Marketing In A Global Environment

Assignment 2

EVALUATING STARBUCKS’ OPPORTUNITY

TO EXPAND TO ITALY MARKET

Dung Vo
April 26 2011

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CONTENT PAGE
Executive summary …………………………………………………………………. 2 - 3
Part 1: The “Primary Data” Interview
1.1 Interviewee’s personal information ……………………………………………. 4
1.2 Interview findings .………………………………………………………………4 - 7
Part 2: Country Analysis
2.1 Geography and Infrastructure …………..…....………………………………… 7 - 8
2.2 Political and legal issues …..…………………………………………………… 8
2.3 Economy……………………………………………………………………….. 8 - 9
2.4 Culture .…………………………………………………………………………9 - 10
2.5 Coffee industry .………………………………………………………………..10 - 11
Part 3: Market Segmentation
3.1 Segmentation approach …………..…....………………………………………11 - 13
3.2 Target market selection …..……………………………………………………13 - 14
Part 4: Recommendation …………………………………………………………14 - 17
List of Reference ………………………………………………………………… 18

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EXECUTIVE SUMMARY
At first sight, Italy as a whole seems to be a very tough market for Starbucks to penetrate
due to certain issues: (1) Italian hard-to-change coffee drinking culture that does not seem to fit
Starbucks’ business including differences in product, pricing, and drinking habit, (2) negative
impact of aging population trend (the Italian “consumer” that I interviewed confirmed that older
Italian people, those in their 40s and above, are normally more conservative hence reluctant to
change their coffee drinking culture), (3) saturate market with intensive competition (according
to case 1-1 of the book International Marketing, there are about 200,000 coffee bars in Italy),
and (4) negative impact of economic downturn.
Still, a closer look into specific market elements reveals a clear potential for Starbucks to
expand its business to Italy targeting at certain segments, mainly thanks to the following factors:
• Younger Italians as primary target market. Italian younger consumers, those in
their 20s and 30s, are generally more open-minded and subject to change, especially
towards American lifestyle.
• Market size. Although the growth rate of Italian young population has steadily
declined, the actual numbers of those in their 20s and 30s are still high enough for
profitable market in the long run. In addition, this can be offset by the high and
increasing number of international tourists coming to Italy as a contribution to the
coffeehouse market.
• Continued growth of coffee consumption. Despite of economic downturn, there
was an impressive growth rate of coffee consumption in Italy during 2010, especially
instant/ convenient coffee such as coffee pod. This is a good sight that Italian
consumers do not reduce their expenses on coffee even in an economic hard time.
Moreover, Starbucks can also attack this market to build its brand and create a
positive perception towards its products sold in the coffee house at the same time.
• Change of lifestyle. There is a trend that young Italians now spend more time on
work and less on home-cooking. This means more time and income are spent on
eating out, which brings opportunities for companies like Starbucks to fulfill the
needs of this segment.
• Other favorable factors. Italy is located in a position that can help Starbucks expand
to other European markets easily. This country is also a good place of doing business

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 with low political risk and high political stability. And as a developed country, Italy
has well established policies to encourage foreign investment.
• Starbucks’ brand name and product innovation capability. Global reputation may
help Starbucks build brand awareness fast and less costly. Besides, its product
innovation capacity allows the company to provide consumers with a variety of
product choices. This presents a potential for Starbucks to conquer Italian consumers
who currently enjoy coffee in a limited range of espresso, latte, and cappuccino.
All of the above mentioned points will be discussed in details in the following parts to
clearly rationalize why Starbucks should invest in Italy. However, to maximize the chance of
success, a step-by-step expansion starting in cities having high numbers of tourists and/or
selected populous cities in the north is highly recommended. This approach will be explained in
details in part 4 – recommendation. Nice set up. One of the things to consider would be the
alignment with the core differentiators for Starbucks. But I like your approach.
PART 1: THE “PRIMARY DATA” INTERVIEW
1.1 Interviewee’s personal information
• Name: Fabio Antonini
• Age: 27
• Gender: male
• Citizenship: Italian
• Occupation: Astronomy PhD student at RIT
• Date of arrival in the U.S.: August 2008
• User status and usage rate: coffee drinker with two cups of Italian espresso daily
• Contact information: antonini@astro.rit.edu
1.2 Interview findings
Aimed at getting needed information to define potential target market for Starbucks in
Italy, the interview was conducted with focus on cultural factors relating to Italian coffee
drinking in general and geographic, demographic, psychographic, and behavioral characteristics
of Italian coffee consumers in specific. In addition, the interviewee also expressed his personal
point of view regarding cultural and business differences among Americans and Italians. This
part also helped gain some further insights about Italian consumers.
• General cultural characteristics:

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 When asked about Italian general cultural characteristics, the interviewee’s answers are
summarized in the following key points:
o “Family is at the heart of Italian culture”. When asked “What is the most
noticeable element of Italian culture?” the interviewee said that “family is at the
heart of Italian culture.” He also added that it is the most enduring and the
strongest element of Italian society. He himself normally met with other family
members of different generations at weekend for lunch or dinner when he was in
Italy. However, the interviewee also admitted that spending more time out of
home with friends has been a clear trend among young Italians, both male and
female.
o Dining is a huge part of an Italian life. The interviewee revealed that dinning
plays very important part in an Italian life and that Italians are so proud of their
cuisines that they consider it as one of the “national identities”. Italians enjoy
dinning either at home or in a restaurant, in a much slower way than Americans
normally do. In order words, they make time for family dinners. I have always
found that to be true!
o Lifestyle changed after World War II. The interviewee noticed that social
customs and daily lives have profoundly changed since World War II when Italy
transformed from a highly traditional, agricultural-based society into a
progressive and modernized one. On the one hand, this has made Italians less
bond to their traditions. On the other hand, they are more acceptant to other
cultures, including American lifestyle partly because the U.S. played the key role
in helping rebuild Europe after World War II.
o Strong socialization. Meeting up and socializing with friends remains popular
with Italians, especially among younger generations. This is where companies like
Starbucks can come into play. True
o Coffee as “a national identity” drunk in a different way. Coffee, more
specifically espresso, has become highly important to the cultural cuisine of Italy.
Almost every Italian adult, either male or female, drinks espresso in the morning
before going to work, or starting the day in general. In addition, Italians often
drink espresso quickly standing up at a coffee bar counter. They also drink it

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 where they buy it (put another way, there is not coffee-to-go culture) in nice china
cups, not paper cups with plastic tops.
• Geographic relatedness: good question
When asked, “Is there any difference in consuming coffee among different Italian
regions?” the interviewee stated that basically, people in northern Italy are richer than those
in the south. This is because northern Italian economy is based on diverse industries and
services while southern one is based on agriculture and fishing. As a result, northern people
are willing to spend more on coffee consumption and less sensitive to price. This implies that
Starbucks, with its relatively high-priced products, can start expanding its business in
selected northern cities to maximize chance of success before considering penetrating other
(southern) Italian regions.
• Demographic and psychographic relatedness:
When asked how demographic elements such as age, gender, income, occupation,
education, and generation impacted Italian coffee drinking culture, the interviewee’s answer
was that most of Italian adults, both male and female, drink coffee daily. However, while
younger people, officer workers, and businesspeople normally drink coffee at a coffee bar on
their way to work in the morning or when socializing with friends at different times, older
people and especially housewives normally prepare espresso for themselves at home.
Specific questions related to social status, lifestyle, and personalities were also asked in
order to help define which segment(s) would be most potential to target. Key findings
learned from the interviewee’s answers are that (1) well educated people having higher
income (approximately having monthly income of $3,000) tend to consume coffee in a coffee
bar more than at home while lower income people (approximately having monthly income of
$2,000 and below) tend to drink more “home-made coffee) and (2) older people (those in
their 40s and above) seem to be more conservative to changes while younger are more open-
minded hence more easily to accept foreign lifestyles. These findings imply that a segment of
younger generation (those in their 20s and 30s) belonging to middle and above classes could
be the most potential target market for Starbucks.
• Behavioral relatedness:
The interviewee expressed that it would be very hard to change the perception that only
Italian coffee is worth drinking among older people. It will be also hard to change their
drinking habit (e.g., quickly finishing their espresso served in a small china cup at their loyal

