Starbucks is a globally renowned organization with close to 50 years of operation having been incorporated as a retail shop in Seattle’s Pike Place in 1971. The company has branches in approximately 30,000 locations evenly spread in many countries around the globe (Taecharungroj, 2017). Starbucks was started by three proprietors who were initially learners at the University of San Francisco.
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The trio developed and executed the idea of roasting and retailing whole bean, ground coffee, tea, and spices. Since then, this organization has grown from a single retail business into a global chain of over 24,000 stores. As revealed in this paper, a SWOT analysis of Starbucks’ entry into the Abu Dhabi market demonstrates the extent of the viability of the company’s growth strategy in this new market. Continued innovation and constant growth are part of lessons learned from this company’s well-calculated international entry methods and global marketing techniques.
Improvement to Starbucks’ Existing and Potential International Expansion Plan
Starbucks utilizes a differentiation strategy of selling unique products to different segments of its market. A general principle of this strategy entails designing the company’s products with a well-researched plan of how they will be presented to customers differently and efficiently compared to competitors’ methodologies. According to Shao (2015), differentiation can be done by way of product, price, after-sale-services, user experience differentiation. Consequently, Starbucks may enhance its current global expansion plan by investing more in product innovation and research and development to succeed in Abu Dhabi. This plan is achievable through selling specialty coffee based on customers’ preferences as gathered in its social media platforms such as Twitter among other avenues (Taecharungroj, 2017).
Regarding the company’s potential expansion strategy, Starbucks may wish to integrate a client-focused marketing philosophy into its products and services. This technique considers Abu Dhabi-based potential customers’ diverse demands that differ according to their geographical locations. The strategy of continuously improving Starbucks’ commodities and its approach to penetrating new markets are viable since they have yielded results evidenced by the organization’s level of customer loyalty and presence in more than 70 countries with over 24000 branches globally (Taecharungroj, 2017). Hence, the company can deploy this possible idea in Abu Dhabi.
Starbucks needs to do a SWOT and viability analysis on a potential market such as Abu Dhabi. According to Büyüközkan and Ilıcak (2019), a SWOT analysis will establish the strengths, limitations, prospects, and any risks it may be exposed to while operating in Abu Dhabi. In addition, a viability analysis will reveal Starbucks’ chances of success in the new market. Some of the factors it should carefully evaluate include Abu Dhabi’s economic, political, legal, cultural, and market attractiveness (Samiee & Chirapanda, 2019). These elements influence an organization’s decision to venture into any given market.
In terms of strengths, Starbucks’ broad differentiation generic strategy ensures that it maintains a competitive advantage through special products and ingredients. However, a weakness associated with this technique entails the constant demand for innovation, which may not be achievable in the short term. Starbucks needs to keep improving and innovating ahead of competitors to maintain its growth. In addition, research is costly. Hence, customers are exposed to a financial risk of paying high prices to acquire Starbucks’ products. This situation threatens the company’s operations in Abu Dhabi because expensively charged products will force potential customers to seek alternative competitor items.
Nonetheless, Starbucks has an opportunity to explore ways of achieving price competitiveness through strategic sourcing and economies of scale (Samiee & Chirapanda, 2019). It can also adopt partnering with existing brands to acquire up-to-date technology that favors the production of goods and services in Abu Dhabi. To guard its intellectual property in a joint venture arrangement, Starbucks should consider putting in place patent and copyright agreements.
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Major Factors to Consider in the Proposed International Expansion Plan
Starbucks owns all its businesses in the United States of America contrary to the case with foreign operations. The organization has entered into strategic alliances through licensing and franchises that enable it to monitor the quality of products and services offered by partners in overseas markets. Partnerships became an integral part of its strategy in international markets because of political and legal reasons. In Abu Dhabi, Starbucks should consider statutory regulations that govern foreign companies’ operations in the Middle East. For instance, according to Samiee and Chirapanda (2019), foreign companies are expected to surrender part of the business owners to residents.
Starbucks should also emphasize the quality of its products by carefully selecting potential partners who will be aligned with the company’s values and ways of doing business. Lessons learned from Starbucks’ main growth strategy of market penetration include its capacity to maximize revenue in all subsidiaries. This organization is present in about 70 countries across the world (Taecharungroj, 2017). To capitalize on profits and growth in these markets, it opens more company-owned or partly owned stores as a way of ensuring saturated presence, which can be embraced in Abu Dhabi as a viable strategy.
Viability of the Targeted International Expansion to Abu Dhabi
Starbucks uses market development as its growth strategy. This method is viable since it supports the scanning of new opportunities in un-entered markets such as Abu Dhabi in the Middle East. The company aims to increase its revenue by penetrating additional markets thereby widening its global network. Starbucks’ expansionist strategy has been fruitful, especially through its joint ventures, which have so far enabled it to overcome capital, political, and legal hurdles in foreign countries. Overall, this strategy has led to the organization’s global coverage, market penetration, and dominance.
Today, organizations such as Nestle, PepsiCo among others, which are equally well-performing, regard this company as an international marketing benchmark (Blanchard, 2019). They have embraced Starbucks’ idea of using the latest technologies to reinvent operations to suit their growth plans. As part of lessons learned, this strategy has enabled Starbucks to focus on its core purpose of pioneering coffee selling in a customer-oriented manner.
Starbucks also uses product development as a growth strategy, which involves researching to understand customers’ preferences and the possible mechanisms for delivering what the market requires (Blanchard, 2019). Starbucks has continued to add more products to its catalog. For instance, it introduced beverages in 2014 (Samiee & Chirapanda, 2019). Since the company has maintained its brand in overseas markets by ensuring that new commodities and product improvements are done in a standardized, the proposed plan to enter Abu Dhabi is viable and possible because customers will be assured of quality and affordable items in all cafes established in this region.
The above analysis of Starbucks’ growth strategy in international markets reveals its capability of performing well in Abu Dhabi. The company has managed to balance between adopting distinct marketing tactics and integrating local influences to shape the products on offer. It has also succeeded in maintaining organizational values and the vision of selling quality and affordable coffee to its customers. However, the company’s differentiation strategy may lose its effectiveness if competitors explore the latest technologies to produce high-quality and better-priced items.
Blanchard, D. (2019). Top 10 supply chains of 2019: Our look at how the best companies excel at managing their global supply chains. Industry Week, 268(4), 24-27.
Büyüközkan, G., & Ilıcak, Ö. (2019). Integrated SWOT analysis with multiple preference relations. Kybernetes, 48(3), 451-470. Web.
Samiee, S., & Chirapanda, S. (2019). International marketing strategy in emerging-market exporting firms. Journal of International Marketing, 27, 20-37. Web.
Shao, X. F. (2015). Product differentiation design under sequential consumer choice process. International Journal of Production Research, 53(8), 2342-2364. Web.
Taecharungroj, V. (2017). Starbucks’ marketing communications strategy on Twitter. Journal of Marketing Communications, 23(6), 552-571. Web.