Starbucks Case Study

Question 1

Controllable

Starbucks has encountered several controllable elements in its attempts to venture in international markets. First, it pays very little to its employees. It no longer offers enough to make a living for its employees. This is threatening to the image of Starbucks and has led to poor employee retention for most of its employees. The company charges highly for its products. It is therefore capable of paying higher salaries to its consumers.

Second, cultural diversity of its different markets has made it difficult for the company to operate. Specifically, the company has found itself in the middle of the Middle East Crisis after careless comments by Schultz. Entering into the Italian market may also prove difficult due to their culture. The company should keep off political issues in the future protecting its current market. By getting involved in the middle East Crisis, the company risked losing its huge market share in that area.

Some of the markets in which the company intends to venture are not used to its high prices. The company sells most of its coffee products at significantly high prices. Venturing into certain markets will require the company to lower its prices to meet with those of their markets.

Uncontrollable

The foremost challenge that Starbucks has met is the competition. The article states that the Starbucks has met with local competition as well as with other international companies like McDonalds. This competition has been eager to eat upon the market share of Starbucks in the host markets. The company has also had to compete with convenience stores which offer canned coffee drinks. It has also been faced with lookalikes like Mt. Rainier.

The company also suffers from competition from other companies that provide both coffee and food. On its part, Starbucks has found it difficult to sell food in its markets. It would be difficult for the company to eliminate competition. However, its superior products are likely to help it win the battle.

Question 2

Major sources of risks facing the company

The company fears it could saturate the market and not be able to supply continue achieving its current growth rate. Approximately, the company could saturate the US market within two years. The company has had a tradition of creating so many shops in most of its market areas as to dominate the market. Most of its markets are currently nearing saturation.

The company fears it could lose its current relevance. In most of its markets, it gets a good reception since it is new in the markets. The company risks losing those markets in the future and having to compete with its consumers on an even platform.

It is also feared that the company may not be able to penetrate some of its markets. This way, if the company invests into those markets, it may have to close down eventually. A good example of such markets is the French market where the company may not be able to put up with France’s regulations. France also requires the company to pay its laborers more generously than the company is known to do. Another example is the Italian market. Italians seem unlikely to abandon their own coffee bars for Starbucks.

Solutions

The company needs to offer a wider variety of products like food in its markets. This way, the company is likely to increase its sales and profits hence increasing its likelihood for growth. The company could also partner with other companies like the Coca- Cola Company to take advantage of its large distribution networks.

Rebranding is a viable option for Starbucks in the new markets where it is venturing. This way, the company will appear to be renewing itself every once in a while hence commanding its market share. The company can keep on offering newer products to its markets hence keeping its consumers eager. This strategy has been used in the mobile industry by Samsung and Apple and in the beverage industry by Coca-Cola Company.

Where the company fears it may not penetrate, the company should seriously consider partnering with local companies. In Italy, for example, the company after partnering with local companies can offer its products alongside those of its partners. This way, both companies will be offering their products and thereby offering its products. Local companies could benefit from Starbuck’s wide network while the company benefits from their consumer trust. In France, the company after partnering with the local companies should stand and watch rather than have to get directly involved with the local authorities. This way, the company only needs to cater about quality standards and cost to cater for the high salaries expected in France.

The company could also use loyalty programs in the new markets. This way, the company would be able to attract more loyal companies that it can keep attracted to their products through offers and promotions.

Question 3

Critique

The company has been especially cruel to its competitors. This has been shown by their having to pay rent for shops they no longer use. This is a step that could cause consumers to move away from the company. It would be more reasonable to maintain the company’s existence in those markets with less stock and human resource hence only having to maintain a small profit than to pay for rent in order to keep off competition. The company has also had to pay for up to twice the normal rent rates to secure spaces in certain locations.

The company’s use of Italian terminology has similarly come under attack. It uses grande and venti rather than small, medium and large for its coffee sizes. The attack is mainly on its ability to integrate with local markets. Consumers would be more likely to be loyal if a company identified with their local language. It is surprising that the company has no reasonable share of the Italian market.

Question 4

The company can increase profitability in Japan by doing various things. First, the company can introduce its products in convenience stores. The biggest competitors of Starbucks in Japan are those companies that offer their products through convenience stores. If the company ventures into these markets, it could be able to scoop a large share of this market.

The company is facing stiff competition from McDonalds. It would be necessary for the company to practice its competitive tactics with McDonalds. This would call for the company to offer more outlets in Japan especially in areas where McDonalds is venturing. This way, it will win some of the markets already belonging to McDonalds. McDonalds offers food to its consumers. Unluckily, most of its markets are usually congested. It would be advisable for Starbucks to start offering food in Japan to win Starbuck’s market.