Starbucks as a company is one of the best example of fast growth in terms of expansion. They started in Seattle and now it is possible to go buy a Starbucks coffee-cup in several countries on three continents. But still, it has encountered non-negligible problems that it will be important to underline. First of all, before even trying to get outside the United-States and becoming the great chain it is today, the company suffered from a kind of boycott intended to slow down or even stop its dreams of expansion. Without stumbling over it almost failed, the company started opening several coffee-shops in the country. One thing leading to the second problem, the risk of market saturation since Starbucks was opening many shops in a same place. Their solution has been to open shops abroad so that it will be able to compensate the losses. As such, it is possible to find a Starbucks shop on three continents and in several countries such as Germany, Austria, Spain, England, etc.
I do not think it was really necessary to open such a great number of Starbucks in one single city, to beat competition they could have simply advertise not only to make the brand known but also to reassure people on the quality of their products. Good quality is one thing that even competition is not sure to reach or beat. Another factor that makes it difficult for Starbucks is the younger population which started feeling like it is not a place for them because of the high prices of coffee cups and the atmosphere in the shops that they found “outdated”. Making a brand something attractive for young people is not so difficult; it will take surveys about the trends, what is “in” and what is “out”, the new ways to speak and so on. Young people are attracted by new concepts and technology. Their initiative to create a high-speed wireless Internet service will probably create more enthusiasm among youth.
Starbucks can also make packages to suit all wallets so that the new generation can afford a cup of coffee. Something important that threaten Starbucks’ expansion is the prices on foreign markets. Most of their competitors are local companies which sometimes propose the same services at lower cost. It is the case for example in Italy where coffee is way less expensive than in the United-States. Entering the market in such a place reveals risky for a company as Starbucks. To stand up to the competition, it can use local input instead of importing, it will reduce the costs and make the outcomes cheaper so that the difference will not be enormous.
There also are problems within the company, the employees complaining about their salary. It is said that the reward is not worth all the efforts that they are producing. A solution could be to establish the payment of overtime and rewards on merit. The last thing is that despite the competition, Starbucks succeeded in meeting Japanese people’s expectation by adapting its products to their preferences in taste and in format. This is something that it must try to develop in every locations in order to gain more customers.
1- The Uncontrollable elements that Starbucks encountered in entering the global market
The competition in the US with McDonald’s and in Japan
The political regulations in France
The culture with how to attract young people
The controllable elements that Starbucks encountered are their pricing and the promotion of their products.
2- The basic risks facing the company are:
The saturation of market in the United-States as they are opening several shops in one city as in Seattle for instance.
The difficulty to enter new markets with such some high prices like the Italian market.
The lack of enthusiasm of the new generation.
People being reserved concerning working at Starbucks.
The potential solutions:
They should stop trying to counter their rivals by having as much stores as possible and concentrate on specific places and promotion. Starbucks should adapt its pricing to those in the local markets and also to their customers buying power in order to gain more people of all ages and social classes. To be able to reduce the pricing, it should work with local partner to get cheaper input and raw materials. Concerning the youth, they really should develop technology to attract more young people. The company should review its criteria of paying salaries.
3- According to what I read, I think that Starbucks thinks that having numerous stores almost everywhere will increase the profitability while it actually means more cost and decrease efficiency of existing stores. Also, it does not spend much on advertisement while it should try new promotion strategy. By new promotion strategy. Starbucks is trying to attract more young people but does not adjust pricing. It should understand that the prices proposed do not match the new generation’s buying power. Finally, the salary that it pays to its employee is insufficient regarding to the work that they are doing daily. Employees are unsatisfied and it has repercussions on their work and the quality of the service.
4- To increase the profitability in Japan, Starbucks must innovate because all that it did was to adapt to Japanese preferences (can of coffee, taste of coffee, etc.). This a good initiative that the company should perpetuate by adding other activities proper to Japan. Maybe it will be efficient to develop the order on internet that is working on the United-States. Another thing is that, as in the rest of the world, it should advertise because it is the best way to attract new customers.
Courtney from Study Moose
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