Starbucks International Marketing Strategy

The world's #1 speciality coffee

STARBUCKS - Overview Starbucks Corporation is an international coffeehouse chain based in Seattle - United States. Starbucks is the largest coffeehouse company in the world. Operates 16,635 stores in 50countries, including 11,068 in the United States, while licensees and franchisees operate more than 7,800 units worldwide (primarily in shopping centers and airports). Product Lines - Beverages – Coffee, Tazo Tea, Soda, Juices - Pastries - Whole coffee beans - Merchandise – Mugs ,CDs

STARBUCKS - Overview Through the Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of the company's products are seasonal or specific to the locality of the store in various countries. From a single small store that opened in 1971 to its status as a 21st-century Gourmet coffee giant, Starbucks has led a coffee revolution in the United States and beyond. Its three largest overseas markets are Japan (with more than 480 stores), England, (more than 370) and China and Taiwan (each with about 120 stores).

STARBUCKS – National Culture to Global vision Starbucks Ensures that - Growth does not dilute the company's culture and the common goal of the company's leadership to act like a small company. To create “Distinctive Starbucks experience" in the face of rapid expansion.

The following six guiding principles to measure the appropriateness of decisions: Provide a great work environment and treat each other with respect and dignity. Embrace diversity as an essential component in the business is done. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of coffee. Develop enthusiastically satisfied customers all of the time. Contribute positively to communities and environment. Recognize that profitability is essential for future success. STARBUCKS MISSION Statement – Spanning Boundaries Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining uncompromising principles while growing.

STARBUCKS - Industry and Competitive Analysis Market Structure Monopolistic Competition Competitive Activity Many companies are in the market and competition is fierce. Competitors use location, product mix, and store atmosphere differentiation to establish market niche. Industry Costs and Capital Structure Low to moderate costs for each location. Major start-up expenditures are property and equipment. Major operating costs are labor and cost of sales.

Industry PEST Analysis Political Influences Relationships between coffee producing nations and US State & Local government controls Economic Influences Constant demand for food and beverages Changes in disposable income could influence purchase levels Social Influences Consumer preferences could shift from coffee to other beverages Technological Influences Use of technology can improve operational efficiencies

STARBUCKS – Competitive Strategy Focused Differentiation Serve niche buyers than rivals. Have unique capabilities to serve needs of target buyer segment. Be profitable and offer good growth potential. Resources and capabilities to serve an attractive niche.

STARBUCKS - Global Marketing Mix Strategy Retailing formula is same throughout the world whereas product offerings and are modified to suit local tastes. Starbucks advertising strategies play a crucial role in the success of the business. The advertising strategies adopted by the firm are more local and differentiated rather than standardized. Global Market Segments National Product HYBRID II MARKETING STRATEGY

STARBUCKS - Corporate Strategy Overview Maximize market penetration. Provide a relaxing, attractive social atmosphere. Offer high-quality products. Create a great working environment. Achieve profitability.

Rapid Store expansion Strategy - Domestic store expansion - International store expansion - Employee training and recognition - Real estate, Store design, Planning and construction - Store ambience Product Line Coffee purchasing Strategy Rapid Store expansion Strategy – ‘ Starbucks Everywhere’ approach International Store Expansion - Company owned ,Company operated stores or Licensing. STARBUCKS - Corporate Strategy

Employee Training and Recognition - System to recruit, hire and train Baristas and Store managers - Screening - Training Programmes - Award for partners Real Estate, Store design ,Planning and Construction. - Broad Range of store formats - High traffic ,High visibility store locations - Control of average store operations cost - WI-Fi availability Store Ambience - Concept of ‘Everything matters’ - Assessment of standards. STARBUCKS - Corporate Strategy

STARBUCKS – American Coffee round the world Starbucks had to face issues in developing its international business portfolio. Starbucks focuses on profitable growth. Starbucks aggressively cluster new stores in prime locations in the world's fastest growing economies. Starbucks introduces its full range of products in phases, selling coffee and other beverages including tea and juices through retail stores in international countries. Selectively introduces specific products like its ready-to-drink coffee beverages to specific countries Eg. Japan, Taiwan and Korea to maximize profits.

