Starbucks Corporation: Competing In A Global Market

Starbucks first opened operations in Seattle’s Pike Place Markets in 1971, aiming to provide coffee to nearby restaurants and bars. Eleven years after its opening, the marketing and retail efforts of the company improved with the recruitment of Howard Schultz. It is because of the views of Schultz whose trip to Italy to observe a strong bar culture that Starbucks was able to provide quality coffee beans that became the foundation of their businesses. These coffee beans that they have developed were sold and opened up in the new store that they opened and called Il Gionarle, which then took over the Starbucks Corporation in 1987.

It is also by the end of the year of the take over that they were able to open up seventeen more stores and expanded towards Chicago and Vancouver. It is in 1990 that the company enhanced their expansion with the opening of a new roasting plant in their headquarters in Seattle. To ensure the progress of their company, the administration also focused into the strengthening of relationships and pursuing other ventures during the early 1990s. By 1995, the company was able to establish their name together with the opening of their 676th store.

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The popularity of Starbucks also increased with the addition of compact discs which was proven to be effective by a very popular experiment with the so-called in-house music. It is however, in 1996 that Starbucks was able to reach markets as far as Singapore, Japan and Hawaii. The reason behind this success was their partnership with Sazaby Inc. , which encouraged the development of different coffee shops in Japan (Kembell, et al. , 2002). The peak of the expansion of this company was seen with the opening of the twenty-first century. ,300 stores have been opened in 2000 due to the progress of this particular company. These stores could be found in different countries which ranges from England to Australia. In addition, Starbucks also created a website (www. starbucks. com) to ensure that their operations keep up with the latest technology (Kembell, et al. , 2002). Evidently, Starbucks has primarily focused on specialty coffee products and has been able to expand into numerous locations all over the world through franchising.

Its incomparable success is due to their effective expansion strategy which includes ensuring the effectual manning of authorized representative to oversee the region of his jurisdiction, especially the franchises that are located therein. Furthermore, they have also taken diversity and culture training into consideration in the site where this particular organization has expanded into. This of course is in lieu with their vision, to establish Starbucks as the most recognized and respected brand in the world.

Thus, the current international situation for Starbucks appear to be an emerging part of their business and their reorganization shows how committed they are in the global company in trying to make a difference in the lives of the people all over the world. Because of this, Starbucks coffee shops could be found in almost every country in the world (Australia, Bahrain, Canada, Hong Kong, Israel, Japan, Kuwait, Lebanon, Malaysia, New Zealand, Oman, Peoples Republic of China, Philippines, Qatar, Saudi Arabia, Singapore, South Korea, Switzerland, Taiwan, Thailand, United Arab Emirates, and United States).

Another noteworthy people practice of Starbucks is its employee training, which it has effectively carried out across levels – from the baristas way up to its critical executive positions. The following is a verbatim quote from the HR Vice President of the company: “We want passionate people who love coffee . . . We’re looking for a diverse workforce, which reflects our community. We want people who enjoy what they’re doing and for whom work is an extension of themselves.

Each barista is accorded a minimum of 24 hours of training time in the first month of employment with the company, with a content validated curriculum towards “Brewing the Perfect Cup”. Notably, they are also multi-skilled being adept at cash registering, beverage preparation and equipment maintenance. Incumbents of managerial positions are trained more extensively and require training class attendance from 2 to 3 months. These sessions cover store operations, company procedures and people management. In all such training, all are enjoined to be one with the company’s vision, mission, values and culture.

Yet another exemplary business practice of Starbucks is its relationship marketing efforts. It has more ore less 5 million customers who visit stores on a daily basis since 1998. In fact, those customers who are particularly loyal frequent the store as many as 15 to 20 times within a month, corresponding to an expense of $50. There are even those who have made Starbucks a daily routine. Baristas are taught to establish rapport with such customers by calling them by their first names and even memorizing their favorite beverage.

Coupled with effective branding strategies, its relationship marketing efforts have contributed to making Starbucks a global brand. The Global Strategy of the Starbucks Corporation De Wit and Meyer (1998) refer to globalization as a market tendency towards homogenous variety and tighter international linkages. It is because of this that companies are now being subject to global forces and consumer demands. Thus, these companies recognize the necessity of global strategies. In the same manner, these organizations are now being faced with a challenge to modify the strategies that they are currently adopting.

