Coffee & Conversations

ays drinking coffee is not everyones cup

Market Entry Strategies Of Starbucks across various countries

Origin of Starbucks

Presence in Various markets

UNITED STATES STORES 50 states, plus the District of Columbia 7,087 Company-operated stores 4,081 Licensed stores

GLOBALLY Company-operated- 1,796 Joint Venture and Licensed stores - 2,792

Products
Coffee Handcrafted Beverages Merchandise Fresh Food Starbucks Entertainment Global Consumer Products Starbucks Card

Pricing

Cushion in which to set its own prices Ability to absorb any negative effects Keeps a monopolistic control

Place
Starbucks retail stores are typically located in hightraffic, high-visibility locations. Company can vary the size and format Site Rankings Prime location advantage

Promotion
Not much use of promotional campaigns

Dependence on Brand Image

Uses Location for its Outdoor Advertising

Long term plan: from 2003 to 2010 Starbucks opens 17,970 new stores
Year Total North America International 35.8% growth annual 1,762 2,393 3,249 4,413 5,992 8,138 11,051 15,007 About 20% growth annual 9.5% growth annual 2003 2004 2005 2006 2007 2008 2009 2010 7,086 8,543 9,633 12,000 14,400 17,280 20,736 25,057 5,324 5,830 6,384 6,990 7,654 8,381 9,177 10,049

Identifying the markets

Current market: over 50% of worlds coffee consumption Well-developed market, long-standing coffee drinking traditions Affluent population, room for gaining market share

Current market: 12-15% of worlds coffee consumption Developing market, longstanding tea drinking traditions High potential for market growth

Current market: under 10% of worlds coffee consumption Traditional coffee growing countries Less affluent population, room for gaining market share in frequented commercial districts

Starbucks Corporate Strategy

Maximize market penetration Provide a relaxing, attractive social atmosphere Offer high-quality products Create a great working environment Achieve profitability

The Frappuccinos

Common Strategies
Its strategy to success is blanket an area completely. The core product stays true to its quality and principles, other elements of the offer can adapt to local market needs Go to any store in China, Japan, France, Greece or Kuwait and you will drink the same espresso The food will have a local flavor Certain aspects of the brand are sacrosanct -- no smoking even in smoking cultures, the adherence to the "third place" even where space is at a premium (Japan, for example)

Contd
Where adaptation is needed to fit cultures, Starbucks adapts Eg:- Green tea Frappuccinos in Asia, the division into men-only and family areas in the Middle East. Local recruitment Places great store by its partners, as it calls its employees For partners main duty is to forge links with local communities Decor is done by a local architecture

Possible long-term penetration

1800 1600 1400

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t s f o r e b m u N

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Balanced Rating System - Site selection process 13-16 weeks Design phase

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Approval

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Negotiating with landlord

Consulting with residents and Push-back? local civil organizations

Balanced Rating System

Shall we open a store at that particular location?

Financial factors Strength of the opposition Site Ranking On the spot solution opportunities

Characteristics of the opposition

Media & Communications

Balanced Rating System

Characteristics of the opposition
Anti-globalists or local communities? (1-5 pts off) Problems: (1-3 pts off)
Litter Noise Increased traffic Sharp contrast with the environment

On the spot solution opportunities

Anti-globalists can not be handled at this level Opportunities: pts)

Media & Comm.

Is the push-back driven by the media? Do we have a negative media coverage? If so, how to turn it positive? (emphasis on social responsibility) (1-3 pts)

(1-3

Costs of these actions are taken into consideration under Financial pillar as inputs

Changes in the design of the store Blending into the landscape Supporting local community, giving away a share of profits

Balanced Rating System

Site Ranking
If site ranking is D WITHDRAW If site ranking is C If site ranking is B If site ranking is A 2pts 4pts 6pts

Strength of opposition
Letters of objection Picketing Vandalism (1-5 pts off)

Costs of these actions are taken into consideration under Financial pillar as inputs

