Starbucks’caseThe internationalization of the company

Lorenzo Ferretti

Agenda

• Why go abroad

• How

• Where

• Porter’s Diamond Model (Three examples)

• My personal opinion

• To be or not to be…aggressive in the foreign market

Why go abroad?

• In 1996 the marked had been already saturated

• Undisputed leader in the states

• Tea-drinking countries to convert

How?

• Internationalization theories:

Uppsala Model

Dunning’s OLI paradigm

Internalization theory

• Entry modes:

Wholly-owned stores

Joint Ventures

Licensing

Where?

First and immediate factors

English skills.

telecommunicat

ion

Stability of

government

Workforce

Skilled workfor

ce

But every country has its “reasons”

• Let’s analyze some example using the Porters’ “Diamond Model”

Japan, successful entryFirm strategy, structure and rivalry:-The profitable agreement with Sazaby

Demand condition:-Eagerness among the young people to imitatate the US lifestyle-For the most a tea-drinking country, but the speciality blends marketing were growingRelating and supporting

industries:-No problems with transporting industries

Factor conditions:-No factor problem in Japan, which has basic work force and also advanced work force-Also modern and comfortable infrastructure…maybe a bit expansive

Italy…better don’tFirm strategy, structure and rivalry:-Very strong competitors…but different kind of Demand condition:

-Totally different culture (coffe while walking, plastic cups)

Relating and supporting industries:-No problem with the supporting industries of suppliers or transporting

Factor conditions:-Skilled workforce and unskilled-Financial capitals-Good infrastructure

But…my personal opinion is different

Italian coffee culture has

changed, and as it, also Starbucks• How we (Italians)

look at Starbucks…everything but coffee

• «Hang out» place• The combination

Coffee-MacBook or Coffee-Book which...

• The “Hipster way”

Evidence in support of my thesis

• The success of the competitors:

Does it look

familiar?

So…

•Hurry up Starbucks, or there will be no more space!

Next step…India?Firm strategy, structure and rivalry:

-Competitors: Café Coffee Day, the Qwiky’s and the

Barista-Impossibility (for the

moment) to find a suitable partner

-Economic reforms

Demand condition:-Fourth largest

economy in terms of purchasing power

parity-About 250 million people belonged to

the middle class-The fastest growing consumer group was the age group of 20-

45 (Starbucks’ target)-India had the

youngest population of the world

Relating and supporting industries:

-India is the tenth most industrialized country

Factor conditions:-Good availability of

workforce and skilled workforce

-Cheap cost of labor-Good English language skills-Excellent ratio

between cost and quality of telecom

infrastructure

To be or not to be…aggressive in the foreign market

Good • Ward off competitors

• Sell premium coffee at higher price

• Whole world has became aware of Starbucks

• avoid traditional advertising channels

Bad

• No control

• Quantity instead of quality

• Public criticism

• Decrease product quality

• Drive out small independent stores

• Bad image

• Too many and too near stores

Thanks for your attention