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Brief History

The first Starbucks location opened in 1971. CEO Howard Schultz, the CEO of

Starbucks, had its name that is inspired by a character in the famous Moby Dick novel by

Herman Melville. This name and the mermaid logo were inspired by the love of the sea,

from Starbucks original location in Seattle Washington in the heart of Pike Place Market.

Starting as a single shop specializing in high quality coffee and brewing products the

company grew to be the largest roaster in Washington with multiple locations until the

early 80’s. In 1981, recognized a great opportunity and began working with the founder

Jerry Baldwin. After a trip to Italy to find new products, Schultz realized an opportunity to

bring the café community environment he found in Italy to the United States and the

Starbuck’s brand we know today began to take form. Selling espresso by the cup was the

first test. He left Baldwin to open his own Italian coffee house which found outrageous

success. In 1987 when Starbucks decided to sell the original 6 locations, Schultz raised

the money with investors and purchased the company and fused them with his Italian

bistro locations. The company experienced rapid growth going public and growing tenfold

with locations around the United States, Japan and Singapore. Starbucks also began

expanding its brand. Until Philippines had its first taste of the product.

On December 4, 1997, the Rustan’s Corporation introduced Filipinos to Starbucks.

The Starbucks Experience with its very first branch at the 6750 Ayala Building in Makati

City. From its first location at 6750, The Philippines quickly became the third international

market for Starbucks, following Japan and Singapore which both opened Starbucks

outlets in 1996. At present, there are more than 300 Starbucks Coffee shops in Luzon,

Visayas, and Mindanao.

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Updated History and Current Status

Many people didn't expect Starbucks to choose the Philippines next over all the

other Asian countries. A developing country like the Philippines seemed like an unlikely

choice for a third foreign venture since Starbucks is considered premium product targeting

an upscale clientele.

Setting up a Starbucks franchise in the Philippines was a risk. The decision to

expand in the Philippines did not sit well with the Seattle-based premium coffee retailer.

Many countries have their resources to quickly expand the Starbucks but the Philippines

is one of country that has fairly income. No enough money to expand and be popularized

the Starbucks. But today, Starbucks continuously increase their profit and expansion of

markets. Due to that, the need to expand could cause the company overexposed, more

competitive markets and more risks to expose as well.

Countries with the largest number of Starbucks stores worldwide as of September

2018:

Countries Company operated stores Licensed stores

United States 8,575 6,031
China 3,521 -
Japan 1,286 -
Canada 1,109 409
Thailand 352 0
United Kingdom 335 653
South Korea 0 1,231
Spain 0 142
Taiwan 0 458
Turkey 0 453
Malaysia 0 268
Indonesia 0 365
Kuwait 0 142
Saudi Arabia 0 166
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United Arab Emirates 0 186

Mexico 0 708
Germany 0 152
Philippines 0 360

According to Statistics (2018), The United States and China came top in the

ranking of countries with the largest number of Starbucks stores worldwide as of

September 2018. The famous U.S. coffeehouse chain had the most stores in its home

country accounting for over 14 thousand stores. But most importantly, the Philippines has

360 licensed stored in different places.

Key Issues facing the Firm

Because of the popularity and expanding of markets. Starbucks is facing its own

struggles: According to

Financial Crisis

Starbucks has been leveraging its consumer loyalty and lack of elasticity among

its consumers by continuously passing on increases in costs, due to wages and coffee

prices, to its customers.

More Competitors

Dealing with competitors. There are numerous coffee shops all over the world and

being able to stand out to generate customers is important. Their main competitors are

Dunkin Donuts, McDonald’s, and Nestle in the US and brands like Costa Coffee and Caffè

Nero in the UK.

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Higher Priced

Starbuck coffees are priced higher than other market competitors because of

Starbucks only purchasing the highest quality coffee beans for their product, thus

increasing the price of the drink giving the competitors a cost advantage over Starbucks.

According to Statistics (2019), The revenue

of Starbucks has grown in a similar fashion

to the growth of store locations. Both store

numbers and revenue have increased year

on year.

Within the last 10 years over 70 percent of

Starbucks sales have been generated

through its beverage range. Since the company’s founding, Starbucks has broadened its

product range beyond warm beverages. Food, packaged coffees and tea, as well as

coffee making equipment and merchandise such as mugs help boost Starbucks sales.

Food items have become a more significant product in recent years. The line's share of

total Starbucks sales increased annually over the past 10 years, growing from 15 percent

in 2005, to 19 percent in 2015. That year, Starbucks invested more than 351 million U.S.

dollars in marketing.

Alternative actions
Starbucks continuously expand their markets because foreign countries increase

their resources due to their profitability market. It could possible affect other countries
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including the Philippines that have a fairly income or the other developing countries

licensed Starbucks to their country. In order to achieve these kinds of threats or risks:

Starbucks must reduce their product price by producing a new product of coffee

using cheaper beans, or can come out with special discounts and promotions to reduce

cost, thus increasing sales enabling Starbucks to enter new low cost markets and

increase profitability. It can improved customer’s loyalty and satisfaction. Also needs to

focus on building alliances in new markets/countries to reduce management focus and

benefit from the local and experience curves. Advertising the brand through internet, do

road shows, hand out brochures and etc. can help Starbucks to gain more consumers

and more aware of its brand.

A strategy should be formulated to tackle the competition by entering into

agreements, long-term contracts, with the food service companies that they are

competing against. This way their coffee would be sold at these outlets and they would

gain access to new markets and increase sales while decreasing competition.

Conclusion
Philippines is the third international market. It is continually growing to serve more

coffee-lovers across the country. Through Foreign Direct Investment of Starbucks, the

market may face many struggles in expanding Starbucks. Starbucks competitors are

attempting to specialize in the coffee business, therefore Starbucks must pursue focus

strategy to increase its strength.

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References

Lim Uy, S., (2017). Do you Remember the First Starbucks in the Philippines? Retrieved from

https://www.esquiremag.ph/food-and-drink/food/do-you-remember-the-first-starbucks-in-

the-philippines-a00204-20171201

Trofis Team, (2016). Starbucks’ Challenges and How to Overcome It. Retrieved from

https://www.forbes.com/sites/greatspeculations/2016/12/05/starbucks-challenges-and-

how-it-can-overcome-them/#115f42584be9

Statista (2019). Retrieved from https://www.statista.com/statistics/306915/countries-with-the-

largest-number-of-starbucks-stores-worldwide/

UKEssays: Providers of Free Study Resources (2016). Retrieved from

https://www.ukessays.com/essays/marketing/critical-analysis-of-the-strategic-issues-

faced-starbucks-marketing-essay.php