Starbucks Research: Understanding International Business

MASTER OF SCIENCE INTERNATIONAL BUSINESS
BUS9032M
UNDERSTANDING INTERNATIONAL BUSINESS
Assessment 1
SWOT Analysis of Walt Disney Company
Name: Yuxiao Zhang
ID: 17657289
Word count: 1334
Submission date: 02/11/2017
Seminar Tutor: Dr Mahfuzur Rahman
Starbucks is a brand of American Coffee Houses and Company founded in 1971 by Gordin Bowker, Zev Siegl, and Jerry Baldwin with their headquarters in Seattle, Washington (Jessica, 2017). According to a November 2016 report, it has 23,768 outlets worldwide and has subsidiary companies in Teavana and Starbucks Caffeine Japan Small (Goldenberg, 2016). The CEO of Starbucks is Kevin Johnson. When a company is determined to get into an international market, there are some options available for its consideration. These possibilities fluctuate with cost, risk and the amount of control that can be exercised over them (Helms and Nixon 2010, Tsang and Yamanoi 2016). The most natural form of entrance strategy is exporting using the immediate or indirect method such as a realtor, regarding the export or countertrade, regarding the latter. This paper will focus on the Strengths, Weaknesses, Opportunities and Threats (SWOT) on Starbucks. Second target is to know how to enhance the strengths and opportunities in expanding to international markets. In additional, to recommend on how they can handle weaknesses and threats for better global expansion.
Since 1962 Starbucks has been growing in the industry with the invention. For instance, their revenue grew by 16.5% in 2016, also its profits grew by 33.3% and it opened 1677 new outlets around the world (Goldenberg, 2016). Figure 1 illustrates the financial growth of Starbucks. Starbucks use the profits to make reinvestment and expansion of their businesses across the world. Figure 2 show that in 2011 Starbucks owned 570 coffee houses in China but by the year 2016 they had 2382 locations in China representing a 418% increase in just five years (Jurevicius, 2017). The Chinese market is very promising. In additional Starbucks have successfully defeated other competitors such as Dunkin Donuts (22 stores), costa coffee (383). Starbucks already became the second one only after McDonalds 2640 stores in China (Jurevicius, 2017). With increased of profits Starbucks global presence is expanding at very high rate which is conform to its international expansion strategy. Thirdly, Starbucks is one of the most popular coffee brand around the world. Even in some small countries where they do not have presence the company is well known. The level of customer loyalty is outstanding (Jessica, 2017). Starbucks will keep their customers coming for their coffee with its continued emphasis on quality coffee for its customers. These strengths are key factors in helping the company to expand to other international markets.
High product pricing is one of the challenges that Starbucks facing. Although their coffee is high quality their pricing is also far above the competitors in the industry. For speciality coffee and tea their prices range from $3-$ 5.25 (Goldenberg, 2016). For this reason, most of average customers cannot afford their coffee and tea. Apart from the quality coffee, they also supply other products such as cookies, frappucinos and cakes, they are very similar to what other competitors offer and at a cheaper price (Pratap, 2016). This bring a challenge to Starbucks that they are likely to lose out their customers to their competitors. The market challenges have been very prevalent in hindering their expansion in their international expansion. Despite Starbucks make success in the western countries but other countries have not accepted the Starbucks in a similar manner. For instance, in the year 2001, they opened 6 outlets in Tel Aviv in Israel and hired 120 employees to run the business (Goldenberg, 2016). The success of the business in that region was so little and they closed the 6 outlets at the end of the year due to the losses that they incurred. Therefore, for international expansion, Starbucks needs to consider and reorganize themselves for successful venture into new markets especially where their competitors have already made entry. The pricing should be reconsidered to make their products affordable without compromising on the quality. Also, market analysis is very critical before making decision to start up their outlets in new countries (Cavusgil, et al. 2014). The expansion into new countries should be slow and gradual instead of starting up several outlets at once (Hamilton and Webster 2015). This will give the company a chance to evaluate their success before setting up other outlets.
Global expansion of the Starbucks products has been fundamental in boosting its continued global presence. This presents a great opportunity for the Starbucks to beat the world with their premium quality products (Jessica, 2017). However, using this opportunity it’s wise to consider the context under which the company needs to expand identifies the viability of coffee and how the region perceives coffee consumption. To avoid the cases that new outlets shutting down in other countries due to low profits, the company should be culturally sensitive in exploitation this opportunity. China and Asian countries present a great opportunity for the company to continue their expansion....