Starbucks case study

INTERNATION MARKET ENTRY (247.003) |
RESUMING INTERNATIONALIZATION AT STARBUCKS
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May 16th 2011 |



Introduction
The coffee industry has been growing significantly in the past century. Nowadays, the coffee industry plays a major role in the economy, creating employment to hundreds of million of people in the world. The economies and the politics of several emerging countries rely onthe export of coffee. Even if the coffee industry has seen several crises, such as economy crisis, rise of coffee prices and publicity on the downsides of caffeine, the demand for coffee over the years has increased noticeably. According to the International Coffee Organization, the U.S consumption has seen a major change in the 1970’s. The coffee’s quality had considerably increased. Therefore,this new “coffee drinking culture” had influenced other countries that had already their own traditions with coffee. Especially in the U.S, the consumption of specialty coffee has been rising to a considerable extreme.
The first Starbucks has opened in 1971, which is quite at the same time as the coffee consumption changed. Starbucks is a major player in the coffee industry as they are nowestablished almost everywhere in the world. The internationalization of the Starbucks shops started in 1996, when their home market was saturated. Brilliantly, they started to implant new Starbucks in North America, which is geographically close the U.S and which has a similar market. Then, they greatly expended worldwide, implanting Starbucks in 56 different countries. Starbucks have known a lot ofsuccess through the years as they are now confronting different sort of issues.
Problem Statement
Starbucks is nowadays going through a phase of lower profitability due to a major issue in its internationalization process (including pace, rhythm, etc) which has in general diminished the profitability of the organization in both markets: international and domestic. Expanding to several countrieshas become a type of “obsession” since the market in the United States was getting saturated, and the company was performing very well. To open new stores was the primary concern even if up to 2009 one thousand stores are closed in the external market. Starbucks wanted to be present all around the world in a relativity small period of time. Although they were very well known internationally andbenefit from a strong image in the United States, the internalization was not structured with a long run vision. As a result, there was no plan besides the strategy. However, the world constantly changes and the strategy should do so, but not in the same rapidness. Starbucks´s strategy was not changed ever since they decided to go global, but the enterprise´s strategy can without major difficulty bemodified. In fact, they can lower the number of products offered and choose between three entry modes. Indeed, they can lower the number of products offered, they adapt to local needs like omitting the logo in Arab countries, and they can choose between three entry modes. The entry mode chosen is attached to the strategy on a certain level. Every country is depending of another´s situation, thusthe entry modes should be revised when the environment or the company suggests to. This also reflects a short- term idea since the strategy was not conceived in this way. The three entry modes they have chosen have been joint ventures, licensing, and mostly owned subsidiaries. Until now, they implement to the strategy these entry modes that were the most appropriate for a variety of countries, butthey are probably no longer the best alternative considering the current situation. Starbucks decision-making is made based in the actual situation. The only motivation to either keep expanding or to stop was economic interferences. Apart of the economical crisis in 2001 or 2009, there are also other elements to consider. As we can see, a rapid pace of internationalization has led to a lower...