Starbucks Corporation: Competing in a Global Market

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30 March 2016

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1. What factors in the global environment provide opportunities or threats for Starbucks? How do Starbuck’s strengths and weaknesses match up to its opportunities and threats? Factors in the global environment provide both opportunities and strengths for Starbucks. Opportunities such as increased revenues, further expansions, and achieving their goal of becoming the most respected brand worldwide. Starbucks also faced threats. These threats include dealing with growing antiglobalization overseas and their huge risk of less return on each overseas store, this deriving from overseas operations being run by local partners instead of Starbucks themselves, as is normally the case in North America.

Starbuck’s strengths of capital, dedication to expansion, flexibility (ability to reorganize as may be required by varying cultures), and strategy of brand name recognition (the primary driving force of their expansion success) matches extremely well with their opportunities overseas. As opportunities permit, Starbuck’s strength of capital will allow timely/quick construction efforts for preparing operation facilities in their overseas markets. Also, their prior dedication to expansion, flexibility, and brand name strategy all directly corresponds with their opportunities of further expansions, and achieving their goal of becoming the most respected brand worldwide. Starbuck’s weakness of competing against itself (opening too many stores in particular locations /blanketing an area) greatly increases the likelihood of encounters or protests from oversea antiglobalization groups/protestants. Also, Starbuck’s weakness of competing against itself would mean even greater losses of returns overseas if it doesn’t undergo evaluative adjustments.

2. Describe Starbuck’s functional-level, business-level, and global strategies. How are these related? Starbuck’s functional-level strategy, according to the case, “is simply: Blanket an area completely, even if the stores cannibalize one another’s business.” The case further states that “A
new store will often capture about 30% of the sales of a nearby Starbucks, but the company considers that a good thing: The Starbucks-every-where approach cuts down on delivery and management cost, shortens customer lines at individual stores, and increase foot traffic for all the stores in an area.” Starbuck’s business-level strategy is seen in their flexibility and efforts of providing customers with an experience relative to their cultural background. According to the case, in order to serve their customers with more than mere coffee, Starbucks strived to create their stores with a distinct feel, yet comfortable, relating to the cultural setting of a location. This made Starbucks fit its interior décor to the local architecture, especially in historic buildings. Also, Starbucks was willing (flexible) enough to adapt the food it offered in-store to local taste. For example, in Asia, Starbucks offers curry puffs and meat buns contrary to what is offered in North America or Britain. Starbuck’s global-level strategy, according to the case, is referred to as the Starbucks way. In the case it is stated that “the company finds local business partners in most foreign markets… It tests each country with a handful of stores in trendy districts, using experienced Starbucks managers.” The case further states that Starbucks “then sends local baristas to Seattle for 13 weeks of training. Then it starts opening stores by the dozen.” These three levels of strategies are related in terms of the support. They all support Starbucks vision and mission statement.

3. What changes did Starbucks have to make in its domestic business model to accommodate the special requirements of its international markets? Why were these changes necessary? In much of its overseas expansions, Starbucks had to change its commitment of ownership and resort to partnerships/joint ventures as reasonable alternatives. They did this in order to develop lasting overseas connections and gain advantage in local regulation negotiations. Even though its coffee lineup did not vary, Starbucks also had to change its menus and adapt its food to local taste. Starbucks also changed its interior décor to the local architecture, especially in historic buildings.

4. Why was there opposition to Starbucks’ expansion efforts in the Primrose
Hill neighborhood in London? Why was there opposition to a location in the Forbidden City in Beijing? Why was the company’s response to these two situations so different? It was the Primrose Hill community at-large which opposed Starbucks entry in the location, however, there are other underlying issues discussed in the case. The Primrose Hill community’s claims for opposition vary, beginning with littering, disruption from deliveries to Starbucks, and ending with a critic’s quote saying Starbucks was “renowned for not paying proper money to coffee growers.” According to the case although the oppositions seemed to have been focused on local planning issues, there was an antiglobalization element as well. Also, in the case Soon Beng Yeap added that their were underlying issues regarding the specialty coffee market. These were issues having to do with the market becoming already crowded and extremely competitive with several other chains such as Café Nero, Coffee Republic and Costa Coffe making a strong push for market share. There were oppositions to the Starbucks location in the Forbidden City, the main reason being bad media coverage. A survey by in a local Beijing newspaper called People’s Daily showed that over 70% of nearly 60,000 people surveyed we opposed to the café’s entry into the location. In the survey, the reason of opposition referrers to Starbuck’s location in the Forbidden City as a damaging effect to Chinese cultural heritage and its atmosphere. CNN then took the survey and began their share of media coverage in the United States. According to the case, survey was the only source used by most reporters covering the issue throughout its entire duration. The issue of Starbucks location was discussed only from the point of view of the survey while disregarding Starbucks support from the administrators of the Forbidden Palace and other government officials. Starbucks response to these two situations was different. This was because in one situation (Primrose Hill) the immediate community, including leaders of that community, showed disapproval of opening a store and in the other situation (Beijing, The Forbidden City) there was, reportedly, no immediate community, however approval came from both government officials and leaders in the immediate location. Also, there seem to have been a greater level of antiglobalization in Primrose Hill, apparently even among leaders, than in the Forbidden City of Beijing. Ultimately, it seems as though Starbucks decisions to open stores is based
on a location’s receptivity.

5. What difficulties is Starbucks experiencing as it attempts to expand in Rio de Janeiro? In your opinion, what action(s) should the company take? What outcomes do you expect will result, if Starbucks took your advice? Starbucks is experiencing the threat of sabotage by nongovernmental organizations, like the Organic Consumer Association, upon their attempts to expand in Rio de Janeiro. These organization, as mentioned in the case, had be preparing from Starbuck’s entry into Brazil by recruiting local activists and had been informing Starbucks that they would oppose its entry by petitions to the local council to reject its (Starbucks) application. They also threatened to start picketing in front of the stores once construction was initiated. As mentioned in the case these activities by the nongovernmental organizations bring serious/disturbing implications to expansion plans; Implication which Starbucks seem to have faced in the past except for the fact that Brazil it an origin country (coffee producing country) of Starbucks. Therefore, I suggest that Starbucks reconsider their plans for another time and develop the workable system, mentioned to the case, for dealing with “puch-backs.” This is because, as might be thought in the case, they aren’t only about to jeopardize their brand name but possibly their suppliers/supplier relations. Starbucks brand name and supplier relationship wouldn’t be in immediate danger of negative publicity and as a result they would retain current profitability in hopes of making more informed decision later.

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