Under the influence of various factors such as globalization, the development of technology, trade and military wars, etc., the international marketplace has experienced significant changes in all of its dimensions, which requires multinational corporations to implement an appropriate competitive strategy to survive and prevail in the global market. It is necessary for transnational organizations to lower the pressure for cost reduction and customize its products to serve customers with a diversity of cultures, preferences and lifestyles. Reality has shown that thousands of businesses had to exit the market due to their failure in defining a suitable strategy, but there are also a large number of companies that have successfully made a strong impression on the minds and hearts of their customers, producing huge revenues and benefits for the firms. One of such companies is Starbucks, an American multinational chain of coffeehouses and roastery reserves. After more than 50 years of formation and development, despite countless significant challenges, Starbucks still manages to maintain its reputation and continuously develop in the FB competitive industry. With a desire to gain profound insights into the international business strategy, our group decided to choose the topic “The international business strategy of Starbucks from 2013 to 2023”. The report is structured as follows:
OVERVIEW OF STARBUCKS
The origin and development of Starbucks
Starbucks began its journey in 1971 at Seattle's Pike Place Market, initially offering fresh-roasted coffee beans, tea, and spices The pivotal shift to a coffee house model in 1983 propelled the company to success, leading to six stores in the Seattle area by 1986 The brand quickly expanded to major cities like Chicago, Vancouver, California, Washington D.C., and New York By 1989, Starbucks had grown to 46 locations across the Western United States and Canada, showcasing its rapid rise to prominence in the coffee industry.
Starbucks made a significant impact on the global coffee market by opening its first store in Japan in 1996, marking a pivotal moment in its international expansion Following this, the company entered the European market in 1998 and the Chinese market in 1999, further solidifying its global presence.
In the early 2000s, Starbucks expanded its market and production capabilities by acquiring several coffee businesses, including Peet's Coffee, Torrefazione Italia, and Seattle's Best Coffee by April 2003.
Today, Starbucks is the largest coffeehouse chain in the world As of September
In 2020, Starbucks boasted 32,660 locations worldwide and generated approximately 2.3 billion US dollars in revenue, showcasing its significant influence in the coffee industry Looking ahead, the company aims to expand to 55,000 locations globally within the next decade, a goal considered achievable.
Missions, visions and goals of Starbucks
In the 1970s, Starbucks began as a coffee bean roaster with the mission to be the “premier purveyor of the finest coffee in the world.” However, after Howard Schultz acquired the company in 1987, it transformed into the coffee shop we know today Starbucks aimed to establish itself as the “third place” for customers, a welcoming space to enjoy exceptional coffee and escape daily pressures This concept led to a new mission statement: “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”
Starbucks aims to create a welcoming environment and deliver high-quality service, not just exceptional beverages By leveraging practical experience and thorough market research, the company is committed to continuously enhancing customer service to achieve its mission.
THE INTERNATIONAL BUSINESS STRATEGY OF STARBUCKS
The international business strategy of Starbucks according to value chain theory 6 2.2 Reasons for choosing the transnational strategy of Starbucks
Starbucks employs a standardized global logistics system for its inbound logistics, sourcing coffee beans directly from diverse producers in Latin America, Africa, and Asia To ensure a consistent taste, the company selectively chooses suppliers based on the Coffee and Farmer Equity (C.A.F.E.) Practices, which set high standards for quality Additionally, Starbucks fosters strategic relationships with producers and maintains an efficient supply chain management system The unroasted coffee beans are transported by ships to six roasting plants in the United States and Europe Furthermore, Starbucks adopts a localization strategy by sourcing components from nearby suppliers to cater to local tastes, such as Zen Rhythm Oolong Tea in China This optimization of inbound logistics allows Starbucks to maintain product consistency and quality while adapting to specific market preferences.
Figure 1: The logistics of Starbucks (Source: Sourcemap)
Starbucks has established a centralized system for coffee processing and manufacturing, allowing for efficient logistics across six continents The company operates six roasting centers where coffee beans are uniformly prepared, manufactured, and packaged through meticulously designed processes.
