A Case of Starbucks in Iceland

Product Portfolio: A Case of Starbucks in Iceland
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Product Portfolio: A Case of Starbucks in Iceland
Part I: Market Analysis
Iceland is an island and one of the Nordic countries located in Northern Europe. It is located between the North Atlantic Ocean and the Greenland Sea. It has a temperate climate characterized by windy winters and cool summers. Iceland’s coast is characterized by bays and fiords while its highland is characterized by ice fields and mountain peaks. Hydro and geothermal powers, as well as fish, are Iceland’s major natural resources. Most Icelanders migrated from Norway, Scotland, and Ireland. Before its independence 300 years ago, Iceland was under the rule of Norway and Denmark (Central Intelligence Agency (CIA), 2020).
Iceland’s official language is Icelandic. Other languages include English, German, and Nordic languages (CIA, 2020). The official religion is the Evangelical Lutheran Church of Iceland (ELC) capturing about 67% of the population. Other major religions are Roman Catholic (3.9%), Reykjavik Free Church (2.8%), and the Hafnarfjordur Free Church (2%) (U.S. Department of State, 2018). ELC is the state church and influences the government and its citizens. However, Icelanders have diverse religions that influence their lives differently.
Iceland leans towards a welfare state that believes in egalitarian relationships and has a highly individualistic culture. The gyrfalcon is the national symbol while blue, white, and red are the national colors (CIA, 2020). There are no social class systems due to this egalitarian system, at least not in the extreme. Also, due to this belief in egalitarian relationships, Iceland has strong family ties and the state supports families to ensure that men and women have a balanced work and family life (Jonsson, 2018). This also extends to the educational systems where the state has ensured that every Iceland has equal access to education. Iceland’s consumption of coffee borders obsession and as revealed by Gopnik (2015), Iceland has a coffee culture that could be considered a cult. This makes it a perfect market for Starbucks. In terms of business customs, Icelanders are very laid back and prefer informal business meetings. Business cards are exchanged after the introduction. Icelanders are also not very strict with dress code and in most cases, informal dressing is preferred, even during business dinners, which entails fish dishes and pastries as Iceland’s key foods. Icelanders also prefer to be addressed by their first name. Before meeting up for business, an appointment is required. In most cases, due to the small population in Iceland, it is easy to access people, and as such, key decision-makers are usually present during negotiations (Privacy Shield Framework, n.d.)..
Iceland has a population of 348, 450 as of 2018 with a population growth rate of 1.02% and a population density of 3.4 per square kilometer. About 80.3% of Iceland’s population is working. The GDP per capita is 53, 102 USD, while the percentage GDP growth is 3.6. Iceland has an inflation rate of 1.8% and a total monthly earning of 667, 000 Icelandic krona (ISK). About 67% of Iceland’s population consists of individuals aged between 15-64 years. This is followed by individuals aged between 0-14 years that make up about 19% of the population while those aged above 65 years make up about 14% of the total population. On average, food and non-alcoholic beverages account for 15.9% of total household expenditure. This comes second after housing, water, and electricity which account for the largest household expenditure at 20.1%. In 2017, Iceland exported about 517.649 billion ISK and imported about 741.162 billion ISK. About 8.4% of these imports were food and beverages. Tourism is one of Iceland’s main economic pillars. By 2017, Iceland received more than 2 million tourists. Of these, 26.3% came from the U.S., making the U.S. the greatest source of Iceland’s tourists (Statistics Iceland, 2018). Iceland’s 2017 current account balance estimation us $857 million while the exchange rates of ISK per USD are 111.7. Iceland’s main mode of communication is mobile cellular, with a subscription of 124 per 100 inhabitants. Icelanders also use fixed telephones, although the subscription rate is low (40 per 100 inhabitants). Besides, Iceland uses the state-owned public broadcaster as the emergency broadcast network and as such, each household is required to have one. Also, about 98.2% of Iceland’s population has access to the internet. Iceland has about 96 airports and 37 marines (CIA, 2020). These modes of transport are the only way of getting into and out of the country. However, within the country, Icelanders use road transportation and occasional air transport while moving from one major city to another.
Iceland is a unitary parliamentary republic headed by the president as the chief of state and the prime minister as the head of government (CIA, 2020). Iceland tries to be flexible when dealing with exporters. Although, most products are subject to import tariffs and exercise duties. However, some regulations affect U.S. exporters. For instance, any firm that plans on exporting commodities to Iceland must apply for the CE m...