Good afternoon everybody. Thank you for making the effort to come here. It’s an honor for us to get the chance to meet you today. My name is Viet Huong and I’m the leader of group 2, which also includes Lan Huong, Tri, Phuong and Ha. As you all know, coffee is one of the world’s most popular kinds of drink and among the biggest names in the coffee industry is Starbucks Coffee Company. And recently, Starbucks HAS brought its special taste to our country. Therefore, this afternoon, we’d like to make a short report on Starbucks expansion campaign in Vietnam.
This should only last about 25 minutes. We’re going to present this project in two sectors: general information about the campaign and the SWOT analysis. If you have any question, we’ll be happy to answer at the end of the presentation. It would be glad if we could have your comments or replies to our talk. To begin with, I’d like to fill you in on some basic information about this company. Starbucks Coffee Company is an American global brand based in Seattle, Washington. It is the largest coffeehouse company in the world with nearly 21,000 stores in 62 countries.
The first Starbucks opened on March 30th, 1971 by Jerry Baldwin, Zev Siegl and Gordon Bowker. They were inspired to sell high-quality coffee beans and equipment by coffee roasting entrepreneur Alfred Peet. Originally, the company was to be called Pequod, but this name was rejected by some of the co-founders. The company was instead named after the chief mate on the Pequod, Starbucks. The company is primarily known for selling coffee, but it also sells other hot and cold beverages, pastries, sandwiches and other snacks.
However, in the last five years, Starbucks has had a major dip in its stock price. Its stock price went from $35 in 2007 down to less than $10 in 2009 and it has just gone up to the low $30’s recently in 2011. The economic crisis throughout 2008 and 2009 really hurt Starbucks’ stock price. The important aspect to learn from the hit it took is that it was able to overcome the loss. Although Starbucks’ stock price plummeted during the midst of the financial crisis, its revenues DID NOT. Starbucks’ profits went from $7. 8 billion in 2006 to $10. 7 billion in 2011.
The stores opened at the year’s end in 2006 have also continued to grow in the last five years. Starbucks has realized the importance of expanding its business worldwide in order to create a larger market. So, expansion is vital to Starbucks. And it has chosen Vietnam as its next market. I think that all of us are wondering why.
The economy of Vietnam is a developing planned econmy and market economy which has experienced rapid growth. Nowadays, Vietnam is in a period of being integrated into the global economy. Vietnam has served as an attractive destination for foreign investment in Southeast Asia. According to a forecast in December 2005 by Goldman Sachs, the Vietnamese economy will become the 35th largest economy in the world by 2025. In 2008, the PricewaterhouseCoopers also predicted that Vietnam may be the fastest growing of emerging economies by 2025, with the size of the economy increasing to 70% of the size of the UK economy by 2050.
Of all the cities in Vietnam, Ho Chi Minh City stands out as the most potential for market expansion. It is the economic center of Vietnam and accounts for a large proprtion of the economy of Vietnam. In 2007, Ho Chi Minh City’s contribution to the annual revenues in the national budget increased byy 30%, accounting for about 20. 5% of total revenues. The consumption demand of Ho Chi Minh City is higher than other Vietnamese provinces and municipalities and 1. 5 times higher than that of Hanoi. Ho Chi Minh City is the leading receiver of foreign direct investment in Vietnam, with $8. billion in FDI in 2008. And finally, on February 1st, Starbucks Coffee Company opened its first store in Vietnam at the New World Hotel in downtown Ho Chi Minh City. The company has studied Vietnamese market since 1991 and made VERY, VERY careful steps when entering this market. The only partner licensed to operate Starbucks stores in Vietnam is Coffee Concepts Vietnam, a subsidiary of Hong Kong Maxim’s Group. The signing with Coffee Concepts Vietnam will maximize the growth potential of Starbucks in Vietnam as the partner has experience in managing 130 stores in Hong Kong and China.
Starbucks’ strategy is to bring unique coffee experience to customers at its stores. Besides, Starbucks will boost the localization of stores in its business strategy in Vietnam to make Starbucks stores the third destination for local people, following their home and office. “Starbucks provides much more than just the best cup of coffee, we will offer a place where people come together, connect with family and friends and celebrate the local Vietnamese coffee culture and heritage”, said Jinlong Wang, President of Starbucks Asia Pacific.
