one
nation to support competitive attacks in another, and quality is difficult to manage. Besides,
Starbucks has also adopted a smart strategy of strategic alliances and smart acquisitions, which
will help the firm develop among worldwide competitors interested in expansion (Geereddy,
2013). Starbucks has given the licensing agreement for the Vietnam market to Hong Kong Maxim's

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Group subsidiary, Coffee Concepts (Vietnam) Limited. Coffee Concepts (Vietnam) Limited will
be Starbucks licensee for running Starbucks shops in this market (Starbucks’ stories & news,
2013).

3.3 Business strategy and organizational structure:

Starbucks operates a Matrix organizational structure, which is a mixture of several elements
from the primary forms of organizational structure. Starbucks' organizational structure consists of
four major aspects. Firstly, the functional structure is determined by the business function.
Geographic divisions provide for more direct management assistance for geographical demands.
Starbucks' product-based divisions address product lines, and teams represent the lowest level of
hierarchy (Meyer, 2019). Therefore, the matrix structure enables the company to communicate
effectively with its personnel at all levels: above, below, and laterally.

According to Hill and Hult (2017), four types of business strategies classify firms based on
a separate framework of the two specific aspects that ranged from low to high of cost pressures
and pressures for local responsiveness. In Starbucks’s case, although the international strategy was
applied in the 1990s, nowadays, they apply the localization strategy based on their low pressures
for cost reductions and their high pressures for local responsiveness.

3.3.1. Low cost pressures:

Due to the huge total supply, suppliers' bargaining power is further reduced. Another factor
to examine is the company's policy of diversifying its supply chain in order to be independent of
a limited number of suppliers (Greenspan, 2019). Additionally, cost reductions were accomplished
by Starbucks through centralized purchasing, the establishment of standard contracts and set prices
for certain products, and the concentration of work under contractors that use effective cost-control
methods (UKEssays, 2018).

3.3.2 High pressures for local responsiveness:

Starbucks prioritizes each strategy based on current market conditions in local and regional
markets. Starbucks is able to adapt to the preferences of other cultures through localization,
convincing people in other areas to drink coffee. Starbucks' global brand foundation demanded

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product diversification and customization to fit the local market. This is especially impressive in
Asia, where tea is the favored beverage. Moreover, Starbucks has a high level of local
responsiveness, suggesting that its business strategy responds to the expectations or requirements
of the local community. Starbucks also has a low assimilation with high reactivity technique as
well. Starbucks' worldwide strategy of growing into major developed and emerging areas in order
to geographically diversify has been very successful, with operations in 80 countries (Nyandat,
2019).
3.3.3. Vietnam market:
However, in the Vietnamese market, the transnational strategy is applied and definitely
focused since there are both high pressures of cost reductions and high pressures for local
responsiveness. The pressures for cost reductions in Vietnam is high because of the challenging
competitiveness of Starbucks among the high demands of Vietnamese consumers for low-cost
coffee. Many local coffee chains specialize in the mid-market category, providing fairly priced
products and service. A cup of coffee from these businesses typically costs between 20,000 VND
and 40,000 VND (UKEssays, 2018), whereas Starbucks coffee prices approximately three times
as much as competitors in Vietnam (Travelhome.vn, 2021). Because the prices are competitive,
cost reduction efforts can be directed toward the Vietnamese coffee market. Furthermore,
Vietnamese people enjoy coffee in their own way; they do not regard coffee as a fast drink with
an anti-drowsiness effect, as Americans do, but rather as a culture: drinking and thinking (Nguyen
et al., 2020). Vietnamese customers' coffee-drinking habits substantially differ from traditional
Starbucks product offers, putting high pressures on local responsiveness in the Vietnam market.

4. IDENTIFY ISSUES IN VIETNAM MARKET

4.1. Macro - environment analysis (PESTLE Analysis)

4.1.1. Political forces

According to Smithson (2021), the government can support Starbucks to access more
customers and suppliers; however, bureaucratic red tape persists in developing countries can be an
external issue. This can create an impediment for Starbucks’s expansion within the Vietnamese
market while it is an advantage for local competitors that have political connections.

