Introduction
Starbucks started as a small coffee shop on Sixth Avenue and Pine Street in downtown Seattle’s Pike Place Market. It opened its doors to customers in 1971, and the company is currently one of the most recognizable brands in the world, known for its coffee (About Us, 2023). The business has about 35,711 locations globally as of the end of the 2022 fiscal year (Starbucks Investor Relations, 2022).
Over the years, it has seen rapid expansions in the United States of America by opening many shops. This growth strategy extended to international markets in “Starbucks – Going Global Fast.” In this case, the analysis will examine the controllable and uncontrollable elements in its expansion, therisks Starbucks faces, potential solutions, theoverall corporate strategy, and recommendations for both the African and Chinese markets.
Starbucks’s Controllable Elements
Starbucks has control over factors such as pricing, place, product, promotion, and research in the domestic and international markets. It has determined the cost at which to charge its coffee. Its core products include coffee, tea, handcrafted beverages, merchandise, sandwiches, desserts, ready-to-drink beverages, salad and grain bowls, equipment required for beverage preparation, and yogurt parfaits and fruit cups. On promotion, its marketing strategy relies on its brand, image, and word of mouth to drive its presence in the market and reduce its operational costs.
Furthermore, the company has always strived to dominate the business by opening several shops internationally; so far, it has about 35,711 in more than 60 countries (Starbucks Investor Relations, 2022). Having many shops gives it excellent control over distribution channels. Innovation through research enabled the development of the idea to install automatic espresso machines, enhancing the speed of service (Rodgers, 2019). Starbucks offers prepaid cards equally, and thus, it has managed to reduce transaction time.
Uncontrollable Elements
The uncertainty of entering a new business territory means Starbucks has been unable to control certain factors within its international operations. Firstly, the company has no control over the laws and regulations governing businesses in foreign countries (Leonard, 2018). For example, France has labor legislation that requires employers to provide employees with generous benefits, including salaries and other benefits. Considering that Starbucks has been paying relatively low wages, it presents the company with a real challenge to mitigate in the international territories.
Likewise, established coffee brands in different countries create stiff competition in every country where they have shops (Leonard, 2018). Additionally, despite having an appealing and globally renowned brand, local rivals could hold an advantage due to cultural influence. Consequently, it could prove challenging for Starbucks to capture and integrate all the norms in over 60 countries where it has stores.
Sources of Risks
Its global expansion strategy presents a significant risk to the business. The company makes less revenue because it has adopted a method whereby, in each country, it enters into partnerships with local brands to penetrate the market. Failure to protect its intellectual property could affect its business and brand value globally (Starbucks (SBUX) Risk Factors, 2022). Similarly, stiff competition could reduce its ability to sell more internationally.
Solutions to Risks
The company should focus on aggressive marketing and advertising programs for its products to increase the number of customers who consume them on a daily basis. This is a way to expand daily revenue that eventually widens profit margins. Additionally, it must adopt a business model that meets clients’ expectations regarding sustainability and environmental issues to have positive reviews on its brands (Starbucks (SBUX) Risk Factors, 2022). Equally, Starbucks must build a portfolio of intellectual property for all its brands worldwide.
Critique of Starbucks’ Overall Corporate Strategy
Starbucks has continued to expand its international operations to enhance business sustainability. The company focuses on achieving market saturation, ensuring its presence is felt everywhere (Jacoba, 2022). To actualize the strategy, it has partnered with local brands in other counties to tap into the existing consumer base. Furthermore, it has maintained its brand identity by owning nearly all stores and shops it operates worldwide (Jacoba, 2022). However, it has failed to concentrate more on satisfying customer needs, tastes, and preferences.
Likewise, its business model favors the older generation in terms of charges and does not offer differential pricing for the younger market. It has not updated its menu to include the millennials (Jacoba, 2022). Its marketing approach has weaknesses; it has relied more on the brand name as its key selling point. Furthermore, it does not emphasize the welfare of its employees. They are paid less against heavy workloads and lack adequate health insurance coverage.
Advice for Starbucks in Africa and China
The African market appears to be struggling in the coffee beverage industry.This is made worse by the fact that most populations in African countries are impoverished. Therefore, Starbucks should develop low-priced products that meet the expectations of the majority of people, particularly in many Sub-Saharan countries. In contrast, in China, many people have the means and can afford to spend big on its products. This market should aim to saturate its customer base by expanding its shops, stores, and promotions to increase revenue generation.
Conclusion
Starbucks has implemented an elaborate expansion strategy that spans both domestic and international markets. Throughout the process, the company has consistently controlled its pricing, promotional schemes, and products on offer, utilizing research to innovate new ideas, including the implementation of automatic espresso machines to enhance service efficiency. However, it has to comply with the regulations guiding businesses in each country, withstand competition in different nations, and adapt to cultural challenges in various countries. In its international operations, the firm has always partnered with established brands, which has constrained its revenue because any generated revenue is shared with its associates.
On the other hand, stiff competition from rivals has been a significant risk to its ability to sell more in the global market. Despite its successful entry into the global market, Starbucks has not focused enough on meeting its customers’ needs, tastes, and preferences. Additionally, its model appears to favor older individuals in terms of pricing. It lacks special pricing for younger customers and has not revised its menu to appeal to millennials.
References
About Us. (2023). Starbucks. Web.
Jacoba, J. (2022). Starbucks strategic analysis (490), University of Nebraska – Lincoln. Honors Program. Web.
Leonard, K. (2018). What are uncontrollable factors in marketing? Chron. Web.
Rodgers, K. (2019). Starbucks is speeding up innovation at its Seattle research hub. CNBC. Web.
Starbucks Investor Relations. (2022). Starbucks Reports Q4 and full year fiscal 2022 results. Web.
Starbucks (SBUX) Risk Factors. (2022). Tip ranks. Web.