INTERNATIONAL BUSINESS ASSIGNMENT

SARTHAK CHADHA(223340)
CASE STUDY ON STARBUCKS

HISTORY OF STARBUCKS

Our story begins in 1971 along the cobblestone streets of Seattle’s historic Pike Place Market. It
was here where Starbucks opened its first store, offering fresh-roasted coffee beans, tea, and
spices from around the world for our customers to take home. Our name was inspired by the
classic tale, “Moby-Dick,” evoking the seafaring tradition of the early coffee traders.

Ten years later, a young New Yorker named Howard Schultz would walk through these doors
and become captivated with Starbucks coffee from his first sip. After joining the company in
1982, a different cobblestone road would lead him to another discovery. It was on a trip to Milan
in 1983 that Howard first experienced Italy’s coffeehouses, and he returned to Seattle inspired to
bring the warmth and artistry of its coffee culture to Starbucks. By 1987, we swapped our brown
aprons for green ones and embarked on our next chapter as a coffeehouse.

Starbucks would soon expand to Chicago and Vancouver, Canada and then on to California,
Washington, D.C., and New York. By 1996, we would cross the Pacific to open our first store in
Japan, followed by Europe in 1998 and China in 1999. Over the next two decades, we would
grow to welcome millions of customers each week and become a part of the fabric of tens of
thousands of neighborhoods all around the world. In everything we do, we are always dedicated
to Our Mission: With every cup, with every conversation, with every community - we nurture
the limitless possibilities of human connection.
 CHANGE OF VALUE

MOTIVES FOR INTERNATIONAL ENGAGEMENT

1. Market Saturation in Home Country (USA):
• By the late 1990s and early 2000s, Starbucks had achieved significant market
saturation in the United States. This made international markets an attractive avenue
for further growth.
2. Revenue Diversification:
• Diversifying its revenue streams across various countries and currencies reduces
Starbucks' dependence on any one market, making it more resilient to economic
downturns in specific regions.
3. Brand Recognition and Reputation:
 • Building a global presence helps reinforce Starbucks' brand image as a high-quality,
premium coffee provider. This global recognition can attract more customers, both
internationally and domestically.
4. Economies of Scale:
• Operating on a global scale allows Starbucks to benefit from economies of scale in
sourcing, production, and distribution. This can lead to lower costs and increased
profitability.
5. Tapping into Emerging Markets:
• Starbucks has targeted emerging economies with a growing middle class and
increasing coffee consumption. Countries like China, India, Brazil, and Russia offer
significant growth opportunities.
6. Competitive Pressure:
• Competitors like Costa Coffee and Dunkin' Donuts also expanded globally, prompting
Starbucks to do the same to maintain its competitive edge.

STRATEGIES FOR INTERNATIONAL EXPANSION

1. Joint Ventures and Licensing:
• Starbucks often forms joint ventures or licensing agreements with local companies in
foreign markets. This allows them to leverage local partners' knowledge of the
market, regulations, and consumer preferences.
2. Franchising:
• In some regions, Starbucks uses franchising as a strategy for rapid expansion.
Franchising allows for quicker growth without the need for significant capital
investment from Starbucks itself.
3. Customization for Local Tastes:
• Starbucks adapts its menu to suit local preferences. For example, in China, it offers a
range of tea-based beverages alongside its traditional coffee menu. This localization
strategy helps appeal to a broader customer base.
4. Store Design and Experience:
• Starbucks often customizes store designs to reflect local cultures and preferences.
This not only makes the brand more appealing but also creates a sense of familiarity
for customers.
5. Digital Innovation:
• Starbucks invests heavily in digital technology, both in its stores and through its
mobile app. This includes mobile ordering, payment options, and loyalty programs,
which are tailored to each market's needs.
6. Sustainability and Social Responsibility:
• Starbucks emphasizes its commitment to sustainability and ethical sourcing. This
resonates with consumers worldwide and helps build a positive brand image.
7. Gradual Expansion and Market Research:
• Starbucks typically adopts a cautious approach to international expansion. It conducts
thorough market research to understand consumer behaviors, preferences, and
competition before entering a new market.
8. Continuous Innovation:
• To stay ahead of the curve, Starbucks continuously innovates with new products,
services, and store formats. This helps keep the brand fresh and appealing to a diverse
range of customers.
 MODES OF ENTRY
1. Joint Ventures and Partnerships: Starbucks often forms joint ventures or partnerships with
local companies in the target market. This approach allows Starbucks to benefit from the
local partner's knowledge of the market, established distribution channels, and understanding
of local preferences. For example:
• In China, Starbucks formed a joint venture with Uni-President Enterprises
Corporation to establish Starbucks Coffee (Shanghai) Co., Ltd.
• In India, Starbucks partnered with Tata Global Beverages to form Tata Starbucks
Limited.
2. Franchising: Starbucks also uses franchising as a mode of entry, especially in markets where
regulations, local customs, or other factors might make it more challenging for the company
to operate independently. Franchising allows local entrepreneurs to operate Starbucks stores
while adhering to the company's standards and guidelines. For instance:
• In the Middle East, Starbucks operates through franchise agreements with Alshaya
Group.
• In Europe, Starbucks has franchised operations in countries such as France and
Germany.
3. Company-Owned Stores: One of the most common modes of entry for Starbucks is to
establish wholly owned subsidiaries and operate its own stores. This approach gives
Starbucks full control over its operations, quality standards, and customer experience. The
company-owned store model has been pivotal in Starbucks' expansion in many key markets,
including the United States, Canada, the United Kingdom, and Japan.
4. Licensing: Starbucks also utilizes licensing agreements in certain markets. This approach
involves granting a local company the right to use Starbucks trademarks and business
processes in exchange for fees or royalties. The licensee operates the business independently
but under the Starbucks brand. Licensing allows Starbucks to enter markets with relatively
low risk and investment. For example:
• In grocery stores and retail outlets worldwide, Starbucks licenses its brand for the sale
of packaged coffee, ready-to-drink beverages, and other products.
5. Acquisitions: At times, Starbucks has chosen to enter new markets through acquisitions of
existing chains or companies. This strategy allows for a rapid expansion of the brand's
presence in a new region. For example:
• Starbucks acquired the Seattle Coffee Company in the UK, which helped establish its
presence in the British market.
• The acquisition of Coffee Partners Hawaii helped Starbucks expand its presence in
Hawaii.
6. Strategic Alliances: Starbucks has also formed strategic alliances with various companies to
expand its reach into new markets or offer its products through different channels. These
alliances often involve co-branding or collaboration on marketing initiatives. For instance:
• Starbucks partnered with PepsiCo for the distribution of its ready-to-drink beverages.
• Alliance with Nestlé for the global distribution of Starbucks packaged coffee and tea
products.
SWOT
Strengths:

