Pair Assignment

DHARSHINI A/P KUMAR J15019938

BOOVANESWARY A/P TANGGIA J16022573
Starbucks Going Global Fast

1. Identify the controllable and uncontrollable elements that Starbucks has

encountered in entering global markets.
Starbucks is synonymous with several uncontrollable factors. Starbucks '
management will have to seek ways to address these threats. For Starbucks
management, it is very important not to ignore it but to combat these factors. The
following factors are uncontrollable in Japan;
 Coffee shops in Japan are abundant, so Starbucks ' competition from rival
stores in Japan is too high. Most Japanese people prefer to drink local coffee
instead of Starbucks coffee. The rivals offer a much cheaper price of local
flavoured coffee. The Japanese customers still ask themselves whether it is
valuable at a high price and taste a Starbucks coffee.
 Japan's economic conditions show a 14% decrease. For any business, this is
not a good sign. The downturn in the economy would mean a reduction in
people's incomes in the country. This reduction would reduce people's
disposable income. Reducing disposable income would mean people are not
prepared to spend a lot of luxury. For customers in Japan, Starbucks is a
luxury priced above all the other similar coffee stores.

In France, the uncontrollable factors differ from those of Japan. Few

uncontrollable factors are as follows in Japan;

 Political legislation is very strong in France. Secret laws are numerous. The
management needs to recognize them, and the organization should comply
with those regulations to avoid legal problems. Starbucks will be forced to
leave the country in the event of ignorance of any of the laws.
 Labor law is very generous. In France, each organization must pay its
employees better than what they pay elsewhere. This will require Starbucks to
provide employee advantages that can appeal to employees and the
government.
 The factors in Vienna are uncontrollable differ from those in France and Japan. The
Viennese culture encourages young people to try and learn new things in the country, and for
Starbucks that is a positive thing. The young people of the nation are very keen to try their
coffee on Starbucks but at the same time are ready to explore new products which are
regularly launched in Starbucks.

A variety of controllable factors have an impact on the Starbucks market. The

variables that can be regulated worldwide are the same. Few of the factors that Starbucks
should control to keep them going in the competition are;

 In Italian coffee shops, the cost of coffee and other non-coffee products is much
cheaper than in Starbucks. Because of this, many in Italy prefer coffee from nearby
Italian coffee shops rather than from Starbucks. The Starbucks Expresso is at $1.5, but
an expresso costs 67 cents (Morris 2014) in Italian espresso outlets.
 Many products such as coffee, tea, smoothies, sandwiches, and others are available
from Starbucks. This expansion is very important to Starbucks so that the customers
can continue exploring new products.
 The channel of distribution used by Starbucks is very unique. All the coffee shops are
owned directly by Starbucks. They have 20,891 stores available in 62 countries. This
is the largest coffeehouse in the world.
 Starbucks doesn't make spending on advertisements. Many commercialization is
carried out through word-of-mouth contact. Starbucks only invests 1% of its overall
marketing sales. This is only achieved when a new product is on the market.

2. What are the major sources of risk facing the company? Discuss potential
solutions.

3. Critique Starbucks’ overall corporate strategy.

Starbucks are incurring losses for mismatch between their corporate strategies and the
customer’s expectations. Those are described below;
• When Starbucks is blanketing some specific cities for dominance, still eight states in the
United States are with no Starbucks stores. Starbucks free cities are Butte, Mont., and N.D.
• Starbucks’s target customers are the Baby boomers or older generation; it has no differential
pricing.
• Though Starbucks fully control its business in the USA, but it has franchisee outside the
USA. Depending on the franchisees undermines the strength of Starbucks outside the USA.
• Starbucks is about to become a global company. But its spending does not match with its
status. Starbucks only spends 1% of its revenue as advertisement; whereas most companies
its size spend at least 10% revenue. Low spending on advertisement hampers Starbucks’s
brand building outside the USA
• By aggressive marketing strategy they have created entry barrier for the competitors
through “predatory real-estate strategy”.
• They have focused on the product concept which myopic attitude in making corporate
strategy.
• Starbucks pay does not come close to match the work load of their employees that created.