Harvard Case - Resuming Internationalization at Starbucks
"Resuming Internationalization at Starbucks" Harvard business case study is written by Rob Alkema, Mario Koster, Christopher Williams. It deals with the challenges in the field of General Management. The case study is 17 page(s) long and it was first published on : Sep 17, 2010
At Fern Fort University, we recommend that Starbucks implement a phased approach to resuming internationalization, focusing on a strategic selection of emerging markets with high growth potential and aligning with their core values of sustainability and community engagement. This approach should prioritize building strong local partnerships, adapting the Starbucks experience to local tastes and preferences, and leveraging technology and data analytics to optimize operations and customer engagement.
2. Background
The case study focuses on Starbucks' decision to resume international expansion after a period of consolidation following the global financial crisis. The company faces several challenges, including navigating a complex global landscape, adapting its business model to diverse cultural contexts, and ensuring consistent brand experience across different markets.
The main protagonists are Howard Schultz, the CEO of Starbucks, and the company's leadership team, who are tasked with developing a strategic plan for international expansion that balances growth ambitions with risk mitigation.
3. Analysis of the Case Study
To analyze Starbucks' situation, we can utilize a combination of frameworks:
Strategic Framework:
SWOT Analysis:
- Strengths: Strong brand recognition, established supply chain, global expertise in coffee and retail, commitment to social responsibility.
- Weaknesses: Dependence on US market, potential for cultural misinterpretations, challenges in adapting operations to diverse markets.
- Opportunities: Growing demand for premium coffee in emerging markets, potential for partnerships and joint ventures, advancements in technology and data analytics.
- Threats: Economic instability in emerging markets, competition from local and international players, fluctuations in coffee prices.
Porter's Five Forces:
- Threat of new entrants: High, due to the relatively low barriers to entry in the coffee retail market.
- Bargaining power of buyers: Moderate, as consumers have a wide range of options, but Starbucks' brand loyalty provides some protection.
- Bargaining power of suppliers: Moderate, as Starbucks has established relationships with suppliers but faces fluctuations in coffee prices.
- Threat of substitute products: Moderate, as consumers can opt for other beverages or brewing methods.
- Rivalry among existing competitors: High, due to the presence of both local and global competitors in the coffee retail market.
Financial Framework:
- Financial Performance: Starbucks' financial performance has been strong, with consistent revenue and profit growth. However, the company needs to carefully assess the financial viability of entering new markets and consider potential risks associated with economic instability.
Marketing Framework:
- Brand Positioning: Starbucks needs to carefully consider how to position its brand in different markets, taking into account local tastes and preferences.
- Marketing Strategy: The company should leverage a mix of digital marketing, social media, and local partnerships to reach target audiences in emerging markets.
Operational Framework:
- Supply Chain Management: Starbucks needs to ensure a robust supply chain that can meet the demands of international markets while maintaining quality standards.
- Operations Strategy: The company should adapt its operations to local regulations and labor practices, while maintaining its core values of quality and customer service.
4. Recommendations
Phase 1: Strategic Selection and Pilot Launch (1-2 years)
- Market Selection: Focus on high-growth emerging markets with a strong middle class, aligned with Starbucks' sustainability and community engagement values. Consider factors like economic stability, regulatory environment, and consumer demand for premium coffee.
- Partnership Development: Seek strategic partnerships with local businesses, NGOs, and government agencies to gain insights into local markets, build trust, and facilitate entry.
- Pilot Launch: Launch pilot stores in selected markets to test the viability of the business model, gather customer feedback, and refine operations.
Phase 2: Expansion and Optimization (3-5 years)
- Gradual Expansion: Based on pilot program success, strategically expand into new markets with a focus on building a strong local presence.
- Local Adaptation: Adapt the Starbucks experience to local tastes and preferences, offering culturally relevant products, store designs, and marketing campaigns.
- Technology and Analytics: Leverage technology and data analytics to optimize operations, personalize customer experiences, and gain insights into market trends.
Phase 3: Sustainable Growth and Innovation (5+ years)
- Long-Term Sustainability: Integrate sustainability practices into all aspects of the business, from sourcing coffee beans to reducing environmental impact.
- Community Engagement: Foster strong relationships with local communities, supporting social causes and promoting economic development.
- Innovation and Product Development: Continuously innovate and develop new products and services to meet evolving consumer demands and maintain a competitive edge.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations align with Starbucks' core competencies in coffee, retail, and brand management, while upholding its commitment to sustainability and community engagement.
- External Customers and Internal Clients: The recommendations prioritize understanding and meeting the needs of both external customers and internal clients, ensuring a positive customer experience and employee satisfaction.
- Competitors: The recommendations consider the competitive landscape and aim to differentiate Starbucks through its unique brand proposition, strong community engagement, and commitment to sustainability.
- Attractiveness - Quantitative Measures: While specific financial projections are not provided in this solution, the phased approach allows for continuous assessment of financial performance and potential adjustments to the expansion strategy based on data-driven insights.
6. Conclusion
Resuming internationalization presents a significant opportunity for Starbucks to expand its global footprint and achieve sustainable growth. By focusing on strategic market selection, building strong local partnerships, adapting the Starbucks experience to local tastes and preferences, and leveraging technology and data analytics, the company can navigate the challenges of international expansion and establish a strong presence in emerging markets.
7. Discussion
Alternative Options:
- Aggressive Expansion: A more aggressive expansion strategy could lead to faster growth but also increase risks associated with market volatility and cultural misunderstandings.
- Franchising Model: Utilizing a franchising model could accelerate expansion but requires careful selection and management of franchise partners to ensure brand consistency.
Risks and Key Assumptions:
- Economic Instability: Fluctuations in emerging market economies could impact Starbucks' profitability and necessitate adjustments to the expansion strategy.
- Cultural Misinterpretations: Failure to adapt to local cultural preferences could lead to negative brand perceptions and customer dissatisfaction.
- Competition: Intense competition from both local and global players could require Starbucks to invest heavily in marketing and product development to maintain market share.
8. Next Steps
- Form a dedicated international expansion team: Assemble a team with expertise in international business, market research, and cultural sensitivity.
- Conduct thorough market research: Analyze potential markets based on economic indicators, consumer behavior, and competitive landscape.
- Develop a detailed implementation plan: Outline specific timelines, milestones, and resource allocation for each phase of the expansion process.
- Establish clear performance metrics: Define key performance indicators (KPIs) to track progress and measure the success of the international expansion strategy.
By taking these steps, Starbucks can effectively resume its internationalization journey, achieving sustainable growth while maintaining its brand integrity and commitment to social responsibility.
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Case Description
Starbucks enjoyed tremendous growth over the previous two decades. In 2007, it had a global reach of over 17,000 stores in 56 countries. Between 2007 and 2009, however, Starbucks' relentless march was slowed by three forces: increasingly intense competition, rising coffee bean prices and a global economic recession. In order to remain profitable, the company started to scale back its overseas operations. In 2010, Starbucks was faced with a critical strategic decision: Should the company resume its international expansion and once again intensify its commitments in overseas markets? If so, what approach should the company take? Had the pace of Starbucks' internationalization (i.e. the rate of opening new stores abroad), the rhythm of its internationalization (i.e. the regularity by which stores were opened abroad) and geographical scope of its internationalization (i.e. number of new countries entered) had an impact on the company's performance in previous years? Could Starbucks learn from its prior internationalization within the coffee industry in order to guide its future international strategy?
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