STARBUCKS - Why Globalize ? With just 20% of the world's coffee consumed in North America, Starbucks has to aggressively sell its offerings in countries that already have dedicated coffee or tea drinkers. Issues : International joint ventures Culture Gender issues Marketing channels Cross-cultural management issues Saturated home market – leading to self cannibalization. Reaching Brand Maturity stage in U.S.

STARBUCKS - International expansion Starbucks’s initial foreign forays were launched through joint venture and licensing arrangements with prominent local retailers. The first market developed in 1996 was Japan with the help of SAZABY Inc., a Japanese retailer and restaurateur.

Some of the methods Starbucks have used to expand and maintain their dominant market position : Buying out competitors' leases. Intentionally operating at a loss. Clustering several locations in a small geographical area (i.e., saturating the market). STARBUCKS - International Entry Strategies

Starbucks fueled its initial expansion into the UK market with a buyout of Seattle Coffee Company and then used its capital and influence to obtain prime locations, some of which operated at a financial loss. Starbucks in the 2000s greatly increased its "licensed store" franchise system, which permits Starbucks franchises only if they contribute to less than 20% of the franchisees gross income, are inside other stores or in limited or restricted access spaces, as to not dilute the brand image. STARBUCKS - International Entry Strategies

Globalization – Issues faced and Tackled in different countries The Japanese are noted for admiring and adopting American products and trends such as blue jeans and Coca-Cola. Critics warned that the Japanese would never buy take-out coffee in paper cups or accept the interior non-smoking policy. Starbucks proved them wrong. Some 30% of its customers drink take-out coffee in those throwaway cups Japan Starbucks had to deal with an initial lack of acceptance from France's historic cafe culture, with older consumers frowning on a big U.S. coffee house chain with standardized disposable cups. Younger coffee drinkers in France joined American tourists in Paris to embrace such favorites as Starbucks caramel coffee. France

Globalization – Issues faced and Tackled in different countries The company is aggressively expanding in China where Chinese traditionally prefer tea. Key to success in China are coffee houses that empower China's emerging middle class to publicly display their new lifestyles and status while keeping Starbucks beverages as affordable luxuries. China England Second biggest overseas market for Starbucks. Tackling imitators aiming at reducing market share of Starbucks. Italy Lower pricing and popularity of local brands. Culture of serving food with coffee – Starbucks had to address the demand.

STARBUCKS – Benefits of Mergers and Acquisitions The first Starbucks location outside North America opened in Tokyo, Japan, in 1996. Starbucks entered the U.K. market in 1998 with the $83 million acquisition of the then 60-outlet, UK-based Seattle Coffee Company, re-branding all the stores as Starbucks. In April 2003, Starbucks completed the purchase of Seattle's Best Coffee and Torrefazione Italiafrom AFC Enterprises. In September 2006, rival Diedrich Coffee sold most of its company-owned retail stores to Starbucks.

Starbucks Corporation M&A Summary Year Acquisitions Stakes Divestitures 2010 0 0 0 2009 1 0 0 2008 0 0 0 2007 0 0 0 2006 4 0 0 2005 3 0 1 2004 1 1 0 2003 4 3 2 2002 0 0 0 2001 1 0 0 2000 0 0 0 1999 2 1 0 1998 2 0 0 1997 0 0 0 1996 0 0 0 1995 0 1 0 1994 1 0 0 Total 19 6 3

STARBUCKS – CULTURAL DIVERSITY Diversity at Starbucks Aside from extraordinary coffee, Starbucks has made a business out of human connections, community involvement and the celebration of cultures. At Starbucks, Diversity is defined in the form of an equation. Diversity = Inclusion + Equity + Accessibility With a presence in over in over 50 countries, Passion for great coffee, genuine service and community connection Transcends language and culture.

