RESPOND STRBCK

REFLECT (SUPPORT, CRITICIZE, EXPAND) ON AT LEAST THREE OTHER STUDENTS INITIAL ANSWERS.

PERSON 1

1. Identify the controllable and uncontrollable elements that Starbucks has encountered in entering global markets.

Controllable elements:

· Price: Starbucks charges a premium prices for their products. (approximately $3 for a cup of latte)

· Promotion: the company has saved a lot on advertisement and depends solely on people’s fascination for Starbucks and the word of mouth for marketing.

· Product: hot and cold beverages , $8 sandwiches and desserts and non coffee items.

· Channels of distribution: Starbucks grew to have 19,000 outlets in 58 countries. Has 7000 international outlets in the world from Beijing to Bristol and still planning to dominate the globe. Works with Japanese beverage maker and distributer Suntory Ltd.

· Research and innovation: always innovative in services and products. Introduce summer products as well as seasonal. Installed automatic espresso machines to increase the speed of service, introduced prepaid card to cut transaction times in half that’s convenient with Japanese fast paced life. Invented Starbucks express with faster service and web technology which was terminated later. Expansion of high-speed wireless internet service to about 1200 Starbucks locations in North America and Europe to attract the next generation of customers. Drive through service introduction in Japan in 2006.

Uncontrollable elements:

· Culture: adapting products with local culture. Convenient ready-to-drink bottles and cans, different variation of espresso and latte that are less sweet to suit Asian palates as well as a green tea Frappuccino in Asia that suits well with their lifestyle.

· Competition: imitators in England try to steal market share and already established local coffee makers who offer the same fare for their coffee drinks and lower prices of local coffee in Italy. Also, Starbucks lookalike competitor’s coffee in Japan were found such as “Mt. Rainer is embolized with a green logo that closely resembles that of Starbucks.”

· Economic climate: the average spending

 

per person influences how people are willing to buy a high-end coffee.

· Political and legal force: different laws and regulations in different countries which contravene the parent company policy of  minimum worker wage ( such as in France that provides generous labor benefits.)

 2) What are the major sources of risk facing the company? Discuss potential solutions?

· The coffee market became saturated with Starbucks stores in the US and self-cannibalization occurred; cutting sales at existing Starbucks outlets at 30% a year rate. Also, customers were becoming annoyed because of fewer choices in the market and the company’s goal to prohibit other coffee stores to open their business in big cities. The company has been faced with ominous wave of anti-globalization supporters: Starbucks was considered to be a free-market capitalist leading to low coffee choices and less choices to consumers

· As Starbucks business grew in size, its employees are becoming less connected to the company’s mission of treating customers like family due to the lack of incentives and low wage. Also, employees were feeling underappreciated  and were overworked without extra pay. 

· Facing challenges from future consumers, the twenty- or thirty somethings of generation X, because once Starbucks hypnotized this group for a market study, so they became uncomfortable to buy approach their stores. 

· Competition from Mc. Donald’s McCafés, Dunkin Donuts in the US and abroad, as well as facing local coffee companies in Japan, China and Italy including Starbucks lookalikes in Japan.

· Going global makes less money due to operation with local partners, which results in a decrease of profits share from 20-50 %

· Economic downturn: high price for a cup of latte at $3

· CEO political stance for some countries made Starbucks undesirable to have in these countries.

Solutions: 

· Stores must be strategically located to prevent self-cannibalism, there are some states in the US with no Starbucks stores. Also focusing on going global to maintain profits and earnings.

· Adjusting pricing strategies internationally and repositioning their products according to the need of the local and future customers.

· Aggressive marketing in international market to attract more customers

· Licensing and franchising for foreign investors to go globally faster and maintain growth rate.

· Reduce their prices and increase benefits to customers and its employees as well.

· Be flexible in prices in case of economic downturn and fluctuation of the world cash rates

· Create an easy to deal with online system that allow customers order online would boost sales due to the convenience of fast pick up.

