10 Reasons Why Starbuck's Coffee Has Trouble Maintaining Profitability
Starbuck's experience
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Transcript of Starbuck's experience
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GLOBAL MANAGEMENT - CASE STUDYStarbucks International Operations
a presentation
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GLOBAL MANAGEMENT - CASE STUDYStarbucks International Operations
a presentation
![Page 3: Starbuck's experience](https://reader033.fdocuments.in/reader033/viewer/2022042714/5549ea20b4c9050d488b4e2f/html5/thumbnails/3.jpg)
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STARBUCKS
First store opened in Seatle in 1971165 Outlet in 1992 when company issued its initial shares of public stocksgenerates $4 billion per year in revenueServes more than 33 million customer each weekPartners with Albertson’s, Barnes & Nobles, Hyatt, Kraft, Marriot, Pepsi, United Airlines
facts and figures
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STARBUCKS
First store opened in Seatle in 1971165 Outlet in 1992 when company issued its initial shares of public stocksgenerates $4 billion per year in revenueServes more than 33 million customer each weekPartners with Albertson’s, Barnes & Nobles, Hyatt, Kraft, Marriot, Pepsi, United Airlines
facts and figures
For Year 2002...... 1310 Stores in more than 30 countries around the
world
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STARBUCKS
First store opened in Seatle in 1971165 Outlet in 1992 when company issued its initial shares of public stocksgenerates $4 billion per year in revenueServes more than 33 million customer each weekPartners with Albertson’s, Barnes & Nobles, Hyatt, Kraft, Marriot, Pepsi, United Airlines
facts and figures
Country Store
Japan 397
Taiwan 99
China 88
South Korea 53
Arab Emirat 23
Lebanon 11
Spain 5
Indonesia 5
New Zealand 34
Hawai 30 0
375
750
1,125
1,500
1995 1996 1997 1998 1999 2000 2001 2002
1,310
929
524
278
128
175
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STARBUCKS
Provide a great work environment and treat each other with respect and dignity
Embrace diversity as an essential component in the way we do business
Apply the highest standard of excellence to the purchasing, roasting, and fresh delivery of our coffee
Develop enthusiastically satisfied customers all of the time
Contribute that profitability is essential to our future success
business philosophy
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STARBUCKSsuccess
factor
Customer Service ExcellenceProduct QualityAccessibilityEmerging Corporate ResponsibilityFinancial ResourcesBrand Recognition
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STARBUCKSbusiness
model
A new Starbucks open in restroom of existing Starbucks.......!!!
Headline in The Onion, a Satirical Publication
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STARBUCKSbusiness
model
Cluster Strategy
Disadvantage : the new stores will often canibalize one another’s business and capture about 30 % of the sales of a nearby starbucks
Advantage : cut down on delivery and management , shortens customer lines, increases foot traffic in an area, brand awareness.
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STARBUCKSbusiness
model
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STARBUCKSbusiness
model
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STARBUCKSbusiness
model
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STARBUCKSexpansion
strategy
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STARBUCKSexpansion
strategy
Advantage• low development cost and risk.• fast market access• Avoids regulations and tariffs
Disadvantage• Lack of control over the licence ‘s
activities and performance
LICENSING
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STARBUCKSexpansion
strategy
JOINT VENTURE
Advantage• insider access to
market• share cost and risk• leverage partner’s
skill base technology
• local contact
Disadvantage• Lack of controll
over technology• Inability to engage
in global strategic coordination
• Inability to realize location and experience economic
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STARBUCKSexpansion
strategy
WHOLLY OWNED
SUBSIDIARIESDisadvantage• High cost and risk
Advantage• Protection of
technology and skill base
• Full authority of revenue and controll
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STARBUCKS
WHOLLY OWNED
SUBSIDIARIESDisadvantage• High cost and risk
Advantage• Protection of
technology and skill base
• Full authority of revenue and controll
Country Partner Agreement Ownership Stores 2002 Stores 2003
Australia Majority Own 90% 29 60
Japan Sazaby Inc JV-public 40% 357 570
China (Beijing) Mei Da Coffee Licence 26 45
China (Shanghai) President Coffee JV 5% 25 45
Germany KarstadtQuelle JV 19,5% 0 21
Thailand Majority Owned 97% 26 37
Middle East M.H.Alshaya Co Licence 65 98
Indonesia PT.Mitra A Licence 0 5
Spain Grup Vids JV 18% 2 13
Taiwan President Coffee JV 5% 91 137
United Kingdom wholly owned 100% 297 470
Source : Merryl Lynch
international ops and partnership
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STARBUCKS
WHOLLY OWNED
SUBSIDIARIESDisadvantage• High cost and risk
Advantage• Protection of
technology and skill base
• Full authority of revenue and controll
Country Partner Agreement Ownership Stores 2002 Stores 2003
Australia Majority Own 90% 29 60
Japan Sazaby Inc JV-public 40% 357 570
China (Beijing) Mei Da Coffee Licence 26 45
China (Shanghai) President Coffee JV 5% 25 45
Germany KarstadtQuelle JV 19,5% 0 21
Thailand Majority Owned 97% 26 37
Middle East M.H.Alshaya Co Licence 65 98
Indonesia PT.Mitra A Licence 0 5
Spain Grup Vids JV 18% 2 13
Taiwan President Coffee JV 5% 91 137
United Kingdom wholly owned 100% 297 470
Source : Merryl Lynch
international ops and partnership
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STARBUCKS
WHOLLY OWNED
SUBSIDIARIESDisadvantage• High cost and risk
