UNIVERSITY OF CEBU LAPU-LAPU & MANDAUE

A.C. CORTES AVE. LOOC MANDAUE CITY

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS
IN
MARKETING MANAGEMENT
A
CASE ANALYSIS ON
STARBUCKS JAPAN

SUBMITTED BY:
Estremos, Novie Anne T.

Jhun L. Veril, CMITAP,MBA

December 2022
 CASE STUDY ANALYSIS OF STARBUCKS IN JAPAN

I. SUMMARY OF THE CASE

Starbucks Coffee Company was founded by three coffee aficionados in the year
1971, it is named after the coffee-loving first mate in Moby Dick that opened its first
store in Seattle’s Pike Place Public Market. Starbucks was a local, highly respected
roaster and retailer of whole bean and ground coffees. In 1987, Howard Schultz, a
former Starbucks employee, acquired the company. A business trip to Milan’s
famous coffee shops in 1983 opened his eyes to the rich tradition of the espresso
beverage. Inspired by the Italian espresso bars, Schultz convinced executives to
have Starbucks’ stores serve coffee by the cup.
In 1996, the first store outside North America was opened in the upscale Ginza
district of Tokyo. Japan was chosen as Starbuck’s first international location
because of its position as the third-largest coffee importing country in the world,
making it “an essential part of Starbucks International’s expansion plan.”
Local cafes in Japan like the Doutor Coffee, Tully’s Coffee and Kissaten, are
tough competitors and have adopted Starbucks practices. Doutor, which had 1222
stores at the end of March, appeals to "Old Japan". Its low-cost, no frills coffee
houses allow patrons to smoke - no small thing in a puffer's paradise like this. Like
Starbucks, Tully’s Coffee is an imported franchise, owned by American parent
company Barista’s Coffee Company Inc. headquartered in Seattle. It has been
present in Japan since 1997 when the first local branch opened in the fashionable
Ginza district of Tokyo. Kissaten, is a Japanese-style tearoom that is also a coffee
shop. Developed in the early 20th century as a distinction from a café, as cafés had
become places also serving alcohol with noise and celebration. A kissaten was a
quiet place to drink coffee and gathering places for writers and intellectuals.
Starbucks appeals to "New Japan". Its patrons tend to be 20 or 30-something
women who like its premium coffee and no-smoking environment. Its shops also are
favorites among Japanese who want a taste of Americana without buying a burger
and fries.
The competition of coffee in Japan is very fierce, giving Starbucks a hard time
placing and leading their product in the market. The issue of worrying investors is
oversaturation. A setback for Seattle-based Starbucks, which anticipated
international sales would make up for any slowdown in its US business, is due to too
many coffee shops competing for too few customers in Japan.
II. STATEMENT OF THE PROBLEM

The main purpose of this case study is to determine the effects of oversaturation
of coffee shops in Japan and how does it affect the Starbucks Japan’s overall sales
performance. The researcher sought to answer the following question:
  What is the effect of oversaturation of coffee shops in Japan in terms of
Starbucks' sales?

III. OBJECTIVES
To be able to learn the effects of oversaturated number of coffee shops
opened in Japan and come up with a recommendation that can possibly help the
rapid growing of competition in its coffee industry.

IV. ALTERNATIVE COURSES OF ACTION

The following are the actions that were applicable in the case of Starbucks in
Japan:
 Starbucks should focus on international ang global marketing.
 Starbucks should carefully formulate a new strategy to market the newer
generations.
 Starbucks should reposition their product and price.
 Starbucks should innovate a product that suits well with the tastebuds of
the Japanese people.
 Starbucks should have been more careful in opening other outlets as it will
result to cannibalizing their own business.
V. SUMMARY OF
A. FINDINGS
Japan has a coffee culture that has evolved over time in response to societal
demands. These days, coffee shops fill a certain niche in metropolitan societies.
Although Dutch and Portuguese traders first used it in the sixteenth and seventeenth
centuries, as the twentieth century began, it quickly acquired popularity. It promotes
Japan's social features by providing a place for connection as well as an escape
from societal demands. Along with class interactions and traditionalist attitudes,
coffee is also characterized by its widespread importation and widespread
consumption in Japan in a variety of forms.
In the year 2003, Profit at Starbucks Coffee Japan fell 70 percent in the first nine
months of the fiscal year because of growing competition from rival coffee chains.
Starbucks earned a pretax profit of 353 million yen ($3 million) from April to
December. Sales rose 17.9 percent, to 41.4 billion yen, with most of the gains from
new stores. Sales at stores open more than one year fell 16 percent. The company
reaffirmed that it expected to report a loss of 500 million yen for the full year, which
ends March 31.
Starbucks sales performance is greatly influenced by the high percentage of
competition in the Japanese coffee industry. Competition reduces the company's
market share and reduces the number of available customers. Too many coffee
shops are vying for too few customers in Japan.
B. RECOMMENDATION
Due to the oversaturated coffee shops in Japan which resulted to a very stiff
competition and small number of sales, this study highly recommends the Starbucks
to innovate a product that suits well with the tastebuds of the Japanese people to
avoid customers seeking out a suitable substitute based on his or her preferences.
They ought to develop long-term strategic plans for innovating their goods and
services to provide them a competitive edge over other coffee companies already on
the market.
Starbucks competes with a wide variety of businesses worldwide, includes Krispy
Kreme, Dunkin Donuts, Caribou Coffee, Peet's Coffee and Tea, McDonald's, and
others that sell a variety of coffee products that are marked as substitutes. Starbucks
must have a unique way of getting coffee products to customers that provides it an
edge over competitors if it wants to stand out in this type of competition. The
International Coffee Organization states that coffee consumption is anticipated to
increase between 2.0 and 2.5 percent annually. The predicted rise in consumption
will present the business with an opportunity to boost output and earnings.
C. CONCLUSION
To conclude the case study, Starbucks took advantage of the US market for
coffee and made a name for itself as a high-quality coffee business. It opened its
first store outside of the US in Japan with the intention of bringing culture and coffee
to other countries. Because the Japanese are known for assimilating to Western
culture, they accepted the Starbucks idea and its coffee, which helped Starbucks
become successful in Japan. However, the success was short lived, and in 2003
Starbucks reported losses in Japan. But in 2004, profits were made due to stringent
cost control measures and an improved menu. After that, the company joined the
ready to drink coffee market, although analysts doubted its success in an already
crowded market. The company was also concerned about the evolving tastes and
preferences of the Japanese market. Since the past decade, Starbucks' expansion
strategy in Japan has been quite successful, and indicators indicate that the
company will be able to maintain its growth there.
REFERENCES:
https://www.nytimes.com/2003/02/20/business/world-business-briefing-asia-japan-
starbucks-profit-falls.html
https://www.wsj.com/articles/SB1045649802211646343
https://www.theage.com.au/business/trouble-brewing-for-starbucks-in-japan-
20030611-gdvuvr.html
https://outwiths.com/uploads/user/kbf-jimenez/portfolio_attachments/case-study-
starbucks-corporation-2009-kbf-jimenez-Outwiths-1628769806.pdf?
fbclid=IwAR0IKswtnLcmafcuACICpXwGKEoytH5AvzciGsXZ-
3yaMLYVn2ZNvxS5rU4
https://www.linkedin.com/pulse/coffee-oversaturated-market-shift-ryan-roth
https://www.businessinsider.com/starbucks-omnipresence-sparks-over-saturation-
fears-2017-8