· Stay away from politics and focus on the value Starbucks would provide to customers wit their services.  

3) What advice would you have for Starbucks in Africa? In China?

· Customize Starbucks products to the culture of the countries of interest. Small sandwiches and less sweet desserts to maintain healthy growth for years to come. 

· Advertising  with a message that means something to people’s lifestyle. 

· Reduce price and increase benefits.

· Make Starbucks a more welcoming place for younger people with high speed Internet and marketing for spending quality time in the stores to accomplish tasks too.

PERSON 2

) Identify the controllable and uncontrollable elements that Starbucks has encountered in entering global markets.

 

I think controllable elements are price, product, promotion and place. For price, Starbucks use different prices in different markets. For example, Italian coffee is cheaper than U.S., Americans pay about $1.5 for an espresso, in north Italy, the price is 67 cents, in the south, just 55 cents. For product, Starbucks tried to add food and other noncoffee items to increase sales. For promotion, as the case mentioned, Starbucks spends only 1% of revenue on advertising. For place, Starbucks already expanded stores to many countries like Italy, Japan, Spain, Germany and France. They also plan to expand to Mexico and Puerto Rico.

I think uncontrollable elements are political forces, cultural forces and competitive forces. For political forces, Starbucks in France should obey the labor law, it focuses more on benefits than U.S. For cultural forces, because of Asian food culture, they trend to drink less sweet coffee. Starbucks make two new products for Asia. For competitive forces, with the expansion of Starbucks, there are many competitors, such as McDonald’s, it also attacks the Japanese market with the induction of its McCafé coffee shops.

                                                                                                

2) What are the major sources of risk facing the company? Discuss potential solutions?

I think there are 3 major sources of rick. They are culture, employee and competition.

The first one is culture. As Starbucks expands in overseas markets, it is bound to encounter many risks brought by cultural differences. As mentioned in the case, the coffee culture in Italy is different from that in the United States. In addition, “young coffee drinkers already feel uncomfortable in the stores. “I think Starbucks has to do a lot of market research to address this risk. Starbucks needs to position the target market in different situations and make some changes based on the characteristics of Starbucks.

The second one is employee. As mentioned in the case, the salary of Starbucks employees is only a little higher than the minimum wage standard, but the workload of Starbucks is very heavy. The mismatch between pay and workload makes employees unhappy. The best solution for employee risk is training. In my opinion, training can improve the quality and efficiency of employees, so that the same workload may need fewer employees to complete. Reducing the number of employees can achieve the goal of increasing the salary of employees.

The third one is competition. Competition has always been there, but Starbucks is bound to face more competition as it expands globally. In Japan, for example, Starbucks faces local coffee brands. Starbucks has been aggressive in the face of competition. For example, as mentioned in the case, Starbucks would buy the store at twice the price, or would leave the store empty instead of selling to the competitor. However, such an approach can only be temporary. If always do that, Starbucks will face great financial pressure. I think the best solution is to improve the quality of products and services, and make some changes to the target market. Starbucks already has a strong reputation, and if it can make small changes to cater to new customers when entering new markets, it can certainly overcome the competitive risk.

 
 

3) What advice would you have for Starbucks in Africa? In China?

Africa is the origin of coffee beans, and local coffee brands are doing well. Mugg & Bean, for example, features unlimited refills and free Internet access. Seattle coffee, in partnership with exclusives, South Africa’s largest bookstore, has opened its shops in bookstores.

In the face of such strong competitors, Starbucks will have to make huge changes if they want to gain market share in Africa. First, Starbucks still has to target the high-end coffee market. Because coffee in Africa is so cheap, it’s almost impossible to beat the price. In addition, Starbucks can provide the image of fast coffee. Since Africa already has plenty of brands to sit back and enjoy, Starbucks should innovate to attract to faster-paced office workers.

