What Does the Future Hold for the Company in Each of These Three Regions
Essay Preview: What Does the Future Hold for the Company in Each of These Three Regions
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Asia encompasses several significant markets offering some of the highest rates of growth worldwide. While the company has already tapped some of these markets, the real opportunities might lie in ex-panding some of these markets rather than new entry. For example, high growth markets such as Malaysia and Indonesia seem to hold much more potential, but the company has very few stores in these areas. In terms of new markets hereto unexplored, Vietnam and India are possibilities. While Vietnam is probably the better market in terms of Appendix A data (India rates very poorly), India might well be a big bet similar to China. It has the added advantage of much higher consumption rates, indicating established affinity to coffee drinking.
Europe
The initial experience in Europe has been quite positive (Austria/Germany/Switzerland), although the total number of cafés that the company has opened in these countries is very small. While a frontal assault into France and Italy might be desirable for Mr. Schultz for personal reasons, it might be more prudent to focus on Eastern and Central Europe plus the Scandinavian region before going “back home” to Italy. Some of these regions have very high rates of coffee consumption, and the Scandinavian countries have the per capita incomes to justify expansion. However, with respect to countries in Eastern and Central Europe, the per capita incomes are rather low and would thus warrant strategies similar to the ones the company would employ in parts of Asia.
America
While many of the cities in the U.S. (and to a lesser extent those in Canada) have been saturated with stores, there do appear to be some growth opportunities still remaining in these markets. However, this growth is likely to be incremental rather than dramatic. Therefore, the region to focus on would be Central and South America. The students will quickly point out that many of the countries in this region share similarities with those in Central/Eastern Europe and Asia since they do not have the economic wealth. The significant advantage is that they already have well-developed tastes for coffee and are among the largest growers in the world. Therefore, the penetration of Latin America comes with the added challenge of being responsive to already ingrained coffee drinking habits and the need to be locally responsive in procurement practices. This raises a good debate about the procurement practices of Starbucks and the fact that they have only two roasting facilities, one of which is located in Seattle, to serve the South American market. The invariable question that comes up is whether it makes sense to buy coffee in Puerto Rico, ship it for roasting to Seattle, and then send roasted coffee back to cafés in Puerto Rico. We draw attention to the table comparing domestic and international costs to point