Starbucks Entering into a Global Market
Essay Preview: Starbucks Entering into a Global Market
Report this essay
Starbucks Entering Global Markets
Starbucks Entering a Global Market
A small coffee shop chain of 17 locations within the Seattle metro area has considerably expanded its business over the last 15 years, finding new customers in over 50 countries. There are now thousands of international Starbucks locations with over tens of thousands domestic locations scattered throughout the United States. Starbucks saw the saturation within the market and over dominance eating away profit margins from existing locations, and this is when the company decided to enter the global market of coffee shops.
Controllable Elements
Controllable influences that Starbucks has encountered entering the global market are very similar to those in their domestic markets and can be dealt with in equivalent fashion. The main controllable factors include an adaption of product, price, and promotion. Starbucks has created something unique to the worldwide coffee industry across the world, and this is the angle they have approached when assessing the four P’s of marketing within their new markets. “To compete with a host country store in their markets, firms must possess superior assets and skills that can earn economic rents that are high enough to counter the higher cost of servicing these markets. A companys asset power is reflected by its size and multinational experience, and skills by its ability to develop differentiated products.” (Aragwal, Ramaswami 1999). The Starbucks name and imagery have connected with millions of consumers around the globe. Starbucks can internally adjust to fit a countys cultural tastes and expectations to best suit local consumer’s needs. This is done through proper market research before execution to highlight how that particular region/country desires their coffee and other products the company will have to offer. Cultural aspects play a significant role when defining the products Starbucks goes to market with. Pricing will also slightly fluctuate across all markets, but the primary goal is for the company to keep product and position consistency on a global level. According to the enterprises website, they uphold a high level of international success by choosing global partners who share their ideals and commitment to bringing the Starbucks experience to customers all over the planet. The company’s international partnership program is an excellent example of a global brand acting on a local level do exude relevance and reach a hyperlocal audience.
Uncontrollable Elements
Some elements that are almost impossible to control by Starbucks management
Can be caused by Mandatory changes involving political, legal, economic, and climatic adversities. Governments of foreign countries may change their fiscal and monetary policies leading to countless operational problems for Starbucks. “Competition, legal restraints, government controls, weather, fickle consumers and any number of other uncontrollable elements can, and frequently do, affect the profitable outcome of good, sound marketing plans.” (Guari, Cateora 2009). The Price of coffee that Starbucks purchases at a wholesale level is out of their control. The world commodity market can change at any given time causing price change. Coffee distribution could be affected by natural disasters occurring at any given time. A drought or similar act of mother nature can potentially ruin a significant portion of crops. Uncontrollable human causes such as worker strikes, civil unrest or a supply agreement to raise prices on all deliverables coming from a particular region are acts of uncontrollable human nature. Changes in customers disposable income due to economic shifts similar to the 2008 United States recession causing Starbucks to close down 475 stores to reduce costs. Local competition could take foreign companies entering in a local market personally, especially in developing countries that are not familiar with capitalism. Starbucks has identified uncontrollable elements and has continued to be flexible and adaptive when uncontrollable international issues have risen to have many successful market entries and a constant presence in over 200 countries.
Identifying Risk Factors
Starbucks is well aware of the upper limit of coffee shop saturation being reached in many primary markets across the United States, and There is danger of International market saturation in the future as markets continue to grow in developing countries and newly entered markets. Another risk is losing customers and spreading the company too thin. When