Starbucks employs a standardized outbound logistics process, transporting finished products to regional distribution centers and smaller warehouses across the U.S., Canada, Europe, and Asia/Pacific These centers consolidate coffee with other items like dairy, baked goods, cups, and napkins, ensuring frequent deliveries to Starbucks retail stores and outlets selling Starbucks-branded products Additionally, Starbucks leverages E-commerce by offering a limited selection of products online at starbucksstore.com, reaching customers globally The company minimizes the use of intermediaries, primarily selling products through its own or licensed stores.
Starbucks prioritizes investment in high-quality products and exceptional customer service over aggressive marketing tactics Their marketing strategies are tailored to local markets, varying by country, and focus on fostering customer loyalty and leveraging word-of-mouth Additionally, the company emphasizes ethical practices and community involvement as key components of its brand identity.
Starbucks has tailored its product offerings to suit local markets instead of merely replicating its American model In China, for example, the menu includes local favorites like green tea, soy, green tea tiramisu, and moon cakes, along with limited edition themed cups that reflect Chinese culture Similarly, in Turkey, Starbucks serves traditional Turkish coffee, while in Spain, freshly prepared orange juice is available In India, the brand has introduced unique items such as the Alphonso Frappuccino and local dishes like Murg Kathi wrap and Chicken Makhani, alongside a diverse range of Teavana tea beverages Despite these regional variations, customers worldwide can still enjoy rare and exclusive coffee options that are specific to certain markets.
Starbucks not only adjusts its main products but also adapts its store designs to enhance customer experience The company strategically positions its stores in high-visibility, high-traffic locations, as seen in the Shanghai Lippo Plaza and Piazza Montecitorio branches This approach allows Starbucks to maximize its value proposition globally Additionally, the corporation employs a localization strategy by varying store sizes and structures to fit diverse environments, including urban and suburban areas, university campuses, and office complexes For instance, Chinese outlets feature high roofs and a courtyard-style layout, while the Qianmen store in Beijing showcases traditional elements like dark wooden furniture and antique decor In countries like China and Mexico, where customers often visit in groups, Starbucks designers incorporate flexible seating arrangements to create a lounge atmosphere, encouraging social interaction.
Starbucks employs strategic pricing to enhance its premium image and utilizes price discrimination, resulting in varying product prices across different countries Research indicates that the most expensive Tall Latte (12 oz) is priced at $7.17 in Switzerland, while it costs just over a dollar in Turkey (Bonnie, 2022) Factors influencing Starbucks' pricing include brand positioning and production costs.
Figure 2: The price of Starbucks tall latte in every country
Starbucks promotes its brand through word of mouth, strategic store locations, and a strong online presence, rather than traditional media like television or radio With over 32,000 stores worldwide, the company actively engages with its global audience on social media platforms such as Twitter, Facebook, and YouTube, focusing on building a vibrant online community.
Starbucks has developed online communities such as My Starbucks Idea for gathering customer feedback and Starbucks V2V for community volunteering The company effectively utilizes social media marketing, exemplified by the "Tweet-a-coffee" campaign, which allows customers to gift coffee through Twitter, enhancing brand awareness In China, Starbucks has adapted its digital marketing strategy by launching a WeChat mini program in 2016, enabling users to access the digital menu, place orders, and earn rewards Additionally, the "Say it with Starbucks" feature on WeChat allows users to send gifts and messages, which can be redeemed at Starbucks stores, creating a unique customer experience.
In markets lacking a coffee culture, Starbucks invests significant time and resources in consumer education about coffee For instance, during the grand opening of its Nanchang store in China, customers were taught the distinctions between "Latte Coffee" and "American-styled black coffee." This educational approach fosters customer appreciation and preference for Starbucks' offerings.