It is in modifying their existing strategies that they are assured of their competitive advantage in a rapidly changing environment (Starbucks’ Global Strategy, n. d. ). A well designed global strategy, according to the article Starbucks’ Global Strategy (n. d. ), helps firm in gaining a competitive advantage that could arise from Efficiency, Strategy, Risk, Learning and Reputation. In creating successful global strategies, managers must be able to understand the nature of global industries as well as the dynamics of global competition.

Starbucks is said to undergone changes in their product, operations and strategies to be able to cope with the changes in the global market. Aside from selling the franchise of their world class coffee, the said coffee company is proud of their good citizenship locally and in the other countries where their franchises are located. In fact, they do contribute to local charities, especially those that prioritize the welfare of the children, the environment, the homeless and lastly, the AIDS research support. As for the organizational structure of this particular company, Starbucks is organized into a numerous business units.

The retail business of the company that is based in North America focuses on selling coffee beverages, whole bean coffees as well as hardware and equipments that are related to the coffee making industry through the different company-operated retailed stores based in the United States and Canada. On the other hand, their international retail business involve units that own and operate retail stores located in almost all countries around the world. These two branches of the company are usually managed by different presidents under the said Corporation.

In the same manner, they are also being measured and evaluated independently by senior management members. One best business practice that Starbucks ought to continue is its careful selection of zone vice presidents who oversee the expansion activities within the region. Because they have expansion activities globally, they aim to understand the culture of the country in which they operate. This comprehension is very critical. Starbucks advocates the idea of a right hire resulting to a quick start. Based on strategic objectives and plans, competency requirements are laid down on a per position – per level basis.

These competencies then become the basis of all HR systems, linking these systems clearly and logically. These same competency requirements then become the basis for targeted selection, against which potential employees are behaviorally assessed. This implies that right at the start – at the first step – of hiring, that Starbucks employees blend well into the organization’s culture and business strategy. Competencies are general descriptions of the abilities necessary to perform a role in the organization. These are usually described in measurable terms.

They differ from job descriptions – while job descriptions typically list the tasks or functions and responsibilities for a role, competencies list the abilities needed to conduct those tasks or functions (McNamara, 2005). Assessing an individual’s specific strengths and development needs as they relate to the success profiles across levels of supervisors, managers and executive is a key component to selection, development, and promotion decisions. Information and data used to drive these decisions must be accurate and objective. Starbucks has also set up a structured selection system based on Targeted Selection.

This ensures that all questions asked of candidates are behaviorally based (Development Dimensions International, 2005). The acculturation of its zone executives is likewise critical. Based on a past research by Kabasakal and Bodur (1997), some cultures are characterized by a strong slant towards collectivism and both societal and organizational levels. It has perhaps been useful for Starbucks to initially analyze the cultures of the regions it expands into in terms of power distance, masculinity, human orientation, achievement, and future orientation (Hofstede, 1983).

It has looked into their business culture’s commitment and sense of duty to the organization, respect for managerial hierarchy, type of leadership, and other ethical norms. Armed with such knowledge. Starbucks executives can definitely influence the expectations of its executives (especially expatriates) and help in their adjustment to the new work environment (Hofstede, 1983). Business culture communication styles have also been assessed by Starbucks and the manner through which corporate values and organizational culture are transmitted.

In some cultures, exchange of favors, information sharing and friendships are critical means of winning and developing trust. Logically, Starbucks managers who are sent to other regions ought to have such characteristics as patience and being open to socialization with locals. Advantages of Franchising: For Starbucks Starbucks acknowledge the benefits of operating at the global level through franchising. Their franchises have surely helped them in bringing entrepreneurs into the organization. At the same time, it allows their company to grow at a faster rate and help them with the creation of a global brand identity.

True enough, the more Starbucks coffee shops there are all over the world, the more benefits they (Starbucks) get from the economies of scale. Profits generated by Starbucks Franchises and Other Strategies The reason behind the success of the Starbucks Corporation is its expansion. Apparently, these expansions have contributed so much to the establishment of Starbucks as a global brand without having to pay so much for it. Apparently, the presence of Starbucks franchises in all the six continents (except Antarctica) contributed so much to the increase in the profits of the said company.

