Orkhan Hajizada

Case Study: Starbucks Going Global Fast.

1.

Identify the controllable and uncontrollable elements that Starbucks has encountered in
entering global markets.

The controllable elements are based on the intrafirm level, and are following firm characteristics,
price, product itself, promotion, channels of distribution and research. The uncontrollable elements
relate mainly to the domestic and foreign environment. They are following: political/legal forces,
competitive structure, economic climate, geography and infrastructure, level of technology and etc.
Starbucks faced following controllable elements in going global:

Price. In Italy the price for espresso is varying between 0.55$ and 0.67$ comparing to

1.5$ paid by Americans.

Products. Italian coffee bars prosper by serving food as well as coffee, an area where

Starbucks still struggles.

Promotion. The expenses on advertisement are too low. Only 1% of revenues are spent on
ads.

Uncontrollable elements:

2.

Competition. Rivals in Japan offer similar fare & In England imitators are attempting

to steal market share. McCafe from Mcdonalds is racing against Starbucks.

Cultural Factors. In Vienna, Starbucks package seems new, cool and hip. Coffee

Consumption Habits of the local population.

Political Environment. There are secret regulations and generous labour benefits in

France.
Shared profits with local partners on about 20-50%.

What are the major sources of risk facing the company? Discuss potential solutions.
The major risks that Starbucks are facing are following:
saturation of US market.
dissatisfaction of part-time employees with odd-hours and low compensation.

Improve the employee satisfaction in order to increase the quality of service.

changing generation.

The possible solutions are introduction of non-coffee items, such as sandwiches in the
coffeshops, installment of the Free Wireless Network in the stores. And the main one, is going
global, expanding overseas.

3.

Critique Starbucks overall corporate strategy.

Managements expansion tactics: predatory real estate strategy paying the fee

higher than in the market in order to keep the competitor away from the location.
Only 1% of revenues is spent on Advertisement, in spite of going overseas.
Odd hours and low pay for the employees.
They should prevent self-cannibalism. There are too many outlets. While the practice
of covering an area with outlets is helpful for market dominance, it can cut sales at

existing outlets.
Outlets expansion in other countries is too fast to take into account the preferences
and habits of local consumers.

4.

How might Starbucks improve profitability in Japan?

Reduce Price
Add Japanese beverages, wider range of tea, local candies, food, cakes and snacks

to the menu. So it become more Japanese.

Implement logo in Japanese characters
Mobile apps for orders for busy Japanese.