Starbucks case answers 1. Identify the controllable and uncontrollable elements that Starbuckshas encountered in entering Global Market.

CONTROLLABLE Product Price Starbucks charges a premium prices for their products Hot and Cold beverages, pastries, snacks,

Promotion The Company has controlled its promotional strategy and has saved a lot of marketing cost by mainly relying on worth of mouth and the company has good brand name in national market as well as in overseas market. Channel of distribution

Starbucks have 20,891 outlets in 62 countries which shows that the company has good controlled over the channel of distribution.

Research and development The Company has also controlled over its research and development process such as in 800 locations it has installed automatic espresso machines to increase the speed of service and it has also offered the prepaid card which clerks swipe through a reader to deduct a sale, thus the company cuts transaction times in half. Starbucks launched Starbucks Express its boldest experiment yet, it blended java, Web technology, and faster service, At about 60 stores in the Denver area, customers can preorder and prepay for beverages and pastries via phone or on the Starbucks Express Web site. They just make the call or click the mouse before arriving at the store, and their beverage will be waiting. Starbucks continues to try other fundamental store changes. It announced expansion of a high-speed wireless Internet service to about 1,200 Starbucks locations in North America and Europe. UNCONTROLLABLE Economic Forces Economic conditions. Local price range of commodities

Competitive Force Local competitors Imitators Coming in to grab the market share o Coffee is a beverage that has a worldwide appeal. Starbucks entering the global market might face stiff competition from local coffee brands indifferent countries. While Starbucks may hold an advantage in terms of brand recognition worldwide,

local brands can hold an advantage in terms of local appeal and cultural familiarity. Cultural Force Different cultures Capturing the local cultural appeal of different countries may prove to be challenging especially to a brand going global. There has to be a certain amount of standardization while applying the right localization The solution is to overcome cultural challenges by studying and researching on coffee consumptions habits of locals. Political/legal Force Different laws and regulations in different countries. Starbucks had a lot of issues regarding overworked but underpaid employees as it continues its growth globally and dealing with local rules and regulations. o For example, France has very generous labor benefits as opposed to what Starbucks is currently implementing.

2. What are the majors sources of risk facing the company and discuss potential solutions. Saturated market condition in USA There are still eight states in the United States with no Starbucks stores Prevent Self-Cannibalism- Stores must be strategically located Starbucks have to Offer new food and other non-coffee items Market research should be carried out before investing anew store and realize the fact that the market can become saturated. Go global. it will have to depend on overseas growth to maintain growth rate Licensing and franchising for foreign investors.

Problems of changing generation

Consumers 35 years and older tend to consumer coffee more often than the18 - 25 age group Market research should be carried out to study consumptions habits for younger consumers. Starbucks should offer innovations such as wireless networks to its customers to overcome challenge in order to attract the next generation of customers.

Dissatisfaction of odd hours and low-pay Positive reinforcement which leads to higher feelings of job satisfaction Improve the employee satisfaction. So, the quality of service as well coffee increases

3. Critique Starbucks overall corporate strategy.

i. ii. iii. iv.

Eight cities in U.S. remained untapped. Relying on word of mouth, Starbucks spends just1% of revenues on advertising. Low payment to employees Predatory real estate strategy o Paying more than market-rate rents to keep competitors out of a location. Not only it is claimed as an unfair attempt to drive out small, independent competitors who could not afford to pay inflated prices for premium real estate, this also leads to monopoly and then leaves customers annoyed with fewer choices.

v.

Stores Expansion in the U.S o Growing continuously rapidly, Starbucks has done clustering several locations in a small geographical area. Doing so eventually will inevitably act to cannibalize existing locations same store sales

vi.

Stores Expansion Globally o Stores expansion in other countries too rapid to concern the real preferences and habits of local consumers and competitors.

vii.

Predatory real estate strategy o Buying out competitors leases o Not only it is claimed as an unfair attempt to drive out small, independent competitors who could not afford to pay inflated prices for premium real estate, this also leads to monopoly and then leaves customers annoyed with fewer choices.

viii.

Labor Disputes & Involvement in Lawsuit

o Because of Starbucks payment and policies toward its part-time and full-time employees do not compatible with working hours and duties.- 470 Frustrated store managers sued Starbucks in 2001 for allegedly refusing to pay legally mandated overtime.

4. How might Starbucks improve profitability in Japan i. Reduce Price / Increase Benefits o Targeting mid-income levels were frequent buyers and grew substantially. ii. Offering new beverages according to the Asian or Japanese culture and provide wider range of different tea or soft drinks o Tea drinks will increase popularity because their perceived value of healthy benefits. iii. Offering special, Japanese food in Starbucks stores, Japanese candies, cakes or sweets or even snacks o Starbucks may become more Japanese! iv. v. Following the health conscious trend by reducing caloric and fat content. Online, phone ordering and drive-through service for busy Japanese.