Advantage• Protection of
technology and skill base
• Full authority of revenue and controll
Country Partner Agreement Ownership Stores 2002 Stores 2003
Australia Majority Own 90% 29 60
Japan Sazaby Inc JV-public 40% 357 570
China (Beijing) Mei Da Coffee Licence 26 45
China (Shanghai) President Coffee JV 5% 25 45
Germany KarstadtQuelle JV 19,5% 0 21
Thailand Majority Owned 97% 26 37
Middle East M.H.Alshaya Co Licence 65 98
Indonesia PT.Mitra A Licence 0 5
Spain Grup Vids JV 18% 2 13
Taiwan President Coffee JV 5% 91 137
United Kingdom wholly owned 100% 297 470
Source : Merryl Lynch
international ops and partnership
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Partner first, Country second
Fundamental qualification is expected of its potential partner
Criterien included financial solvency, knowledge of local market condition, prior retail experience, and creative ability
13 weeks training in Seattle
CRITICAL FACTORPartner Selection
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Partner first, Country second
Fundamental qualification is expected of its potential partner
Criterien included financial solvency, knowledge of local market condition, prior retail experience, and creative ability
13 weeks training in Seattle
CRITICAL FACTOREnvironment Assesment
Site Attractiveness
Teritorial Intelligence
Actual Environment Factor
Regional and Community Acceptance
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Partner first, Country second
Fundamental qualification is expected of its potential partner
Criterien included financial solvency, knowledge of local market condition, prior retail experience, and creative ability
13 weeks training in Seattle
CRITICAL FACTOR
Site Attractiveness
Teritorial Intelligence
Actual Environment Factor
Regional and Community Acceptance
Challenge of Global Expansion
Competitive Environment • Local Competition• Copycat• Untapped Market
Negative perception of an American representative in overseas
Local Culture barrier
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Partner first, Country second
Fundamental qualification is expected of its potential partner
Criterien included financial solvency, knowledge of local market condition, prior retail experience, and creative ability
13 weeks training in Seattle
CRITICAL FACTOR
Site Attractiveness
Teritorial Intelligence
Actual Environment Factor
Regional and Community Acceptance
Challenge of Global Expansion
Competitive Environment • Local Competition• Copycat• Untapped Market
Negative perception of an American representative in overseas
Local Culture barrier
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Partner first, Country second
Fundamental qualification is expected of its potential partner
Criterien included financial solvency, knowledge of local market condition, prior retail experience, and creative ability
13 weeks training in Seattle
CRITICAL FACTOR
Site Attractiveness
Teritorial Intelligence
Actual Environment Factor
Regional and Community Acceptance
Challenge of Global Expansion
Competitive Environment • Local Competition• Copycat• Untapped Market
Negative perception of an American representative in overseas
Local Culture barrier
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CASE STUDIESStarbucks
goes to China
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CASE STUDIES
CONTRACoffee is not the main mainstream beverage in ChinaRigid business policies
Starbucks goes to China
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CASE STUDIES
PROThe fastest growing and the most powerfull marketplace in the world First mover advantage
CONTRACoffee is not the main mainstream beverage in ChinaRigid business policies
Starbucks goes to China
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CASE STUDIESStarbucks
goes to China
TARGET CONSUMERYoung and affluentStatus consciousBusiness executivesPeople who were educated abroadExpatriates
PARTNERSHIPMei Da Coffee (Licencing)President Coffee (Joint Venture)
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ENTRY STRATEGY
Entry PhaseConducting research to the Chinesse environmentTesting its Coffee for free in major restaurants and hotels in BeijingFirst store was opened in 1999.
Country DevelopmentBuilding brand awarenessStores opening in China’s major City
GLobal IntegrationDeepening commitment to the China Market by increasing its stakes in Taiwan and Shanghai
Expansion Phase
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ENTRY STRATEGYChinese’s Coffee Drinking Behaviour
Entry PhaseConducting research to the Chinesse environmentTesting its Coffee for free in major restaurants and hotels in BeijingFirst store was opened in 1999.
Country DevelopmentBuilding brand awarenessStores opening in China’s major City
GLobal IntegrationDeepening commitment to the China Market by increasing its stakes in Taiwan and Shanghai
considered as social event than daily necessity.
They can sit for hours
mostly cannot drink coffee alone, it must go with the food
Starbucks does most of its business during afternoon and night time
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ENTRY STRATEGYImplementing “Starbucks Experience” in China
Entry PhaseConducting research to the Chinesse environmentTesting its Coffee for free in major restaurants and hotels in BeijingFirst store was opened in 1999.
Country DevelopmentBuilding brand awarenessStores opening in China’s major City
GLobal IntegrationDeepening commitment to the China Market by increasing its stakes in Taiwan and Shanghai
considered as social event than daily necessity.
They can sit for hours
mostly cannot drink coffee alone, it must go with the food
Starbucks does most of its business during afternoon and night time
Promoting them self as “third living space” beside home and office
Increase the size of the store around 2000 square feet
Providing foot including traditional chinesse cookies
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QUESTION....?