According to the article Starbucks Corporation (n. d. ), the specialty operations of Starbucks strive in developing the brand outside the traditional company-operated retail store environment using channels. These specialty operations include retail store licensing agreements, wholesale accounts, grocery channel licensing agreements and joint ventures. It is through these specialty operations that Starbucks placed more emphasis on their customers. By the end of the fiscal year in 2000, specialty revenues have accounted for sixteen (16%) percent of Starbucks’ net revenues.

As mentioned, the retail stores of Starbucks could be seen in all the continents around the world except Antarctica. Its stores that are located outside of North America, the UK, Thailand and Australia are operated through joint ventures and other licensing agreements with prominent retailers in a certain country. It is also in the end of the 2000 fiscal year that the company was able to play a more vital role in the international market. It opened up an estimated 184 new stores including the first one in Lebanon, the United Arab Emirates, Qatar, Hong Kong and Shanghai.

They also opened 154 stores in Japan, 47 in Taiwan, 28 in China, 28 in Singapore, 27 in the Philippines, 20 in Hawaii, 15 in New Zealand, 14 in Malaysia and six in South Korea. For their wholesale accounts, the corporation sells whole bean and ground coffees. The said wholesale accounts usually include the service industry such as hotels, airlines and restaurants, etc. The corporation also teamed up with Kraft Foods in order to hasten the growth of their products in the different groceries in the United States.

It is because of this partnership and agreement that Kraft manages all the distribution, marketing, advertising and promotions for Starbucks. Likewise, they also entered a joint venture with the Pepsi-Cola Company for the distribution of their ready-to-drink coffee based products. In the same manner, they teamed up with Dreyer’s Grand Ice Cream for the distribution of their premium coffee ice creams. Because of this, the net sales of the said company rose 25%, reaching to about 1. 30 billion dollars. The reason behind the increase in revenue is the opening of the new retails stores as well as the higher comparable store sales.

Undoubtedly, few brands could go beyond Starbucks, a coffee company which humble origins could be traced back twenty years ago, as a single coffee shop in Seattle. Although its financial records are quite impressive in nature, Postrel (2003) says that these numbers do not tell the whole story of Starbuck’s incorporation into popular culture. This particular company surely contributed so much to dramatic resurgence of coffee consumption in the United States and around the world which then affected and changed the leisure practices and daily routines of its customers.

The coffee being served at this very popular coffee shop is not just the reason why consumers patronize Starbucks. Postrel (2003) also recognizes the importance of the aesthetic look, feel, and sound of Starbucks which influenced the design of the retail services being offered. The so-called Starbucks Revolution became an important cultural icon that created the growing market for coffee shops and premium-priced gourmet coffee beans, as Helliker and Leung (2002) explicitly states. Starbucks take all the details of their business into consideration.

Starbucks have been true to its saying: Everything Matters. According to the owner of this big coffee business, Howard Schultz, as mentioned by Shapiro (2006), they make sure that each coffee shop is designed in such a way that it would enhance the quality of everything that the customers would see, touch, hear, smell and taste. It is because of this that artworks, music, aromas and surfaces are designed in such a way that it would be sending the same message. In the same manner, its success, as Shapiro (2006) notes, is affected by its product being highly emotional.

People don’t go to Starbucks just to drink coffee; instead they visit the said coffee shop for experience. They would usually meet up with their friends or with a certain group of people for connection. It is because of this that Starbucks spend little money on advertising, instead they maximize their resources by focusing on the appeal of their products, especially their coffee and other services in making sure that their brand is widely recognized all over the world (Thompson & Strickland, 1999).

They also make sure that their international branches comply with their standards since their management look upon each store as a billboard for the company and contribute so much to building the brand and image of the company. As mentioned, each detail associated with their product is scrutinized to enhance the mood and ambience inside their stores. Their belief that everything matters was incorporated into the store fixtures, the merchandise displays, the colors, the artwork, the banners, the music and the aromas (Thompson & Strickland, 1999).

This is done to create a consistent, inviting and stimulating environment that evoked the romance of coffee, as Thompson and Strickland (1999) mentions. This do not change from one branch to another, which then ensures that the good image of the coffee company is maintained whether a customer is in North America, South America, Latin America, Europe, Asia or Africa.

References

http://www.managementhelp.org/staffing/specify/cmptncys/cmptncys.htm

http://www.echeat.com/free-essay/Starbucks-Global-Strategy-33119.aspx