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 4.1.2. Economic forces
Vietnam's economy is growing fast in recent years, with a 7.1% GDP steady growth in
2019 and 2.9 percent in 2020 (The World Bank). As a result of a steady growth economy in the
last couple of years, a portion of the population has seen a significant increase in their income.
Vietnam is becoming a promising destination, attracting an increasing number of high-end coffee
chains, including foreign coffee chains such as Starbucks. However, despite the high GDP growth
rate, Vietnam’s GDP is not as high as that of developed countries; thus, it is recommended that
Starbucks expand in Vietnam for the long-run rather than opening stores rapidly.

Furthermore, as the unemployment rate in Vietnam falls, Starbucks will be able to gain
more revenue in the long run. Despite the fact that labor costs in Vietnam are lower than most
countries, Starbucks is having difficulty finding the right partners to expand more in other areas,
not just only in big cities such as Hanoi or Ho Chi Minh city (Uyen, 2021).

Since the Covid-19 pandemic, Vietnam's economy has suffered, and many cities in
Vietnam have implemented lockdown policies, reducing Starbucks’s business and revenue.
Another economic issue which related to the foreign exchange rate theory is that the exchange rate
from Vietnam currency to US dollar currency is low (1 US Dollars equals 22.808,500 VND);
therefore, it is difficult for Starbucks to adjust its general product prices to fit with Vietnamese
market. This is an important issue as the exchange rate at which one currency converted into
another can affect a firm's sales, profits, and strategy (Hill and Hult, 2017).

4.1.3. Social forces

Geographic influence
Vietnam is the second largest coffee producer in the World after Brazil with more than
30.5 million bags of coffee produced (Statista, 2021). Domestic coffee consumption rate in
Vietnam is high every year. Vietnamese people of all ages and genders drink coffee as a part of
their daily life; therefore, Vietnam is a potential market for Starbucks to enter, bringing Arabica
coffee taste to this destination. However, it seems to be a tough competition for Starbucks to enter
a “coffee land” like Vietnam.

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 As coffee is a traditional beverage in Vietnam, the coffee taste is different and special.
Additionally, Vietnamese people can make coffee by themselves and there are traditional coffee
shops in Vietnam which are Starbucks’s competitors when it involves the Vietnamese market.

Demographic influence
Within Starbucks, there are two most demographic factors relevant to their market sector,
which are age and income distribution. Firstly, Vietnam's population rate is high at the age from
twenty to forty years old, which is the age range that has the highest coffee consumption rate
(Statista, 2020). This is an opportunity for Starbucks to expand their business.

Vietnam Population, 2021 (World population review, 2021)

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 (Statista, 2020)

However, people from age twenty to forty in Vietnam do not have much ability to afford
Starbucks’s high price offerings. Starbucks targets middle to upper class men and women
customers because of the percentage of the general public who can afford their higher priced cups
of coffee on a regular or daily basis. The upper middle class are usually at the age from thirty-five
years old to forty-five years old. However, generation X and Y (Millennials) prefer traditional
Vietnamese coffee. Moreover, Robusta coffee beans are grown mostly in Vietnam, therefore,
suppliers, investors, Vietnamese people and also the government want to consume and export this
coffee as much as possible for the growth of the Vietnamese coffee industry and economy.

Another demographic issue is that the income rate in Vietnam is not high enough to afford
Starbucks’s price. Even after ten years of the fast-growing economy, Vietnam is still considered
as a lower-middle-income country. (About Viet Nam, 2020). This issue affected the Vietnam’s
coffee market given the price of coffee became sensitive. Therefore, foreign brands such as
Starbucks have not been profitable or grow rapidly as other markets as local Vietnamese chains
offer very competitive prices.

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 4.1.4. Technology forces
In Vietnam, the demand for drinking coffee is high which caused Vietnam to emerged as
a potential market for coffee machine brands such as Epicure, Tiross. The rising availability of
coffee machines helps competitors in Vietnam to provide and improve quality of coffee drinks,
which is an issue for Starbucks. Moreover, home-use coffee machines owned by individuals or
companies can also decline Starbucks’s market share Smithson (2021). However, in a developing
country, this issue does not pose as of a threat to Starbucks’s business in contemporary.

4.1.5. Legal forces

Impact of governments and related policies is one of the first things Starbucks needs to
focus on when entering a developing country such as Vietnam. Starbucks must adhere to
Vietnamese laws and regulations in order to avoid additional costs or issues. For example, business
and employment laws in Vietnam differ from those in other countries and must be thoroughly
understood before entering Vietnam.

