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Solutions to problems with starbucks international operation

While on a business trip in Milan, Italy, in 1983, Starbucks founder and CEO Howard Schultz noticed the popularity of coffee shops as a community gathering place. He realized that, for Italians, coffee was not so much a beverage as it was a social experience. Starbucks opened up its first international store in Vancouver, British Columbia, in 1987. Today, the company is a multinational powerhouse with more than 19,000 stores in 62 countries. Globalization offers many advantages to Starbucks.

As the coffee industry becomes increasingly saturated in the United States, international expansion allows Starbucks to take advantage of untapped opportunities in other countries. However, global expansion has not always been so easy. Starbucks has learned that while it must ensure consistency of quality, it must also customize to adapt to local tastes. For example, in the United Kingdom, Starbucks was not initially popular with British consumers.

In response, Starbucks began to renovate its stores to create a unique look so that each store fit into the local neighborhood environment. The company rebounded, and today it has nearly 800 stores in the United Kingdom with plans to begin opening franchises in the country.

Solving Starbucks Problems

Starbucks also faces sociocultural barriers in China. In 2007, the company closed its store in the Forbidden City after criticism from the Chinese media. Due to the backlash from Chinese citizens, Starbucks once again customized its offerings, with more Chinese-inspired food products and coffee-free beverages Chinese consumers drink an average of three cups of coffee annually.

  • In response, Starbucks began to renovate its stores to create a unique look so that each store fit into the local neighborhood environment;
  • Until recently, the Indian government mandated that foreign firms could only operate in the country if they created 50-50 joint ventures with domestic firms;
  • Paul likens Starbucks returning to its core to restoring antique furniture to its core, original finish.

To show support for Chinese business operations, the company opened a coffee farm and processing facilities within the country and reorganized to form a China and Asia Pacific division. Starbucks must work to ensure that its Western roots and expansion plans do not clash with Chinese values, since the country is a highly lucrative market. Sales in the coffee market grew 20 percent from the year before. However, while the coffee market is booming, Starbucks has also come across economic barriers.

Because operating costs are higher in China, and labor costs are increasing, the price of Starbucks drinks in China is 50 to 75 percent higher than in the United States.

Some media outlets in China have accused the firm of ripping off Chinese consumers an allegation that Starbucks vehemently denies. This success is particularly significant due to political barriers for foreign multinationals in India.

  1. I explain how Bearista Bears and Finger Puppets sell very well, but it a great cost to the brand.
  2. Written by john moore John Moore is an influential marketing strategist, author and keynote speaker. She highlights how Starbucks losing its authenticity has driven the company from using customers as its primary advertising vehicle, to using national television commercials as an advertising vehicle.
  3. Paul analyzed the switchover from the La Marzocco espresso machine to the Verisimo automatic machine and offered up tactical ideas Starbucks can use to course-correct itself back to espresso authenticity.
  4. As the coffee industry becomes increasingly saturated in the United States, international expansion allows Starbucks to take advantage of untapped opportunities in other countries.
  5. However, while the coffee market is booming, Starbucks has also come across economic barriers.

Until recently, the Indian government mandated that foreign firms could only operate in the country if they created 50-50 joint ventures with domestic firms. The Indian government changed the law to allow companies that only sell one brand of products to develop wholly-owned subsidiaries in the country.

Such a joint venture has many advantages, including an easier transition into the Indian market Tata Global Beverages is part of the largest business group in the country.

On the other hand, Starbucks must still contend with sociocultural and economic barriers. Interestingly, there is one notable country in which Starbucks is absent: For instance, the amount of espresso and the proper times to offer certain drinks like cappuccinos never for breakfast or after heavy meals in Italy are very different from American coffee-drinking habits.

Starbucks announced that it was expanding in Europe with plans to eventually come into Italy. The announcement led to an uproar among some Italian coffee drinkers. To succeed in Italy may require Starbucks to significantly customize its shops and beverages to appeal to Italian tastes.

Questions for Discussion What are some of the most significant obstacles to expansion in Italy, and how can Starbucks overcome them?