Sault College of Applied Arts and Technology

International Sales and Marketing- GBM(306)

Assignment

On

Star Bucks

Instructor: Faith Oluwajodu

Members: Alka Alka (21063529)

Renu Renu(2107997)

Date: 04, December 2022

Brand name: star-bucks

International strategies introduction

There has been a growth focus at Starbucks since it opened. After years of steady expansion in

the USA, a saturated market forced competitors to emerge in order to avoid stagnation. The

firm now has a worldwide focus as a result. Different elements are significant for business

performance in both home and international markets. The Porter's Five Forces model may be

used to explain and evaluate these factors. According to Porter's framework, a business is

impacted by five main factors: the threat of substitute products, supplier and buyer bargaining

power, rivalry among competitors, and entry barriers to a market.

 Competitive Forces

The demand for a company's product is influenced by substitute items. Customers have more

options with more replacements. Therefore, if the usefulness of an item is constant and price

elasticity is growing, dropping the price of replacements will lead to lower sales. The rival with

the lowest price will draw all clients in a perfect market. Customers need to be able to clearly

perceive the benefits of utilising a particular item before they will be prepared to pay a higher

price for it. The alternative use of money is a distinct kind of substitution, therefore going to the

movies instead of a coffee shop may be an alternate way to spend money. However, most

customers go to Starbucks to drink something, and they won't probably skip a movie to get a

coffee, so the threat of substitutes offering alternative experiences is less of a concern.

Starbucks provides more than just coffee; it also provides an experience. In regard to this,

alternatives must be compared to the full package that Starbucks gives its patrons, which

includes a wide selection of coffees, a pleasant atmosphere, elegant décor, and wireless LAN

connectivity in the majority of its American and European locations. Even though, for example,

other retailers in Britain have a similar assortment, music, decoration, and ethics to Starbucks,

they cannot compare to the brand of Starbucks and the image associated with it. It is difficult

for a typical supermarket or coffee shop offering hot and/or cold beverages to imitate

Starbucks. Starbucks is able to charge more on its offer as a result. When Starbucks is reduced

to a coffee shop, issues arise. Then, any other coffee shop is on par with Starbucks, and the

main factor influencing customers, especially in nations with a strong coffee culture where

Starbucks is new and scarce, is the cheapest price or coffee culture habits.

The ability of suppliers to influence the price they receive for their goods determines their

negotiating power. Suppliers have a significant impact if they are concentrated, few, or if

moving between them is expensive.

Coffee continues to rank behind crude oil as the second most traded commodity today. It is

challenging for farmers to make long-term projections in the coffee sector because of the large

number of small suppliers, intense rivalry, and exposure to fluctuating worldwide prices. As

more nations began to manufacture coffee, prices fell, going from over one US dollar per pound

in the 1980s to less than 50 US cents per pound now. Because there are only two types of

coffee beans—Arabica and Robusta—and only the latter is utilised for premium coffee,

suppliers that wish to supply Starbucks must establish and uphold a high standard of quality
and provide competitive pricing. Because of the cheap pricing, their profit margin is getting less,

and they could even sell at a loss. Therefore, the power of suppliers may be viewed as weak.

Fair Trade coffee was founded in the second part of the 20th century as a minimal kind of

protection. It is a non-profit initiative that guarantees fair prices for coffee farmers in

underdeveloped nations. However, despite paying more for their beans, Starbucks still only gets

a small portion of their revenue from Fair Trade.

The Seattle company specifically trains suppliers to meet their standards in exchange for a

higher quality, collects samples to spot quality differences early on, and, in addition to fair

trade, pays prices above market average in order to uphold their standards for quality and

maintain good relationships with their suppliers. However, Starbucks' expansion plan will make

it challenging to maintain a steady supply of high-quality coffee. The supply of high-quality

coffee is limited, and harvests themselves are finite. By doing this, suppliers could be in a better

position to bargain with Starbucks and the coffee sector as a whole.

The clients are located at the opposite end of the value chain. The average person who walks

into a business has little negotiation power. His cost is set. Customers who make significant

demands have a stronger position since it puts them in a better position. Starbucks serves both

varieties. Starbucks has partnerships with major corporations like Pepsi, Dreyers, Barnes &

Noble, etc. in addition to retail store patrons. They can enhance Starbucks' reputation and add

strategic value by assisting in the creation of new products and growing Starbucks' market

share. They can therefore demand things from Starbucks and haggle over prices as a result.

Furthermore, when a business expands internationally, some risks can be identified.

  Strategic risks: Porter's issues might be viewed as strategic risks. They are outside

dangers that a business must anticipate and address, but which it can scarcely affect.

Only through gaining expertise and knowledge and being able to reduce strategic risks

will a firm be able to adapt to its environment.

 As a result of conducting business, a corporation may encounter operational hazards.

For instance, a malfunctioning machine or a lack of staff may make it difficult for a

business to comprehend the needs of its customers.

 The political system of a target nation contains inherent political risks. State laws,

unpredictability, and other factors might make it difficult for a corporation to succeed in

international markets. Understanding and being receptive to political forces are

essential if you want to avoid problems altogether.

 Environmental hazards include unfavourable environmental outcomes that a business

must address, such as pollution or waste. For one Starbucks business unit, this category

may appear to be unimportant, but on a global level, Starbucks must incorporate

environmental concerns into its business strategy.

It's necessary to address each of these threats. There are four different mitigation strategies

that can be used to lessen the effects of occurrence while also extending the window for taking

action to mitigate the risk. The four most popular types of mitigation strategies are

Avoidance: If strategies with lower risk and the same predicted benefit are adopted, a risk can

be avoided.

- Acceptance: required if results of a choice are known.

- Control: The most popular methods for reducing risks and successfully managing them are a

constant monitoring and adaptation process.

Information transfer: If a danger is apparent, all of the company's partners should be given

access to the knowledge so they can respond. Risk management, insurance, warranties, or

contractual risk shifting all relate to sharing the risk.

(STREHLE, 2004)

References:
STREHLE, P. (2004). Starbucks. International Business Concept and Starbucks in Germany. GRIN , 40.
https://www.grin.com/document/32098