Midterm report international marketing case study starbucks – going global fast

Key elements that Starbucks has encountered in entering global market:.... Introduction: | STARBUCKS COFFEE + RRA Ree Starbucks is a well-known global chain of coffee shops that has

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS & FINANCE

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ĐẠI HỌC KINH TẾ TÀI CHÍNH MIDTERM REPORT

INTERNATIONAL MARKETING

CASE STUDY:

STARBUCKS — GOING GLOBAL FAST

STUDENTS

Bui Thi Lan Anh 215143079

Le Doan Bao Khoi 215140042

Dinh Nguyen Anh Thu 215143181

Nguyen Huynh Anh Thu 215143182

Lecturer: Nguyen Ha Giang Date: October 08 2023

Table of content

II Detailed content: 4

1 Key elements that Starbucks has encountered in entering global market: 4 1.1 Uncontrollable ElermerÏS: - - 5 xinh re 4 1.2 Controllable Elerneri†S: . - nh» HH ng ve 5

2 Major sources of risks & SOlUTÏOTS: . HH HH nh ene 6 2.1 SOUFCGS Of FÏSKS: Q S SH HH nọ no Hi nhe 6 2.2 Key SOlU[ÏOFIS: Q Ă SH HH HH TH kh 7

3 Starbucks” overalÏ corpOFraf€ StTAt@ØV: - TH HH HE, 8 3.1 What has been done WelÏ: - chen rkp 8 3.2 What could be imIprOVeC: LH HH ng ky 9

4 Key approach for Starbucks to improve profitability in Japan: 9

5 BiDIOGrAPNy oobobB®®-ii 11

Table of figures

Figure 1 The international marketing task MOGEl «0.0.00 eee eeneeceeeeeeeeeeeeeeeeeeenaeeeeeennnens 4 Figure 2 Picture of the Gacha machine in Japan nhe 9 Figure 3 Retail value of the capsules toys (Gachapon) market in Japan from the fiscal year 2016 to 2022 by S†atiSfA LH HH HH HH HH KH go kh 10

| Introduction:

| STARBUCKS COFFEE

+ RRA Ree

Starbucks is a well-known global chain of coffee shops that has built a reputation for high- quality coffee and a unique coffee experience which brings a distinctive and professional environment to serve customers with friendly baristas Starbucks was established in Seattle in 1971

by entrepreneur Howard Schultz and has since become one of the most well-known and significant coffee brand in the world

The case study shows the way Starbuck has survived and positioned their brand as a premium level Firstly, Starbuck was just a coffee storefront in Seattle, and one day, it was on the front page all over the world It still remains and reaches one of the last growth stories despite protests and even having to close nearly 500 stores in the United States due to the economic crisis in

2009 With great ambition, Starbucks corporate had 281 foreign coffee shops in 1999, more than it had in its initial strategy to dominate the FnB sector

In this analysis report, we will highlight the crucial elements that make Starbucks' strategies successful and provide advice from an international marketing perspective

Il Detailed content:

1 Key elements that Starbucks has encountered in entering global market:

International marketing presents greater challenges compared to domestic marketing

Starbucks has encountered various controllable and uncontrollable factors during its global

expansion

Foreign environment

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lable elements) arket B

ironmental

controllable elements}

untry market C

Figure 1 The international marketing task model

These factors significantly influence Starbucks' operations and success in international markets Controllable elements are within Starbucks’ control, allowing them to shape their business goals and thrive globally Uncontrollable elements, however, are external factors that Starbucks must adapt to as it expands worldwide

1.1 Uncontrollable Elements:

During its global expansion, Starbucks faces uncontrollable factors that impact its operations These external influences are beyond the company's direct control

Economy: The US market saturated had significant impacts on Starbucks' global operations Under the saturation, competition from other nearby Starbucks stores can result in a

sharing of market share and a decrease in the saturated store's revenue Due to this circumstance,

Starbucks had actively pursued an aggressive expansion strategy into foreign markets By expanding internationally, Starbucks aims to tap into new customer bases, diversify its revenue streams, and

reduce its reliance on the saturated domestic market

The other event that hit the Starbuck globalization was the 2009 economic crisis The fact

that with limited funds, people often choose to cut back on expenses, and one of the first areas they typically reduce spending on is this kind of product This situation could negatively impact Starbucks'

became more intense, with new competitors emerging and local coffee brands strengthening in

different countries

Legal/Politic: It is hard for Starbuck to avoid political conflicts As Starbucks establishes

its presence in various countries, including those with complex political situations The criticism CEO Schultz met in the Middle East was a typical situation of global business His explanation that his words were taken out of context and reiterated his stance as being “pro-peace" for both sides was

an intelligent way in this situation

Culture: In this case, Starbucks met the first barrier while entering a new market was the local coffee taste For instance, Japanese people favor drinks with fewer sugar French tastes in coffee are significantly sweeter than Japanese tastes, and Italians favor gourmet versions with a rich coffee bean aroma ltalian coffee bars thrive by offering a combination of food and coffee, which is an area where Starbucks finds it difficult to approach Starouck matches the needs of its target market