4.1.6. Environmental forces

Coffee bean production may be hampered as a result of global climate change. Moreover,
Starbucks adheres to Coffee and Farmer Equity (C.A.F.E), a comprehensive set of social,
economic, environmental and quality guidelines for coffee production (Starbucks). Despite the
fact that it produces high-quality and ethically sourced coffee beans, its price is higher than that of
Robusta coffee, which is the most popular coffee flavor in the Vietnamese market.

4.2. Micro - environment analysis

4.2.1. Company
Starbucks has always set very specific goals for its brand development strategy during the
formation and development process. For starters, Starbucks' primary goal is to maintain its image
as a well-known and respected global leading brand. To achieve this goal, the company is focusing
its efforts on business activities and actively expanding into markets outside of the United States.
Starbucks is focusing on global market growth, particularly in potential emerging markets such as
China and ASEAN countries, with the goal of establishing a business base in the Indian market
within the next few years. Secondly, in order to grow through business expansion in new markets,

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Starbucks has not lost sight of its goal of preserving its brand identity by retaining traditional
goods, providing unique experiences, and sustaining its brand identity. Their products have been
brought to customers. Not only that, the company also strives for research and innovation activities
to introduce new products to the market that respond and adapt to changes in consumption or
differences in demand in different markets.

4.2.2. Competitors
This is a market with a lot of rivalries competing for the same proportion of the market,
which requires large investments, and it is unlikely to create product differentiation. Not only
facing the advantages and outstanding development of sidewalk cafes, Starbucks also has to
compete with foreign brands like Coffee Bean & Tea Leaf (USA) and Tous Les Jours (Korea), as
well as native brands like Trung Nguyen Coffee and Highlands Coffee, and some coffee shops are
emerging recently like Phuc Long Coffee and The Coffee House. However, when it comes to
entering Vietnam coffee market, there are two primary opponents for Starbucks which are Trung
Nguyen coffee and Highland Coffee. Trung Nguyen Coffee is the most popular brand in Vietnam,
with over 1000 coffee shops serving traditional Vietnamese coffee with a strong flavor. Their
products appeal to a select group of adults and cultured tourists. Highland Coffee has
approximately 100 locations, the majority of which are in major cities. It has been positioned as
the coffee for entrepreneurs and high-income workers. According to market research, customers
prefer Highlands Coffee because of its delicious drinks and large area, good service attitude, and
diverse goods.

4.2.3. Consumers
When a big brand like Starbucks enters a new market, it always causes a sense of curiosity
and a desire to explore. Young people are the most affected customer segment, as they are eager
for a new environment, are easily receptive, and have a strong ability to interact. As a result,
Starbucks customers may initially be young people who are curious and want to explore. However,
Starbucks is not a brand for young people, but rather for the business class, who are always busy
and have the lack of time. With such target customers, the brand faces both advantages and
disadvantages. The biggest advantage of this customer segment is that it represents a large portion
of the population in major cities, and Starbucks did directly target consumer psychology, which is

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that Vietnamese people are curious and enjoy discovering new things. However, one of their
disadvantages, mentioned in 4.1.3 Demographic influence, is that the price of their products is
quite high compared to the average Vietnamese living standard. The high price issue not only
caused by the low income rate in Vietnam but also by the different in price preference for a cup of
coffee. Vietnamese people used to drink a cup of black coffee or milk coffee with the range price
is about 10.000 VND – 60.000 VND. Specifically, the price of a cappuccino at Starbucks is 80,000
VND while in Trung Nguyen, it is only 65,000 VND. A specific analysis about customer level
included in Appendix C. Furthermore, the Vietnamese coffee culture prefers strong coffee mixed
with condensed milk, so they are unlikely to enjoy Starbucks’s American style coffee. Only young
people who have not yet formed their tastes can easily change and accept new things, but the
majority of young people are teenagers who still rely on their families. These are some of the
disadvantages Starbucks still faces in this market.