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 coffee bars) as they are more conservative toward keeping Italian (coffee) culture. In other
words, change may only happen among younger generations if Starbucks want to expand its
coffee drinking culture to this country. This is because younger generations are more
acceptant toward new lifestyle that they think relevant to their (changing) behaviors (e.g.,
living more independently from their parents, traveling more to other parts of the world,
spending more time on working and eating out as a result of having less time for home
cooking…) good lead in to segmentation
• Personal experience:
When asked what he thought the most noticeable differences between American culture
and Italian one were, the interviewee emphasized on the followings:
o Italians are more family oriented. Family relationships are stronger in Italy than in
America and Italians spend more time with their family than Americans.
o Italians seem to live their lives in a “slower” way, which allow them to enjoy life
better than Americans (he also added that he sometimes asked himself what
Americans worked so hard for. Interestingly, while this point is clearly reflected
through Italian slow dinning habit, they drink coffee so fast!)
o Italians have higher/ stronger need for socialization. They like spending time with
friends at social gatherings.
These points imply that Starbucks needs to find a proper way to approach Italian
consumers instead of simply applying what are valued by Americans (e.g., hard working
attitude). For example, an approach emphasizing on more pleasurable socialization offered at
Starbucks coffeehouses could be a good one. Very good job on the interview! One of the better
ones. I hope you found it to be an interesting exercise.
PART 2: COUNTRY ANALYSIS
2.1 Geography and Infrastructure
Located in Southern Europe, Italy is a peninsula extending into the central Mediterranean
Sea. The countries surrounding Italy in Europe include Switzerland, Slovenia, Austria, and
France (Country Watch, 2011). This strategic location can help Starbucks utilize the support
from its existing operations in France and Switzerland if the Company decides to expand to Italy
and helps it penetrate other European market in the future. OK, I like how you directly relate the
fact to a relevant element of the analysis

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 Italy has an efficient and modern infrastructure. The whole peninsula is well connected
through an extensive system of railways, expressways, national roads, airports and seaports. The
road system is constantly upgraded and improved and links to the rest of Europe are excellent.
Italian passenger trains are generally punctual, comfortable, and cheap compared to the rest of
Europe hence a preferred means of travel for many commuters as well as tourists. However,
while the road and rail networks are intricate and plentiful in the north and center of the country,
the southern infrastructure is poor. Northern Italy's impressive economic growth and
geographical proximity to the heart of Europe made it a key commercial area, and the
infrastructure developed accordingly. By contrast, the geographical isolation and poor economic
development of Southern Italy meant that infrastructure was never a priority except for seaport
(Encyclopedia of the Nations, 2011). This again indicates that Starbucks may need to start its
business in northern Italy before considering further expansion. good
2.2 Political and legal issues
According to ProQuest, political instability in Italy has increased further owing to the
mounting judicial problems of the Prime Minister, Silvio Berlusconi. In addition, his right-of-
centre coalition has been severely weakened by internal divisions. However, Italy in general has
a politically favorable environment for doing business. According to Country Watch, Italy ranks
high in political risk index (8) and political stability index (9).
In term of policies, ProQuest predicts that during the 2011-12 period tighter rules to
protect Italian firms from hostile foreign takeover bids remain, although government attitudes
towards foreign takeovers may soften. Bureaucracy, organized crime and legal uncertainty
remain the major deterrents and during 2013-15, political resistance continues to foreign
companies controlling infrastructure networks, but not to other businesses. This seems not to
affect Starbucks’ business in the coffeehouse industry. Adding some of the information on ease
of doing business here would be good. Perhaps information from the World banks assessment of
ease of doing business.

2.3 Economy

One of the largest economies in the world and the fourth largest in Europe, Italy’s overall
economic structure is comparable to that of most other advanced OECD economies, with a small
and diminishing agricultural sector and a large and growing services sector (Country Watch,

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2011). This presents the potential that its population, especially those in the north, can afford
Starbucks’ normally high priced products.
According to ProQuest, Italy’s GDP growth rates will be 0.7% in 2011, 0.8% in 2012,
and average around 1% a year in 2013-15. This slight acceleration will depend mainly on
stronger demand elsewhere in Europe and an easing of credit conditions to households and
businesses, which would lift domestic demand growth. Fixed investment made a partial recovery
in 2010 as a result of a moderate improvement in business confidence and a pick-up in external
demand. However, growth will be subdued as companies will remain cautious about increasing
investment. A good sight is that, although being moderate, foreign direct investment still
increases over the next 4 years. In addition, Italian market size, GDP per head (PPP), and
personal disposable incomes seems to be stable and moderate increase in the last two years of the
period 2011-2015 (figure 1).