Competitive Structure: Competition from local rivals poses another obstacle for

Starbucks, who offer similar products, creating a challenging competitive environment In countries

like England, which is Starbucks' second-biggest overseas market with over 400 stores, the company encounters imitators who aim to capture market share These imitators pose a significant challenge

as they try to emulate Starbucks' success while offering lower-priced alternatives This puts pressure

on Starbucks to differentiate itself through its unique brand experience, quality offerings, and customer loyalty programs to maintain its market position and attract customers despite the availability of cheaper options

Starbucks encounters difficulties because of the prevalence of affordable coffee options in the market In Italy, Starbucks faces a unique competitive structure due to the country's rich coffee culture and the strong presence of local coffee bars Many Italians find it unlikely that they would

abandon their 200,000 coffee bars in favor of Starbucks Italian coffee bars thrive by offering not only coffee but also food, an area where Starbucks still faces challenges

1.2 Controllable Elements:

Starbucks has achieved remarkable success in its global expansion by effectively managing various controllable elements

Price: Starbucks' premium pricing strategy sets it apart in the market The company positions itself as a high-quality, upscale brand, offering a unique and elevated experience By using quality ingredients and introducing innovative beverage options, Starbucks justifies its higher prices

a loyal customer base

Place: Starbucks considers place as a crucial factor and difficulty in its global expansion Starbucks' vast presence is achieved through a combination of predatory real estate practices, where they paid higher rents to secure prime locations, and the utilization of convenience stores in Japan, leveraging vending machines to enhance accessibility and expand their reach

Products: Maintaining a consistent brand identity of high-quality products worldwide can

be a challenging task However, Starbucks has successfully captured this factor, particularly in Japan The company has recently expanded its menu offerings in the country, introducing a wider range of options tailored to local preferences The fact that the majority of Japanese people have smaller food portions compared to Americans, which led to the introduction of customized products such as smaller sandwiches and desserts By diversifying their menu and adapting to the specific tastes of Japanese customers, Starbucks has effectively increased its appeal and customer satisfaction in Japan

Catering to the tastes and preferences of foreign customers is the other problem Starbucks reduced the amount of sugar in beverages like Espresso, Latte, and Green Tea Frappuccino to accommodate the less-sweet palate of the Japanese On the other hand, in France, people generally have a preference for sweetness, Starbucks adjusted the flavors to increase sweetness and cater to the

preference for a sweeter taste

Promotion: Starbucks finds fewer difficulties in brand promotion due to strong word-of- mouth marketing driven by its high-quality brand identity This consistent brand image serves as a reminder to customers, reinforcing their perception of Starbucks as a provider of premium products

As aresult, the company benefits from lower marketing costs, as the positive reputation and customer recommendations generate organic publicity and attract new customers

There are some various challenging factors in Starbuck global expansion However, the controllable factors have played a crucial role in how Starbucks copes with these difficulties These controllable factors are within the company's power to manage and adjust strategically

2 Major sources of risks & solutions:

2.1 Sources of risks:

The saturation of the U.S market compelled Starbucks to seek growth opportunities elsewhere Besides that, with numerous stores close together, they had reached a point where further

expansion in the domestic country became increasingly challenging

had to consider While there are potential benefits to expanding globally, there are also uncertainties and potential drawbacks for the business

Localization: The first factor that Starbucks has to consider is “localization” This factor introduces potential risks for Starbucks when entering new countries Adapting to the local cultural norms, required dependence on local partners, which resulted in profit-sharing and reduced the overall profitability of overseas stores Another challenge is the loss of control Operating with local partners means Starbucks has to relinquish some control and decision-making authority to the collaborators Consequently, it leads to inconsistencies in activities that can affect revenue flow

Difference in culture: Other risk that Starbucks has to encounter is the difference in culture Each nation has unique tastes and preferences, which is a crucial point for Starbucks to adjust its products and services However, this process poses a significant challenge Failure to understand the local culture is an opportunity for foreign and domestic brands, or even imitators, to offer a menu that closely matches consumer demands and steals market share

Low-morale employees: On the other hand, as businesses expand, they tend to focus more

on standardization and efficiency That leads to a risk of demotivating and making the company less special to employees The case study has shown that Starbucks' wage doesn't close to their staff workload, which negatively affects the quality of overall customer service, their products, or even Starbucks’ employee turnover rate

2.2 Key solutions:

Starbucks may encounter several risks when expanding its business Here are some

solutions to overcome these challenges:

However, we believe that collaboration is inevitable to navigate these challenges

successfully Forming deep relationships with local partners can provide valuable insights to support Starbucks in its expansion efforts To ensure a mutually profitable, Starbucks should negotiate agreements that benefit both parties It will enable them to establish a solid foundation for cooperation and retain control over their overseas operations

