The internal analysis of Starbucks will contain an organizational research strategy examination and a business model analysis.
4. 1. Organizational Analysis
The corporate objective of Starbucks, along using its vision statement and business model are necessary in identifying where Starbucks desires to visit as an organization. The Starbucks mission affirmation is: to motivate and nurture the real human spirit - one individual, one cup and one neighbourhood at the same time (Starbucks, 2011).
To deliver on its objective, Starbucks executes some center principles. Firstly, Starbucks commits to the finest coffee. Starbucks isn't only concerned with quality for the finish consumer, but also ensures coffee beans are purchased in an ethical manner that will increase the lives of the farmers. Secondly, Starbucks deems their employees as an essential resource and property. Starbucks warranties perfect coffee with their customers, which can only just be shipped by high proposal of staff (Starbucks, 2011). Finally, the third place experience provided by Starbucks gives customers a gratifying atmosphere of human connection and a sense of belonging (Rice, 2009).
The products and services that Starbucks offer are critically important to Starbucks attaining differentiation in the market using constant product creativity (Kelly, 2006). Starbucks presently offers more than just quality gourmet caffeine. Starbucks is pleased with its customer support and is focused on making certain each customer relishes each trip to Starbucks (Starbucks, 2011). Other services are the third place experience atmosphere and onsite coffee service. The third place experience is exactly what Starbucks refers to as the 3rd location that consumers will relax and enjoy drinking coffee beverages (Rice, 2009). Starbucks offers free Wi-Fi to everyone at its store locations to attract customers to stay longer and work or browse the net while they enjoy their coffee (Starbucks, 2011).
The organizational research evaluates the key characteristics of the organization. Starbucks aspires to nurture the real human spirit around the globe by offering the finest coffee in a friendly and appealing atmosphere. It helps bring about product invention and customer service through the decentralized authority style that emphasizes allocated decision-making and information-sharing. The grade of an organization is judged by the symbiotic fit between its strategy and organizational structure, yet thought is also placed on if the firm's strategy and composition meet the demands of the external environment (Hannan, 2011). The next section will give a detailed evaluation on Starbucks' strategy.
4. 2. Strategy Analysis
The strategy research contains three parts: marketing strategy analysis, procedures strategy examination and international expansion strategy analysis.
Marketing strategy
The first part is approximately Starbucks' placement strategy. A positioning strategy aims at placing rival companies into strategic groups. These proper groups contain industry members that have similar goals and positions in the competitive industry (Piercy, 2008). These groups are placed on a strategic group map to analyse how industry firms are positioned. Companies in the caffeine industry will be mapped based on price and quality with their products versus product line breadth. How big is the circle representing each company on the strategic group map is symbolic proportional to the size of the firm's show of total group earnings.
The coffee drink strategy group consists of quick-service restaurants and area of expertise coffee outlets. The major players in the strategy group are detailed in the next table. The organizations are divided by breadth of products wanted to the marketplace, industry related sales, and percentage of sales in accordance with rivals. The data listed in stand x are used in building the proper group map.
Diagram 7: Strategic Group Map of Caffeine Industry
Green
Mountain
Price/
Quality
Source: Williams (2007)
Competitors of Starbucks can be split into two different categories: direct and indirect. The immediate competition would include organizations that produce and produce hot drinks (Datamonitor, 2010). These companies are the suppliers of ready-to-drink espresso and tea products, quick-service restaurants, and supermarkets. Also, in this category will be the large multinational companies that produce ground coffees and instant coffees (Datamonitor, 2010). The indirect rivals are comprised of firms producing energy beverages, caffeinated soft drinks, and energy photographs. Starbucks' close competitors include other specialty espresso shops, doughnut retailers, and restaurants.
Starbucks holds a prominent position in the niche coffeehouse market and does not have any single clear rival in the sector. Its closest specialty coffeehouse rival is Caribou Coffee with 440 stores in the US. Its most powerful niche coffeehouse competition is dispersed among the list of thousands of self-employed or small-chain coffee shops around the nation and the entire world. Two of Starbuck's stiffest quick-service restaurant rivals are McDonald's and Dunkin Donuts. McDonald's adopted its 2009 strategy of competing against Starbucks through development of McCafe locations into more stores both domestically and internationally (Liu, 2009). Nevertheless, there are big variations between their core customers. Privately owned or operated Dunkin Donuts is another major competitor, with nearly 5, 000 stores in the US. Following Starbuck's footsteps, Dunkin Donuts can look to expanding internationally, especially in the Asian markets (Dicarlo, 2004). Although Dunkin Donuts' retail footprint also overlaps typically start of Starbucks, its customer experience is a lot more like the coffee-to-go model as opposed to the "third place to work and relax" model. Consequently, chances are to be competitive more straight with McDonald's than with Starbucks (Dicarlo, 2004).
