starbucks - final presentation (2)
TRANSCRIPT
CASE STUDY
STARBUCKS: GOING GLOBAL FAST
STRATEGY, MANAGEMENT & PLANNING
Professor Jorge Lengler
30TH APRIL 2012
AGENDA
STARBUCKS ANALYSIS
MARKET ANALYSIS
INTERNATIONAL STRATEGY
RECOMMENDATIONS
STARBUCKS: GOING GLOBAL FAST 2
BACKGROUND
OVERVIEW
MISSION
PRODUCT LINE
PRODUCT SUPPLY
STORE AMBIENCE
EMPLOYEE TRAINING
7S MODEL ANALYSIS
STARBUCKS ANALYSIS
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BACKGROUND
Business started in 1971 as a retailer chain of coffee, tea and spices.
Managed by the chairman Howard Schultz and the CEO Orion Smith.
Products – Arabica coffees, exotic teas and dark-roasting beans.
Experience – Italian “coffee culture”:
― Employees greeted customers by name;
― People were in a comfortable and familiar atmosphere.
PRODUCT/SERVICE
STARBUCKS‘ DIFFERENTIATING
FACTOR
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OVERVIEW
Public company: NASDAQ – SBUX Headquarters
Employees: 149,000 (2011)
Revenues: $11,7 billion (2011)
United States, Japan, Canada, United Kingdom, China, Mexico, Australia, Germany …
Starbucks Corporation:
Leading roaster and retailer of specialty coffee in the world
One of the largest chains of coffee shops
More than 15,000 stores in 50 countries
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MISSION
To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.
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PRODUCT LINE
Coffee: High-quality bean coffees – Arabica coffees.
Handcrafted Beverages: Italian-style espresso beverages and cold blended beverages - Frappuccino coffee.
Merchandise: Premium teas and complementary food items – Coffee and tea‐brewing equipment, mugs and accessories.
Fresh Food: Baked pastries, sandwiches, salads, yogurt parfaits and fruit cups.
PRODUCT SUPPLY
Buys green coffee beans from coffee farms in Latin America, Africa and Asia.
Custom roasts them to its standards.
Takes it in ocean containers to the United States and Europe.
Sells their products throughout their own stores, grocery and warehouse club.
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STORE AMBIENCE
Thesis: "Everything matters“
The store fixtures, the colors, the banners, the music, and the aromas are all blended to enhance the mood and ambience of the store.
EMPLOYEE TRAINING
Fast growth means specially train employees and store managers:
― Employees - 2 to 4 weeks training;
― Managers - 8 to 12 weeks training.
Implant the company's values, principles and culture in each worker.
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7S MODEL ANALYSIS
STRATEGY
Rapid store expansion strategy.
Concentration on core competencies.
Penetration in new markets and consolidate their positioning in existing ones.
STRUCTURE
Starbucks has a functional structure.
SYSTEMS
Information system to support business operations (IT).
Extensively training staff.
Starbucks has economies of scale by purchasing coffee directly from growers.
Shared Values
Structure
Systems
Skills
Staff
Style
Strategy
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STAFF
Low employee turnover - Starbucks offers a motivating benefits package which includes base salary, health care benefits, stock option plan, among others.
Employees training include 24 hour-training, star skills, coffee master program, servant leadership workshop, career power and career power for coaches’ workshop.
Starbucks has retail positions and management positions.
STYLE
Innovative, flexible, friendly and team-orientated.
7S MODEL ANALYSIS
Shared Values
Structure
Systems
Skills
Staff
Style
Strategy
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SHARED VALUES
Leverage the Starbucks experience;
Great work environment and take care of customers and employees with respect;
Diversity is encouraged;
Positive contribution to communities and environment;
Maintain the highest quality standards of products;
The importance of profitability for future success;
Understand environmental issues and share information with its partners (employees);
Recognizing that fiscal responsibility is essential to its environmental future.
STRUCTURE
Friendly and well-informed staff;
Non-retail operations;
Coffee experience.
7S MODEL ANALYSIS
Shared Values
Structure
Systems
Skills
Staff
Style
Strategy
COFFEE INDUSTRY
COMPETITORS
PESTEL ANALYSIS
MARKET ANALYSIS
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COFFEE INDUSTRY
COFFEE BEANS PRODUCTION
Coffee is the second most traded commodity on worldwide markets, after oil.
Coffee was an $80 billion industry by the late 1990s. The major consuming regions
were the European Union (35%), the United States (25%) and Japan (9%).
Note: Fair trade coffees were coffees that were purchased directly from cooperatives of small farmers at a guaranteed floor price.
STARBUCKS AND COFFEE
Starbucks belongs to the specialty retailers.
During several years Starbucks has been active as an
"ethical trader“ and in 2000 Starbucks began buying
Fair Trade certified coffee .
