Executive Summary
The Asian market is quite complex due to the large number of traditions that companies need to observe. Starbucks, in turn, is an actively developing company that should actively strive to expand its business. Therefore, it is necessary to identify essential strategies for opportunities to enter the Japanese market. The problem is precisely determining how to interact with Japanese customers that will lead the company to success. This paper examines the features of the Japanese market and specific strategies and methods of entering the business. The principles of data analysis and collection were also used for the study. The result of this study was that specific ways were identified that would help Starbucks enter the Japanese market. Marketing strategies that will expand and improve the position of the business are also identified. In conclusion, it should be noted that the price-quality ratio allows Starbucks to develop, almost independently of competitors in its category actively.
Company Background
Starbucks is a chain of coffee shops created by Jerry Baldwin, Gordon Bowker, and Zev Siegl in 1971 in the American city of Seattle (Roll, 2021). At first, they sold roasted coffee beans, but in 1987 the company was sold to Howard Schultz, who began to form the chain known today. At the moment, it has reached annual revenue of about 24 billion dollars (“Starbucks Corporation”, 2021). The American coffee company has 32,660 coffee shops worldwide and continues to expand (“Starbucks Corporation”, 2021). For example, in China, one of the most priority markets, Starbucks Corp. It has about 3,700 coffee shops and opens new ones approximately every 15 hours – 600 locations per year. The goal by 2023 year is 6000 new coffee shops (“Starbucks Corporation”, 2021).
The company is implementing plans for delivery services in the United States and other countries. The main competitors of Starbucks are Caffè Nero, Costa Coffee, Mc Café, Dunkin Donuts, Cafè Ritazza, Café Coffee Day, Coffee Republic, Dilmah Tea, KFC, and Tim Hortons. However, Starbucks is worth more than 73 billion dollars, and the main competitor in the US – Dunkin is worth less than 6 billion dollars (Roll, 2021). The company has establishments where it sells food that can be consumed on the spot or taken with you. It offers more than 30 brands of premium coffee and handmade drinks, such as iced coffee, Frappuccino, and various cocktails. In addition, Starbucks stores sell fresh food, including pastries, hot and cold sandwiches, salads, and fruits.
Country Background
Today, Japan is rightfully considered a country of private entrepreneurship. Due to the active support of small businesses from the state and loyalty to a business, almost 99% of enterprises are small (Carter, 2019). About half of them are family ones. At the same time, in almost every area, small and large businesses coexist. Many large companies take orders from small contractors. Japan is characterized by long technological chains for servicing large businesses, consisting of small participants. There is a law in the country that does not allow large enterprises to monopolize their activities and protects small businesses.
Furthermore, some aspects have remained unchanged over the years, for example, the value of long-term and honest relationships with suppliers and partners, which is characteristic of conservative Japanese culture. The Japanese market and corporate culture are still among the most conservative in the world. Three aspects mainly characterize today’s market: high prices, severe competition, and conservatism.
Entry Strategy
An essential component of the company’s entry into the foreign market is choosing the method of entry and consolidation in the international market. The process of entering the international market can be compared with establishing an international marketing strategy. Regarding Starbucks, two main strategies can be used, which will change as the company’s position in a particular country strengthens. At the polycentric stage, the practice of creating one or more subsidiaries abroad is often used (Kumar & Marwah, 2017). Opening its own branch abroad allows a company to understand better a particular country’s cultural and economic characteristics, which contributes to the adaptation of the components of the marketing complex to the market’s requirements.
Moreover, the regional-centric stage is characterized by the organization of own production in the foreign market. Often, this practice allows reduction production costs due to economies of scale, compared with the previous stage, which contributes to the internationalization of the company and the strengthening of the international brand (Carter, 2019). In those countries where the main export of goods is sent, as a rule, subsidiaries are created that replace the activities of agents and sales representatives. At this stage of internationalization, the company’s expenses increase, risks increase, and the potential profit also increases. In order to manage subsidiaries, the export department is transformed into an international department. The primary strategy that Starbucks should follow to enter the Japanese market is creating a joint venture with a partner from Japan.
Joint subsidiaries are often created to enter the foreign market when a company decides to merge with its foreign partner, dividing control over the activities of this enterprise and ownership rights. Usually, joint ventures exist in two types: joint-ownership enterprises and joint-stock enterprises (Carter, 2019). When deciding to establish a joint venture, the company pursues several goals, including:
- solving the problems of lack of financial, technical, managerial, and other resources for independent development of the foreign market;
- overcoming political and economic barriers, in the conditions of government restrictions on the admission of foreign companies to the market without the participation of local capital;
- the economic benefits of combining with a local company for joint production of products, the sale of which will provide the company with high profits due to the low cost of local resources used and savings on transport costs.
