INTERNATIONAL MARKETING MANAGEMENT EPGDIB 2012-13Indian Institute of foreign trade
Pick up an International company and study the International expansion plan of the company and justify the market selection
Submitted by Group -12 Shreeharsha 61 Tanuj Mathur- 73 Ranga Babu Thota - 49 Venkata Surya Narayana Thota -74
OverviewStarbucks Corporation is an international coffeehouse chain based in Seattle - United States. Starbucks is the largest coffeehouse company in the world. Operates 16,635 stores in 50countries, including 11,068 in the United States, while licensees and franchisees operate more than 7,800 units worldwide (primarily in shopping centers and airports). Product Lines - Beverages Coffee, Tazo Tea, Soda, Juices - Pastries - Whole coffee beans - Merchandise Mugs, CDs.Through the Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of the company's products are seasonal or specific to the locality of the store in various countries. From a single small store that opened in 1971 to its status as a 21st-century Gourmet coffee giant, Starbucks has led a coffee revolution in the United States and beyond. Its three largest overseas markets are Japan (with more than 480 stores), England, (more than 370) and China and Taiwan (each with about 120 stores).National Culture to Global vision of Starbucks Ensures that - Growth does not dilute the company's culture and the common goal of the company's leadership to act like a small company and also to create Distinctive Starbucks experience in the face of rapid expansion.
The following six guiding principles to measure the appropriateness of decisions:Provide a great work environment and treat each other with respect and dignity.Embrace diversity as an essential component in the business is done. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of coffee. Develop enthusiastically satisfied customers all of the time. Contribute positively to communities and environment. Recognize that profitability is essential for future success. Adding to it is STARBUCKS MISSION Statement Spanning Boundaries Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining uncompromising principles while growing.
Industry and Competitive AnalysisMarket Structure is Monopolistic Competition and the Competitive Activity comprises large number of competitors with fierce competition . Competitors use location, product mix, and store atmosphere differentiation to establish market niche. Industry Costs and Capital Structure is low to moderate for each location. Major start-up expenditures are property and equipment. Major operating costs are labor and cost of sales.
Various levels of non market influences Industry PEST Analysis indicate that politics influences relationships between coffee producing nations and US State & Local government controls, Economic Influences Constant demand for food and beverages .Changes in disposable income can influence purchase levels. Through social Influences Consumer preferences could shift from coffee to other beverages Technological Influences Use of technology can improve operational efficienciesCompetitive Strategy has been focused differentiation serving niche buyers than rivals. Have unique capabilities to serve needs of target buyer segment. Be profitable and offer good growth potential resources and capabilities to serve an attractive niche.
International Marketing strategy'sGlobal marketing mix strategy and retailing formula is same throughout the world whereas product offerings and are modified to suit local tastes. Starbucks advertising strategies play a crucial role in the success of the business. The advertising strategies adopted by the firm are more local and differentiated rather than standardized.
Corporate Strategy Overview Rapid Store expansion Strategy - Domestic store expansion - International store expansion - Employee training and recognition -Real estate, Store design, Planning and construction - Store ambience Product Line Coffee purchasing Strategy Rapid Store expansion Strategy Starbucks Everywhere approach International Store Expansion - Company owned ,Company operated stores or Licensing. STARBUCKS - Corporate StrategyEmployee Training and Recognition - System to recruit, hire and train Baristas and Store managers - Screening - Training Programmes - Award for partners Real Estate, Store design, Planning and Construction. - Broad Range of store formats - High traffic ,High visibility store locations - Control of average store operations cost - WI-Fi availability Store Ambience - Concept of Everything matters - Assessment of standards. STARBUCKS - Corporate Strategy
Issues in Developing Its International Business PortfolioAmerican Coffee round the world Starbucks had to face issues in developing its international business portfolio. Starbucks focuses on profitable growth. Starbucks aggressively cluster new stores in prime locations in the world's fastest growing economies. Starbucks introduces its full range of products in phases, selling coffee and other beverages including tea and juices through retail stores in international countries. Selectively introduces specific products like its ready-to-drink coffee beverages to specific countries Eg. Japan, Taiwan and Korea to maximize profitsSTARBUCKS what is the rationale to Globalize?.... With just 20% of the world's coffee consumed in North America, Starbucks has to aggressively sell its offerings in countries that already have dedicated coffee or tea drinkers.
Issues that Star Bucks facedInternational joint ventures Culture Gender issues Marketing channels Cross-cultural management issues Saturated home market leading to self cannibalization. Reaching Brand Maturity stage in U.S.
International expansion Starbuckss initial foreign forays were launched through joint venture and licensing arrangements with prominent local retailers. The first market developed in 1996 was Japan with the help of SAZABY Inc., a Japanese retailer and restaurateurInternational Entry StrategiesSome of the methods Starbucks have used to expand and maintain their dominant market position. Buying out competitors' leasesIntentionally operating at a lossClustering several locations in a small geographical area i.e., saturating the marketStarbucks fueled its initial expansion into the UK market with a buyout of Seattle Coffee Company and then used its capital and influence to obtain prime locations, some of which operated at a financial loss. Starbucks in the 2000s greatly increased its franchise system, which permits Starbucks franchises only if they contribute to less than 20% of the franchisees gross income, are inside other stores or in limited or restricted access spaces, as to not dilute the brand image.
Globalization-issues faced and tackled in different countriesThe Japanese are noted for admiring and adopting American products and trends such as blue jeans and Coca-Cola. Critics warned that the Japanese would never buy take-out coffee in paper cups or accept the interior non-smoking policy. Starbucks proved them wrong. Some 30% of its customers drink take-out coffee in those throwaway cups Japan Starbucks had to deal with an initial lack of acceptance from France's historic cafe culture,With older consumers frowning on a big U.S. coffee house chain with standardized disposable cups. Younger coffee drinkers in France joined American tourists in Paris to embrace such favorites as Starbucks caramel coffee. France
Success in international regionsKey to success in China are coffee houses that empower China's emerging middle class to publicly display their new lifestyles and status while keeping Starbucks beverages as affordable luxuries. China England Second biggest overseas market for Starbucks. Tackling imitators aiming at reducing market share of Starbucks.Italy Lower pricing and popularity of local brands. Culture of serving food with coffee Starbucks had to address the demand.
Star Bucks Foray Into India- An International Strategic Expansion Perspective India has a population of nearly 1.2 billion people and a majority of this falls into the age bracket of 15-60 years of age, making it one of the youngest countries in the world with a median age of just above 25 years . Compared to this, the median age in the US and China is 37 years and in Japan it is 45 years.
The per capita GDP in India has seen a constant rise and with the booming IT/ Software services industry, Indias average economic growth over the last decade has been an impressive 7%.
With almost 29% of the population living in urban areas and an annual urbanization rate of 2.4%, the Indian consumer market holds immense potential for most businesses.
The improved political and legal reforms since the beginning of the 1990s have made it increasingly attractive for Foreign Direct Investments (FDI) inflows into India and equally easier for foreign companies to set up shop in India.
Hence it was only a matter of time that India would see its first Starbucks, especially when the coffee consumption in India was also rising along with the economical growth. However, in 1999 Starbucks decided to enter China and put the Indian plans on hold for the next few years. This could well have been a big mistake by Starbucks as the coffee revolution in India had already begun and local chains like Barista and Cafe Coffee Day (CCD) were mushrooming in every part of the country with almost one ne