starbucks-going global fast

1. STARBUCKS- GOING GLOBAL FAST
Prof: Hamad alghadeer
Student: Aasem Alsayyed Soliman (201215004)

2. BACKGROUND
 Starbucks Corporation is an American global coffee company
and coffeehouse-chain based in Seattle, Washington.
 The first Starbucks opened in Seattle, Washington, on March
30, 1971 by three partners that met while students at
the University of San Francisco: English teacher Jerry
Baldwin, history teacher Zev Siegl, and writer Gordon Bowker.
 They sold beans and coffee makers.
 Customers were encouraged to learn how to grind the beans and
make their own freshly brewed coffee at home.
 Starbucks name came from a character in classic novel Moby
Dick, published in 1851, which takes place in sea.
 Logo was chosen with the start of the company in the year 1971.
The founders wanted the logo reflects the historical relationship
between coffee and sailing traders.
 In 1987, the original owners sold the Starbucks chain to former
employee Howard Schultz and quickly began to expand.

3. COMPANY GROWTH
 Starbucks grew from 17 coffee shops in Seattle 15 years
ago to over 20,891 outlets in 62 countries.
 including 13,279 in the United States, 1,324 in Canada, 989
in Japan, 851 in China, 806 in the United Kingdom, 556 in
South Korea, 377 in Mexico, 291 in Taiwan, 206 in the
Philippines, 171 in Thailand and 10 in India.
 The company planned to open a net of 900 new stores
outside of the United States in 2009.
 Since 1987, Starbucks has opened on average two new
stores every day.
 The first store outside the United States or Canada opened
in the mid-1990s, and overseas stores now constitute
almost one third of Starbucks' stores.

4. SOME CHALLENGES FACING THE COMPANY
 Starbucks faces antiglobalization movement.
-During the World Trade Organization talks in November
1999, Starbucks was among the aims of protesters , a
symbol, to them, of free-market capitalism.
 Dropping Sales from ($10.4 billion) in 2008
to ($9.8 billion) in 2009, and dropping in
profits from $673 billion in 2007 to $582
billion and $494 billion in 2008, 2009
respectively.

5. SOME CHALLENGES FACING THE COMPANY
 The firm closed 475 stores in the U.S. in
2009 to reduce costs.
 Saturated market with over 10,000 stores
scattered across the United States and
Canada. (there are still eight states in the United
States with no Starbucks stores.)
 self-cannibalization (opening stores in the same
area)

6. SOME CHALLENGES FACING THE COMPANY
 - global expansion poses huge risks for Starbucks,
it makes less money on each overseas store
because most of them are operated with local
partners(it reduces the company’s share of the profits to
only 20 percent to 50 percent).
 Starbucks faces cultural challenges. After riding the
wave of successful baby boomers (who born from 1946 to
1964) through the 1990s, the company faces a hostile
reception from its future consumers, the twenty- or thirty-
somethings of Generation X (who born from 1960 to 1980)
— cultural changes.
-The company knows that because it once had a group of
twentysomethings ignored for a market study.

7. SOME CHALLENGES FACING THE COMPANY
 The company facing employees
dissatisfaction (Dissatisfaction over odd
hours and low pay is affecting the quality of
the service and even the coffee itself)—
feeling overworked and underappreciated.

8. SOME CHALLENGES FACING THE COMPANY
 Starbucks faces competition from competitors such
as Nestle, Dunkin’ Donuts and McDonald’s and
their new McCafés .
 Starbucks faces steep competition in Japan,
including Starbucks lookalikes.
-One of the most popular brands, called Mt. Rainier, is
emblazoned with a green circle logo that closely resembles
that of Starbucks.

9. STARBUCKS AROUND THE WORLD

10. QUESTION 1
 Identify the controllable and uncontrollable
elements that Starbucks has encountered in
entering global markets.

12. CONTROLLABLE
 Product
-Hot and Cold beverages, pastries, snacks, etc…
 Price
- Starbucks charges a premium prices for their products
 Promotion
-The Company has controlled its promotional strategy and has saved a lot of marketing
cost by mainly relying on worth of mouth and the company has good brand name in
national market as well as in overseas market.
 Channel of distribution
- Starbucks have 20,891 outlets in 62 countries which shows that the company has good
controlled over the channel of distribution.

13. CONTROLLABLE
 Research and development
-The Company has also controlled over its research and development
process such as in 800 locations it has installed automatic espresso
machines to increase the speed of service and it has also offered
the prepaid card which clerks swipe through a reader to deduct a sale,
thus the company cuts transaction times in half.
- Starbucks launched Starbucks Express its boldest experiment yet, it
blended java, Web technology, and faster service, At about 60 stores in
the Denver area, customers can pre-order and prepay for beverages
and pastries via phone or on the Starbucks Express Web site.
-They just make the call or click the mouse before arriving at the store,
and their beverage will be waiting.
-Starbucks continues to try other fundamental store changes. It
announced expansion of a high-speed wireless Internet service to
about 1,200 Starbucks locations in North America and Europe.