Built on Great Global Partnerships We owe much of our global success to our international partners . In fact, we wouldn’t be the universally respected brand we are today without their commitment to bringing our coffees to the world. Shared values, strategic fit, good leadership and a strong track record are among the most important qualities we look for. Chairman Howard Schultz “ We remain highly respectful of the culture and traditions of the countries in which we do business . We recognize that our success is not an entitlement, and we must continue to earn the trust and respect of customers every day .” Starbucks is dedicated to supporting communities around the world – where we live, where we work and in the countries where our coffees are produced. STARBUCKS – CULTURAL DIVERSITY Respect for Local Cultures

Partners (Employees) - Focusing on partner development by educating and engaging partners. Customers - Extend the Starbucks Experience to all customers, recognizing and responding to their unique preferences and needs by connecting with customers in a culturally relevant way. Communities - Support and invest in local neighborhoods and global communities through strategic partnerships and economic development Opportunities. Suppliers - Trusted and welcoming company for suppliers through supplier diversity program Starbucks is dedicated to creating a workplace that values and respects people from diverse backgrounds, and enables its employees to do their best work. STARBUCKS – CULTURAL DIVERSITY

STARBUCKS - Organization Chart President, International President CEO Thailand VP, Northwest VP, South Central VP, Southwest President, North America President, Europe, Middle East, Africa President, Japan Senior VP, Coffee Executive VP, Chief Financial Officer Executive VP, Partner Resources Executive VP, Supply Chain & Coffee Executive VP, Legal Australia United Kingdom Corporate organization has four levels of management above store management.

STARBUCKS – Store Structure Functional in structure and relatively flat

STARBUCKS – Global HRM The relationship we have with our people and the culture of our company is our most sustainable competitive advantage ." -Howard Schultz, chairman and chief global strategist of Starbucks "My biggest fear isn't the competition, although I respect it. It's having a robust pipeline of people to open and manage the stores who will also be able to take their next steps with the company." -Jim Donald, president, Starbucks North America in 2005 Starbucks realized early on that motivated and committed human resources were the key to the success of a business. Company takes great care in selecting the right kind of people and makes an effort to retain them. The company's human resource policies reflects its commitment to its employees.

In January 2005, Starbucks Coffee Company (Starbucks) was placed second among large companies in the Fortune "Best Companies to Work For" survey. Starbucks stands out for its employee-friendly policies and supportive work culture. The company is noted for the extension of its benefits program to part-time workers - something that not many other companies offer. Starbucks employees are among the most productive in the industry and the company has a relatively low employee turnover. STARBUCKS – Global HRM

Starbucks relies on its baristas and other frontline staff to a great extent in creating the 'Starbucks Experience' which differentiated it from competitors. Starbucks recruitment motto is "To have the right people hiring the right people." Starbucks hires people for qualities like adaptability, dependability and the ability to work in a team. Starbucks invests in training employees in the skills they would require to perform their jobs efficiently. Starbucks is one of the few companies who invest considerably in employee training and provide comprehensive training to all classes of employees, including part-timers. STARBUCKS – Global HRM

STAFF TRAINING Black aprons displaying the title "Coffee Master" are worn by employees who have completed the Coffee Master course, which educates employees in coffee tasting, growing regions, roasting, and purchasing. Employees were rigorously trained, completing at least 25 hours of coursework on topics. STARBUCKS – Training

STARBUCKS– Global Knowledge Management Use of IT In Knowledge Management Corporate IT System Individual Stores Individual Stores Sales, Inventory, Staffing Sales, Inventory, Staffing Individual Stores Inventory, Orders, Transfers Vendors, Distributors, Mgmt., Channel Members Orders, Budgets, Future Sales

Starbucks uses the Onyx system to manage corporate sales activities including efficient delivery and management of leads, effective pipeline management, faster activation of new accounts, and more immediate resolution of customer issues for their Foodservice business. The Foodservice team focuses on delivering Starbucks products to operators in hotels, restaurants, colleges and universities, and business and industry. Starbucks deploys Blue Martini's order management system to its retailers and Channel partners. The system provides Starbucks with the ability to centrally manage and deliver contract-based products and pricing in different languages for its global distribution. STARBUCKS– Global Knowledge Management

STARBUCKS– Global Knowledge Management Benefits Starbucks cards MyStarbucks iPhone app Let customer use iPhone as their Starbucks card.

STARBUCKS– Global Knowledge Management Benefits MyStarbucksIdea.com Starbucks Wi-Fi

STARBUCKS – Future Trends and Global Competitive Advantage Continuity of Innovations in the coffee business. Eg. Starbucks VIA Managing cultural diversities. Increasing penetration across countries Eg. China. Entering in growing economies such as India. Blending Tastes with Technology – Use of KM for sustainability.

Starbucks International Marketing Strategy

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Starbucks International Marketing Strategy