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Johan Schoonhoven

on 6 October 2015

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Transcript of Starbucks

- How to enter the Italian market?

Starbucks overview
Founded in 1971, Seattle, WA, USA
World's largest coffeehouse chain
140.000 employees (2013)
20.891 stores in 62 countries (march 2013)
Revenue: US$ 13.29 billion (2012)
Starbucks in UK
Starbucks in Spain
Starbucks in Germany
The European market
Italian market
Market size: 60 million people (2012)
GDP/Capita: 33,909 US $ (2012)
Gini ratio: 31.9 (medium) (2012)
Coffee/capita: 5.9kg/year (2011)
People in target group: 18 million people between the age of 15-39 (2012)

How Starbucks should enter the Italian market
First step should be an M&A process (large domestic coffee house chain)
Fast way to enter the market
Gain increased knowledge of the Italian market behavior
Italians are skeptical towards american brands
Starbucks company culture is too different from the Italian
Strategic alliance with large Italian department store
to sell fresh roasted coffee beans for home brewing (small bags to secure freshness)
Next step is franchise-owned stores in different cities
Franchisee has more local knowledge
lowered risk for Starbucks
Franchise-owned stores can adapt more locally (re-naming? new interior? different menus?
Starbucks is a great global brand with many opportunities
Italian culture
Coffee in Italy
7th largest consumer of coffee in Europe (2010)
2/3 of the coffee are consumed in the early morning hours (2010)
Coffee market is dominated by few large domestic companies
Demand and knowledge for/of high quality flavor
Increased competition -> low prices on high quality
Prefers espresso (small cups)
70% of the coffee is consumed at home (5-10 % consumed at work) (2010)
Buys small amount of coffee in order to maintain freshness
Prefers coffee made on an Italian moka pot
Entering UK market
Entered UK in 1998 as Starbucks Coffee Company ltd. (UK)
M&A process (acquisition of 65 Seattle coffee company stores)
Re-named the Seattle coffee company into Starbucks the following year
Spring board to further entering on European markets
Acquisition is an efficient and fast way to enter a foreign market (unlike green field operation)
Formed an alliance with Sainsbury's in 1999
Starbucks in UK today
Recognized in top ten of best working place in UK (2007)
810 stores located in UK (2013)
First franchise-owned store opened in February this year - today there are 45 franchise-owned stores in the UK (2013)
Moving from rich and high rental locations to more local areas
Entering the Spanish market
in 2009, Starbucks signed a joint venture agreement (VIPS and El Moli Vell)
Called the joint venture "Tres Estrellas Unidas SL"
First latin country to enter
Joint venture provided know-how and large cost savings
Entering German market
Strategic alliance signed in 2001 with Karstadt Quelle AG group
First individual Starbucks store opened in 2002, Berlin
Selling Starbucks products in Karstadt department stores
Source: http://www.starbucks.com/store-locator/search
Source: http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-newsArticle&ID=1777829&highlight
Top 5 countries in EMEA (2013)
UK: 810 stores
TR: 179 stores
DE: 167 stores
FR: 82 stores
ES: 80 stores
Source http://www.loxcel.com/sbux-faq.html
Target Group
Customers aged 25-40 accounts for 49% of sales
Customers aged 18-24 accounts for 40% of sales
Specialty coffee drinks account for around 75 percent of Starbucks’ sales
SWOT Analysis
Most recognizable brand in the coffee chain industry (loyal customer base)
Largest coffee chain company in the world (economies of scale)
Financial strength and profitability (Net income: 1.38 billion $)
Strong geographical presence (62 countries)
Diverse product portfolio (Over 87,000 possible drink combinations)
Lucrative store locations
High quality products (organic, fair-trade, specialized staff)
Negative publicity in Europe (tax evasion)
Higher prices than competitors (low switching costs)
Little control on prices of coffee beans
High calories in their food-products and lots of caffeine in their coffee (A Starbucks grande coffee has 320 milligrams of caffeine, over four times the amount of caffeine in a Red Bull - The Starbucks cinnamon chip scone has more calories than a McDonald's quarter pounder with 480 calories)
Starbucks is associated with americanization (resentment towards The United States)
International expansion (still emerging markets)
Vertical integration of supply chain (coffee plantations)
More diversification of products (Alcohol? Fast food? Juice?)
Further usage of franchising to expand
Arising in competition (McDonalds, Dunking Donuts)
Rising awareness of health implications considering Coffee consumption and high calorie products
Small-sized companies are better at adjusting to new trends and flavors
Rising prices on beans and dairy products (Starbucks uses over 93 million gallons of milk per year, enough to fill 155 Olympic-sized swimming pools)
source: http://smallbusiness.chron.com/starbucks-target-audience-10553.html
Internal origin
External origin
source: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/The%20Italian%20Coffee%20Market%202010_Rome_Italy_12-3-2010.pdf
Source: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/The%20Italian%20Coffee%20Market%202010_Rome_Italy_12-3-2010.pdf
Source: http://www.indexmundi.com/italy/demographics_profile.html
Source: http://geert-hofstede.com/italy.html

Source: http://www.youtube.com/watch?v=54RNMrKx7v
Table of content
Starbucks introduction
Target group
European market
Italian market
Italian culture
Coffee in Italy
Starbucks in UK
Starbucks in Spain
Starbucks in Germany
How to enter Italian market?
List of references
Silent language
Strategies for instituting change
Value systems
Cost-benefit analysis of change
Resistance to too much change
Opinion leadership
Reward sharing
Learning abroad
UK is culture wise very close to America
1st market in Europe to be entered
German market today
Individual stores in fancy located areas failed
New strategy -> Motorways and train stations
Plan is to open Franchise-owned stores in unknown local areas
Bright future in Europe despite difficulties
Various entry strategies has overcome the cultural and economic barriers
local responsiveness goes a long way
It seems that the Italian market could have a huge impact on Starbucks' business in Europe
a special business strategy must be taken into consideration in order to achieve success
Made by:
Gerard van den Ham
Hans Toft Nielsen
Johan Schoonhoven

Starbucks Corporation 2011 Annual Report, Form 10-K, Filing Date Nov 18, 2011". secdatabase.com. Retrieved June 19, 2012.
Source: "International business", environments and operations, 14th edition, Daniels, Radebaugh, Sullivan - Pearson
Source: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/The%20Italian%20Coffee%20Market%202010_Rome_Italy_12-3-2010.pdf
Source: http://geert-hofstede.com/united-kingdom.html
Source: http://geert-hofstede.com/spain.html
Source: http://geert-hofstede.com/germany.html
Source: http://www.emeraldinsight.com/journals.htm?articleid=1752297&show=html
Source: numbers derived from calculations of: http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-newsArticle&ID=1777829&highlight
List of references:
"International business", environments and operations, 14th edition, Daniels, Radebaugh, Sullivan - Pearson
"Global Strategic Management", 2nd edition, Frynas and Mellahi - Oxford
Internet articles:
Full transcript