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Published: 8 / 12 / 2013
1.0 Introduction
The present business environment is filled with a number of uncertainties in the sense that it is
increasingly becoming very difficult to predict the potential of businesses entering new markets to
success. A number of factors play influential role in the case of uncertainty highlighted, but the most
Number researches (such asRuggles, 1998; McCann and Buckner, 2004; Ciabuschi, 2005) have discussed
on the influence of increased competition on business success, and such discussions have linked
With numerous institutions such as the WTO already established to regulate the business processes
conducted by member nations, it becomes very clear that the global market is fast transforming into an
open sphere where the survival of the fittest is the case for companies that are “diehard fans” of
The business of every business has for long been described as “business” – with the implication being
that companies should focus primarily on their own growth irrespective of whether such growth
influences the overall social wellbeing of the country that they exist in. On that account, the view will be
in the form of increased threats to both social values and the lives of people residing within such places.
However, the view of corporate social responsibility (CSR) is geared towards ensuring that these
companies maintain the social value and quality of life in their new market. In any case, there is a
question that has for long yielded mixed responses and feelings and that is as to whether these
multinationals will be able to ensure that their business is sustainable (satisfying the needs of the
present generation without compromising the potentials of the future generations to meet their own
need).
On that ground, this paper is designed to present a proposal for conducting the business analysis of
Starbucks in Brazil. Brazil has been grouped together with India and China as the potential super powers
of the future. With continued increased in economic growth and the abundance of agricultural products,
there is no refuting the fact that Brazil is one of the countries with potential for business growth
Starbucks was formed in Seattle, Washington in 1971, with the objectives of selling only packaged
coffee. Howard Schultz, CEO travelled to Italy in 1983 and visualized the Italian concept of coffee as a
new potential business. In 1985, he created a café called II Giornale which used coffee grains supplied by
Starbucks, and in 1987, he bought over Starbucks together with local investors. Since then, Starbucks
has grown from strength to strength and now serves millions of customers in 60 countries with its
18,000 stores (Starbucks, 2012). Starbucks entered the Brazilian market in 2006; with the opening of its
first two stores at Shopping Morumbi in Sao Paolo (Starbucks News, 2006).
From the above analysis, it can be seen that the entry strategy adopted by the company is foreign direct
investment (FDI). The basic definition of FDI is a business strategy in which the company starts up a new
business in a foreign market from the scratch. The company entered into Brazil through this means by
4.1 Political factors – the Brazilian government has been working tireless to help local entrepreneurs to
survive and this simulation is thought to be capable of increasing the purchasing power of customers
(Animata et al., 2006). This increase in purchasing power will help Starbucks to be successful as more
customers are likely to patronize their products. The political scene in Brazil is also improving on a
constant base, with the government encouraging foreign investors to open coffee stores and enter its
coffee industry as a way of increasing the demand and consumption of Brazilian coffee. Therefore, it can
be said that the political environment creates a huge opportunity for the success of Starbucks in Brazil.
4.2 Economic factors – together with India, China, and Russia, Brazil is one of the countries the new
emerging market economy. Brazil has recorded an average annual growth rate of 2.4% since 1980 (1MF,
2004), New economic policies are designed in Brazil to aid stabilization of its public debts, maintenance
of current account surplus and meet inflation targets. The ability of Brazil to control its inflation has
resulted in an increased confidence in the Brazilian market (Animata et al., 2006). The market is
constantly gaining high surplus cash and its increasing the purchasing power of customers. Thus, the
2006), with 93% of the population drinking coffee on a regular bases. Brazilians tend to have a similar
attitude with the Americans at work, often engaging in long hours of work in order to help support their
families. Consumerism is very high and there is a high demand for quality products. It was also found
that coffee customers are less likely to stay in the coffee store for long period of hours (Animata et al.,
2006), thus it increases the rate of turnover. This is important success factor for Starbucks as the high
number of customers who seek coffee on daily based will mean increased sales and profit for the
company.
4.4 Technological – most of the technologies used in Brazil are imported from the United States
(Animata et al., 2006), which is the parent country of Starbucks. Thus, it is expected that the issue of
technology will pose little worry to Starbucks as they can make such available through their American
supply center.
4.5 Environmental factors – in Brazil, energy supply is very stable and this increases the success of
companies as they will not be investing on energy production. However, what supply is not as efficient
as the energy as most of the waters are contaminated and undrinkable (Animata et al., 2006), and most
companies invest hugely on production of waters for undertaking their daily business activities.
