international marketing - starbucks coffee case

International Marketing

Group 1:-Nguyen Thu An

-Nguyen Khac Thuy An-Nguyen Le Minh Anh

-Huynh Minh Tam-Nguyen Thanh Phu

• Background

• Controllable and uncontrollable elements

• Sources of risks and potential solutions

• Starbucks with its corporate strategy

• Certain context: Japan

• 1971, Jerry, Zev, Gordon open a small coffee shop.– Sold fresh roasted coffee beans and brewing

equipment.

• 1983, Schultz sold coffee by the cup.

• 1987, sell Starbucks name for $3.7 million.– Schultz believed that they could open 125 outlets

within the following five years.

• Saturation of US market within 2 years.

• Going global, profit reduced to 20-50%.

• Problems of changing generation.

• Employee dissatisfaction on odd hours, low-pay.

• Maintaining the growth rate.

• All company owed outlets.

• 1% of revenue in Advertisement.

• Design and open a store in 16 weeks.

• Initial investment recovered in 3 years.

Price:

– Higher price in Korean

Product:

– Italy serves non-coffee items too

Promotion:

– In local Word of mouth

– 1% of revenue on Advertisement of new launches

Economic Force:

– Economy down turn results by 14% in Japan

Competitive Force:

– Similar fare by local rivals in Japan

– Imitators Coming in to grab the market share in England

Cultural Force:

– The youth is more enthusiastic in embracing new things

Political/ Legal Force:

– Secret regulations and Labor Benefits in France

What are the major sources of risk facing the company? Discuss potential solutions.

The market:

• The saturations of United States market.

• The crowding of many stores so close.

The customer:

• Changing the generation

• 20 years old group vs 30 years old group

The employee:

• Odd hour – low pay.

• Over worked and underappreciate.

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• The market:

– Eight states of US that no Starbucks stores.

– Prevent Self-cannibalism (location of the stores).

– Licensing and franchising for foreign investors.

– Go global.

• The customer:

– 30 years old group and older use coffee more often.

– Do market research to determine consumptions habits for younger consumers.

– Upgrade the Wi-Fi connection.

• The employee:

– Improve the employee satisfaction.

– Increase the salary.

• 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.

• 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.

• 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.

• 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.

Competitors

Mt. Rainier Georgia

What Starbucks did?

Ready-to-drink beverage

Sandwich and less – sweet desserts

Result The largest market

722 stores opened since 1996

Drive through service

Language adaptation

. Product: Japanese flavor adaptation Japanese ingredients:

Sakura, Hokkaido milk, YuzuCha Shake

Healthy beverage: sugar beet

Fresh products: Coffee in sachet and other ingredients in package

Understanding Japanese culture

. Place: School and work Vending machine at metro

station