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COMPETITORS
Starbucks does not have a group
defined of competitors
STARBUCKS HAS LOCAL OR REGIONAL COMPETITORS
Nationwide coffee manufacturers
Coffee shops and restaurants
• Range of products
• Quality of products and service
• Affordable price
• Location
COMPETITORS’ STRENGTHS
• Number of the stores available
– less than Starbucks
COMPETITORS’ WEAKNESSES
• Merger of some local and regional chains – bigger and better position
COMPETITORS’ OPPORTUNITY
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PESTEL ANALYSIS
FACTORS MAIN ISSUES TO TAKE INTO ACCOUNT
POLITICAL
&
LEGAL
• Industry specific regulations, such as employment law, health and safety regulations, consumer protection;
• Government policy changes;
• Degree of government’s intervention (for example, extent to which it subsides firms and its priorities in terms of business support);
• Relationships between coffee producing nations and US;
• France’s case: arcane regulations and generous labour benefits.
ECONOMICAL
• Economic indicators: interest rates, taxation changes, inflation, exchange rates, economic growth;
• Income growth: changes in disposable income may influence the consumers’ buying power and consequently the purchase levels.
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PESTEL ANALYSIS
FACTORS MAIN ISSUES TO TAKE INTO ACCOUNT
SOCIAL
• USA’s case: consumer behaviour after the September 11;
• Demand for food and beverages;
• Variances in consumer preferences: it can shift from coffee to other beverages;
• Outside the U.S: diversity in culture and behaviour;
• Austria’s case: the youth is enthusiastic in embracing new things.
TECNOLOGICAL
• Equipment integration in business processes: the use of technology can improve operational efficiencies;
• Technological implementation in all stores: wifi;
• Technological developments: better systems such as security, purchasing, bar coding, among others.
ENVIRONMENTAL
• Environmental regulations: for example, energy taxation and water limits;
• Global warming: may have an impact on beans’ quality;
• Eco-friendly products.
CONTROLLABLE & UNCONTROLLABLE
INTERNATIONAL MARKETING MANAGEMENT
MARKET-DRIVEN VS. MARKET-DRIVING
INTERNATIONAL MARKETING STRATEGY
PRODUCT LYFE CYCLE IN INT. MARKET
MARKET ENTRY OBJECTIVES
MARKET/COUNTRY SELECTION
MARKET ENTRY STRATEGIES
BUILDING A GLOBAL BRAND
CASE ANALYSIS: ASIA & JAPAN
INTERNATIONAL STRATEGY
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CONTROLLABLE & UNCONTROLLABLE
COUNTRY’S NAME ELEMENTS
CONTROLLABLE
COUNTRIES WITH A STARBUCKS’ COFFEE SHOP
Promotion
In local word of mouth; 1% of revenue on advertisement of new
launches
ITALY
Price Italian coffee is cheaper than US java
Product
Italian coffee bars prosper by serving food as well as coffee, an area where Starbuck still
struggles; and Italian coffee is seen as being better
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CONTROLLABLE & UNCONTROLLABLE
COUNTRY’S
ELEMENTS
UNCONTROLLABLE (FOREIGN ENVIRONMENT)
FRANCE Political/legal
forces
Arcane regulations and generous labour
benefits
JAPAN
Competitive forces
Rivals offer similar fare
Economic forces
Economic depression
ENGLAND Competitive
forces
Imitators popping left and right to steal
market share
AUSTRIA Cultural force
The youth is enthusiastic in
embracing new things, Starbucks is
considered to be hip
Political/legal forces
Economic forces
Competitive forces
Level of technology
Structure of distribution
Geography and
Infrastructure
Cultural forces
Orientation to
international marketing strategy
Polycentric orientation
and Multi-
domestic approach
Strategic Orientation
EPRG Schema Starbucks customizes its products
and marketing towards different national conditions.
Creates a maximum of local responsiveness.
Polycentric Orientation develops Starbucks
subsidiaries autonomy and creates a better
understanding of local needs and demands.
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INTERNATIONAL MARKETING MANAGEMENT
ADAPTATION STRATEGY
For example people in China tend to use Starbucks as a gathering place, where they sit and chat, often over curry puffs and moon cakes.
Starbucks adapts - green tea Frappuccino in Asia, the division into men-only and family areas in the Middle East.
Parts of the Starbucks strategy cannot be copied because they are innate to the brand.
Each foreign market requires its own culturally adapted
marketing strategy
Starbucks does not use global market
concepts in marketing decisions
Starbucks-Global marketing
management
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INTERNATIONAL MARKETING MANAGEMENT
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MARKET-DRIVEN VS. MARKET-DRIVING
STARBUCKS – MARKET – DRIVING STRATEGY Redefined coffee in North America, through the concept of the coffee bar, re-
educating about coffee and is increasing a coffee culture. “Only the Starbucks coffee is the best in the world”.
VERSUS
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INTERNATIONAL MARKETING STRATEGY
The company targeted for a narrow market.
It differentiates from competition.
Offers different lines of coffee and tea product to coffee loving customers for a premium price.
Starbucks sells coffee but does it in a different way that others do.