Starbucks has consistently prioritized customer service to establish a premium brand value and a welcoming atmosphere in its stores The company invests significantly in employee training, complaint resolution, and enhancing store ambiance to ensure a convenient experience for customers This environment fosters easy interaction between customers and Baristas, allowing patrons to relax and enjoy their time With free Wi-Fi available in all locations, Starbucks serves as an ideal temporary workspace or meeting venue Additionally, the launch of mystarbucksidea.force.com in 2008 enables customers to share feedback and suggestions The integration of Apple’s iBeacon system allows for seamless ordering through the Starbucks app, enhancing the customer experience These efforts have positioned Starbucks as a comfortable "third place" between home and work.
Starbucks boasts a robust infrastructure across various departments, including finance, management, and marketing, with its main corporate office located in Seattle and several regional offices worldwide This synchronized system enables the company to strategically position its stores in high-traffic areas such as train stations, street corners, and malls, thereby maximizing market share and enhancing regional reputation through store clustering The company employs business managers at its corporate offices and on-site store managers to ensure well-designed stores and exceptional customer service delivered by a dedicated team of employees in green aprons.
Starbucks is renowned for its positive work environment and employee-friendly policies, fostering a culture of continuous learning across its global network The company emphasizes ongoing training, from coffee bean roasting to customer relationship management, ensuring employees stay informed and skilled New hires receive initial training from store managers and dedicated trainers, covering the company's history, social responsibility, and culture through the Starbucks Experience program This training occurs at regional centers or in-store, supported by learning coaches who guide new baristas through hands-on training The human resource management team focuses on enhancing company culture and improving employee retention by keeping staff motivated through high-quality products, a unique work environment, and superior HR policies Both regular and part-time employees enjoy benefits such as healthcare coverage and stock options, contributing to Starbucks' effective management of human capital.
Starbucks ensures consistent coffee taste and quality by adhering to uniform technical standards in its brewing process, which also helps reduce costs Utilizing an advanced brewing system, the company automatically adjusts grind size and water temperature to deliver the perfect cup of coffee consistently Additionally, Starbucks enhances customer convenience and satisfaction through various software applications and websites, including mystarbucksidea.force.com, the Starbucks app, and the Starbucks mobile card, leveraging collective intelligence technology (Turban et al., 2015).
Starbucks primarily sources its procurement from in-house operations, which it considers a key competitive advantage The company exclusively avoids purchasing coffee beans from third-party suppliers and has established stringent criteria for supplier selection and product quality Additionally, Starbucks has successfully implemented a Supplier Diversity Program to enhance its supplier selection process From coffee bean production to packaging, all processes are managed internally, and the brand does not offer franchises, ensuring that all stores are directly or indirectly controlled by Starbucks.
The international business strategy of Starbucks
Evaluation of the implementation of the transnational strategy of Starbucks
Starbucks' transnational strategy has been pivotal to its global success, with the number of stores reaching 35,711 worldwide in 2022 From 2003 to 2022, Starbucks experienced consistent growth in store locations, including segments like Siren Retail The coffee chain has expanded nearly every year over the past decade, with the exception of a decline in 2009, likely attributed to the global financial crisis This global expansion has enabled Starbucks to nearly double its locations in the last ten years.
Figure 3: Number of Starbucks stores worldwide from 2003 to 2022 (source: Statista)
Starbucks employs a transnational strategy to penetrate international markets, leveraging market research to gain insights into local institutions and their impact on business performance This research facilitates targeted market selection and strategic decision-making As a leading global brand in the coffee industry, Starbucks operates in over 76 countries, with a remarkable expansion rate in China, where a new store opens approximately every 15 hours (Turner, 2018).
Starbucks's strategy effectively addresses limitations, strengthens brand identity, and fosters customer loyalty However, challenges arise from collaborating with various coffee distributors and business partners To navigate these issues, Starbucks executives focus on geographical and product line considerations, emphasizing differentiation as the company's primary strategy.
