Starbucks

Corporation
MKT 6A2 Situational Analysis

Rasmus Bender
S00705904 word count: 1163

Table of Contents
Starbucks Corporation ...................................................................................................... 1
1.0

Starbucks Company profile ..................................................................................... 3

2.0 Motivation to Internationalize Starbucks .................................................................. 3

2.1 Proactive and reactive motives .......................................................................................... 3
2.2 Internationalization triggers ................................................................................................. 4
3.0 Identifying target markets Scandinavia .................................................................... 5
3.1 Selection of target markets ................................................................................................. 6
4.0 Target market Finland .................................................................................................. 6
4.1 Industry competition ............................................................................................................. 6
4.2 Market size & volume ........................................................................................................... 7
4.3 Consumers & Consumer demand ..................................................................................... 7
4.4 Target market - Culture ....................................................................................................... 8
4.5 TOWS .................................................................................................................................... 9
4.6 Target Segments ................................................................................................................ 10
5.0 Perceptual mapping ............................................................................................................ 11
6.0 Recommendations .............................................................................................................. 12
Reference: ............................................................................................................................. 13
7.0 Appendices ..................................................................................................................... 15

1.0 Starbucks Company profile

Starbucks is a large corporation based in Seattle, United States. (Starbucks
Timeline, 2015) The Corporation was founded in 1971 and have over 191 000
employees in over 65 countries. Starbucks is operating across The pacific (Asia),
North America, Europe, Middle East, Africa, Latin America and their key operations
is marketing, roasting and distributing coffee. They have a total 17 009 stores, 8 870
company owned and 8 139 stores under licensing (as of January, 2011). (Starbucks,
2015) their product line consists of premium blends of coffee, soft drinks, food, ready
to drink products and merchandise. The fiscal year of 2014 that ended in September,
Starbucks presented revenues of $16,447.8 million, an increase in revenues of
10,6% compared to previous year. The company made an initial public offering in
1991 and is traded under the symbol SBUX at NASDAQ (marketline, 2015)

2.0 Motivation to Internationalize Starbucks

2.1 Proactive and reactive motives
If expanding to any Scandinavian country, Starbucks would still benefit from lower
taxes, generating economies of scale with a mix of reactive motives: extending their
seasonal products into such market. The Nordic region of Europe, Sweden, Norway
and Finland lists as top 5 consumers of coffee in the world. (Visitsweden, 2015) As
can be seen in figure 1.1 the proactive and reactive motives pushing and pulling
Starbucks away from domestic (U.S.A) and toward foreign markets (Scandinavia).
Starbucks

Push (away from domestic) USA

Proactive

Reactive

Pull (toward foreign market) Scandinavia

Existing competencies of
existing related markets,
(Sweden & Norway)
Managerial Urge
Economies of scale
Technological competencies

Competitive pressures
Saturated domestic market
Overproduction
Psychic distance from
consumers

Foreign market opportunities

Tax Benefits (strategic location of
coffee distribution, through
Switzerland)


Unsolicited foreign orders
Scandinavia got four seasons creating
opportunities in extending Starbucks
sales of seasonal products

(Figure 1.1 proactive & reactive)

2.2 Internationalization triggers

Starbucks have through previous expansion from the domestic (American) market,
located their EMEA head office in Amsterdam. The Company have also through
previous foreign direct investments located their operations of roasting and
distributing coffee to Lausanne, Switzerland: closely related to previous expansions
from domestic to host-nations in Europe. These two strategic places do not only
lower the barriers of distribution within Europe, the company is also conducting
efficient financial planning by buying and selling their coffee beans through
Lausanne, lowering their taxes on parts of the company operations; according to
some governments defining it as Starbucks avoiding taxes (marketline, 2015) The
consumption of coffee, and the culture of drinking coffee clarify that the main
purpose of expanding further would be justified by mainly external triggers. On
average a Swedish person drink 3,4 cups of coffee a day, and consume 8,1 kg
coffee annually (as of 2008). (chambertradesweden, 2010) In figure 1.2 you can see
the internal triggers at domestic (American) market and external triggers at target
markets (Scandinavia).
Internal Triggers (Domestic)
United States of America