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PRODUCT LIFE CYCLE IN INTERNATIONAL MARKETS
PRODUCT LIFE CYCLE CHANGES OVER TIME
MARKET ENTRY
OBJECTIVES
MARKET
OPPORTUNITY ASSESSMENT
Starbucks actively collects information which means
Starbucks selects the market proactively .The company
does not wait for an unsolicited order.
RESOURCE SEEKING
EFFICIENCY SEEKING
MARKET SEEKING
Considering Starbucks – The strategy chosen is market seeking because it is a company that ventures into new countries to become international, because it is looking for new markets, actively seeking customers worldwide, but the company achieves the efficiency seeking strategy as well.
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MARKET ENTRY OBJECTIVES
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MARKET/COUNTRY SELECTION
FRANCE’S CASE “The French seem to be ready for Starbucks’
sweeter taste” France’s arcane regulations and generous
labour benefits ITALY’S CASE Italian coffee VS Starbuck Food + coffee
Country Attractiveness Competitive strength of the company
Market size (total and segments) Market Share
Market growth (total and segments) Market ability and capacity
Competitive conditions Product and positioning fit
Market uncontrollables (cultural, legal and political environments)
Quality of distribution service
In the US market, Starbucks never allowed any type of franchising or partnership.
JOINT VENTURES LICENSING
However, the company’s international strategy consisted in the following market entry strategies:
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MARKET ENTRY STRATEGIES
JOINT VENTURES LICENSING
In 2008, Starbucks Coffee International and Grupo Vips, through the joint venture Starbucks Coffee Portugal, Lta., opened the first store in Portugal.
In 1994, PepsiCo and Starbucks entered into a joint venture arrangement to create new coffee-related products for mass distribution through Pepsi channels, including cold coffee drinks in a bottle or can.
In 1995, Starbucks partnered with Dreyer’s Grand Ice Cream to supply coffee extract for a new line of coffee ice cream made and distributed by Dreyer's under the Starbucks brand.
In recent years Starbucks begun to enter into a limited number of licensing agreements for store locations in areas where it did not have ability to locate its own outlets.
• Marriott Host International: operate Starbucks retail stores in airport locations
• Aramark Food and Services: put Starbucks stores on university campuses and other locations operated by Aramark
• United Airlines: have Starbucks coffee served on all United flights
All licensed stores had to follow Starbucks' detailed operating procedures
All managers and employees who worked in these stores received the same training given to Starbucks managers and store employees
MARKET ENTRY STRATEGIES
It prefers to build the brand cup by cup with customers, depend on word-of-mouth and the appeal of its storefronts.
Starbucks had spent very little money on advertising
The company spends just $30 million annually on advertising, or roughly 1% of revenues.
Starbucks’ brand can
be defined as its
products, its people
and its in-store
experience
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BUILDING A GLOBAL BRAND
WHY ASIA, WHY JAPAN?
• Emergent markets with a significant economy growth.
• Consumer’s disposable income is increasing.
• Coffee consumption growth rates in Southeast Asia are increasing.
WHAT WERE THE MAIN BARRIERS STARBUCKS FACED WHEN IT ENTERED IN THE JAPANESE MARKET?
• Profit from the Japanese venture did not happen for several years.
• Operating costs being extremely high, like rent and labor.
• Costs of coffee shipment from its roasting facility in Kent to Japan was high.
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CASE ANALYSIS: ASIA & JAPAN
HOW WOULD STARBUCKS IMPROVE ITS PROFITABILITY IN JAPAN?
• Focus on product innovation concerning beverages and food, expense reduction initiatives and new store openings.
• Awareness to their customers’ needs and expectations.
• Innovate by giving a “local touch” to its products.
• Internet facility or introduction of various cultural/entertainment campaigns.
• Starbucks can introduce US style online system in Japan, so that busy Japanese people can provide their order through the internet.
• Open a roasting plant in Japan in order to cut shipment costs.
• Finding partnerships to help Starbucks grow faster.
• Starbucks should start to consider their pricing strategy.
• Encouraging domestic competition and greatly expanding the market for coffee chains.
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CASE ANALYSIS: ASIA & JAPAN
RECOMMENDATIONS
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RECOMMENDATIONS
Increase their products line:
― Pastry: sell a typically bakery of each culture in each country.
― Beverages: sell more natural juices because they have too many bottled juices.
― Add fresh bread to their products line.
― Create and sell healthier products in their stores.
Enhance their control over beans’ quality due to global warming, climate change, etc.
Invest more in IT to apply in their stores.
Continue rising living standards and production areas.
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RECOMMENDATIONS
Continue to expand globally – to invest in joint ventures
and licensing.
Make the connections through the value chain more
efficient.
Be more selective in the recruitment process regarding
the employees passion.
Increase concern about
environmental issues.
Create more individual areas with
appropriate infrastructure to
work/study.
Higher investment in marketing.
GROUP 4
MSC.BA
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THANK YOU!
MAFALDA ANJO
MARTA ROTARU
NÚRIA CRUZ
OLESEA ROTARU
SÓNIA AZEVEDO
TELMA CABRAL