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Starbucks Presentation - MGMT5601
Transcript of Starbucks Presentation - MGMT5601
Internationalisation at Starbucks Outline Case Background
Recommendation 1971, Starbucks first store was opened in Seattle, US.
1982, Howard Schultz joined Starbucks
1983, Schultz visited Italy. Brief History 1985, II Giornale was founded,
1987, Il Giornale acquired Starbucks. Total stores: 17
Jan 2011, Starbucks operates in more than 56 countries with 17,009 stores whereas 8,870 company owned and 8,139 licensed stores
The world’s largest coffehouse chain Continued Growth and Performance Between 1993 and 2009, Starbucks experienced substantial growth. Revenues increased from US$ 160 million in 1993 to US$ 10 billion in 2009 Recent years, the speed of expansion diminished over the years
In the early 1990s, the growth in stores was approximately 70 per cent
Between 2003 and 2008, the growth of the company slowed to approximately 20 per cent per year
Growth of stores dropped even further in 2009 Growth and Performance The company expanded abroad when it perceived the domestic market to be saturated
The first move was to expand into Canada in 1987
In 1996, the company entered Japanese market
In 1998, the company started to enter UK market
Over the period 1996 – 2009, Starbucks entered 56 countries with 16,635 stores Internationalisation Starbucks strategy was to retain its core service and product offering, while adapting to local demands
Starbucks adopted various modes of entry, eg. licensed joint ventures and company-operated wholly owned subsidiaries Pursuing rapid growth with insufficient attention on improving customer service and product value
Increasing competition: - Domestic coffehouses
- International retailer such as McDonald’s and
Dunkin Donuts Global Financial Crisis:
Shrinking demand; people have been more selective Problems on Starbucks’ Internationalization Rare / Valuable
Imitable (Resource Based View Analysis) Competitive Advantage Analysis Market Analysis SWOT Internal (Strength, Weakness)
External (Opportunity, Threat) RBV Analysis Improving quality of personal service and product value: Revamp quality standard: Freshness, hand-scooping, smaller brewed coffee batches
Revamp the experience of “The Third Place” (home office and Starbucks) Localize supply chain: to reduce cost Possible Solutions Product diversification through R&D: Introducing Pike Place Roast;
Selling tea in Asian Countries. Closure some unprofitable stores: e.g. the failure in Australia’s market. Expansion in more potential markets: E.g. Huge Chinese Market: 450 stores already
World’s 20% population (1.4 billion)
Modern lifestyle: 13.8 mill car sales, 3,000 KFC outlets, 1,210 McDonalds (2010)
Supply chain localized already Recommended Solutions Short-term: Improving product service quality Training to preserve, implement and improve corporate culture, Improving store ambience,
Providing extra services (e.g. wifi hotspot, relaxing music, and meeting space) Advantage: creating more product value
Disadvantage: need more financial resource Localizing supply chain. Advantage: Tax and transportation cost will be reduced,
Easier implement corporate culture,
Easier to control/manage. Disadvantage: Need further knowledge about host country culture and employee working behaviour,
Need different management for every culture. Long-term: SWOT Problem Mapping Main problems:
1. Too fast expanding
2. Increasing competition
3. Global financial crisis From exhibit 10 in the case:
"The relationship between Starbucks' ROA and its relative growth in the number of stores and countries entered, 1993 - 2009" ROA measurement = Performance measurement (Alkema R., Koster M. & Williams C. 2010) From Exhibit 11 in the case:
"Relationship between the pace of Starbucks' internationalisation and its performance, 1993 - 2009" "The best performing years were the years characterised by a slower pace of internationalisation (i.e. 2004, 2005, 2006 and 2007)." (Alkema R., Koster M. & Williams C. 2010) "Starbucks strategy for expanding its retail business is to increase its market share in existing market and to open stores in new markets where the opportunity exist to become the leading speciality coffee retailer." (Starbucks' Annual Report 2000 cited in Alkema R., Koster M. & Williams C. 2010) "The company has made major impacts on the communities
it serves through support of community events, charitable programs, and
volunteerism. But the key element that has skyrocketed Starbucks to be
the exceptional company it is today is inventiveness."
(Bussing-Burks M. 2009)
Bussing-Burks, M 2009, "Starbucks: corporations that changed the world", Greenwoods Press, California. "Customers identify Starbucks with premium quality, serving the world’s finest coffees in a friendly and welcoming setting. ... sell an elite dream, an atmosphere that can be a departure from real life, and a place for escape from the mundane."
(Bussing-Burks M. 2009)
Bussing-Burks, M 2009, "Starbucks: corporations that changed the world", Greenwoods Press, California. Video of Starbucks History