Starbucks has been in China for 20 years. To cater to Chinese tastes, Starbucks has made many changes to its menu. However, the emergence of Luckin coffee threatens Starbucks’ position. Luckin coffee uses a pricing strategy, and its coffee is about 3 yuan cheaper than Starbucks. In addition, its takeout has developed very well, and almost every store provides takeout service. Starbucks has a delivery service too, but it doesn’t cover every store. 

In my opinion, Starbucks needs to develop its own delivery service if it wants to maintain its position in China. Because people like to order takeout very much in China, Starbucks can cooperate with takeout platforms like Elema and Meituan to implement it in every store. In addition, Starbucks should continue to take the high-end route, and enhance its service level while providing high-quality coffee, so as to make it different from Luckin coffee. At the same time, the development of science and technology in China is fast. Many industries, such as Alibaba’s future hotel, have applied a series of high-tech products such as robots to real life, so Starbucks should also strengthen the development of science and technology. Finally, Starbucks’ peripheral products, such as cups, enjoy a good sale in China, which is beyond the reach of Luckin coffee. Therefore, Starbucks should focus more on issuing high-quality peripheral products to attract customers.

PERSON 3

1. Identify the controllable and uncontrollable elements that Starbucks has encountered in entering global markets? 

As Starbucks has entered the global market there are many different controllable elements that they possess.  Some of these elements include where the location will be; as stated in the case Starbucks has the money to rent a store and keep it empty or they can pay double the asking price for rent to outbid their competitors.  At the present time the company can afford to have multiple locations even with them knowing that self-cannibalization is at a rate of 30 percent.  Another controllable element that Starbucks has is that they do not partake in franchising, in doing this they can keep a “tight grip on its image” and along with this they can save up to 30 million dollars annually on advertising which is only about 1 percent of their revenue.  Starbucks also has control globally as to what they serve in different areas across the globe, they are able to offer sweeter dinks in the US versus a less sweet drink that is preferred in Asia.  Starbucks has the understanding that they need to conform to their purchaser tastes, able to adjust to the economic changes of the regions and keep their corporate goals insight.   Some of the uncontrollable elements that Starbucks faces or could face are the prices of espresso, if there is a dry season this could drive the price of coffee up.  Another uncontrollable element is the economy, if the economy decline people will become much more frugal with their monies and not want to buy a 3 dollar beverage. They also have no control over world currency rates.   Culture is another uncontrollable element.  There are some areas of the world where a Starbucks shop will not be welcome, but as time and traditions change this to could change where Starbucks could be accepted. 

 

1. What are the major sources of risk facing the company? Discuss potential solutions? 

One of the major risks that the company faces with global expansion is that it makes less money on each overseas store due to most of them being operated by local partners, they need to strategically plan and partner with the appropriate dealers to make sure they can make a profit.  An additional risk that Starbucks faces is its loss of consumers due to decreased options severed.  Currently Starbucks is generally a coffee shop with limited options of food.  It does seem that they are trying to increase these options to try to stay competitive in the market.  Another risk that Starbucks faces is that the younger generation do not feel comfortable in the store.  The atmosphere is not appealing to them.  Starbucks needs to try and change their marketing, let them know they are welcome to use the free internet access, have coffee and something to eat at lower more competitive prices.  One of the largest ricks that Starbucks face is market saturation.  As in the article stated, the company is trying to open a Starbucks in the Starbuck bathroom.  At the current rate, right now in specific locations there is self-cannibalization, if not monitored this rate could significantly increase due to over population of stores to close, they should focus on international stores. 

 

1. What advice would you have for Starbucks in China? In Africa? 

I would say that they are doing pretty well in China though it does seem that they are opening more stores then necessary at a very fast rate, as mentioned in the article a new store every 15 hours with 3,000 planned in the next few years.  They may have a problem with over population and saturation of the market much like they do here in the US and will also be struggling to stay above inflation rates.  When looking at African I would suggest sticking with their plan, only opening up a few stores.  With the economy in Africa as it stands, I do not believe there will be much profit or growth for a while, the company will not flourish unless they where to change there rates.