MGN-578

CA-3
CASE STUDY: Internationalization of
Starbucks

Date of submission:14th october,2020

Submitted to: Dr. S.K. Kashyap
By: Tania (12013002)
Section: Q2041
Roll no.: A83
 ❖ INTRODUCTION:

Starbucks (an international coffee brand ) opened its first store in 1971 in SEATTLE.
It acquired a large share of the domestic market in 1996, and opened up its first
location in North America. Over the years the company has done very well but over
time it began to receive criticism from its competitors for its rapid growth and
ultimately pointing to the quality of Starbucks product. In 2007 the company had to
deal with a huge global economy, as a result of which it had to close about 1000
corporate stores. After 2009, the company had to decide whether to continue
internationally or not.

❖ IDENTIFICATION OF PROBLEM:
The biggest problems the Starbucks faced:
GROWTH: Starbucks was growing its business rapidly in many countries. At
the beginning of this expansion, its profit increased by 30% but in 2009, its
profits began to decline rapidly for various reasons. Therefore, the company
had to decide whether to expand to other countries or not and to try to benefit
from the existing market.
PERFORMANCE: the pace of operation was very low in relation to the first
years of expansion because Starbucks was simply focused on expansion,
ignoring customer satisfaction. Another reason was a competitive threat from
McDonald's, which was not good as these companies also began offering
special coffee (previously supplied by Starbucks only).

❖ ANALYSIS:

Since a company had to make big decisions that could affect their company to a
greater degree, it was very important to consider every aspect that affects its sales.
Analysing those factors clearly was very important to reach at a final decision.

• Over the period of 15 years ,Starbucks entered into various countries to grow
the business, where it focused more on growing the company than on
providing customer satisfaction . although in the beginning of expansion
 company did really well but after 2009 company experienced a severe
recession and competition from others which eventually affected sales of
Starbucks. Prior to 2009 Starbucks had grown to nearly 17,000 stores in 56
countries around the world.
• Rise in the prices of coffee beans also affected the sales of Starbucks as they
had to pay higher prices for the same coffee beans. It happened because
speciality coffee gained a lot of customers.

• The company did not respond well to the threats from competing market.
As McDonald’s was the big threat to Starbucks but it never took it as threat
because of Starbucks unique coffee. Because it had to deal with problems as
both restaurants offered the same type of items on the market.
• Starbucks shifted its main focus to expansion from improving customer
standards. It was definitely a wrong move by Starbucks as
internationalisation cannot simply make sure that the company will be in
profit but the customers are the one who decide by the services they
experience.
• There was negative relationship between pace and performance of company
because of irregular rhythm and more volatility.
• No relationship was there between pace and ROA.
• In the terms of scope ,there was tremendous growth in the number of
countries entered but the return from countries was relatively low.
• Starbucks had a problem in retaining their core services and product
offerings.
• There was decrease in product quality of Starbucks.
❖ RECOMMANDATIONS:
The company should use incremental decision model where they should see
what is the current situation and move forward by choosing various
suggestions.
▪ Starbucks should not rush in opening new stores, rather it should
focus in improving customer service and satisfaction.
▪ For expansion, Starbucks should enter in only those countries which
are least affected by economic recession and where a steady
economy is there.
▪ Also, Starbucks should enter new markets with local partners as they
will be having proper knowledge of market and the risk could also be
divided.
▪ Starbucks may vary their rates according to the different countries
with comprising quality. As different countries have different
willingness to pay.
▪ It should offer different products except coffee to gain more
customers.
▪ It should try to make Starbucks as a brand because it will ensure that
it is better and different from its competitors. As only for coffee
people have different choices such as CCD, McDonald’s and other
cafés in the region.
▪ Such country can be chosen for expansion , where there is advantage
of access to resources.
 ▪ It should try to make better customer relations, as the customer will
visit again only if likes the services and behaviour of the managers
and workers.
▪ Starbucks should invest some money in marketing in order to
promote their products in the market.
▪ It should slow its pace for expansion .
▪ A cheaper coffee should be started by company to gain more
customers.
❖ REFERENCES:

• http://www.collegetermpapers.com/TermPapers/S/STARBUCKS_INT
ERNATIONAL_ENTRY_STRATEGY.html

• https://www.starbucks.in/
• https://en.wikipedia.org/wiki/Starbucks
• Case study 5 details