STARBUCKS CASE STUDY

Company´s Profile

Starbucks Corp, incorporated on November 4, 1985, is a coffee roaster and retailer of specialty
coffee with operations in approximately 82 markets around the world. The Company has over
32,000 Company-operated and licensed stores. It operates through three segments: Americas,
International and Channel Development. It also sells a variety of coffee and tea products and
license its trademarks through other channels, such as licensed stores, grocery and foodservice.
It purchases and roasts coffees that it sells, along with handcrafted coffee, tea and other
beverages and a variety of food items through Company-operated stores. In addition to its
flagship Starbucks Coffee brand, it sells goods and services under various brands, including
Teavana, Seattle’s Best Coffee, Evolution Fresh, Ethos, Starbucks Reserve and Princi.

The Company’s Americas segment includes the United States, Canada and Latin America. Its
International segment includes China, Japan, Asia Pacific, Europe, Middle East and Africa. Its
Channel Development segment includes roasted whole bean and ground coffees, Seattle's Best
Coffee, Starbucks- and Teavana-branded single-serve products, a variety of ready-to-drink
beverages, such as Frappuccino, Starbucks Doubleshot, Starbucks Refreshers beverages and
Teavana iced tea, and other branded products sold worldwide outside of its Company-operated
and licensed stores. The Starbucks Card, its branded stored value card program, is designed to
provide customers with a convenient payment method and support gifting. Using the Mobile
Order and Pay functionality of the Starbucks mobile app, customers can also place orders in
advance for pick-up at certain participating locations in several markets

Starbucks Marketing Strategy

Beyond this, one of the biggest benefits of operating globally with a local presence is the
opportunity it provides to develop a deeper understanding of the markets in which your company
operates and their potential. It enables you to prioritize and optimize your efforts and budgets
effectively. And last but not least, it gives you as many territories to test and learn from. For each
campaign or activity, you run, you will gather feedback and suggestions from a range of markets.
This is invaluable insight you can leverage by developing a repository of best practice and ideas
which will help drive your long-term success.

Some of the methods Starbucks has used to expand and maintain their dominant market
position, including buying out competitors' leases, intentionally operating at a loss, and clustering
several locations in a small geographical area (i.e., saturating the market), have been labeled anti-
competitive by critics. For example, Starbucks fueled its initial expansion into the UK market with
a buyout of Seattle Coffee Company, but then used its capital and influence to obtain prime
locations, some of which operated at a financial loss. Critics claimed this was an unfair attempt to
drive out small, independent competitors, who could not afford to pay inflated prices for the
premium real estate.

Problems with International Expansion

Not all challenges faced by companies seeking to expand internationally are so tangible in nature.
When negotiating a path through new and unfamiliar markets, cultural considerations can all too
often be underestimated or swept under the carpet as an afterthought. In actual fact, managing
the cultural implications of international expansion is a non-negotiable ingredient for its success.
Companies that get to grips with cross-cultural communication are the best placed to use shared
information and experience to enhance their competitive position at home and abroad.

They are also far better equipped to deliver their long-term business objectives. It’s important to
appreciate and assimilate the subtle differences in verbal and non-verbal communication across
cultures. And language is perhaps the least of the cultural obstacles that international managers
can face. If misconstrued, even barely perceptible nuances of gesture, eye contact, tone, and
humor have the potential to offend, and can even derail projects if not dealt with swiftly.

Business cultures themselves can also vary widely, with significant deviations among countries on
attitudes to challenging authority, resolving conflicts and even working with members of the
opposite sex fluctuating significantly between countries. This is where strong, sensitive and
flexible leadership from the management team can be invaluable for keeping things on track. With
multi-cultural businesses fast becoming the rule, rather than the exception, managers are
increasingly recognizing the value of working with the diversity of a cross-border team to create
mutual trust, recognizing that the creativity engendered by a multi-cultural team can lead to more
rounded decisions and more effective plus productive performance.

Lack of understanding local culture is even more evident in Starbucks entry into Australia. When
Starbucks penetrated the Australian coffee market in 2000, the company approached the
endeavor with great ambition. Not only did they build stores in major cities like Sydney and
Melbourne, but they also set up stores in less populated communities that occupy the coastal
regions of the country. By 2008, they had established 85 stores. All the stores were internally
structured and operated the same as they do in the United States. Essentially, they attempted to
infiltrate the Australian coffee market by establishing their presence within the market relative to
their presence in the US and other international markets.

It doesn’t take a marketing genius to see where Starbucks went wrong with its foray into the
Australian market. Rather than building an organic demand for their coffee-flavored syrup
slushies, the chain bombarded potential customers with multiple store openings over the space of
a few months. The premium prices and questionable customer service didn’t help much either.

The Australians were not impressed by the Starbucks coffee culture. Starbucks had been
successful all around the world, but some people did not want to buy coffee from the corporate
giant. Those who had tried Starbucks were not impressed by the product. Consumers said it did
not compare with the numerous local brews available which were largely better. Starbucks
International failed to pay attention to the Australian’s passionate coffee preferences and culture.



» What type of strategy did STARBUCK apply for growth?
The strategy that STARBUCKS applied for their growth was the Market development, this is
because they banned products worldwide outside of its company operated and licensed stores, but
they are introducing it to the Australian Market in this case.

» What are the challenges that a company might face when being introduced in a new
market?
1. Inadequate time management: Due to the lack of motivation companies may face when
entering a new market, the poor management of time is a very common challenge.

2. Dissatisfied customers: Customers are not used to the brand, and have other local
favorites, new products may not impress these customers.

3. Legal and regulatory challenges: It really depends on the country the brand is planning
on expanding, some countries prohibit certain items to protect the industry, others have
strict limitations on local affairs and overall it can be a big risk to take.

» Examine, what could be some of the possible reasons STARBUCKS failed on the
Australian market
The business of the Starbucks coffee branches in Australia, had a resounding or enormous failure
since they did not do adequate market studies, since Australians, being a culture totally different
from the American one, like coffee in a different way in terms of sweetening and in terms of to the
content of the same coffee as well as it can be appreciated that the Australian body is used to
other or prepared content of coffee.

Instead of building organic demand for its coffee-flavored beverages, the chain bombarded its
potential customers with multiple openings.

of stores everywhere, in a very few months. High prices and questionable customer service didn't
help too much.

» Reflect. What would have been the most appropiate strategy to develop for STARBUCKS,
explain why?
The main mistake that Starbucks made was not doing a market study correctly, it had to rethink its
introduction in the market and correct, it had to do surveys, do tastings, and know the competition,
what is their culture, their trends, what are their tastes for To be able to work correctly since no
culture is the same as another in any part of the world, so to enter with a product you must know
the idiosyncrasy of the people and also analyze the quality, price and promotion strategy, in order
to determine with which product to work , under what standard, with what prices and to be at the
height of what the market requires. So practically Starbucks didn’t really pick a wrong strategy it’s
just they could’ve executed the process much better.