Starbucks’ CEO, Howard Schultz, asks an interesting question: “What would happen if one takes the high-quality coffee from Starbucks and connects it with the charm and atmosphere of European cafés? Starting from this idea, the company developed in a unique way. Starbucks is now the world leader in the premium coffee market with 128,898 employees in more than 17,000 locations and a revenue of US $ 9.77 billion. Starbucks has revolutionized the coffee business. Its main marketing strategy is to present the Starbucks store as a “third place” between work and home. Starbucks has expended rapidly abroad, but there were and are some cultural differences through which Starbucks has problems. I will try to analyze these problems and demonstrate solutions.
Table of Contents
1. Introduction
2. History
3. Acquisition and Expansion
4. Strategy
4.1 What Is Starbucks’ Product?
4.2 Changes in Society
4.3 Strategy in General
5. Problems with Starbucks’ Strategy
6. Problems in Expanding Abroad
7. SWOT Analysis
8. Conclusions
Research Objectives and Themes
This essay analyzes the business model and global growth trajectory of Starbucks, specifically examining the strategic factors behind its success and the significant cultural and operational challenges encountered during its international expansion.
- The evolution of Starbucks from a local Seattle retailer to a global coffee leader.
- Core marketing strategies, including the "third place" concept and high-quality positioning.
- Operational challenges related to rapid international expansion and intense local competition.
- Strategic evaluation of strengths, weaknesses, opportunities, and threats (SWOT).
- The impact of cultural differences on consumer behavior and market acceptance abroad.
Excerpt from the Book
Problems in Expanding Abroad
In 1996 Starbucks began expanding into foreign countries, first in Japan, Singapore and the Philippines and in the following years into Europe. In some countries Starbucks was and is very successful; in others the numbers were below expectations. On the following pages I try to clarify the reasons for these different developments and the cultural peculiarities on which these are based. To date, Starbucks’ 1532 overseas stores, in over 30 countries, which account for 23% of its stores, yet only 9% of sales, are net money losers.
The causes of the troubles include the fact that, unlike in the U.S., Starbucks faces big rivals in Europe and Asia. Another reason why Starbucks has not been as successful abroad as in the U.S. may be the series of joint ventures Schultz agreed to in order to expand quickly. While the company gets a portion of revenues and profits as well as licensing fees for supplying its coffee, it has been harder than in the U.S. to control costs. Real estate and labor costs, for example, are sometimes far higher than those in the U.S.
Starbucks’ biggest problems have occurred in the countries in which a coffee-culture already exists. In Germany only 62 cafes were opened in four years, although originally up to 200 were planned. By contrast, in the UK more than 400 were opened in eight years. One reason for this is that Germans prefer to make their coffee at home, which is much cheaper and more personalized.
Chapter Summaries
Introduction: This chapter introduces Starbucks as a global coffee leader and defines the core marketing strategy of establishing the store as a "third place" between work and home.
History: This section details the founding of Starbucks in 1971, the influence of Howard Schultz, and the early corporate development of the company.
Acquisition and Expansion: This chapter covers the transition of Starbucks into a public company and its aggressive growth strategy, beginning with the U.S. market and expanding internationally by 1996.
Strategy: This section examines the product portfolio, the role of societal changes, and the operational tactics used to penetrate new markets, such as partnerships and strategic alliances.
Problems with Starbucks’ Strategy: This chapter addresses internal challenges, such as cannibalization due to excessive store density and increasing pressure from local competitors.
Problems in Expanding Abroad: This analysis investigates the difficulties of entering markets with established coffee cultures, highlighting high competition and cultural differences in consumer habits.
SWOT Analysis: This section provides a strategic overview of the company's internal strengths and weaknesses, alongside external opportunities and threats in the current market environment.
Conclusions: The final chapter summarizes the current state of Starbucks and suggests that future success depends on refocusing on core business values while adapting to cultural regionality.
Keywords
Starbucks, coffee, expansion, business strategy, internationalization, SWOT analysis, retail management, coffee culture, global market, marketing, competitiveness, consumer behavior, Howard Schultz, third place, operational challenges.
Frequently Asked Questions
What is the primary focus of this document?
The document provides an analytical overview of Starbucks' business evolution, focusing on its growth strategies and the specific challenges it faces when expanding into international markets.
What are the core themes addressed in the text?
Key themes include the company's historical development, its strategic "third place" concept, internal operational problems, and the complexities of competing in markets with strong pre-existing coffee traditions.
What is the central research question?
The essay explores how Starbucks built its success, why it encountered significant problems during its international expansion, and what solutions or strategic adjustments are required for future growth.
Which analytical method is used in the study?
The author uses a descriptive analysis approach, incorporating historical data, business performance metrics, and a SWOT analysis to evaluate the company's competitive position.
What does the main body cover?
The main body covers the company's history, its specific product and marketing strategies, the issues related to rapid internal expansion, and the cultural hurdles experienced in foreign markets like Europe and Asia.
Which keywords characterize this work?
The work is characterized by terms such as global expansion, coffee culture, competitive strategy, market challenges, and brand management.
Why does Starbucks face difficulties in countries like Germany?
Starbucks struggles in countries with established coffee cultures because local consumers often prefer preparing coffee at home due to lower costs and higher levels of personalization compared to the Starbucks retail experience.
How does the competition in the UK differ from the US market?
In the UK, Starbucks faces fierce competition from well-entrenched local chains like Costa Coffee and Caffé Nero, which often compete on price and are deeply integrated into the local market.
Why has Starbucks avoided entering the Italian market?
Howard Schultz has shown great respect for Italy's unique and highly developed coffee culture, leading the company to avoid entry due to the high risks of challenging such a deeply rooted cultural tradition.
- Quote paper
- Christian Mangold (Author), 2010, The Starbucks Company. Success Strategy And Expansion Problems, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/159596