14. UNCONTROLLABLE
 Economic Forces.
-Economic conditions.
-localprice range of commodities
 Competitive Force.
-Local competitors.
-Imitators Coming in to grab the market share.
-Coffee is a beverage that has a worldwide appeal. Starbucks entering
the
global market might face stiff competition from local coffee brands in
different countries. While Starbucks may hold an advantage in terms of
brand recognition worldwide, local brands can hold an advantage in
terms

15. UNCONTROLLABLE
 Cultural Force.
-Different cultures.
-Capturing the local cultural appeal of different countries may prove to be
challenging especially to a brand going global. There has to be a certain
amount of
standardization while applying the right localization.
-The solution is to overcome cultural challenges by studying
And researching on coffee consumptions habits of locals.
 Political/legal Force.
-Different laws and regulations in different countries.
-Starbucks had a lot of issues regarding overworked but underpaid
employees as it continues its growth globally and dealing with local rules
and regulations.
-For example, France has very generous labor benefits as opposed to what Starbucks is
currently implementing.

16. QUESTION 2
 What are the major sources of risk facing the
company and discuss the potential
solutions?

17. RISKS
 Saturation of United States market.
-There are still eight states in the United States with no
Starbucks stores.
-Prevent Self-Cannibalism----Stores must be strategically
located.
-Starbucks have to Offer new food and other non-coffee
items
-Market research should be carried out before investing a
new store and realize the fact that the market can become
saturated.
-Go global. it will have to depend on overseas growth to
maintain growth rate.
-Licensing and franchising for foreign investors.

18. ANSOFF MATRIX

19. RISKS
 Problems of changing generation.
-Consumers 35 years and older tend to consumer coffee more often than the
18 - 25 age group
-Market research should be carried out to study consumptions habits for
younger consumers.
-Starbucks should offer innovations such as wireless networks to its
customers to overcome challenge in order to attract the next generation
of customers.
 Dissatisfaction of odd hours and low-pay.
-Positive reinforcement which leads to higher feelings of job satisfaction
- Improve the employee satisfaction. So, the quality of service as well
coffee increases

20. QUESTION 3
 Critique Starbucks overall corporate strategy.

21. FAULTS
 Eight cities in U.S. remained untapped.
 Relying on word of mouth, Starbucks spends just
1% of revenues on advertising.
 Low payment to employees.
 ―predatory real estate‖ strategy—paying more than
market-rate rents to keep competitors out of a
location.
-Not only it is claimed as an unfair attempt to drive out
small, independent competitors who could not afford to pay
inflated prices for premium real estate, this also leads to
monopoly and then leaves customers annoyed with
fewer choices.

22. FAULTS
 Stores Expansion in the U.S.
-Growing continuously rapidly, Starbucks has done
clustering several locations in a small geographical
area. Doing so eventually will inevitably act to
cannibalize existing locations same store sales.
 Stores Expansion Globally
-Stores expansion in other countries too rapid to
concern the real preferences and habits of local
consumers and competitors.

23. FAULTS
 Predatory real estate strategy
-Buying out competitors' leases
-Not only it is claimed as an unfair attempt to
drive out small, independent competitors who
could not afford to pay inflated prices for
premium real estate, this also leads to
monopoly and then leaves customers
annoyed with fewer choices.

24. FAULTS
 Labor Disputes & Involvement in Lawsuit.
-Because of Starbucks’ payment and policies
toward its part-time and full-time employees
do not compatible with working hours and
duties.
- 470 Frustrated store managers sued
Starbucks in 2001 for allegedly refusing to
pay legally mandated overtime.

25. QUESTION 4
 How might Starbucks improve profitability in
Japan?

26. IMPROVING PROFITABILITY IN JAPAN
 Reduce Price / Increase Benefits.
-targeting mid-income levels were frequent buyers and grew substantially.
 Offering new beverages according to the Asian or Japanese
culture and provide wider range of different tea or soft drinks
–Tea drinks will increase popularity because their perceived value of
healthy benefits.
 Offering special, Japanese food in Starbucks
stores, Japanese candies, cakes or sweets or even snacks
– Starbucks’ may become more Japanese!
 Following the health conscious trend by reducing caloric and fat
content .
 Online, phone ordering and drive-through service for busy
Japanese.

27. QUESTIONS
&
ANSWERS

28. THANK YOU