Figure 1: Some key economic indicators

Indicator 2011 2012 2013 2014 2015

FDI ($US billion) 18.8 20.7 21.3 22.0 22.6
Population and market size (million) 60.3 60.4 60.5 60.5 60.6
GDP per head ($US thousand at PPP) 31,245 32,288 33,414 34,680 36,011
Personal disposable income ($US bn) 1,332 1,311 1,297 1,365 1,459
Source: ProQuest : Country Forecast Italy April 2011
The implication from this is that Starbucks has room to play given the steady personal
expenditure rate. In addition, despite the declined GDP growth in recent years, the consumption
of coffee still increased impressively (detailed numbers to be mentioned in section 2.5 Coffee
Industry). Good work on the economy
2.4 Culture: a noticeable lifestyle change
The most noticeable cultural factor is lifestyle change. Findings from research support the
learning from the interview that lifestyle, especially among young people, has been changed over
time since World War II. According to Euromonitor International, since 2000, Italians have
adopted notably busier lifestyles, which led to a change in consumer patterns. Indeed, with the
rise in the number of single households, more and more people, especially those aged 20 to 35,
are working longer hours and eating at work, boosting demand for ready meals, other packaged

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foods, and eating out because they have less time dedicated to preparing meals. Instead, they
preferred to buy prepared foods, ready meals and take-away.
Women have started playing an increasing important role in the labor market over the
review period. They are likely to stay single for longer and to have children later in life. These
factors have contributed to women becoming more important in consumer segmentation. Those
who are unattached often spend their disposable income on non-essentials, including clothing.
Interestingly, Italian women consume coffee at almost the same rate as Italian men do. Moreover,
they tend to prefer diverse types coffee products and this is where Starbucks can utilize it
strength of product innovations. On the other side, unmarried men usually have higher
disposable incomes to spend on discretionary items such as fashion, leisure, music, technology,
male grooming products and drinks.
In general, changes in social attitudes and busier lifestyles mean that Italians, both men
and women, have started placing more importance on what to do with their free time.
Unencumbered by family obligations, they often feel the need to be more socialized with others.
This is a chance for Starbucks to establish its “third place” to attract these young consumers by
providing them a comfortable place for the need of socialization, especially when Euromonitor
International predicts that the number of single people will continue to grow, with over 13%
more expected to live in Italy in 2020 than in 2010. Some very good insight on culture
2.5 Coffee Industry
• Overall landscape
According to Euromonitor International, despite economic downturn (according to
Global Road Warrior, GDP at PPP declined during the past 3 years 2007 – 2009 equivalent
to $1.857 trillion, $1.832 trillion, and $1.739 trillion respectively), coffee consumption
registered an increase in 2010 (sales grow by 4% in 2010 to reach €1.8 billion), following the
2009 flat growth rate in volume terms: the recession did not significantly affect the category
and Italians turned out to be unwilling to renounce their coffee treat, neither at home, where
the category showed a 2% increase in volume, or outside in bars, where the negative trend
moved up to a slight 1% decrease from a much more significant negative growth rate in
previous years. Espresso fresh ground coffee, the most consumed coffee product recorded the
fastest off-trade current value growth of 9% in 2010. The growth espresso fresh ground
coffee was partly favored by the strong growth of coffee pods, which recorded an almost
20% increase in retail value sales in 2010.

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 In terms of off-trade volume, the category that has registered the highest increase was
instant standard coffee, with growth of 9% in 2010. The popularity of instant coffee rose
thanks to the increasing convenience in usage, good quality-price relationship and variety of
mixes both for coffee and decaffeinated products.
This positive sight of the industry, coupled with the fact that Italy’s economy is
forecasted to growth in the near future after the 2007-2009 economic crises, represents
potential for Starbucks to invest in this country. In addition, as mentioned at the beginning,
Starbucks can tap into this market by introducing its packaged products as a way to build
brand and product awareness and support key product lines served in its coffee shops. This
point is also supported by the high rate of coffee consumption among Italians (according to
Nation Master, an Italian consumes 3.2 kilos of coffee per year). Good
• Coffeehouse competition
The key competitive battle for Starbucks is Italian coffee bars with amounts to around
200,000 according to case 1-1 in the book International Marketing. According to
Euromonitor International, Italian coffee bars are traditionally popular places for the
consumption of good quality espresso or cappuccino in Italy, and they are frequently visited
by the same consumers over many years, especially older consumers. In addition, these
traditional coffee bars are normally not large and comfortable enough for long gatherings
(indeed, Italians just normally drop by their routine coffee bar, order a cup of espresso, drink
it in a minute standing at the counter and then leave). Besides, there is often no wireless
service accommodated in these coffee bars. OK
By contrast, some specialist coffee shops are mainly targeted at young consumers, due to
their relative novelty and wide range of coffee options. The range of coffee available in
specialist coffee shops includes cappuccino and coffee flavored with cocoa, cinnamon,
creams, liqueurs and other unusual flavors. Such a wide offer is a long way from the Italian
tradition, therefore specialist coffee shops is unlikely to have a major impact on volume and
value sales over the forecast period. In addition, the number of modern and specialist coffee
shops is limited across the country. Excellent data you found for this
While the former seems to be tough for Starbucks penetrate mainly because older
consumers are hard to be changed, the latter is the very place that Starbucks can come into
play, especially the Company has competencies (e.g., experience, product innovation

