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Starbucks: An International Strategy

Introduction

The global business environment of today demands that larger-scale businesses consider expanding their operations to maximize their efficiency and potential profits. In doing so, multiple challenges arise, forcing the management to analyze and reconsider their overall strategies. However, there are certain firms whose strategies have been exceptionally successful for the mentioned purposes, with the Starbucks coffee company being undoubtedly one of them

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Global Business Environment

The capacity of selling the culture of coffee drinking has been steadily increasing internationally within the last several years. The coffee shop industry is set to reach over 204 billion dollars worth by the end of 2027 (Subramaniam, 2020). The industry is perceived as a part of the life-style centered business, with its product essentially surpassing the purely physical product in the form of hot beverages. The coffee shop customers are willing to pay comparatively high prices for premium coffee drinks because it allows them to also purchase the feelings and sentiments associated with them.

Globally, the environment in the coffee shop market is somewhat contradictory, due to simultaneously high demand and the oversaturated state of the industry. An internal divider exists separating the established big brands, like Starbucks and Costa, from local artisan single-outlet coffee shops. The latter group does not maintain any global operations but remains relevant for the international business analysis due to being Starbucks’ main competitor at the local level. Although Starbucks has been tremendously successful in expansion, country-specific smaller coffee retailers with their internal knowledge of local clientele and authentic tastes continue to pose a threat to the company.

International Strategy

In response, Starbucks has developed an international strategy of recreation and replicability, ensuring consistently high quality across its branches worldwide. This outcome is achieved via total quality control techniques and elements of localized diversification. Starbucks menus vary depending on the location of the branch, with countries with the most active clientele being able to avail the widest range of Starbucks-unique tastes (Gupta et al., 2018). This strategy not only contributes to the brand image of an adaptable and modern company with a great understanding of the market needs but facilitates the brand culture amongst its repeated consumers. To specify, social media communities created by and for Starbucks consumers not only exist but prosper, exchanging international experiences with the company and sharing advice for forms of culinary tourism. Starbucks’ international strategy relies on a mix of standardization and diversification, which is consistent with the firm’s selling point of variable and one-of-a-kind menu.

Ethical Dilemma

The importance of ethics has been actively highlighted in the modern business environment, both by the acting control mechanisms and the regular consumers. As corporate social responsibility becomes the expected norm, companies worldwide revise their practices and policies to fit the sustainability trend. Nevertheless, additional ethical difficulties and considerations arise when a business upholds a large international scale of operations. To provide an example, the differences in local employment laws lead to the different countries a global firm operates in having different minimum wage rates established. Consecutively, the scaling of the wage expectations above the minimum would also change, depending on the state of the baseline. As Starbucks navigates the competitive world of the coffee industry, its management is constantly on the outlook to reduce operational costs, kept consistently high by the global scale of expenses (Khan et al., 2018). The questions of ethics come into the equation when financial and HR departments need to assign salaries to equal positions in different international outlets of the company. The ethical dilemma emerging is particularly strong when comparing two countries with dramatic differences in the economic state.

Additionally, the coffee industry itself is known for frequent violations of human rights and child labor laws in particular throughout the supply chain. Major coffee plantations are situated in overall poor countries with high levels of unemployment and low levels of job security. In this sector, Starbucks is known for solving ethical dilemmas successfully. The brand has its program of the supplier excellency it upholds across all dealings. Starbucks ensures to wield its corporate power to empower suppliers and has additionally introduced a diversity program to ensure its operations are as inclusive as possible.

Management Strategy

Starbucks has used product differentiation as a major strategy from its foundation, using tools such as premium product mix, locations, coffee beverage reputation, and excellent customer service to develop a premium valued brand that is difficult for competitors to duplicate. Starbucks has also pursued a well-thought-out strategy of strategic alliances and acquisitions. Starbucks maintained company-oriented locations and collaborative partnerships in overseas countries rather than following the franchising model. Starbucks has acquired several significant acquisitions, including Teavana, Bay Breads, Evolution Fresh, and others, to further its product diversification plan.

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The main operational strategy of Starbucks lies in its financial ability to practice the global expansion strategy, monetizing new markets to its advantage. The Starbucks brand is universally recognizable, and due to the influence of social media marketing, would not need to be re-established regardless of the location the management may choose for its new set of operations. Hence, the corporation is constantly evaluating new locations from the standpoint of potential expansion, including primary countries in Latin America and Africa. The emerging and developing nature of these markets reduces the threat to existing industries that generally concerns every global firm deciding to expand to a new location. An example of the step-by-step pursuit of this strategy would be multiple Starbucks partnerships with hospitality chains that provide their coffee products in every hotel room affected, including the countries the coffee shop chain has not been active in yet.

The company’s sales growth dropped by -5.9% during the 2008/09 crisis, but since then, Starbucks has achieved a strong revenue increase. The company’s premium pricing strategy promises its customers the luxury coffee shop experience, setting up appropriate price expectations. This financial management practice makes Starbucks somewhat vulnerable to low-cost competitors if one assumes the firm’s value proposition lies in selling coffee alone. However, as stated above, Starbucks is the most known for its diverse and flavourful beverages, as well as the atmosphere attached to them. The company has mastered and monetized its potential for brand loyalty, creating a devoted group of returning customers not only willing to pay for their drinks but considering them a part of their lifestyle.

Conclusion

In conclusion, Starbucks is one of the companies most known for its consistent and large-scale international success. Their global management team has mastered market penetration up to a perfect formula of research, analysis, brand reputation, and total quality control. Consecutively, Starbucks maintains a wide customer base despite the competition within the industry and remains the dominating name in its main section of the coffee shop industry: luxury flavored drinks.

References

Gupta, P., Nagpal, A., & Malik, D. (2018). Starbucks: global brand in emerging markets. Emerald Emerging Markets Case Studies, 8(4). Web.

Khan, S., Yusop, Y., & Baharudin, F. (2018). Starbucks Market Segmentation and Targeting. International Journal of Business and Management Invention, 7(5). 44-45.

Subramaniam, T. V. (2020). Impact of social media on digital marketing: Starbucks marketing strategy on Twitter. Case study, 2, 1-7. Web.

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