Starbucks can be an industry innovator in both product invention and product offering. Most other firms have a follower position and copy successful Starbucks' products at lower prices. This is a favourable position for Starbucks. The tactical group map shows Starbucks as the leader in both price/quality of product offerings as well as the breadth of products offered. The white space on the map is possible opportunities for existing organizations or new companies to go into. These would be high priced, low breadth offering positions, or low priced, high breadth offering positions.
The second part analyses Starbucks' competitive strategy using Porter's Generic strategies framework. As a whole, Starbucks implements a broad differentiation strategy. It offers high quality coffee and a distinctive experience in accessible locations, rendering it stick out among all the espresso providers. VIA, the new instant caffeine line, straddles extensive differentiation and cost management strategy. Though it will be an inexpensive and convenient alternative to Starbucks regular caffeine, Starbucks coffee is still unique from other products on the market. Providing in-store gifts and brewing utensils is the focused differentiation strategy; it was designed for coffee enthusiasts, especially Starbucks' devoted fans.
Diagram 8: Starbucks' competitive strategy
Competitive Advantage
Uniqueness Low cost
Broad Target Small Target
As a whole
VIADifferentiation
Cost Leadership
In-store making utensils/ gifts
Differentiation Focus
Cost Focus
To differentiate it from rivals, Starbucks convinces customers that it provides greater than a sit down elsewhere and affiliates its brand image with a feeling of community activism. In addition, Starbucks serves as a interpersonal in charge company to reinforce its differentiation strategy. It promotes ethical sourcing, environmental stewardship, and community participation. Starbucks also prides itself on the technology of services, which further differentiates it from its challengers. However, with the customer bottom becoming more advanced and differentiation indications adopted by standard coffee companies, Starbucks' benefit on the differentiation strategy may fade (Piercy, 2008).
The third part is approximately Starbucks' brand building strategy. Its marketing strategy has focused on "word-of-mouth" advertising and building the brand cup by cup, making the high quality of the products and services speak for themselves (Starbucks, 2010). For a long time, this unique online marketing strategy has enjoyed an important role in making Starbucks Caffeine Company successful. In 2010 2010, two-thirds of most coffee was bought from supermarkets. Starbucks coffee bought from supermarkets presented distinctive, elegant product packaging and the same top quality as that bought from its stores. This new change requires Starbucks to create a new way to develop its brand. Therefore, the Starbucks online marketing strategy has expanded to create a community around their brand. On its website, individuals are encouraged to express their activities with Starbucks' history, and the company strives to "personally" interact the conversations.
Operations management Strategy
Starbucks has located itself as a professional of ethical superior caffeine products and satisfying, luxurious conference places for people. So, its prices are relative high and it competes on a distinctive value proposition. Determination to the best quality and high moral standards are obvious in every step of the source string, from bean procurement to service (Jennings, 2009).
Starbucks' supply chain begins from bean sourcing. To make sure compliance using its rigorous coffee expectations, it controls coffee purchasing, roasting and presentation, and the global circulation of coffee. Starbucks pays off over the marketplace price because of its beans in order to procure superior coffee beans. Besides acquiring the best quality coffee, the ethics of paying a fair price for espresso producers provides an moral aspect to the worthiness proposition (Rubin, Dierdorff and Dark brown, 2010). Starbucks also offers the knowledge to secure top-notch coffees to supply the business's growing needs. All this allows Starbucks to serve caffeine that is of superior quality in comparison to competitors.
As part of its sourcing strategy, Starbucks got into into fixed-price purchase commitments to be able to secure an enough way to obtain quality green coffee beans and limit contact with fluctuating espresso prices (Starbucks, 2010). When reasonable fixed-price commitments weren't available, the business purchased coffee future deals to provide price protection. Nonetheless, there were occasions years back when sudden jumps in espresso prices put a squash on the business's margins and necessitated an increase in the prices of its beverages and beans sold at retail price. However, by this approach, Starbucks can even costs and avoid price hikes in the stores that would have a disastrous effect on the business's image.