Additionally, the coffee industry is becoming congested with little road side retailers who offer low
priced coffee with quality taste and feel. Thus, the environmental factors pose a threat to the success of
Starbucks in Brazil as the issue of water will mean added production cost, while the high competition
will make gaining of more customer shares very difficult for Starbucks.
4.6 Legal factors - Animata et al, (2006) stated that there are well established laws designed to protect
both employees and companies in the Brazilian market. such laws also monitor value chains and supply
network in order to ensure quality of distribution in the Brazilian markets. Many law firms exist in the
market for consultation and advices. Thus, the legal system of Brazil is good for the survival of Starbucks
as they operate in a system where everything is expected to move according to the law, and this means
protection of their corporate images, properties and rights while operating in the Brazilian market.
5.1 Entry strategy – from the earlier discussions, it was made known that the strategy adopted by the
company is FDI. This strategy can be considered a success because following their initial two outlets in
Sau Paulo; the company had enjoyed tremendous success since 2006 and now has 26 coffee outlets in
6.0 Critical success factors for operating in the Brazilian coffee industry
It has been identified from the above analysis that in order for Starbucks to successfully operate in the
Brazilian market coffee industry; certain factors must be taken into consideration if they are to be
6.1 Marketing – due to the high competition that exists in the Brazilian coffee industry, marketing is
crucial for success as it will help in communicating the value or Starbucks products to the market,
creating awareness and persuading customers to patronize as well as be loyal to Starbucks brands.
6.2 Distribution network – with Brazil being a big country with high spending power and passion for
coffee, it is important that a quality distribution network be designed to make Starbucks’s products
available to the market. The availability of their products in all segments of the market will ensure
6.3 Quality customer services and product offerings - it was discussed in the customer’s bargaining
power above that Brazilian customers seek quality coffee in a comfortable environment as they seek to
escape from their daily hustles and bustles. Therefore, a quality customer services is important as it will
make customers fell relaxed and increase their loyalty towards the brand. The products are also
expected to be high in quality as it will increase demand and aid in differentiation as well as added
product values.
The success of Starbucks in Brazil is high as the company has numerous resource, competences and
financial support to back such. These resources can be further analysed below.
Starbucks have different assets such as retail stores, warehouses, coffee farms, brewing and roasting
machines, inventories and transportation equipment in Brazil. The company also recorded huge financial
gains in 2011 at the value of $11.7 billion as announced in their 2012 annual report (Starbucks, 2012).
These resources will without a doubt help Starbucks to quickly make a stand in Brazil and operate at
such ease as compared with their competitors who are not endowed with these resources.
Starbucks maintains huge global presence and the company have gained high number of customer bases
in Brazil during their short period of operation of about 6 years now. The company maintains high
quality image, skilled staff and management expertise that are amongst the best in the industry and also
invest heavily in marketing and public relationship. Since the company has been in operation since 1871,
they have gained huge management expertise and experience that will ensure strategic management of
its customers and assets in Brazil towards a path of increased productivity and growth.
8.0 Conclusion
The focus of this conclusion will be on the increase of Starbuck’s stores from just 2 in 2006 to 26 in a
space of 7 years which can be used to represent an increase in two stores per annum. Although Brazil is
well known for the production of quality coffee as a result of the vast coffee bean present in the
country; and the availability of high quality coffee at lower price – Starbucks still managed to see off
these threats and took advantage of its opportunities in establishing itself as one of the preferred brand
References
Aminata O., Daniele A., Melissa B., and Matvey K. (2006), “Starbuck Brazil.” Available
athttp://pierre.benain.free.fr/MBA698%20Starbucks%20in%20Brazil%20Report.pdf[Accessed on:
28/11/2012].
Ciabuschi, F. (2005), “On IT systems and knowledge sharing in MNCs: a lesson from Siemens AG”, Knowledge
Management Research & Practice, Vol. 3 No. 2, pp. 87-96.
McCann, J. III and Buckner, M. (2004), “Strategically integrating knowledge management initiatives”, Journal of
Knowledge Management, Vol. 8 No. 1, pp. 47-63.
Ruggles, R. (1998), “The state of the notion: knowledge management in practice”, California Management
Review, Vol. 40 No. 3, pp. 80-9.
Starbucks (2012), “About Us: From the Official Starbucks’s US Website.” Available at:
http://globalassets.starbucks.com/assets/9a6616b98dc64271ac8c910fbee47884.pdf [Accessed on:
11/11/12].
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