- Perceptive Management
- Specific Internal event
- Importing as internal internationalization

External triggers (Target market)

Scandinavia
-

Market Demand (Scandinavian

coffee consumption lists as one of
the highest in the world per person)
Competition (High rivalry at target
market)
Starbucks have already developed
strategic and strong distribution
channels to target markets.
External experts

(Figure 1.2 Internal & External triggers)

3.0 Identifying target markets Scandinavia

Scandinavia account the northern region of Europe and is made out of five countries;
Sweden, Norway, Finland, Denmark and Iceland. (Briney, 2015) However, Finland is
one of the few within the region that have yet not been exposed to the expansion of
Starbucks; the only place where Starbucks can be found is through visiting Helsinki
Airport. (Sspfinland, 2015) Moreover, by looking at the Uppsala Internationalization
Model they have listed that the way of internationalization most often happened,
was through a four step process. Most likely starting at domestic and physic market
evolving into export and further internationalization, as can be seen in the four steps:
Step 1: No regular export activities (sporadic export).
Step 2: Export via independent representative (export mode).
Step 3: Establishment of a foreign sales subsidiary.
Step 4: Foreign production/manufacturing
(Hollensen, 2007)
Starbucks Corporations process of internationalization is in line with the Uppsala
Internationalization model and is not a global born company, they have already
expanded to the extent of having both foreign headquarters located in Amsterdam,
covering the European, Middle-East and African region, as well having
production/manufacturing of coffee in Switzerland, Lausanne. (marketline, 2015) As
can be seen in figure 1.3, Starbucks foreign direct investments show the companys
increasing market commitment for expansion within Europe.

(Figure 1.3 Internationalization)

Source: adapted from Forsgren and Johanson, 1975.

3.1 Selection of target markets

When looking at the Scandinavian countries; Sweden, Norway, Finland, Denmark
and Iceland. From these five countries, Finland was selected as the target market
Starbucks should further expand into.
Rationale Finland:
-

High market demand

Already developed strong distribution channels to countries surrounding

Finland.

Finnish people consume an average of 12kg of coffee per person each year.

Previous experience from expansions into neighbour countries.

4.0 Target market Finland

4.1 Industry competition
The competitive environment for Starbucks in Finland is high, there is although a
projected growth of coffee shops and the key players in number of stores on the
Finnish market can be found in figure 1.3. The SOK Corporation is in total owning 64
coffee shops through two different brands (Presso & Coffee House) making them the
single largest coffee shop owner in Finland. (Marketsizes.mintel, 2015)
Corporation

2013

2014

SOK (Presso)

44

42

Roberts Coffee

33

34

Arnolds bakery & Coffee

34

33

SOK (Coffee House)

24

22

HeseCafe

18

18

(Figure 1.5 Competition)

Source:(Marketsizes.mintel, 2015)

4.2 Market size & volume

There is a high number of already established competitors and the market is
projected to grow 0,9% over the next four years. The current absolute value of the
market in Euro reached 186.6 million, the forecasted total value would only expect to
reach 191.6 million in 2019, a growth by five million Euros. The absolute volume of
the market in 2014 presented 981 coffee shops in Finland and was expecting to
reach 1,006 coffee shops in 2019; growing by 25 coffee shops. (Marketsizes.mintel,
2015)

4.3 Consumers & Consumer demand
The Finnish population has an average consumption of 4-5 cups of coffee every day,
which account for about 400 mg of caffeine. (Kelly, 2015) In the latest research on
annual coffee consumption per capita, the Finnish people average a 12kg coffee a
year. While the U.K. average consumption lands at 2.8kg; proving that Finnish
people drink approximately 9,2kg more coffee a year. (ChartsBin, 2010)

4.4 Target market - Culture

Starbucks presence in Sweden and Norway two of the Scandinavian countries
have possibly generated experience that could be applicable to the host-nation.
When looking at Hofstedes study on cultural dimensions you find in figure 1.4,
that the cultural differences in existing markets is very similar to the target market
Finland. (Geert-hofstede.com, 2015) Giving the company evidence of cultural
similarities in relation to Starbucks previous expansion; culturally wouldnt differ
only to some extent.