Primrose Hill London, UK

Historical and picturesque area Special residents (writers, actors, musicians, photographers Claims: litter, noise and disruption from deliveries to Starbucks would ruin the historical village ambience Local residents, associations were contacted formerly Anti globalization elements came up as well: Starbucks was renowned for not paying proper money to coffee growers? Local association campaigned strongly against Starbucks: letters of objection, involving celebrities Site rank was A Crowded market with several competitors

Decision: withdraw

European Coffee Culture

Small coffeehouses, long standing traditions Cheaper coffee, more Robusta ingredient No quality assurance, you may easily run into bad coffee Variety of coffee cultures in different countries Smoking accepted and widespread

Entry in UK
Country where tea was the default beverage of choice. Ideal customers because about 80% of them stay in the store to drink their coffee Gives Starbucks a chance to sell them food In the U.S., by contrast, 80% of the customers buy their drinks and leave. In May 1998 through its acquisition of 65 Seattle Coffee Company stores in the UK

Contd
Since September 1998, worked its wellknown "flood the zone" strategy in London, opening 192 stores Has more than 500 stores with over 5,000 workers and continues to expand Strategy was to go all-out in new markets, opening stores quickly and putting pressure on rival firms there. Major competitors Costa Coffee and Caf Nero Have increased the prices of the coffee over a period of time and always prices its products 1-3% more than its competitors Won an award for its mince pie

Germany
Large, affluent population

Starbucks clones already sprung up

Old-style coffeehouses disappearing

No real competition in high quality segment

France
Vibrant coffee scene

Coffeehouses also frequented for alcoholic drinks during the cocktail hour

History of anti-American sentiment

Austria
Favorable reception in one of the densest coffee markets of the world Non-smoking policy does attract young people High coffee quality has been proven People like the atmosphere

Brazil
Starbucks spent four years researching the market Planet's No. 1 coffee producer & one of the largest consumer introduced two outlets in premium retail locations.

Added value differentiation. Price major factor in brazil Starbucks products are unique and different to the regular coffee one finds in Brazil One alliance in Brazil, and that is for the coffee crop called Brazil Ipanema

Israel
Entered the Israeli market in 2001 - JV with Delek Group Planed to reach 20 outlets nationwide by the end of 2002 Israel bid farewell to Starbucks in 2003 All six Starbucks cafes shut down Heavy operating loses bad management (the team of 120 employees was fired ) chain chose the wrong locations Recession and fear of terrorism kept potential coffee drinkers at home Didnt like the taste - bitter coffee

Asia Pacific
Traditional tea-drinking culture The consumer looks for: improved taste, convenience, variety, perceived quality, tailor-making, health-benefits Specialized coffee appeals to the young and the non-coffee drinkers Less developed market than in US, but changes fast
Market may be improved through emphasizing culture

Coffee production and consumption is expanding

Japan
600 stores and $565 million in sales Doutor Coffee- Market leader Green tea beverages Rented most expensive real estate outlets Japanese dont want global brands too localised 280 yen ($2.35)

China
Tea drinking region >200 stores in china Located stores in prime real estate locations Perpetuated self cannibalization President Group as its local partner Real-estate know-how Three Phased execution

Location Advantage
Shanghai-middle to high class customers(Western brand ) Beijing - less socio-economically (traditionally) product to each localitys market Hong Kong
Coffee Concepts (Starbucks Corp and Maxims Caterer) Geographic expansion strategy

Brand Building exercise

Add traditional Chinese items Build the Starbucks brand, to establish Starbucks as the standard for good coffee Distributed free cups of Starbucks coffee Did not believe in franchising

Life-cycle model of coffee consumption

Development Growth Maturity Shakeout Decline

Asia

Latin Latin America America

USA

Europe

Buyers

Few: trial of early adopters Few: competitors

Growing adopters trial of product/service

Saturation of users Repeat purch. reliance Fight to maintain share e Emphasis on efficiency, low costs

Growing selectivity of purchase Deepening competition Shakeout of weakest competitors

Drop-off in usage e

Competitive conditions

Entry of competitors Attempt to achieve trial Fight for sale Undifferentiated products

Exit of some distributors e Selective distribution

Thank you
Presented by:
Shweta G. Swati J. Behroz M. Vishal M. Amee S. Sonia S. Swetank S. 22 24 31 32 57 61 62