Now let us begin our SWOT analysis. One of my team members, Lan Huong, is going to show you some strengths of Starbucks Coffee Company. Thank you Van Ha. Good morning guys. I’m another Huong from group 2. My name is Lan Huong. I’m so glad to see all of you here to listen to our presentation. And now I want to share with you some of the results of our SWOT analysis on Starbucks project, first of all, the S – strengths. I think that most of you have heard of the name “Starbucks” before.
Yes, it is an American brand well known for the coffee quality and customer service. Starbucks premium coffee has been recognized worldwide with a diverse menu of over 87,000 drink combinations. Every year, it uses 2. 3 billion paper cups on average, from which we can see just how popular Starbucks is. In addition to this, people love Starbucks for its friendly service. Take Starbucks China as an example. The company’s approach here is to accommodate Chinese consumer differences while preserving its brand integrity. It has crafted a menu appeal to Chinese tastes, and not all of them are coffee. For instance, a few years ago, it rolled out the Black Sesame Green Tea Frappuccino – a unique combination of premium green tea, lightly sweetened milk blended with ice and black sesame seeds complementing the whipped cream on top.
Last but not least, Starbucks Coffee Company has great responsibility for society and employees. One example of this can be seen in the development project that Starbucks started in 2007 in Ethiopia, which aims to provide farmers and their families with better food, safe drinking water and greater income. For its employees, who are called “partners”, Starbucks has built a solid foundation on the direct and open relationship. It has made treating its partners with respect and dignity one of its guiding principles. There were many strengths when this plan was conducted.
However, as every coin has two sides, after analyzing Vietnamese market carefully, we have found that Starbucks Coffee Company still has to face some problems. They are high prices and Starbucks’ main market. Starbucks is a worldwide brand well known for its premium coffee and other products. Therefore, it’s reasonable that the prices are PRETTY high. Nevertheless, a normal person in Vietnam earns around $150 a month so he or she cannot afford Starbucks coffee on a regular basis and this premium coffee may become beyond the reach of Vietnamese people.
Another problem the company has to deal with is that the main market of Starbucks is the U. S. A with over 2/3 of its stores located there. This will become a weakness when the company expands to other countries including Vietnam. It is predictable that Starbucks stores and services in Vietnam may not be invested as much as in the U. S. A and do not live up to Vietnamese people’s expectation about Starbucks. So as you can see, these are some weaknesses of Starbucks Coffee Company. Now we’ll continue our presentation with Ha Phuong and the opportunities from this project.
Thanks Van Ha for introducing me. So you guys have heard about some strengths and weaknesses of this expansion. But there is another point that each project must concern. That is the opportunities Starbucks gains from the expansion campaign. Now I would like to tell you some of the most important ones. Firstly, this step will make an increase in the company’s revenue. As you can see from this bar chart, Vietnamese market is expected to grow faster compared to other countries in the area. Starbucks believes that the expansion will be an effective long-term plan.
That’s all for opportunities. And now please welcome Tri, from whom you will hear some of the threats that Starbucks has to face. Thank you Ha Phuong. My name is Tri. Now I’m going to lead you through the last part of our SWOT analysis – the threats that Starbucks Coffee Company has to deal with when this expansion project is conducted. The first and maybe the biggest threat is the intense competition of Vietnamese coffee market. As many of you may know, Vietnam ranks second in the world as a coffee producer.
There are many popular brands in Vietnam, both domestic and foreign ones, especially Trung Nguyen Coffee Company with a local brand recognition and a widespread retail distribution network of more than 10,000 stores and 500 marts all over the country. MOREOVER, Starbucks may have to struggle because of Vietnamese traditional tastes. People here prefer strong coffee like black coffee, while Starbucks is a brand of coffee with milk – white coffee. It is understandable that many people in Vietnam may not come to Starbucks for a cup of coffee. This is a formidable challenge for Starbucks when it comes to Vietnam.