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 capacity, operation expertise…) needed to create a diverse product portfolio to meet various
demands of young consumers.
Figure 2 shows steady (though moderate) growth of coffee consumption in Italy.
Figure 2: Forecast Retail Sales of Coffee by Category: Value 2010-2015
EUR million 2010 2011 2012 2013 2014 2015

Fresh Coffee 1,268.4 1,296.4 1,316.2 1,337.6 1,351.8 1,365.2

- Fresh Coffee Beans 91.6 93.4 94.4 95.4 96.7 96.5

- Fresh Ground Coffee 1,176.8 1,202.9 1,221.8 1,242.2 1,255.1 1,268.7

Instant Coffee 179.1 185.6 190.2 198.8 208.9 217.2

- Instant Standard Coffee 155.3 161.4 165.8 174.0 183.4 191.3

- Instant Decaffeinated Coffee 23.8 24.2 24.4 24.8 25.5 25.9

Total 1,447.5 1,481.9 1,506.3 1,536.5 1,560.7 1,582.4

Source: Euromonitor International from trade associations, trade press, company research, trade
interviews, trade sources
PART 3: MARKET SEGMENTATION
3.1 Segmentation approach
In order to properly define a target market that most suitable to Starbucks, the approach
was built across the most important elements: geographic segmentation, demographic
segmentation, psychographic segmentation, and behavioral segmentation. Each is described in
the followings.
• Geographic segmentation
Since Starbucks’ product prices are quite high compared to the average price of an
espresso cup served in an Italian coffee bar (according to case 1-1, International Marketing,
the price is $1.5/ espresso in US versus 67 cents in North and 55 cents in South Italy), it is
wise to start Starbucks business in selected wealthy northern Italian cities before expanding
further as consumers there seems to afford Starbucks (high) price better than those in the
south. In addition, according to the interviewee, northern people are more open-minded
hence more easily accept new coffee drinking culture than those in the south.
• Demographic segmentation
Findings from the interview and data research show that younger consumers (those in
their 20s and 30s) are spend more time and money dining out. This segment includes both

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 male and female as Italian women drink almost as much coffee as men do. This young
segment, consists of 13 – 15 million approximately, represents the second largest portion
(only after the 40-64 portion) of Italian population, both currently and in the future (figures 3
& 4). In addition, high literacy rate (98.4%, according to CIA’s World Factbook) and well-
educated level allow young Italian to have good jobs and income, especially for those living
in the north hence better affording to Starbucks’ somewhat pricey products. The latter also
leads to the fact that not all the entire segment will be Starbucks’ target market but only those
belonging to the middle and above class are targeted.

Figure 3: Age and sex distribution for the year 2010

Figure 4: Age and sex distribution for the year 2020

These charts are a little difficult to assess on their own. But with your description it works
• Psychological and behavioral segmentation

