Strategic Management - Starbucks Case

Starbucks has been very successful in their home country and has been doing very well in other foreign countries as well. Expanding to international market is not exactly similar to expanding in home country because of several differences like culture, food, discrimination etc. Sometimes being a USA company helps doing business in international market where USA’s products are treated with respect and pride i.e. countries like Singapore, Thailand, and India treats USA’s product with pride, whereas in other counties USA’s products are being banned.

Two major challenges for company to expand internationally are location strategy and choice of entry mode. These factors are closely tied to each other and if they are not considered before expansion could result in disaster.

Strategy being the important part of expansion, I would recommend Starbucks to follow a transitional strategy. The popular products being coffee should follow a global standard strategy.  Coffee drinker would expect the same taste of coffee in any location within the country of in international market. But they should also have localized strategy and have flavors of coffee best suited for local region. For example introducing one flavor of coffee for a particular country would make the local consumer proud. Some countries have heavy tea drinkers, introducing fresh tea would be a plus. Also the foods and ambience should be localized. As mentioned in the case, they have already introduced food items like puff in Asian countries where they are very popular and local people are use to puff with coffee.  At the same time, it should distinguish itself from other local companies.

Developed countries and developing countries are most attractive location for international expansion. Starbucks should consider the size of the market (Coffee drinker) and consumers buying potential (Per capita income). Poor countries can’t afford a premium brand coffee. They should perform benefit-cost-risk analysis and rank the countries in terms of attractiveness and future potential.

Timing is also an important factor to consider while entering in international market. Company can take first-mover advantage associated with entering a market early. Countries like Brazil, China and India are developing very fast and their cities are reforming. Expanding in these markets in their mid developing time would give Starbuck the first mover’s advantage to capture the market

Starbucks need to consider the scale of entry when contemplating international market entry. Entering a market on large scale involves the commitment of significant resources to that venture. Starbucks should go for small-scale entry. Small-scale entry reduces the risk associated with a subsequent large-scale entry. Small-scale entry could be seen as a way of experiencing that market. Once successful, they can expand gradually.

Starbuck should continue with its current strategy of choice of entry mode. They focus on partnership first, country second. Choosing the right partner to enter a market is the key to success in that market. They look for firm that has similar philosophy. When venturing overseas, the company tests each country with handful of stores in trendy districts, using their own experience managers. It reduces the risk of large-scale entry and failure costs. Also the joint ventures allow Starbucks to get benefit from a local partner’s knowledge of a host country’s competitive conditions, culture, language, political systems and business systems.