Starbucks deems store operations as an important part of conditioning the business's reputation and image. The company formed a group to make a store development process to ensure that each store conveys the appropriate image and persona. Then, the info and operating system of Starbucks let it talk information throughout the organization to boost the quality of decisions and efficiency in value-chain activities (Gamble & Thompson, 2011).
Starbucks also will try to develop the company's brand through its niche functions with third get-togethers beyond your traditional coffeehouse. This consists of Certified Stores, Packaged Tea and Caffeine, Branded Products and Foodservices Procedures. In 1997, Starbucks started entering into a restricted variety of licensing agreements for store locations in areas where it did not be capable of locate its own shops. For example, Licensed Stores with Marriott Coordinator International and Aramark Food and Services put Starbucks stores in international airport locations and on university campuses. Starbucks received a license fee and a royalty on sales at these locations and supplied the espresso for resale in the qualified locations.
International Expansion Strategy
Starbucks' international growth started in 1995 and its own international development strategy is to provide licenses or create joint projects with reputable local companies, which are equipped with retailing know-how in the mark country (Garza, 2010). . This strategy is built upon the growing reputation of the Starbucks brand and the ability to identify attractive store locations. The international growth strategy is also reinforced by centralized buying, standard deal development and resolved fees for certain items, and consolidated work under companies with good cost-control tactics (Alberto, 2011c). Starbucks' product resource is also a key in the successful enlargement. As reported by the Wall Neighborhood Journal (2006), the Starbucks Firm is increasing at a very high rate and concentrating on China. This company has aggressively campaigned to be the leading espresso in the United States and after attaining this, they have made further steps to considering global control.
The enlargement and development of Starbucks has been popular, especially by its desires to venture in appearing economies. Currently, the Starbucks Organization is downsizing in the US because of this of the economic downturn in this country and its own increasing global enlargement. In 2008, the corporation closed more than 600 coffee shops over the US. Because the dependence on international espresso has increased, Starbucks is opening up 1, 000 coffee shops around the world especially in Asia. Starbucks' enlargement strategy was well-planned: the strategy focus on was in the Asian Pacific, far away from Europe and Latin America where caffeine retailers competition is very strong. As the diagram below shows, the earnings from the US market is shrinking and the operating income of the EMEA market became negative in 2010 2010 and 2011, as the market of China and the Asian pacific shows good potential. Therefore, China is Starbucks' greatest target, as it is likely to be the biggest growing market over another 2 yrs (Starbucks, 2011). Following the global economy recovery, Starbucks is likely to open typically more than one store each day. Starbucks continues to close home stores which may have already saturated the market, and replace them with international stores abroad.
Total profits ($ Million)
Starbucks can enter into Asian markets and China in particular by concentrating on China's middle income and taking new standards of living while maintaining espresso and other beverages as affordable luxuries. Barraclough (2006) studies that the Chinese language are known for their increasing preference for coffee and therefore Starbucks is able to influence more customers to take coffee. American products and lifestyle are highly adored by the Chinese language and Japanese, and therefore consumers there take up American styles and products easily and quickly. This indicates that Starbucks is making use of the Chinese language culture to enter into China's market (Haoting, 2009).
However, the immediate international expansion also has negative effects. To begin with, way too many new locations set up would exert an adverse effect on customer service. Therefore, the client experience may degrade. Subsequently, some shops opened even prior to the local supply string was fully built up, resulting in bad customer perceptions towards Starbucks coffee and food. Thirdly, the strategy of closing down US locations to offset new expansion abroad results in reducing the convenience factor in the US market. Many American customers have to drive a long way to buy a cup of much loved Starbucks coffee. As mentioned previously, the convenience is one of all important elements of its value proposition. Previous but not minimal, the large number of stores is an enormous asset or liability, depending how one assesses the problem. If there is a strong market and folks have throw-away income, then it is an advantage to possess abundant stores to create revenues. On the other hand, the vast number of stores will become a huge financial liability during economic downturns. Therefore, now Starbucks, led by Schultz, advocate the disciplined extension of store bases and give attention to real, sustainable expansion.
4. 3. Value chain analysis
Michael Porter (1998) claims that acquiring competitive advantages can be done through an evaluation of the company's value string. Companies can attain competitive advantage when the value chain is optimised by coordinating these activities to generate value because of its products or services that exceeds the costs of performing the value activities (Porter, 1998). In other words, an organization can create extra value without necessarily increasing costs.
