Introduction
Starbucks is one of the world’s leading coffee shop chains. It has a presence in over 44 countries through 15011 stores. Their growth was phenomenal during the period 1971 – 2008. The company’s headquarters are in Seattle, USA. The products of the company are mainly coffee though they serve different varieties of tea, chocolates, and frappuccino. Almost 30% of the stores of Starbucks are located outside the US.
Starbuck’s factors successes in the united states
Starbucks being an international company, existence is influenced by various internal and external factors. A congruence model diagnosis will help the company to identify the misfits and rectify them.
The inputs should fit well to give the necessary output. The inputs are environment, resources, history, and strategy. Environment as the name signifies refers to the factors that are outside the organization such as market pressures, government restrictions, and limitations of scarce capital. Resources of the organization mainly refer to the assets which include employees, technology, information, capital, etc.
These resources when deployed properly give quality outputs for the organization. The history or past events of the organization have a greater influence on its current functioning. The market position of a company in the present is the result of strategies that were applied in the past. The strategy of the organization is one of the most crucial inputs. It determines what an organization should do and how it should be done. (The Congruence Model: Aligning The Drivers of High Performance).
Environment
The political stability of the government, the credit policy of the bankers, the investment climate, and the attitude of labor unions are the major environmental factors that affect the company’s working. There has been no major change in the financial policy of the government in the US even when there was a change in government. This was a favorable factor for Starbucks in the United States market. The bankers were following a liberal credit policy so Starbucks had no difficulty in getting short-term and long-term loans from the banks for their revenue and capital requirement. Because of the good human resources policy of Starbucks, there were fewer disputes between the employees and management, and trade unions. (The Congruence Model: Aligning The Drivers of High Performance).
Marketing strategy in the United States
The management of the company should seriously take the advice of its present founder Howard Schulz and take a more practical approach to the company’s expansion. The rate of growth should be brought down and an attempt to bring back the old club-like atmosphere and the smell of fresh fried coffee beans. They should also understand that clustering which had worked well in the past may no longer be a feasible option.
Overview of the United States market
The outcome of these changes will have a positive effect on the leadership and culture in the organization. The company and its management will become more customer-centric instead of becoming a ‘cold sterile cookie cutter’. The employees will also feel needed and happier in having a close association with the customers. A slower growth rate may not go well with other stakeholders like the stockholders and the management.
But the consequences of not changing have to be explained to them and their views changed accordingly. It should be noted that all these changes will be a slow process that can only be completed over a number of years. The most important stakeholders of the company, namely the customers will be the happiest to get back the opportunity of having coffee in the old atmosphere of Starbucks.
Diversification within Starbucks in the United States
The goal of the company is to expand worldwide so that more customers will have access to Starbucks stores. Strategy is one of the most important drivers of business growth. The strategy incorporates what markets to serve and what products to serve and at what price it should be served. “Starbucks’ strategy for expanding its retail business is to increase its market share in existing markets and to open stores in new markets where the opportunity exists to become the leading specialty coffee retailer.” (International guide of hospitality and restaurant managers).
Starbucks successes in Brazil
Starbucks in the United States is synonymous with coffee and coffee products. It was started in 1971 in Seattle and has outlets all over the world. The company’s goals are to run over 40000 locations worldwide. The most famous fast food in the world is creating a style in the coffee-houses, whereby every store is an independent coffee-house. Starbuck growth has benefited coffee farmers in many countries and especially in Brazil to find a market for their produce. More complicated firm growth may slow down the growth. The future for Starbucks is to open with 600 make which transforms the concepts and design. (Starbucks Strategies and its new Stake: How to Consider Coffee Houses an Alternative to Fast Food Restaurants).
Starbucks Failures in Brazil
Falling coffee prices eliminated millions of dollars of the wealth and thousands of investors were washed out. Recently, falling prices of coffee have made the once-profitable coffee farms fail. Five years back, the coffee bean sold for 3 pounds and now it fetches only 50 to 60 cents per pound. The coffee plantations in Brazil are forced to cut down the workforce due to a drop in prices. The day-to-day fluctuations of world coffee prices have more predictable incomes for the employees. (Batsell).