In recent years, Starbucks has enhanced its supply chain visibility, allowing the company to better anticipate potential shortages (Alwaleed et al, 2019) With most of its coffee sourced from developing countries, Starbucks has historically encountered significant supply disruptions due to regional instabilities (Honack and Waikar, 2017) Previously lacking visibility, the company struggled to predict the impact of these shortfalls on its coffee supply However, Starbucks now focuses on corporate activities that connect various instabilities to specific coffee type reductions, actively seeking alternative sources (Shih, 2017) This proactive approach has improved its management of supply disruptions.
The absence of coffee cultivation in the US makes the global production and delivery of coffee essential, prompting Starbucks to implement policies that protect its raw supply chain to ensure customer satisfaction A key factor in Starbucks' success is its commitment to sourcing only premium coffee beans To maintain a competitive advantage, Starbucks employs a dedicated team that frequently visits coffee-producing countries Additionally, the company champions sustainable practices in these regions, adhering to a policy that ensures fair pricing to cover production costs and improve living standards for farmers.
Starbucks has established a structured approach to develop strategies and operations, effectively connecting manufacturing, procurement, and logistics to align with business requirements The material flow initiates with the acquisition of green coffee beans, followed by their transportation to the company, roasting, packaging, and ultimately serving brewed coffee to customers.
In 2018, Starbucks prioritized high-quality products at every stage of its value chain, ensuring customer satisfaction across its global outlets Research by Azriuddin et al (2020) indicates that there are minimal serious concerns from customers regarding product quality The company's commitment to standardization reinforces its reputation and strengthens its relationship with consumers.
Despite its success in the USA and other markets, Starbucks struggled to establish a foothold in Australia due to the country's mature and sophisticated coffee culture When Starbucks entered the Australian market in 2000, a vibrant urban café scene was already thriving, and many Australians had developed a preference for stronger, unadulterated coffee The company's rapid expansion strategy backfired, as they prioritized visibility over quality, leading to market saturation and self-cannibalization As noted by Mescall (2008), Starbucks imposed its own coffee norms on Australians, which clashed with local preferences and ultimately hindered their success.
THE IMPLEMENTATION OF THE BUSINESS STRATEGY OF
The business strategy Starbucks adapting in China
Starbucks' success in China exemplifies how global brands can thrive by adapting to local preferences By implementing innovative strategies tailored to Chinese consumers, Starbucks has maintained its brand identity while meeting unique market demands Their commitment to embracing new ideas, such as integrating tea-based drinks into their menu, has resonated with Chinese customers, as tea is the national drink This adaptability showcases Starbucks' appreciation for cultural differences and its dedication to serving local tastes As brand recognition grew, Starbucks expanded its coffee offerings to align with the rising trend of American-style coffee consumption, solidifying its position as a leader in specialty coffee shops In 2019, the launch of the Modern Mixology line, featuring cocktail-inspired cold drinks served in reusable cups, further exemplified this approach The menu includes diverse flavors like "Vinegar Peach," "Chi Hyun Iceberg American," "Orange Pomelo," and "Lime Cold Brew," each designed to cater to varying tastes while reflecting local preferences.
Starbucks has enhanced its digital connectivity and expanded into emerging markets by partnering with Tencent and Alibaba in China This strategic move reflects the company's commitment to leveraging innovative technology solutions to maintain competitiveness The introduction of WeChat mini-programs allows customers to conveniently place orders via mobile devices, distinguishing Starbucks from other brands and reinforcing its reputation for exceptional customer service By effectively adapting to consumer preferences, Starbucks has successfully retained customer loyalty, achieving unmatched success rates compared to competitors who are still struggling with their marketing strategies.
The business strategy Starbucks adapting in Italy
Starbucks' success in Italy exemplifies how international brands can thrive by deeply understanding local culture The company's achievements stem from its commitment to innovation and the incorporation of regional nuances By implementing a localization strategy, Starbucks has introduced regionally-inspired offerings like affogato and espresso con panna, while also using locally-sourced ingredients to create authentic sandwiches and paninis that resonate with Italian flavors.
The quality of coffee is fundamental to this global brand's enduring popularity, as it focuses on delivering outstanding customer service and expertly trained baristas who create personalized brews This approach exemplifies 'glocalization,' where global companies adapt to local preferences while upholding their essential values.