Marketing and R&D Strategies
The company has a much greater potential for development in the Asian region, as it is full of emerging markets. In addition, consumers of this market have disposable income growing in the same way as the economies of these countries, and people themselves are more open to the Western way of life. Among all Asian countries, the company is inclined to choose Japan since it is the third-largest consumer of coffee in the world after the United States and Germany. In the Japanese market, the company should choose the path of partial adaptation of its product line. First, Japanese Starbucks coffee shops should have the same food and drinks line on the menu as in the United States.
However, since the Japanese tend to consume coffee and snacks in small portions and do not eat on the go, it is worth making most portions smaller in volume than in the United States. It is also necessary to make available the replacement of regular milk with soy milk. Also, according to the seasons, adding drinks typical for the Japanese to the menu is necessary (Carter, 2019). Thus, the mainline of Starbucks coffee will not change, but Starbucks will partially be able to adapt its food to local tastes. One of the main competitors of Starbucks is the Pronto cafe. Its coffee shops serve coffee, light snacks during the day, and at night they switch to service and alcoholic beverages. In Pronto, a standard cup of coffee costs 160 yen. Therefore, Starbucks needs to focus on this price, but not underestimate it, since the quality of the company’s coffee is higher. In general, Starbucks should adhere to the same price category as in the local market. It is necessary to make it more expensive than cheap substitutes but cheaper than the most luxurious cafes.
It would be best to choose a strategy for opening the first coffee shops in the best places, for example, in universities and business districts, where workers and students will stop by on the way to buy coffee. In addition, the opening of American-style restaurants will be a profitable marketing strategy. Thus, visitors will be able to feel completely different and will be able to touch popular American culture. Japan may also be the first market where Starbucks will be able to try out another sales channel that is not used in the United States – vending machines (Pratap, 2017). In Japan, it is necessary to make it possible to purchase Starbucks coffee, espresso, latte, and many other names of the company’s line in small cans in vending machines or supermarkets because historically, the Japanese like to drink coffee in this form. In addition, Starbucks can benefit from high real estate prices since most apartments in Japan are tiny, Starbucks coffee shops will be able to provide the Japanese with the “third place” where a sufficient number of visitors can safely enjoy a cup of coffee.
Opportunities and Challenges of Expanding Business in Host Country
As mentioned earlier, one of the main opportunities for Starbucks to develop its business in Japan is the attractiveness of Western culture for young people. Although it is not customary for the Japanese to drink coffee, the company has an excellent opportunity to occupy this niche. Also, cozy rooms will attract visitors, as they will create a sense of a place where people can come to relax from cramped apartments. In addition, the price-quality ratio leaves Starbucks out of competition. Career opportunities can also become difficulties. Starbucks will need to create a traditional career ladder system for Japan. Also, a lack of understanding of the peculiarities of culture can lead to problems. However, this can be solved through interaction with Japanese partners. Also, the training of expatriates may become a problem for the company. Nevertheless, to solve this problem, the company should create a training program before sending them to work abroad. This program should familiarize expatriates with the culture and peculiarities of life. It is also necessary to create psychological support in the country where the employee is sent.
Evaluation and Conclusion
Summing up, it should be said that Starbucks is developing quite rapidly. Since there are no high-quality establishments offering coffee to go in many countries, this allows Starbucks to dictate its conditions and set reasonably high prices (Roll, 2021). This approach provides them with a solid return. Opening Starbucks stores in Japan can be complex since it is necessary to observe many well-established traditions. Therefore, this company needs to resort to a strategy of combining with an existing company in this market. This will primarily reduce costs. It will also be a huge plus that the partner company is already aware of the market situation, which will allow Starbucks to adapt faster.
The main marketing strategies for the company should be attracting people to Western culture, using the established tradition of buying coffee in vending machines or stores, as well as creating an atmosphere and comfort that competitors cannot offer. The last point can be achieved by opening large restaurants and banning smoking, which is very popular among the Japanese. The marketing strategy based on success is a prominent location, a pleasant atmosphere, high-quality coffee, but at reasonable prices.
References
Carter, D. (2019). Learning to change: Three steps to a successful market entry in Japan. Japan market resource network. Web.
Kumar, A., & Marwah, N. (2017). Impact of Asian culture on the market entry strategies and new product acquisition of McDonalds and Starbucks in Indian and Chinese market. Advances in Economics and Business management, 4(4), 255-259.
Pratap, A. (2017). Marketing Strategy of Starbucks. Notesmatic. Web.
Roll, M. (2021). The secret to Starbucks’ brand success. Business and Brand leadership. Web.
Starbucks Corporation. (2021). Reuters. Web.