Starbucks ‘ knowledge of consumer preferences in the global society was reflected in the corporation’s white and green logos with no nipples on the cup shows the globalization of the Starbucks stores. It also shows the increasing culture of the consumption of the product. The low price for coffee is due to the oversupply of the product in the market. Farmers are struggling to survive is not investing in quality coffee threaten in supply chains. (The people vs Starbucks).
Local resentment occurs because the small company is forced to compete with the multinational companies. Management is very anxious about the decision with the new choice and the employees are remaining silent and think about the salary type they can earn in Starbucks. (Stone).
Starbucks Overview of the Brazil market
Starbucks naturally decided to open a market in the world’s top coffee-producing country, Brazil. The company has been researching the Brazilian market for 4 years. These new stores reveal that the Brazilian market is tough to crack. “It is our hope to have a significant business in Brazil someday,” said Buck Hendrix, president of Starbucks Latin America.” (Clendenning ). A Starbucks outlet in Brazil will cost $1.27 to start with minimum wages for a month is $159. Starbucks can play a role in the Brazilian economy by providing a market for coffee as well as providing jobs for the local population.
Starbucks Marketing strategy in Brazil
The marketing strategy of Starbucks in Brazil is built around high-quality coffee, and in the year 2006, Starbucks paid a premium of $1.42 pound of 37% to the New York commodity price. To sell more quality coffee, the production cost is high and higher overheads. Starbucks encloses the price paid to the farmers for benefiting from the quality market boom. (The People vs Starbucks). Starbucks pays an average of 23% above the market price for the coffee beans. This social responsibility of the company is a commitment to its sincerity towards its suppliers. The employees in the business work for 20 hours or more than per week and are provided with health insurance for the benefit to employees. (Stone).
Diversification within Starbucks in Brazil
Starbucks has had 15 years of continuous 5% growth in business. In 2006 the target for the long-term store count was raised to 40,000 and opened its stores in Brazil and Egypt and launched a plan to expand the business to Russia and India. (The people vs Starbucks).
Starbucks has planned to start the business in Brazil as part of its efforts to boost its sales abroad. “Starbucks formed a joint venture with Cafes Sereia do Brasil Participacoes SA, a Brazilian holding company led by local retailers, to form Starbucks Brasil Comercio de Cafes Ltd.” Starbucks opened throughout Brazil within a year as per the company statement. An advantage is that foreign coffee buyers are encouraged in the country to start a business to boost consumption and increase the demand for the products. (Starbucks expanding to Brazil: Bloomberg News).
Competition within Brazil
Starbucks increased competition with McDonald’s Corp and expanded the specialty of coffee counters at the restaurants. They plan to add 14,000 US stores when sales increased to 39% within 2007. The higher cost of the commodity and declining economic growth affect the sales and the serious problem of the company is mainly focusing on expansion and not customer satisfaction which is the major drawback. To improve the performance and growth of the company, customer satisfaction is a must. (Goncalves).
Works Cited
The Congruence Model: Aligning The Drivers of High Performance. Mind Tools. 2008. Web.
International Guide of Hospitality and Restaurant Managers. Starbucks. 2008. Web.
Starbucks Strategies and its new Stake: How to Consider Coffee Houses an Alternative to Fast Food Resturants. Tesionline. 2007. Web.
Batsell, Jake. Growers from Fair-Trade co-op Appeal to Starbucks’ Taste Buds. The Seattle Times. 2001. Web.
The people vs Starbucks. New Internationalist. 2008. Web.
Stone, Matt. Responsible Coffee, Starbucks Style. The Wildcat Online. 2006. Web.
Clendenning, Alan. Starbucks enters Brazilian coffee market with 2 Sao Paulo stores. Business & Technology. 2006. Web.
Starbucks expanding to Brazil: Bloomber g News. Seattlepi. 2006. Web.
Goncalves, Isabel. Starbucks’ Schultz Back as McDonald’s Increases Competition. International Business Times. 2007. Web.