4.2.4. Suppliers and Distributors

Starbucks has demonstrated its determination to conquer the Vietnamese market by
beginning to purchase high-quality Arabica coffee in Vietnam. Not only that, in order to ensure a
long-term and sustainable supply, the company promotes production in the supply chain, as well
as coordinates and works closely with coffee growing cooperatives in some localities to improve
Arabica’s coffee quality. With its position as the world’s second largest coffee exporter, although
Starbucks’ premium coffee output is Arabica, only 6 – 7 percent, it is sufficient for this company
to use in the early stages to penetrate the Vietnamese market. Starbuck’s expansion of the chain of
stores may make it difficult to supply high quality, but with experience operating in over 50
countries around the world, this will not be a major challenge for Starbucks.

Starbucks has established its own coffee shop network to introduce and sell products.
Starbucks has a stores network that spans all over the world. According to “Mô hình chuỗi cung
ứng của Starbucks coffee” report (Pham, H., 2014), Starbucks entered the Vietnamese market by
opening its first store in Ho Chi Minh City in February 2013, through a license signed between
Starbucks and Y Tuong Viet Food and Beverage Company Limited - a subsidiary of Maxim's
Hong Kong Group. It can be said that Starbucks' product distribution system is very large and they
have very reasonable market expansion strategies to consume their products.

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5. RECOMMENDATIONS FOR VIETNAM MARKET

5.1. Recommendation 1: Localizing and updating menu

As Starbucks's strategy aims at localization, its revenues will be derived primarily from
aligning its products to the tastes and preferences of its market.

One of the most difficult obstacles Starbucks had was deciding to establish its brand in
Vietnam, the world’s second largest Robusta exporter and the country with the most coffee shops
per square mile than almost anywhere else on the planet. Vietnam is known for its bitterly Robusta
tastes, but Starbucks generally utilizes Arabica coffee beans, which give it a more refined flavor.
Aaron Robinson, Starbucks coffee engagement manager, stated Arabica coffee beans as “It can be
elegant. It can be complex. It can have a body and acidity that is interesting and can be used and
played with and blended into new, interesting tastes”.

Starbucks made an effort to tailor their experience for Vietnam’s target consumers by
developing Dolce Misto in 2015, which mixes the richness of Starbucks premium arabica coffee
with a layer of sweet dolce flavor that Vietnamese coffee drinkers enjoy. In early 2020, Starbucks
marked its 7th market anniversary in Vietnam by introducing the Vietnam Coffee Filter, which
recreated an icon of Vietnamese coffee culture - the traditional Phin coffee – and reimagined it for
customers in their stores (Starbucks, 2020).

Despite this, a noteworthy suggestion for Starbucks would be to address its customers more
directly by providing new seasonal flavors that are both taste and price exclusive to Vietnam.
Starbucks’s costs will almost certainly be higher than projected since the firm has positioned itself
as a premium coffee brand. Other than that, based on a study of ValuePenguin financial research
group, it was found that Vietnam is among four Southeast Asian countries where a Starbucks latte
costs three times more than in the U.S (TuoiTreNews, 2017). Starbucks can introduce a seasonal
menu with Vietnam’s classic black coffee made from Arabica coffee beans, Vietnam’s bac xiu,
Vietnam’s egg coffee,..and experiment with its taste and flavors to bring forth new unique tastes
that can influence the hearts of Viet’s customers.

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 Starbucks can also “localize” the seasonal menu prices in order to attract a wider range of
customers, and use this opportunity to extend its product lines for the middle-income sector.
Starbucks may also offer its seasonal product at a lower price point to appeal to the middle-class,
while still offering its more expensive line as premium.

5.2. Recommendation 2: New entry mode: Applying joint venture

Starbucks primarily uses wholly owned subsidiaries as its entry mode because it allows
Starbucks to maintain tight control over strategic coordination. Even so, there are situations where
being more flexible in terms of entry mode is advantageous to the firm. In this situation,
considering a joint venture might be a wiser move for Starbucks when entering a new market such
as China and Vietnam, where one is used to drinking tea, and the other is familiar with inexpensive
Robusta coffee.

Starbucks has formed a joint venture with various partners at various times since entering
the Chinese market. Following this, Starbucks gained extensive information about the Chinese
market in terms of laws, tastes and preferences, which also assisted Starbucks in reducing
operational expenditure and risks. As a result, Starbucks has recognized China’s culture and
modernized it to become a great hit in China, where they apply one of the main aspects to their
success, ‘Status’. Michael Zakkour (2017) stated that Chinese place a premium on gaining and
upholding reputation and status, especially for their family and community, and charge 20% higher
prices in China compared to other parts of the world.

