OVERVIEW OF STARBUCKS
Starbucks Coffee Company was founded early in 1971 at Seattle. Starbucks was named after the coffee-loving first mate in Moby Dick. It opened its first store in Seattle’s Pike Place Public Market. Most coffee was purchased directly in a can from supermarket during this time. The concept of selling fresh-roasted whole beans in a specialty store was a revolutionary idea by Starbucks. In 1987, Howard Schultz, a former Starbucks employee, bought the company with 11 stores and 100 employees. When Schultz first joined Starbucks in early 1980s, Starbucks was a local, highly respected roaster and retailer of whole bean and ground coffees. An idea to develop Starbucks arises when Shultz went to business trip to Milan’s famous coffee shops in 1983. This trip opened Schultz’s eyes to the rich tradition of the espresso beverage. He said, “Italian people had unique relationship with the everywhere coffee bars around Italy. They used the local coffee bars as the third place from home and work.”
Schultz implemented the Italy culture in North America. He then named Starbucks and modified the bare breasted and Rubenesque siren logo. The new Starbucks been introduced as a third place - a comfortable, sociable gathering spot away from and work, like an extension of the front porch. Every Starbucks since its conception ha imitated the original Starbucks experience, and at its heart is the commitment to serve customers. The Company has seen successful growth from 17 coffee outlets in Seattle almost 15 years, back to over 5600 shops in around 28 countries worldwide. At 1993, Starbucks went public and has done extremely well in turning an everyday beverage into a premium product. The green and white mermaid logo is widely recognized, and the brand is defined by not only its products, but also by attitude.
STARBUCKS INTERNATIONAL ENTRY
With a stable business in North America, Starbucks plans on expansively expanding abroad. Starbucks’s international strategy is to utilize two expansion strategies, that were licensing and joint-venture partnerships. Starbucks ability to find the right local partners to negotiate local regulations and other country specific issues, made this company successful in expanding into foreign market. Currently, Starbucks exist in a few foreign countries in Asia. The company felt that Asia offered more potential than Europe. Starbucks does not have a roasting plant in Asia as of yet. Instead, one shipment of coffee beans arrives in Asia every other week to supply the company’s shops in Asia.
Starbucks opened first store outside of the U.S. and Canada in Tokyo in 1996. Japan was selected because it is the third largest coffee importer in the world. Schultz felt going to Japan was an essential part of Starbucks International’s expansion plan. For all its international operations Schultz decided it was best to form partnership with local operators. China then becomes a place for expansion the company. Starbucks Coffee International, a subsidiary of Starbucks Coffee Company has start the first step expanding business in China. The new store opened at Southern China, Shenzhen. The store is owned by Coffee Concepts, a joint venture between Starbucks and Hong Kong’s Maxim group, who together have already opened 32 Starbucks stores in Hong Kong. Starbucks’ success in Asia has surprised many people, and executives at Starbucks have been surprising critics for many years. How did a small coffee company from Seattle with 11 stores in 1987 grow into an international company with nearly 6,000 stores worldwide?
Now on, Starbucks have 850 stores in 14 Asian and Pacific markets and will continue expanding its presence throughout Asia.
GREATEST CHALLENGE IN BROAD ENVIRONMENT
Social Culture Influences
As China adopted market economy policies, more western companies have been entering the Chinese Market. Several US companies, such as McDonalds’s, KFC and Pizza Hut have been able to capture the Chinese customer’s taste. In some several studies, young generation of Chinese customers are those who are the most vulnerable to the western trend. Chinese government implemented rigid legislation, which allowed Chinese people to have just one child, this lead to young married couples have more available purchasing power. They could save more money and the economy was growing. Spending more money on recreational activities, such as American fast food restaurants, will be these young married concerns.
The major challenges that Starbucks will face when expanding into the Chinese market is the people culture. The change of culture influences many aspects of people’s lives. China has traditionally been a tea-drinking country. Propose the coffee drinking is not an easy task for the company. Not all of the Chinese will consume the coffee, so Starbucks must implements some strategies to overcome this. Starbucks must monitor the society first. As a result, the change can be an opportunities to the company. People will attract with something new, and the excellent approach by Starbucks will make the coffee business successful in China. Nowadays, drinking coffee been a trend for new generations in China and they also require quality of the coffee instead of drinking only.
Coffee can be a substitute for tea and Starbucks does not have a problem supplying the coffee beans to its Chinese store. Starbucks advance in term of supplying the best coffee beans from Africa, South America and Indonesia.
Technological Influences
In the era of technology development, China is also not exception by this. Computers, internet, and cell phones are part of people’s live nowadays. Business and companies rely on technology to manage their purchasing, control flow of cash, and serve the customers. This advancement of China’s technology enables foreign investors to communicate in real time with their branches in China. By this way, the head offices outside of China get updated information from their Chinese branches.
