Starbucks International economics
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  • 1. RESUMING INTERNATIONALIZATION AT STARBUCKS Group:2 Aravind Uppala 122 Dasari Pradeep 126 Sangam Lalsiva Raju 138 Rajesh Mishra 151
  • 2. PACE α 1/PERFORMANCE Year Pace Performance Reason 1993 Moderate Low Increase of assets 115% led to second roasting plant estb’ 1997&98 High Moderate Acquisition of Seattle, added 65 stores 2001 High 10.85% 75% Of pace from Europe 2008 Low Low Global recession & Increase in price of coffee
  • 3. REGULARITY α PERFORMANCE Year Rhythm Performance Reason 2006-09 More regular than 2002-05 Lesser than Global ROA of 2002-05 economic recession & Competition
  • 4. SCOPE α 1/PERFORMANCE Year Scope Performance Reason 1998 High Moderate Acquisition of Setattle coffee 2008&09 Low Low Global economic recession THREE MOTIVES TO GO ABROAD •Industry-based view: increase profitability, and the target countries chosen usually have real potential in size of population and with high disposable income (western nations had great impact on Americanization)
  • 5.  Resource based view: purchasing only the highest quality of coffee beans from ideal coffee- producing climates. ( upgrading its SCM) it makes starbucks price and quality more competitive ( differentiation strategy) in the new markets and world wide coffee industry.  Unique strategy of key locations helps to attract foreigners. This promotes starbucks brand image and raises prominence. Institution bases view: shareholders expectations for high returns, as domestic market is saturated , the managers are pressurized by the shareholders to internationalize thus analyzing coffee industry in order to leveraging their core competence. MAIN REASONS:  reaching saturation point in U.S  High potential of new emerging markets  Brand recognition in many countries  Customer loyalty and security in the SCM
  • 6. STARBUCKS- TOO AGGRESSIVE ????  One of the best ways to increase market share is to internationalize ( started doing when the home market become saturated in 1996)  Lots of countries lots of shops lots of countries many shopsless countries less shops But, after fast internationalization starbucks always back off to slow the pace, rhythm and scope to do its market penetration in existing markets and market development in new markets. Localizing starbucks provides new products to cater different cultures of countries by product development strategy. But, strabucks is criticized for growing too fast which led to decrease in product quality and company image, cannibalizing turnover in closely located stores, driving out small independent competitors International Strategy Global standardization strategy Localization Strategy
  • 7. How should Starbucks approach internationalization going forward ?  Mergers and collaboration for expansion proved beneficial in the past. We recommend that Starbucks continue to work with McDonald’s to prevent cannibalization. Improve the service and experience within each existing store instead of focusing on geographic spread.  Need to explore countries with the highest per capita coffee consumption.  Consider penetrating the hospitality markets globally through hotel chains (Marriot, Hilton) which offer in room brewing as well as hospitality counters in the main foyers. Already have a presence in many airport terminal locations and could continue to expand in this way.  When entering a foreign market, Starbucks' strategy was to retain its core service and product offering as much as possible, while adapting to local demands in the host country. I think this is a good way to survive in foreign markets. They have to follow this policy.