Take Starbucks's success in the Chinese market and apply it to other difficult markets such
as Vietnam. As Starbucks collaborates with another firm, they may learn about Vietnam’s culture
and their tastes while also expanding their target market.

5.3. Recommendation 3: Organizing charitable community campaigns

Firms who participate in charity and community campaigns will be labeled “good” in this
social media era, and this will attract more customers because they will feel as if they are
contributing to something as well.

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 Starbucks has donated more than $3 million dollars to global relief efforts during a stressful
time like now, when COVID-19 is still a huge problem affecting the world’s economy. “In China,
where early signs of recovery from COVID-19 are showing, The Starbucks Foundation will
contribute $1 million to Give2Asia to fund a project focused on supporting front-line medical
workers, and strengthening grassroots capabilities to safeguard the future of local communities”
(Starbucks, 2020).

A small yet meaningful campaign like that can warm people’s hearts, making them feel
more obligated to Starbucks and eventually leading to them becoming loyal customers.

6. CONCLUSION

Starbucks uses licensing as its entry mode in the Vietnamese market and applies
transactional strategy. With respect to other countries, Starbucks had to reconsider their strategy
in Vietnam, which is the second largest coffee producer and there is a huge difference between
business operations and preferences of their customers in pricing and favor.
In conclusion, we can comment that in order to fully develop in a new market, Starbucks
has been flexible with its strategies (entry mode, marketing, product line, etc.) in order to most
effectively reach its customer and maintain its competitive advantage as a premium coffee brand.

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 7. REFERENCE LIST

Anon, Arabica vs. Robusta: Starbucks at Home US. Arabica vs Robusta Coffee Beans |
Starbucks® Coffee at Home. Available at: https://athome.starbucks.com/starbucks-
difference/content/arabica-vs-robusta/ [Accessed August 19, 2021].

Anon, The Starbucks Foundation Donates more than $3M to Global COVID-19 relief efforts.
Starbucks. Available at: https://stories.starbucks.com/press/2020/the-starbucks-foundation-
donates-more-than-3m-to-global-covid-19-relief-efforts/ [Accessed August 19, 2021].

Anon, 2017. Vietnam third most expensive country to buy STARBUCKS: SURVEY. Tuoi Tre
News. Available at: https://tuoitrenews.vn/news/business/20170428/vietnam-third-most-
expensive-country-to-buy-starbucks-survey/39398.html [Accessed August 19, 2021].

Buffy, Starbucks Việt Nam & Wowweekend, Tại Sao Starbucks chọn Việt NAM? - Why would
Starbucks Choose Vietnam? WOWWEEKEND. Available at:
https://www.wowweekend.vn/en/blog/Tai-sao-Starbucks-chon-Viet-Nam-Why-would-
Starbucks-choose-Vietnam-756?v=thumview [Accessed August 19, 2021].

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 8. APPENDIX

Appendix A: Starbucks’s ordering and making coffee process guideline

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 Appendix B: SWOT Analysis

This SWOT analysis table summarizes the environment analysis and includes issues in
the Vietnam market that are identified through the weakness and threats analysis. The following
are their strengths, weaknesses, opportunities and threats.

STRENGTHS WEAKNESSES

1. Strong brand image 1. High price

2. Strong financial performance 2. Imitability of products
3. Growth in stores 3. Generalized standards for most products
4. Extensive international supply chain 4. Procurement Practices
5. Acquisitions 5. Not large segmentation and target market
6. Moderate diversification Quality, Taste in Vietnam.
and Standardization
7. Efficiency, Strategic Planning, and
Reinvestment Strategy.
8. Matrix structure, employee treatment

OPPORTUNITIES THREATS

1. Business diversification and Product 1. Competition with middle-end or low-end

specifications
2. Introducing new product
3. Increase presence in developing nations
4. Partnerships or alliances with other
firms.
5. Exploit Latest Coffee Trends and
Technologies
cost coffee brands or big outlets
2. Rising price of raw coffee bean
3. Different drinking coffee habits in
different markets.
4. Income rate in Vietnam
5. Economic negatively affected by disaster
or pandemic
6. CoronaVirus pandemic (2020, 2021,
2022)
7. Coffee machine development

