Starbucks Case Essay

621 Words Mar 22nd, 2016 3 Pages
MG
Case 1.1 Starbucks – Going Global Fast

Starbuck Corporation is an American coffee company and coffeehouse-chain founded in 1971 in Seattle, Washington. In 1987, the three owners sold the Starbucks chain to Howard Schultz, a former employee, and quickly began to expand, going from 17 coffee shops in Seattle to over 20,891 shops in 62 countries: United States, Canada, Japan, China, United Kingdom, South Korea, Mexico… Since 1987, Starbucks has opened on average two now stores every day. However Starbucks is now facing some challenges. The sales have dropped from $10.4 billion in 2008 to $9.8 billion in 2009. The corporation had to close 475 stores in the United States in 2009 to reduce costs. The market is saturated across the
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- Cultural forces: adapting to every country may be challenging for the firm as every country as its own culture and standards. The firm needs to make some research on coffee consumption habits of locals.
- Geography and infrastructure: it may be more difficult to build a Starbucks outlet in East Europe than U.S as the infrastructures may not be the same.
- Competitive forces/structure: it includes local competitors (Dunkin Donuts, McDonald’s and their McCafe) and future ones coming in to grab the market share.

2. Starbucks overall corporate strategy is facing some issues. Eight cities in the United States remained with no Starbucks firm, meanwhile the market is saturated. Starbucks is having a “predatory real estate” strategy by paying more than market-rate rents to keep competitors out of the location. This is an unfair attempt to erase small competitors who could not afford to pay those premium prices. This also leads to monopoly and leaves the customer with no choice than to go to Starbucks and pay the price. The firm only spends 1% of revenues on advertising, relying mostly on word of mouth. They should invest more on marketing. The company is facing issues with their employees. They are overworked and underpaid.

3. Starbucks wants to improve its profitability in Japan, country where it has many opportunities. To do so, it should target mid-income levels by

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