1. Global Presence: Starbucks has a vast global presence with thousands of stores worldwide.
2. Strong Brand Image: The company has a strong brand identity and is synonymous with
premium coffee.
3. Customer Loyalty: Starbucks has a loyal customer base, supported by its rewards program
and mobile app.
4. Innovative Products: Continual introduction of new products and beverages, such as seasonal
drinks and food items.
5. Social Responsibility: Commitment to ethical sourcing, environmental sustainability, and
community engagement.

Weaknesses:

1. High Prices: Starbucks' premium pricing may alienate price-sensitive customers.

2. Dependence on Coffee: Reliance on coffee sales makes the company vulnerable to
fluctuations in coffee bean prices.
3. Saturation in Some Markets: In certain regions, Starbucks faces saturation, leading to
competition for foot traffic.
4. Overreliance on US Market: A significant portion of revenue still comes from the US market,
exposing it to domestic economic conditions.
5. Operational Complexity: Managing a large number of stores globally can lead to operational
challenges.

Opportunities:

1. Expansion in Emerging Markets: Growing presence in countries with a rising middle class
and coffee culture.
2. Diversification of Menu: Expanding menu offerings to include more non-coffee beverages,
food items, and healthier options.
3. Digital Innovation: Further development of its mobile app, loyalty program, and online
ordering.
4. Partnerships and Collaborations: Collaborating with popular brands or celebrities to create
co-branded products.
5. Acquisitions: Strategic acquisitions to diversify product offerings or enter new markets.

Threats:

1. Competition: Intense competition from both established coffee chains and smaller boutique
cafes.
2. Changing Consumer Preferences: Shifts in consumer preferences towards healthier options or
alternative beverages.
3. Economic Instability: Economic downturns impacting consumer spending on premium
products.
4. Supply Chain Disruptions: Risks associated with supply chain disruptions, especially with
coffee bean sourcing.
5. Regulatory Challenges: Increasing regulations on labor, environmental practices, and health
standards.

PESTEL
Political:
1. Taxation Policies: Changes in taxation rates can impact profitability.
2. Trade Policies: Trade tensions or tariffs affecting import/export of coffee beans.
3. Regulatory Compliance: Adherence to labor laws, health regulations, and food safety
standards.

Economic:

1. Global Economic Conditions: Economic downturns affecting consumer spending on

premium products.
2. Exchange Rates: Fluctuations in currency exchange rates impacting international operations.
3. Income Levels: Disposable income levels affecting willingness to spend on premium coffee.

Social:

1. Health Trends: Growing demand for healthier options and transparency in ingredients.
2. Cultural Preferences: Understanding local cultural preferences for coffee consumption.
3. Lifestyle Changes: Shifts in consumer habits towards convenience and on-the-go options.

Technological:

1. Digital Advancements: Opportunities in mobile ordering, delivery services, and personalized

marketing.
2. Data Privacy: Ensuring customer data privacy and compliance with data protection laws.
3. Automation: Implementing technology for efficient store operations and customer service.

Environmental:

1. Sustainable Sourcing: Increasing focus on sustainable coffee bean sourcing and eco-friendly
practices.
2. Waste Management: Efforts to reduce waste through recycling and composting initiatives.
• Climate Change: Impact on coffee bean production and supply chain resilience.