Starbucks' success in Italy stems from its commitment to adapting both its products and store design to local customs By incorporating Italian artistic elements, Starbucks created an ambiance that reflects the classic cafe culture The company's first outlet in Milan, opened in 2018, features traditional design elements, including a marble bar for espresso preparation, a dedicated bean roasting area, and outdoor seating with views of Piazza Cordusio The use of brass and wood, along with native materials, fosters a welcoming atmosphere that resonates with local consumer preferences.
Starbucks, a renowned global food and beverage chain, is celebrated for its distinctive atmosphere and rich flavors, attracting millions of customers globally With operations in over 80 countries, it has established itself as a beloved spot for coffee enthusiasts, making a significant impact on the food and beverage industry.
The great success of Starbucks can be attributed to the long process of constant innovation, creation and exploration while maintaining its core strengths and values.
Starbucks has emerged as one of the world's leading coffee brands by effectively adopting a transnational business strategy This approach has allowed the company to balance global efficiency with local responsiveness, contributing to its widespread popularity and success in international markets.
Starbucks, despite its notable success in the food and beverage industry, faces various challenges and setbacks in its growth journey These difficulties have provided the company with essential lessons and experiences, enabling it to implement positive changes and adapt to the constantly evolving market.
- evolving landscape of international business, consolidating its reputation as the world’s largest coffeehouse chain.
Bonnie (2022, February 21) The Price of Starbucks in Every Country CashNetUSA Blog. https://www.cashnetusa.com/blog/starbucks-price-every-country/
Boyer, K (2013) Behind the Scenes at Starbucks Supply Chain Operations it’s Plan,
Source, Make & Deliver - Supply Chain 24/7.
Supplychain247.com https://www.supplychain247.com/article/behind_the_scenes_at_starbucks_supply_chain_o perations
Dudovskiy, J (2017, April 6) Starbucks Value-Chain Analysis - Research Methodology.
Research-Methodology https://research-methodology.net/starbucks-value-chain-analysis/
Starbucks has revolutionized its supply chain by focusing on sustainability and efficiency, ensuring high-quality coffee from bean to cup The company emphasizes direct relationships with farmers, which enhances product quality and supports local communities By implementing advanced technology and data analytics, Starbucks optimizes inventory management and reduces waste This transformation not only improves operational efficiency but also strengthens the brand's commitment to ethical sourcing and environmental responsibility.
Lee, H L., Duda, S., James, L., Mackwani, Z., Munoz, R., & Volk, D (2007) Building a Sustainable Supply Chain Building Supply Chain Excellence in Emerging Economies, 98, 391–405 https://doi.org/10.1007/978-0-387-38429-0_16
MENÙ – Starbucks (n.d.) Retrieved June 7, 2023, from https://www.starbucks.it/il-nostro- menu/
Patterson, P G., Scott, J., & Uncles, M D (2010) How the local competition defeated a global brand: The case of Starbucks Australasian Marketing Journal (AMJ), 18(1), 41–47. https://doi.org/10.1016/j.ausmj.2009.10.001
Saeed, B (2022, October 10) VRIO Starbucks Analysis 2022 IRN Post. https://irnpost.com/vrio-starbucks-analysis-2022/
Starbucks (n.d.-a) Stories.starbucks.com. https://stories.starbucks.com/stories/2013/starbucks-launches-tweet-a-coffee-encourages- spontaneous-gifting-on-twitter/
Starbucks (n.d.-b) Stories.starbucks.com. https://stories.starbucks.com/press/2017/starbucks-partners-with-weixin-to-launch-social- gifting-in-china/
Starbucks (2019, January 24) Company Profile Starbucks.com. https://stories.starbucks.com/press/2019/company-profile/
Starbucks (2020, February 28) C.A.F.E Practices: Starbucks Approach to Ethically Sourcing Coffee Stories.starbucks.com https://stories.starbucks.com/press/2020/cafe- practices-starbucks-approach-to-ethically-sourcing-coffee/