Resuming internalization at starbucks

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Resuming internalization at starbucks..In this following questions are answered:
How did the pace, rhythm and scope of Starbucks' internationalization in the coffee industry affect its performance?
how Starbucks approach internationalization?
Was Starbucks too aggressive in its internationalization?

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Resuming internalization at starbucks

  1. 1. Resuming Internalization at Starbucks
  2. 2. Q(a). How did the pace, rhythm and scope of Starbucks' internationalization in the coffee industry affect its performance?
  3. 3. Pace… relative growth in foreign stores each year • Negative association between pace and performance • Seemingly no relationship between pace and ROA Rhythm… regularity in internalization • Irregular rhythm more volatility lower performance • Regular rhythm higher ROA (exception: 1994-97) • Performance more sensitive to rhythm of foreign expansion than domestic expansion Scope… growth of number of countries entered into over a period of time • Negative relationship between scope and returns • Exceptions: 1998, 2000, 2008-09 (economic recession)
  4. 4. Performance PaceRhythmScope This graph is a mere depiction of the generalized relationship between the variables in concern, to aid understanding of the concept
  5. 5. Q(b). Was Starbucks too aggressive in its internationalization?
  6. 6. Yes, Starbucks was too aggressive because: • 56 countries, approx. 17,000 stores • Created a joint venture with a reputable and capable local company with retailing know-how in the target host country • Targeting local demands & Culture in the host country, for instance; serving tea in Japan, China omitting the Siren from the logo in Muslim countries
  7. 7. The other side of the coin… • Focusing more on expansion and not on improving customer service • ROA was declining in spite of foreign operations • Involvement of child labor in their operations • Decreased product quality • Problem in retaining their core service and product offerings
  8. 8. Q(c). How should Starbucks approach internationalization going forward?
  9. 9. • The company should recognize the problem and the need to make a decision • The company had been too concerned with competitors and had focused on expansion instead of improving customer service Identification phase • A solution is formed to solve the problem identified in the previous phase • Need to slow the pace of U.S. store growth and renew its focus on the store-level unit and also determine a way to deal with extreme competition as well as build a name with their customers again Development phase • During this phase, a decision is chosen • Launching a cheaper alternative to the market, Starbucks Via, an instant coffee • Should also launch a program for all of its stores to help with the customer service issues • Should train all the store managers and employees to deal with customers in a uniform way • Community outreach programs to build their reputation with customers again Selection phase Incremental decision model should be used to evaluate their current situation and move forward
  10. 10. • “Slow and Steady wins the race” As experienced from past, Starbucks should not rush in opening new stores, rather it should focus in improving the customer service and satisfaction, as suggested by Howard Schultz. • Enter in only those countries who seem to have been less affected by the economic slowdown and where a steady economy is forecasted in future. • Should try to enter new markets only with local partners as the local partners will have thorough knowledge of the market and risk will also be divided. • Should have a flexible rate structure from country to country without compromising with the quality i.e. each country has varying affordability and willingness to pay. A country like India can give Starbucks huge business but people here hesitate to pay heavy charges just for coffee.
  11. 11. • Invest in only those assets where they expect high return. • Try more to create a difference between Starbucks and its competitors.( In India, may be a customer will go to Starbucks once to try it because of its reputation, but that does not mean he will keep on coming again and again. He might instead got to CCD where he will get a good ambience , good coffee and that too at a cheaper price.) • Try building strong bonds with the customers for customer retention. • Should take corporate responsibility very seriously, as it will give a very good face to Starbucks in new markets
  12. 12. Thank You! Presented by: Swasti Bardhan Monika Bansal Sulagna Dutta Tania Ann Koshi

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