Legal:

1. Labor Laws: Compliance with labor laws, especially in international markets.

2. Intellectual Property: Protection of trademarks, recipes, and branding.
3. Consumer Protection: Adherence to consumer rights laws and product safety regulations.

Identifying Risks:
Cultural Differences:

• Consumer Preferences: Taste preferences, beverage habits, and even dining customs
can vary significantly. What is popular in one country may not necessarily resonate
with consumers in another.

• Local Competition: Established local coffee shops might have strong brand loyalty.
It could be challenging to break into markets where local cafes are deeply rooted.

Regulatory and Legal Challenges:

 • Trade Regulations: Tariffs, trade restrictions, and import/export laws can impact costs
and market accessibility.
• Labor Laws: Differences in labor laws and employment practices could affect hiring,
training, and managing staff.
• Food Safety Standards: Compliance with varying food safety regulations across
different countries can be complex.

Economic Factors:
• Exchange Rate Fluctuations: Changes in exchange rates can affect profits, especially
if revenues are in a different currency than costs.
• Economic Stability: Operating in markets with volatile economies can lead to
uncertainty in sales and profitability.
Supply Chain Risks:
• Logistics: Ensuring a smooth supply chain process in international markets can be
challenging due to transportation, infrastructure, and distance.
• Sourcing: Obtaining high-quality coffee beans and other ingredients locally may be
difficult or expensive.

Political Instability
.
Brand Perception

Technology and Infrastructure

Etc……

Assessing Risks:
Risk Mitigation Strategies:

• Market Research: Comprehensive understanding of local markets, consumer

behaviors, and preferences.
• Partnerships and Joint Ventures: Collaborating with local businesses or franchisees
who understand the market.
• Adaptive Strategies: Flexibility in menu offerings, store designs, and marketing
campaigns to suit local tastes.

Diversification:
• Balancing presence across diverse markets to reduce reliance on any single region's
performance.
• Gradual Expansion: Testing the waters in smaller or neighboring markets before
expanding further.

Operational Efficiency:
• Streamlining supply chain processes to minimize costs and disruptions.
• Investing in training programs to ensure consistent quality across international stores.

Legal and Compliance Measures:

• Engaging legal experts to navigate complex international regulations.
 • Regular audits to ensure compliance with local laws, especially regarding food safety
and labor practices.
Brand Management

Financial Hedging

Scenario Planning

RECOMMENDATION
Emerging Economies:
➢ Countries with rapidly growing economies such as India, Brazil, and Indonesia offer
immense potential for Starbucks. These markets boast a burgeoning middle class with
increasing disposable incomes and a growing appetite for premium coffee
experiences.
➢ In these regions, Starbucks can introduce its signature offerings while also adapting to
local tastes and preferences. For example, offering traditional coffee blends alongside
the classic Starbucks menu can attract a diverse customer base.

Expanding in China:
➢ China represents one of the most lucrative markets for Starbucks, given its vast
population and evolving coffee culture. The company has made significant strides in
China, but there is still ample room for growth.
➢ Tier 2 and Tier 3 cities present untapped opportunities. These areas are witnessing
rapid urbanization and a shift towards Western consumption patterns, making them
ideal for Starbucks' expansion.
➢ Additionally, investing in digital initiatives such as mobile ordering and delivery
services can further enhance Starbucks' appeal to Chinese consumers who value
convenience.

Focus on Convenience and Accessibility:

➢ Urban centers around the world are experiencing a rise in busy lifestyles, driving
demand for convenient coffee solutions. Starbucks can capitalize on this trend by
expanding its presence in key locations such as office complexes, transit hubs, and
universities.
➢ Implementing drive-thru locations in suburban areas can also cater to customers
seeking on-the-go options, tapping into a market segment that values efficiency and
speed.

Strategic Partnerships and Co-Branding:

➢ Collaborations with local businesses, hotels, and airlines can facilitate Starbucks'
entry into new markets while leveraging existing customer bases.
➢ Co-branded initiatives, such as Starbucks-branded products in grocery stores or
partnerships with popular retail chains, can enhance brand visibility and accessibility.

Sustainability and Ethical Sourcing:

➢ As consumers worldwide become increasingly conscious of sustainability practices,
Starbucks can differentiate itself by emphasizing its commitment to ethical sourcing
and environmental stewardship.
 ➢ Investing in initiatives such as fair-trade partnerships, recyclable packaging, and
energy-efficient stores can resonate with environmentally conscious consumers and
drive brand loyalty.

Market Research and Adaptation:

➢ Prior to entering new markets, conducting thorough market research is crucial.
Understanding local competition, consumer preferences, and cultural nuances will
inform strategic decisions and ensure successful market entry.
➢ Flexibility and willingness to adapt offerings based on customer feedback will be key
to maintaining relevance and capturing market share.

REFERENCES
https://www.starbucks.com/about-us/

https://www.statista.com/statistics/266465/number-of-starbucks-stores-worldwide/

https://businessmodelanalyst.com/starbucks-swot-analysis/

https://businessmodelanalyst.com/starbucks-pestle-analysis/

https://ivypanda.com/essays/international-strategies-of-starbucks-company/