(Figure 1.4 Norway in comparison with Finland)

Source: (Geert-hofstede, 2015)

4.5 TOWS
Describing SWOT analysis on domestic (American Market) converting it into TOWS
explaining target market (Finland). Full explanation of the SWOT analysis can be
found in appendices 7.1.

Starbucks corporation

Internal Strengths (S)

- Strong customer
connection
- Strong distribution
channels
- Strong Financial position

Internal Weaknesses (W)

- Product recall
- Tax avoidance

External Opportunities (O)

- Wellness product &
Services
- Mobile commerce
SO
- Expand customer base
through expansion
- Further develop health
products & services and
introduce them to new
markets.
- Further expand into new
markets and develop a
solid m-commerce
platform
WO
- R&D development in
forms of bringing down
product recalls
-

External Threats (T)

- High rivalry
- Government
regulations

ST
- Loyalty programmes for
existing and new
customers
- Government regulations
pose as a low threat due
to the strong financial
position.

WT
- Extend work covering
CSR (corporate social
responsibility)
- Comply and discuss
potential tax agreements
with existing and new
markets

4.6 Target Segments

Geographic:

Psychographic

Demographic:

Behavioural:

Starbucks has gotten a taste of their customers through their store located
at the Helsinki airport. Foremost, Starbucks should locate their stores in
highly populated and frequently visited areas such as shopping malls and
shopping areas in Helsinki, Finland.
Starbucks target market would be all the frequent coffee drinkers that
reside in Finland. However, Starbucks state that they value high
convenience; by making their stores accessible through strategic geographic
locations.
- Age: 16+ as there is no age limit to coffee.
- Income: Finnish people value their coffee and as Starbucks is perceived as
a premium coffee retailer, middle to high income takers.
- Gender: Starbucks would target all genders
- Previous research mapping 10,000 Finnish coffee consumers, explain
that across all demographics 14% drink 10 cups of coffee or more each
day. (Coffee consumption, 1987)

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5.0 Perceptual mapping

Starbucks is described as a premium retailer and manufacturer of coffee that offer a
wide range of beverages, food and merchandises available in-store. The company
strives to offer their existing and potential customers quality through their products,
convenient locations of coffee shops and high service. To Starbucks in-store
customers they offer a value-adding service through free WI-FI and subscriptions
with several big newspapers. (marketline, 2015)

Starbucks Corporation
SOK (Presso)
Roberts Coffee
McDonalds

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6.0 Recommendations
The Starbucks Corporation should expand their operation of coffee shops to Finland
if:
1. The Corporation could penetrate the competitive market environment
2. They find a partner to enter the market, operating under licensee to further
understand the situation at host-nation
3. If their data from their store at Helsinki airport show positive cash flow, and a
sustainable financial position; showing that the Finnish market is valuable.
4. Existing competencies from previous expansion to neighbour countries is
applicable to host-nation (Finland).
The Starbucks corporation should not expand their operation of coffee shops to
Finland if:
1. The target market proves to be saturated and there is a declining demand of
coffee.
2. Its hard to find possible entry modes to penetrate the market.
3. If Starbucks cant differentiate themselves from their competitors.
4. The psychic distance between domestic and target market is to big.