To achieve success, Starbucks must not only collaborate but also address cultural

differences It is essential to conduct research and analyze each target market before entering By

doing so, Starbucks can tailor its products and services to meet local demands and understand consumer tastes, cultural norms, and preferences This approach enhances Starbucks' competitive

brand presence

Other factor that Starbucks has to focus is their working motivation To build a healthy

workplace and keep employees satisfied, Starbucks should prioritize the well-being of its staff One way to do this is by conducting surveys and actively listening to employees' demands This approach

helps to address their needs effectively, especially when implementing sales-boosting campaigns that

require a strong connection with the staff By creating a positive work culture and valuing employee input, Starbucks can foster a motivated workforce that helps the company achieve its goals

By acknowledging and addressing these risks, Starbucks can navigate proactively the

complexities of expansion successfully Collaboration with local partners, market research, and prioritizing employee well-being will not only mitigate risks but also position Starbucks for long- term growth and success in new markets

3 Starbucks’ overall corporate strategy:

3.1 What has been done well:

Starbucks' dominant position as one of the top coffee shops worldwide is supported by the marketing mix that identifies the four essential elements of a company's marketing strategy, which are the product, price, place, and promotion (4Ps)

Products: This company sells a wide range of high-quality food and drink items, including such iconic beverages as coffee and other fruit-flavored drinks, brunch and dessert Additionally, adapting the flavor of their products to match the needs of each market they enter requires flexibility

Place: As a very ambitious business, Starbuck was fimed as a “Predatory real estate" by opening multiple notable boutiques with the mermaid emblem, primarily in green and white in order

to reach brand recognition, the logo running to the customer's mind Widen the number of stores, especially in the "gold place" where they target affluent consumers, even if the cost of renting may increase two times

Price: In the very initial stage, this corporate self defined a product with a high price, to keep out the mind that the quality

Promotion: Starbucks decided to invest more on real estate rather than spend more on marketing in order to reach consumer awareness of the company as a high-end, premium brand

Overall, connecting these elements which support the strategy together, the strengths were shown clearly, Starbuck don't sell the products, they sell the experience of entering one of its coffee shops That is a professional style coming from their affluent customers and the magnificent space

pricing and flexibility in their menu, Starbuck touches the top of customer's mind by a gorgeous luxury image and creates their dominance position Since then, customers who follow a professional lifestyle trend would choose starbuck to express themselves And this is how effective word-of- mouth operates

3.2 What could be improved:

Starbuck is recognized for having high costs, which is in line with its strengths, but despite what many people have said in the past, we are not convinced this is a weakness of the company

Starbucks' weakness stems from how quickly they expanded their global store count—new locations opened in China every nine hours, and in 50 countries in just 15 years, they had 16000 stores There are significant limitations to this technique of spreading knowledge among all clients Despite the study they had already done for the blanketing plan, they cannot completely control and comprehend insights of the country, such as the culture and prospective competitor and customer

behavior For a brief period, local partners were dissatisfied with the wages that Starbucks was paying

them; McCafé remained a significant threat to the US FnB industry, and Starbucks had already closed over 500 locations due to the economic crisis Numerous stores were opened, but several were also

shut down

4 Key approach for Starbucks to improve profitability in Japan:

Japan is a country that favors simplicity, modernity, and especially tradition, and in today's modern era, there is the appearance of quite interesting new entertainment: Gacha machines (Gachapon) These machines are extremely familiar to Japanese people, especially in their Anime and Manga culture Starbucks can invest in using this machine in business to get closer to its culture

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Figure 2 Picture of the Gacha machine in Japan

cups, bottles, cups from different seasons, Bearista, cards, Starbucks Blend Coffee, etc

Gachapon does not use electricity like other vending machines but uses a handwheel so that when players spend a certain amount of money, they just need to turn the handwheel The machine will randomly give out items So Starbucks can put seasonal items and goods into the Gacha machine and randomly drop them off to the customers

Moreover, this gacha idea can help Starbucks get closer to the community of customers who especially like to buy and collect Starbucks seasonal items (Bottles, blend coffee, bearista, ) and goods called Collectors Maybe this community segment will also bring Starbucks quite good profits in revenue Based on the above factors, Starbucks can take advantage of it to attract Collectors, the Anime and Manga community, and those who like randomness in games

If Starbucks can incorporate gacha into their coffee shop, it can bring out profit Based on the “Retail value of the capsules toys (Gachapon) market in Japan from the fiscal year 2016 to 2022”

by Statista, shows that revenue from gacha machines has increased quite well from 29.7 billion yen

in 2016 and 2022 has increased to 45 billion yen

45

38.5 36.5 5

2016 2017 2018 2019 2020 2021 2022

Figure 3 Retail value of the capsules toys (Gachapon) market in Japan from the fiscal

year 2016 to 2022 by Statista

This chart reveals that people's interest, especially Japanese in this gacha game has increased extremely positively Starbucks not only sells coffee but also services and consumer experiences This solution will help Starbucks Japan reach more interested customers, and profit from the Japanese market

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