Starbucks has grown in size, volume, and number of devoted consumers throughout time.
According to the 2019 Interbrand rating, it has a brand worth of $11.7 billion. The company's
financial success is equally impressive. Starbucks retains a strong financial position in the market,
with $26.5 billion in annual revenue and $3.6 billion in profit in fiscal year 2019. Between 1998
and 2019, it extended its worldwide supply network and increased the number of shops from 1,886
to 31,256. The brand is recognized for having a large worldwide supply network. Starbucks
sources its coffee beans from the three primary coffee-producing regions of Latin America, Africa,
and Asia-Pacific. Starbucks has also expanded product and food items by diversifying its business
activities. For example, the addition of coffee-flavored ice cubes results in a stronger coffee taste.

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Starbucks has developed internationally as a result of its premium mixes and excellent coffees.
The brand also constantly offers high-quality, standardized products in all the sites.

However, in most areas, Starbucks' offerings are more expensive than those of its
competitors and other coffee shops, making them unaffordable for many middle-class and
working-class customers. Furthermore, Starbucks does not have the most distinctive product on
the market. This makes product imitability very easy for other businesses. Similar items are
available in other coffee shops and restaurant chains in Vietnam, such as McDonalds, McCafe,
and Dunkin Donuts, or Highlands Coffee, Coffee House. Some of its product offers are not in line
with the cultural standards of other markets. Crafted drinks, for example, are not associated with
consumer preferences in other regions, such as Vietnam or Australia. Furthermore, the firm has
been criticized by numerous social and environmental groups for its unethical buying methods.
They claim to buy coffee beans from destitute third-world growers. The brand has also been
accused of violating the "Fair Coffee Trade” principle.

Starbucks has a great business diversification which is an opportunity to diversify their

operations and market revenue. Besides, product specifications to satisfy target customers'
preferences in different markets is also a profitable opportunity. However, in the Vietnam market,
developing products is quite difficult and a long-term process for Starbucks because of different
culture and economic issues. As Starbucks is popular and has strengths in marketing, introducing
new products can be profitable and welcomed in new markets. Another opportunity for Starbucks
is the increasing presence in developing nations such as Asian countries due to its global expansion
strategy. Moreover, co-branding can bring benefits for Starbucks in order to strengthen market
share and brand image.

In the coffee chain industry, aggressive competition with low - cost coffee sellers and
coffee outlets can also pose a threat to its market position and future stability. Arabica coffee beans,
which are used mainly by Starbucks, have increased in price during the pandemic (Trading
economics). Therefore, additional cost for Starbucks to purchase Arabica coffee beans may reduce
Starbucks’s profitability and increase cost pressure, which threaten Starbucks’ international
business. Moreover, different drinking habits in different markets such as Vietnam or Australia

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can be a considerable threat for Starbucks when they enter these markets because of its high
pressure for local responsiveness and difficulty to become a favourite taste for customers.
Furthermore, since the Covid-19 pandemic, Starbucks has had to face some threats such as
lockdown circumstances or economic depressions in several countries.
Appendix C: Customer level

Low end customers Medium- end customers High end customers

Coffee • A lot of Vietnamese Sitting in a coffee store Sitting in a coffee

store people prefer to with comfortable store with
drink coffee “street environment (air comfortable
style” - sitting with conditioner, wifi) environment (air
friends in a simple conditioner, Strong –
coffee shop rather Fast wifi)
than sitting in a Required quite
premium coffee places for working
shop. With other premium
services (free
water,...)

Reasons Drinking coffee, Drinking coffee, Drinking coffee,

to come to Chatting with friends, Chatting with friends, Discussing business
coffee Relaxing (watching Relaxing (playing (mainly),
store street), games,... ), Relaxing (playing
Killing time Studying, Working games, watching
Killing time, movies),
Studying, Working,
Killing time

Demand Not to high Medium Premium - High

for service Fast service
quality

Price for a 10.000 - 20.000 20.000 - 50.000 > 70.000

cup of
coffee

Product Taste good Medium quality High quality

Starbucks target mainly on high-end level customers in their strategy as a brand mission and
direction. However, in the Vietnamese coffee market, people are mostly low-end and medium-
end level which not fit with Starbucks’s segmentation and target market (UKEssays, 2018)

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