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Reference:
advantage.marketline, (2015). Starbucks Corporation. [online] Available at:
http://advantage.marketline.com/Product?pid=E86AFA79-07E1-4115-AA0C0016416541FE [Accessed 3 Nov. 2015].
Briney, A. (2015). Scandinavian Region. [online] About.com. Available at:
http://geography.about.com/od/europemaps/tp/scandinavia.htm [Accessed 7
Nov. 2015].
chambertradesweden, (2010). Swedish Market. [online] Available at:
http://chambertradesweden.se/wpcontent/uploads/2012/12/Coffee_Tea_Cocoa_juni2010.pdf [Accessed 3 Nov.
2015].
ChartsBin, (2010). Current Worldwide Annual Coffee Consumption per capita.
[online] Available at: http://chartsbin.com/view/581 [Accessed 7 Nov. 2015].
Coffee consumption. (1987). of Epidemiology and Community Health, (41), pp.237242.
Geert-hofstede, (2015). Geert Hofstede - Norway/Finland. [online] Available at:
http://geert-hofstede.com/norway.html [Accessed 7 Nov. 2015].
globalassets.starbucks, (2015). Company Timeline. [online] Available at:
http://globalassets.starbucks.com/assets/BA6185AA2F9440379CE0857D89DE
8412.pdf [Accessed 6 Nov. 2015].
globalassets.starbucks, (2015). Starbucks Company Profile. [online] Available at:
http://globalassets.starbucks.com/assets/F62C45CD8A8B4699BEFC60A2618F
0431.pdf [Accessed 6 Nov. 2015].
Hollensen S. Global marketing, 4th edition 2007, Pearson Education Limited, pp 63

Kelly, J. (2015). Coffee addiction: Do people consume too much caffeine? - BBC
News. [online] BBC News. Available at: http://www.bbc.com/news/magazine22530625 [Accessed 7 Nov. 2015].

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Marketsizes.mintel, (2015). Coffee Shops in Finland (2015). [online] Available at:

http://marketsizes.mintel.com/snapshots/FIN/192/cagr/single [Accessed 7 Nov.
2015].
Sspfinland, (2015). Starbucks Helsinki. [online] Available at:
http://www.sspfinland.fi/en/starbucks-helsinki/ [Accessed 7 Nov. 2015].
Starbucks Coffee Company, (2015). Company Information. [online] Available at:
http://www.starbucks.co.uk/about-us/company-information [Accessed 6 Nov.
2015].
Starbucks Coffee Company, (2015). Contact Information and Shareholder
Assistance. [online] Available at:
http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-contact [Accessed
6 Nov. 2015].
Visitsweden, (2015). Swedish Coffee Culture. [online] Available at:
http://www.visitsweden.com/sweden/Featured/Sweden-Beyond/Food/Ill-HaveThat-To-Stay-Please--Swedish-Coffee-Culture/ [Accessed 6 Nov. 2015].

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7.0 Appendices
SWOT analysis 7.1

Strengths
Starbucks is operating a highly competitive food & drink service at their retail space,
where keeping existing and attracting new customers is highly important. Through
selling their famous blends of coffee, soft drinks and food retained a global growth.
Starbucks is aware of the competitive environment and try to retain more and keep
existing customers by working on adding value to their in-house customers.
Starbucks offer their in-house customers free WI-FI and free subscriptions at their
stores to several big newspapers, as well as through ITunes letting customers
download exclusive material such as online books and music. They have
strategically located their coffee roasting business in Switzerland, selling coffee to all
of their company owned and licensing retailers. Letting Starbucks financially avoid
taxes that otherwise couldnt have been avoided. During the financial year of 2014
the company presented a steady growth at 12% for the European, middle-east,
African markets growing to $1,3 bln. (Marketline, 2015)
Weaknesses
During 2014 the company had several different product recalls, in form of Mugs that
didnt pass the inspections. Coffee blends that where not labelled correctly and
bottled juices that had swollen. The company has since 2012 been facing legal
actions against the company in forms of lawsuits, where U.K. and other European
countries claim that Starbucks is avoiding tax. (marketline, 2015)
Opportunities
Trends have shown that there is a growing concern in regards of health and lifestyle,
Starbucks has therefore tried to overcome these issues by entering the health food
market. During 2012 Starbucks opened up a new retail platform called Evolution
Fresh. The store would fill the purpose of only selling healthy food and beverages.
Furthermore, the projected growth in mobile commerce suggest that Starbucks
should find a solution to offer their customer base to some extent a service letting the
customer order and pay through their mobile phones. (marketline, 2015)

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Threats
The competitive environment for Starbucks and its coffee shops let the customer
base their consumer behaviour foremost on quality of products, pricing and service
as well as convenience. Regulations provided by both home and several hostnations suggest different labelling of products, that may affect Starbucks products,
forcing them to further develop different labelling strategies. (Marketline, 2015)

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