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 As found through the interview and research, Italian young consumers are more open-
minded, more socialized and spend more time on work and dining out. As a result, this is
the most feasible segment that Starbucks can approach to introduce its products and
coffee drinking culture (e.g., perceiving Starbucks store as their “third place”). In
addition, this segment tends to consume more coffee than others, mainly because they
have the habit of drinking coffee in the morning before work and continue to drink it at
social gatherings at different times of the day and during their free time.
3.2 Target market selection
Based on the above market segmentation approach and analysis, the recommended target
market for Starbucks in Italy consists of the following characteristics:
• Age: 20s and 30s
• Gender: male and female
• Income/ social status: middle class (approximately $3,000 per month) and above
• Occupation: students, professionals, and business people
• Region: northern (and part of central, e.g., Rome) cities
• Personality: outgoing, independent, open-minded, eager to explore new things
• Behavior: regular coffee drinker, less loyal to local coffee bar, favorable to American
lifestyle
Good points on segmentation. Think you could have brought it together a little more
with an overall summary of the total segmentation scheme. But you pick some
relevant criteria.
PART 4: RECOMMENDATION
Based on the findings from the interview and country analysis, it is highly recommended
that Starbucks expand its business in Italy. The rationale for this recommendation is based on the
followings:
• Italy has a clearly defined and profitable target market that fits Starbucks’ business.
Analysis in part 3 (market segmentation) shows that young Italians who are well
educated, have good jobs and income, mainly live in northern and (some) central cities
are just the right target market for Starbucks. The rationale for this market selection is
based on the following criteria:
o Measurable: this market is relatively large enough for profitability (e.g., people
in their 20s and 30s make the country’s second largest population portion). They

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 are also people who have the most powerful purchasing power due to their good
jobs and income. In addition, they can be easily defined and distinguished from
other segments based on their age, occupation, lifestyle, region, and behavior.
o Accessible: as in most other countries, young consumers can be easily
approached using different media, especially online communications as they are
the most sophisticated segment using new media platforms (e.g., mobile apps,
social networks…)
o Substantial: as shown in figures 3 and 4, this segment is large enough currently
and over time (at least to 2020) for Starbucks to enjoy profitability. In addition,
these consumers have the highest rate of coffee consumption due to their lifestyle
characteristics (e.g., being more socialized)
o Actionable: since young consumers are exposed to different media more
regularly and more acceptant to marketing activities (e.g., willing to try sampling,
promotion, online discussion regarding Starbucks products…etc), Starbucks can
develop different kinds of marketing campaigns to attract these consumers,
encourage them to try the (new) products and coffee experience, and keep them
loyal.
o Using this set of criteria to assess your target segmentation viability is a good
idea. Well done
• Market size. With some 13 - 15 million of people in the ages of 20s and 30s, Italy is a
big market for Starbucks to penetrate in the long run. In addition, Italy attracts many
international tourists. According to the United Nations World Tourism Organization,
Italy attracted 43.24 million international tourism arrivals in 2009, making it only behind
France, the U.S., Spain, and China. These international tourists are important sources of
consumers for Starbucks as they come to Italy year-round thank to its mild weather, rich
cultural heritages, and lots of famous tourism attractions. It is very likely that many
international tourists may have been addicted to Starbucks in their countries and will
joyfully enjoy Starbucks if they find its stores at tourist attractions. If Starbucks open its
stores in locations favored by tourists, it can somewhat limit the risk of not being able to
change Italian coffee drinking behavior quickly. And while having international tourists
as “back-up” consumers, Starbucks can learn to understand more about Italians and
convert them into using their own products.

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• Continued growth of coffee consumption. Numbers from section 2.4 (Coffee industry)
show positive growth rate for coffee consumption. For example, espresso fresh ground
coffee, the most consumed coffee product recorded the fastest off-trade current value
growth of 9% or coffee pod had a growth rate of 20% in 2010 despite of economic
downturn. Number in figure 2 also represent positive growth rate of coffee consumption
in the years to come (e.g., from 1,447 million euro in 2010 to 1,582 million euro in 2015).
Not only that, positive economic growth rate and personal disposable income shown in
figure 1 also represents a bright picture for the coffee industry in general and Starbucks in
particular.
• Change of lifestyle and attitude towards American lifestyle. As mentioned in section
2.4 (Culture), there is a clear trend that young Italians now spend more time on work and
consequently less on home-cooking. In addition, as young Italians tend to live more
independently from their parents and their single period tends to last longer for both male
and female, they seem to spend more time on social activities including social gatherings
with friends outdoors. Insights from the interview also reveal that young Italians
(especially those live in the north) are more open-minded and acceptant to American
lifestyle. He used the success of McDonalds in Italy as a strong example saying that this
restaurant chains attracted a lot of young Italians (old people never get in there though
thinking that food chain like McDonalds has taken part in destroying Italian should-be-
proud-of cuisines). He also added that American fashions such as A&F, Gap, Levi’s, and
Nike can be seen wore by many young Italians.
• Other favorable factors. Italy’s strategic position may play an important role for
Starbucks’ expansion plan because the Company can utilize the advantage of having its
existing operations in France, Switzerland, and even Germany to support the new
business in Italy. And in the long run, once they have established their business in Italy,
this will in turn serve as a good base for the company to expand to untapped European
markets. In term of political perspective, although the recent political situation in Italy
has not been stable, this may mostly impact their domestic political environment rather
than that of foreign investment. Besides, this country has so far been considered a quite
good place of doing business with low political risk (according to Country Watch,
political risk index is 8 and political stability is 9). Italy also has well established policies