Starbucks must take advantage of this technology development in China. Starbucks must follows all of the new technological advancement and for that, Starbucks in China has just started a strategic partnership with Compaq Computers. In this agreement, Compaq will serve as the technology supplier and technical supporter to Starbucks. It will help Starbucks to apply the latest technology to efficiently and effectively operate their branches in China. Starbucks also must do some innovation to its products and services. Implementing any new products and service that will move the company ahead is preferable.
Political Influences
China is a communist country and well known as country that restricted their business to foreign countries long over ago. Now, Chinese government opened its doors to foreign investment, and China has been cautious in structuring its rules which govern foreign enterprises. In 2001, China entering the World Trade Organization (WTO), the Chinese market started to share the same rules as the global market. The internal policy making will be more transparent and the government function will be strained by the law frame of the WTO.
This development of China market provide great opportunities for foreign investors, however, investors may still meet the unexpected difficulties because of some policies in China. Any foreign investors willing to invest in China must have to apply for a special government investment license. Starbucks must aware with this, and still have to follow all of the policies that been established. With the WTO interference, taxes are lower to foreign investors as well. This actually provides a low-cost and low-risk operational environment, so that the advanced technology, managerial experience, and marketing network will be better join with the low-labor cost Chinese market and other marketing potentials. All of this will inspire Starbucks, as the majority of the famous international corporations already in China, to consider further investments in China.
Economic Influences
Chinese market is measured as fastest growing and the most powerful market in the world in term of huge population and the overall rising economic growth. Economic factors are an important aspects that concern the nature and direction of the economy in which a firm operates. Starbucks also faced criticism from Non Governmental Organizations (NGOs) that urged the company to acquire certified coffee beans, ensuring that those coffee beans were grown and marketed under certain economic and social conditions. Moreover, a real expectation of huge recession during the next year due to the worldwide financial crisis may affect the company’s results badly.
STARBUCKS COMPETITIVE ADVANTAGE SUSTAINABLE
Starbucks Corporation was a huge company that achieved greater successful now. What makes Starbucks unique from other coffee-bar hops is not only their wide selection of products, but also the environment they provide to all customers. In fact, every location of this Starbucks stores has colorful banners and posters to maintain the look of Starbucks fresh and fun. They restrict employees from wearing any perfume so they keep only the smell of coffee in the shop.
Starbucks sustains competitive advantage by constantly looking for a new ideas, new products as well as new experiences for guest. Therefore, Starbucks hires designers to come up with artwork for commuter mugs. Market trends are constantly being monitored by Starbucks as well. They study every city’s personality and how their products can best fit into the community. However, Starbucks model always been successfully by its competitors and this poses a serious threat to the company. If Starbucks let this happened and cannot retain its differentiator strategy, it is ruined to fall out of popularity, and end up being a company that only selling a cup of coffee.
The SWOT analysis, been a benchmarking for Starbucks to reduce its weaknesses. Due to its large size of company, Starbucks sets trends for the industry that can be backed up by the quantity of their delivery. In nature, how long Starbucks can dominate the market depends on Starbucks itself. This company has a large number of stores for coffee outlets, and this is their huge asset or a liability, depending on how one assesses the situation. The company has managed to maintain the competitive advantage because it has offered conveniences and an atmosphere customers can enjoy. As long as Starbucks fulfils its customer’s wants and needs, Starbucks will continue to be a leading force in the market.
Starbucks also should continue to create more value at its stores. Starbucks has created a perception that it is focused not just on profits, but also on community programs. The company’s stores have become a medium for people and communities to come together and promote a better place to live in an environmentally aware society. Starbucks found a niche market where it identified what makes its customers happy, and has delivered it to them. Starbucks will maintain its competitive advantage for years to come if they ongoing to accomplish this.
STARBUCKS STRATEGIES ON CHINA INCOME DISCREPANCIES
Current and poor economic conditions lead to income discrepancies to some customers in China. The group of potential and active Starbucks customers may decrease based on these conditions. However, Starbucks must improve its performance despite the current economic crisis.
A resource based approach, strategy dynamics can be implemented to understanding and improving Starbucks performance over time. What can Starbucks do considering on China income discrepancies are firstly consider the effect of lowering beverage prices to deal with the current economy crisis or cutting cost. Some other alternatives must be finding to increase their loyal customer base. Next is company must consider the effect of store density on gaining new customers when deciding where to locate a new store. Is it the store can boost the revenue by maximum or not. Then going through internally, the effect of staff turnover occurrence and quality of services in stores must always be monitor. Regarding to competitors and rivals, company revenue and customer visits must also be monitoring, consider improving store atmosphere and product performance with respect to these rivals. More importantly, consider lowering the effective price on special beverages for a short period to win customers and revenue from rivals.
REFERENCES
Chang, H., Gauthier, C., Joerchel, T., Nevarez, J., & Wang, A. (2002). Starbucks entry into China. The Center of Hospitality Research, 1-25.
Gambardella, P. (2009). Application of strategic dynamics: Starbucks corporation. Assignment paper, Worcester Polytechnic Institute. 1-29.
Herve, R. (2004). The starbucks corporation: past, present and future. AmbaiU Graduation Paper, 1-28.
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