Starbucks global expansion strategy Essay
Starbucks global expansion strategy
As Starbucks moves into new markets all over the world, it continues to build its brand through the delivery of the Starbucks Experience. “Our success at every market that we have entered into reiterates our commitment to become a great, enduring company with the most recognized and respected brand in the world, known for inspiring and nurturing the human spirit. Our Mission: to be a global company, making a difference in peoples’ lives by leveraging our brand and the coffee experience to foster human connections.” (www.starbucks.com)Starbucks’ development strategy adapts to different markets addressing local needs and requirements. Starbucks currently uses three business strategies: joint ventures, licenses, and company-owned operations.
Starbucks chooses international business partners based on the following items: shared values and corporate culture, strong multi-unit retail/restaurant experience, dedicated human resources, commitment to customer service, quality image, creative ability, local knowledge, brand-building skills, and strong financial resources. To date, Starbucks has expanded into a diverse range of international markets that have fulfilled these criteria. Starbucks coffee retail locations are currently in the following countries: Australia, Austria, Bahrain, Canada, Germany, Hawaii, Hong Kong S. A. R., Israel, Japan, Kuwait, Lebanon, Malaysia, New Zealand, Oman, Beijing, Shanghai, Philippines, Qatar, Saudi Arabia, Singapore, South Korea, Spain, Switzerland, Taiwan, Thailand, United Arab Emirates, United Kingdom, and, of course, the US.
Starbucks decided to enter the international marketplace for three primary reasons: 1)To prevent competitors from getting a head start; 2) To build upon the growing desire for Western brands; 3) To take advantage of higher coffee consumption rates in different regions of the world.
It was felt that Starbucks’ strategic direction would allow it to sustain growth by continuing the development of the Starbucks brand image and by increasing its presence in different markets. Starbucks was growing very rapidly and was consistently evaluating new opportunities in its domestic and international retail markets.
The Asian Pacific region was one of the first regions Starbucks focused on. While entering this particular market Starbucks focused its concentration on local customs and preferences and included those into their marketing campaigns. Starbucks was cautious and aware of the fact that a standard complaint leveled against U.S. multinationals is that they fail to integrate cultural specifics of foreign countries.
In China, Starbucks positions its stores as part of the neighborhood culture. To this end, the Seattle-based retailer has expanded its product offerings to include snacks for local celebrations, such as the widely celebrated mid-Autumn Moon Festival, which coincides with the autumn equinox of western calendars and marks a moment of thanksgiving at the end of the summer harvest.
Similarly, Starbucks chose to use a joint venture when entering the Japanese market because of the particularities of the Japanese culture. Becoming a successful business in Japan required partnership with individuals who had an intimate understanding of the way that the Japanese people viewed food, coffee, and the food industry.
Thirty years ago Starbucks was a single store in Seattle’s Pike Place Market selling premium roasted coffee. Today it is a global roaster and retailer of coffee with nearly 3,000 coffeehouses in 37 countries. The Company’s objective is to establish Starbucks as the most recognized and respected brand in the world. In 1995, the firm established a subsidiary called Starbucks Coffee International Inc. This group is responsible for all Starbucks business developments outside North America, including developing new businesses, financing and planning stores, managing operations and logistics, merchandising, and training and developing Starbucks’ international managers.
Starbucks’ first non-North American store was opened in 1996 in Tokyo. Starbucks initially used licensing agreement for its global strategy. Because Starbucks wanted to control the business strategy in the Japanese market, it changed the strategy by establishing joint venture with a local retailer, Sazaby, Inc. Then, Starbucks licensed its business format to the joint venture company. After entering into the Japanese market, Starbucks increased the pace of international expansion significantly.
In 1998, Starbucks acquired Seattle Coffee Company in the United Kingdom, a chain with more than 60 retail locations. That same year, it opened stores in Taiwan, Thailand, New Zealand, and Malaysia. In 1999, Starbucks opened in China (Beijing), Kuwait, South Korea, and Lebanon. In 2000, it entered another seven markets (China – Hong Kong and Shanghai, Dubai, Australia, Qatar, Saudi Arabia, and Bahrain). It added three markets in 2001 (Switzerland, Israel, and Austria). In 2002, another nine markets were opened (Oman, Spain, Indonesia, Germany, Southern China – Macau and Shenzhen, Mexico, Puerto Rico, and Greece).
In 1999, the opening of Starbucks in Beijing’s Forbidden City, also known as the Palace Museum, caused uproar in China with the outraged local media reporting that 70 percent of people would rather not sip the American chain’s frappucinos in the footsteps of the Son of Heaven.
Many locals were incensed by the U.S. chain’s opening in the ancient home of China’s emperors and considered it an act of American economic and cultural domination in one of their proudest national monuments. “The Forbidden City is a cultural and historical site, while Starbucks represents the fast pace of metropolitan life,” says Maggie Chen, a 26-year-old membership salesperson at a Shanghai golf club. “The two should not be mixed together,” she says, echoing the sentiments raging across the Internet in recent months. Starbucks finally closed its Beijing store on July 13 after a storm of opposition from patriotic mainland Chinese.
Despite the Forbidden City fiasco, Starbucks remains “highly respectful of the culture and traditions of the countries in which we do business,” says Howard Schultz, chairman and chief global strategist. Starbucks sells a lifestyle, to both customers and employees, and has followed the successful examples of other big corporations such as Coke, Nike and Sony by linking its brand with all things “cool” and “in”. Today, Starbucks Coffee Company
has in place a strategic business plan for expansion to many international regions. The Company’s objective is to establish Starbucks as the most recognized and respected brand in the world.
1. BusinessWeek Jan 12, 2004., Iss 3865; pg 62.
2. Starbucks Coffee Company. Company Web Page. http://www.starbucks.com