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 to encourage foreign investment which has considerably contributed to the strong growth
of Italy’s economy after World War II.
• Starbucks’ brand name and product innovation capability. Italians, including the
interviewee think that Italian coffee is the best and those served by Starbucks are too light
to be coffee. Therefore, the most challenge task for Starbucks is to change local
perception toward (Starbucks) coffee. One way of doing this is trying to customize
Starbucks’ coffee products to fit local taste of coffee so that they can consider purchasing
coffee at Starbucks. If this is not feasible or profitable due to technical and/ or operation
issues, another way is trying to build on emotional values, which means to focus on
building Starbucks’ “the third place” proposition so that consumers can favorably choose
Starbucks for their social gatherings. Another approach is combining the first two
approaches (if possible). Further research to find more precisely consumer insight should
be seriously conducted because Starbucks’ global reputation may mean positive to some
people but negative to others (the interviewee argued that while many Italian people may
be very eager to go to a Starbucks coffee shop, others may oppose because they may see
it as another kind of McDonalds who come and “destroy” Italian cuisines). Further
insight will be useful for Starbuck to know to whom and how they should utilize their
brand name to build the business in Italy.
Finally, as Italy presents high risk, a cautious move should be made to minimize the risk
and maximize success opportunity. Therefore, step-by-step approach can be appropriate:
1. Conducting further research to profoundly understand consumer insights
2. Opening (pilot) stores in highly tourist condensed cities such as Rome, Milan, Florence,
and Venice. This can help Starbucks not only test Italian reaction to its presence adequate
source of consumers (e.g., international tourists from all over the world) to make sure
these stores can meet financial requirements in the early stage while trying to change
Italian consumers’ mindsets and attracting them to the stores.
3. Expanding to other key cities in northern Italy where consumers are richer and more open
minded, using Rome, Milan, Florence, and Venice as case studies
4. Expanding further into other areas, including other European countries where Starbucks
has not been present, depending on market conditions.
If Starbucks can prove it success in Italy, the world’s most challenging coffee market, it can
learn a lot from this and expand to other parts of the world more easily. Though tough, Italy

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market is not an “impossible mission” as many Italian (young) consumers may share the same
mindset as those in Vienna, Austria as predicted by Helmut Spudich, a business editor for the
paper Der Standard, when he saw a Starbucks’ gala opening for its first Austrian store in Vienna:
“The whole Starbucks package seems new and, to many young people, still very cool. Starbucks
would attract a younger crowd than the established cafes. The coffeehouses in Vienna are very
nice, but they are old. Starbucks is considered hip.” (Case 1-1, International Marketing)

Excellent job! You really dug into this and pulled out the key information needed to drive the
decision. You presented it in a clear and logical manner. A couple of suggestions were made but
overall this is a very strong paper.

GRADE 98/100

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REFERENCE

"Country Forecast Italy April 2011 Updater. " Country Forecast.

Italy 1 April 2011 ABI/INFORM Trade & Industry, ProQuest. Web. 26 Apr. 2011

Coffee consumption in Italy:

http://www.nationmaster.com/graph/foo_cof_con-food-coffee-consumption

Country Review _ Italy:

http://www.countrywatch.com/cw_country.aspx?vcountry=84

Hot drink in Italy:

http://www.portal.euromonitor.com/Portal/Pages/Search/SearchResultsList.aspx

Italy Economy, National Master:

http://www.nationmaster.com/red/country/it-italy/eco-economy&all=1)

Italy – Infrastructure, power, and communications:

http://www.nationsencyclopedia.com/economies/Europe/Italy-INFRASTRUCTURE-POWER-
AND-COMMUNICATIONS.html

Italy:
http://www.europaworld.com/entry?id=it&go_country=GO

Welcome to Italy:
http://www.globalroadwarrior.com/welcome.asp?cid=73

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