David Haddad
Dr. Newhouse
International Marketing – Case Study #1
1/21/2015
Starbucks Global Success
1. What are controllable and incontrollable elements that Starbucks has faced?
Starbucks has become a massive corporation, and in the process of creating their empire, Schulz and his team have stepped on some toes and created some enemies. The article opens by talking about protesters destroying a local Starbucks in the city of Seattle (home of the original Starbucks) one of the examples of some of the people whom Starbucks has offended due to their highly competitive methods which put local coffee chains out of business. A controllable element that Starbucks faces is employee satisfaction and pay, which is something that varies on a global scale. Places like France and Germany are going to demand more from Starbucks and are not going to allow people to be paid the same way they are paid here in the U.S. Places like Germany offer a three week paid maternity leave, along with the option of staying at home for three years with the guarantee of your job back once the time is up. These are very different requirements then the ones in the United States and it raises the question as to whether or not Starbucks is capable of maintaining employee satisfaction, when that is something they even struggle with in the U.S. Incontrollable elements can be things like the recession, where according to the article, was a time in which people decided to give up the three or four daily dollars on a cup of coffee and began to make coffee at home instead. For this same reason, the pricing that Starbucks uses is another issue. After only targeting upper level markets in the U.S. it is going to be very difficult for them to sell the same item to people overseas, being that coffee is very popular and less expensive in places like Italy, France and Spain. Incontrollable elements are also obviously things like weather, or monetary currency and even culture that affect how much people are going to drink coffee, when and where they are going to drink it, and how much they are willing to spend on one cup, as opposed to buying a larger amount and brewing it at home.
2. What are the major sources of risk facing the company? Discuss potential solutions
There is an enormous risk that the image of the company will not be a positive one. Something that is meant to be popular amongst the young generations can get pushed aside and become simply a luxury item for older men and women who can afford a foreign cup of coffee. It is true that the image Starbucks has created for itself overseas (In places like Japan) is a positive one that has attracted a lot of customers, especially in Tokyo where the busiest Starbucks in the world can be found. Here in the US it is sometimes being viewed as something that is almost pretentious and can only be afforded by the upper class, which often leads to an older clientele base. More importantly, it is considered a disposable good due to its price. Overseas people are used to paying a lot less for a cup of coffee, in places like Italy it can cost anywhere from 50 cent to a Euro (approx. 1.25$). The lowest cost of a cup of Starbucks coffee is 3$ and can cost even up to 6, 50$ which is simply too much in other western cultures of Europe.
The cup sizes are also something that might not work well in other countries (tall, grande and venti) who maybe speak a language where those words mean something completely different. Even in the US there are customers that are turned off by the size names and would rather go somewhere else that they would consider to be less pretentious (example from the article is Dunkin Donuts, or McCafe which have the sizes small, medium and large) which also presents the issue of the competition, which has established itself very strongly in the global market. Ways to solve these issues of image and cost is to advertise differently and show customers that the product is for everyone, and worth the extra