Starbucks: Going Global Fast

This case study, Starbucks: Going Global Fast by P. Ghauri and P.Cateora, was prepared in 2010 according to the text, so numbers and references will reflect this fact.

Introduction

Starbucks has become a household name across the globe in the last few years: an amazing success story from the initial 17 Seattle coffee shops it began as 15 years ago when Howard Schultz decided to pursue his love of setting up coffee shops and bought the small chain from his bosses. In this short amount of time, Schultz along with his seasoned and skilled management team has transformed the coffee industry into a ubiquitous, fashionable consumer accessory. The company now boasts 5,689 outlets in 28 countries and is continuing to expand with incredible momentum. Starbucks sells drip-brewed coffee, espresso, lattes, and other hot and cold drinks. They have also added snacks and sandwiches in recent years.

Though Starbucks has seen fantastic growth in recent years, the company has not been without its struggles. Like other hegemonic corporations that have expanded and succeeded as far and as quickly, there has been oppositional discourse regarding Starbucks' aggressive strategies and criticism of the company's deliberate destruction of any competitor that could pose a possible threat to achieve their lofty goal of colonizing the globe, regardless of how big or small it may be. These tactics are unethical to some, but they have proven extremely profitable, resulting in astonishing profits of $181.2 million last year with reports showing sales continuing to climb. These numbers are an impressive prediction in an environment where endless corporations have faltered from corrupt management and other disconcerting factors. In the following report, Starbucks has been examined from several different angles that will be helpful in determining what the company can do to improve themselves further, especially in the Japanese market.

Explore and explain the controllable and uncontrollable elements (both internal and external to the organization) that Starbucks has encountered in entering global markets.

Controllable Elements

A. Price

Starbucks is a premium priced consumer product. For some markets, this makes the product even more desirable, giving it a desirable air of status and prestige. While it has been discovered in market research that younger generations of the domestic market are not so keen on shelling out $3 a coffee, some global markets are not as concerned because of the image that surrounds Starbucks. In Vienna, Starbucks is considered a hip alternative to the typical coffeehouse. Japanese consumers are also enthusiastic about the products, even if it costs more, because they like the taste. The English market has also proved that they are willing to pay the premium price, which is reflected in their position as Starbucks' second-biggest overseas market.

However, not all markets are so ready to accept the products and price Starbucks' is spreading. The notoriously pretentious Italian coffee culture is less quick to abandon their large number of affordable, respected coffee bars. This is largely due to the demand for homemade food being served at these places, an area Starbucks has wrestled with. The coffee is also said to be tastier and is significantly cheaper. If Starbucks ever decides to enter Italy, they will have to take these issues into consideration and determine whether it is possible to lower their prices without tarnishing their premium reputation.

B. Placement

Across the globe, Starbucks has established itself as an "oasis of tranquility" where its clientele can comfortably socialize, study, surf the web, read, or just sit and relax to the music played in the stores while they drink their coffee. They have focused on providing ample, comfortable seating so that customers will feel free to sit and enjoy their coffee leisurely. Due to the company's "hip" reputation in foreign markets, it could be beneficial if they direct their attention to creating unique spaces and playing music that will be popular with markets at different stores, delivering the customized experience their customers desire. For example, in trendy neighborhoods it would be a much better bet to play music from locally admired bands rather than their signature elevator jazz like Kenny G. Another option they could consider is to feature local artists' work on store walls as they have done in some American stores. Small touches like this will help Starbucks achieve the neighborhood, comfortable feel that they are striving for and encourage enthusiasm to frequent shops. Store locations are also important and Starbucks has picked up on this, placing stores in highly trafficked areas where people are likely to stop for a break from their hectic lives.

C. Work Environment

Recently, Starbucks has been faced with dissatisfied employees due to extensive work hours without sufficient compensation. Working extra hours without pay has left many managers feeling too stressed and exhausted to properly do their job, as well as underappreciated by the company they are giving their time to. In a cafe where the employees serving customers are expected to strike up light-hearted conversation and attend to tasks with a pleasant smile, disgruntled employees can be a major liability to the desired atmosphere. Starbucks is attempting to remedy these complaints, but given the nature of the low-cost business model, it is difficult to pay demanded rates. A clever remedy to some of this discontent could be to give employees stock options, making them stakeholders. In global markets, where regulations and employee benefits are different and often more stringent, as in France, Starbucks may struggle to profitably survive.

-Image: Though it is not mentioned in the case study, Starbucks' website heavily emphasizes their commitment to being as environmentally friendly as possible and also uses fair trade products sourced through economically disadvantaged countries like Ethiopia. They also attempt to maintain a politically neutral image, though there was an incident regarding Schultz badmouthing Palestinians at a Seattle synagogue. He quickly retracted the statement, and claimed he was "pro-peace" for both sides so as to not limit future growth possibilities with Palestinian supporters.

Uncontrollable elements

A. Economy

The market is often a precarious, unpredictable place. Starbucks relies substantially