A company's value chain system can be categorized into two categories; (1) the primary activities, which require the physical creation of the products, marketing and delivery system, and after sale service and support activities; and (2) the supplementary activities, wherein company infrastructure and inputs permit the primary activities to occur (Porter 1998). When these activities are already defined, the worthiness chain system can be analysed in order to aid the introduction of a tactical goal and gain competitive benefits or, inside our case, to understand the current downfall in the Starbucks business model.
Below is the current value chain of Starbucks with international and technological advancements. The upstream value chain allows the introduction of services that suit international marketplaces better, e. g. green Tea Latte in Starbucks Japan. The downstream is the web storefront customization, that allows customers to order online and create new drinks etc. The newly-added mobile application could discover Starbucks locations and order drinks.
Product Distribution
Bean and Ingredient
Selection
Local
Adjustment
Product
Development
Take-home
products
Online
Storefront Customization
Mobile Apps
Storefront
Starbucks' value chain creates extra value because of its products, which the customers are prepared to pay for. Hence, the client is not hesitant to pay above-market charges for Starbucks coffee. Actually, its customers are not looking for the price tag on the coffee however they are seeking for the grade of the merchandise and the brand image that the company offers.
For a firm to accomplish or maintain competitive advantages and add value to its products or brand, it's important to link these activities and optimise the company's value adding activities (Porter, 1998). In the case of Starbucks, as explained before, its value activities were initially effective in the co-ordination between its most important and secondary activities. For instance, the setting up of stores was well organized. Each location was carefully examined, taking factor of irrelevant details such as traffic stream, density of folks and demographic characteristics of an area, and careful selection of workers to be deployed in each store (Clark, 2007). These directed to provide good quality caffeine products and exude an atmosphere of luxury and comfort because of its consumers (Clark, 2007).
However, gaps in the worthiness chain activities took place in recent years. A good example is the immediate expansion in several locations across Asia. The company failed to maintain the company's brand image of luxury and exclusivity. The business rapidly extended by opening typically a store per week, which led to the downgrading of the "Starbucks experience" that its customers have been looking for (Velta, 2008). In fact, the customers have never seen any notable advancements in their experience (Jennings, 2009). Analyst Andrew Barish also commented that Starbucks' procedures have "'slipped' and longer lines, more complexity and less-than-stellar looking investments could be leading to a modest reduction in sales in this challenging consumer environment (Moore, 2007). Because of this, Starbucks' proper competitiveness is gradually disintegrating and its competitors are eating up a few of its customer bottom part (Rushe, 2006).
4. 4. Business design analysis
The business model concept is defined as the value a firm offers to customers and the structures of the organization and its own network of companions for creating, marketing, and delivering this value to be able to create profitable and lasting revenue channels (Osterwalder and pigneur, 2002). It also consists of a narrative of both how the business works and exactly how it makes a revenue. Schindehutte and Allen (2009) developed a framework in order to determine the primary competencies of the business design from an entrepreneurial perspective.
The most significant component of the framework is concerned with value creation. Starbucks creates unique value through great customer experience and interactive service. The initial value proposition of Starbucks is best explained by Howard Schultz: The theory was to create a string of coffeehouses that would become America's 'third place', a place where people could go to relax and revel in time with others, or just be independently. Starbucks enhances the espresso experience for the clients by making a laid back environment within the store whilst offering constantly rapid and on time delivery.
Many companies go after a resource-based strategy which tries to exploit company resources in a manner that offers value to customers in ways rivals cannot match (Piercy, 2008). Starbucks' customer value proposition is also based on its unique resources and capabilities. Starbucks capitalizes on intangible resources like brand vitality and image as a high quality coffee provider to realize its aims. Starbucks also utilizes its tremendous individual capital and skills in product technology, location selection, and its own marketing capacity to stand out as the premier coffee brand. Specifically, Starbucks utilizes technology extremely well, e. g. the heavy use of internet features, social network marketing, rechargeable payment credit cards, and even new mobile software help to reduce and increase the payment and ordering. Additionally, Starbucks has other competitive advantages based on its skills and particular know-how, and valuable alliances (Piercy, 2008). Starbucks has a skill occur creating and launching innovative products in to the market. These skills give Starbucks a competitive advantages to be an invention leader, but not a copycat follower. It is vital to differentiate itself from competitors in the coffee industry. Last however, not the least, Starbucks has considerable free cashflow and physical assets to invest in and drive its strategic initiatives. Without these physical investments, Starbucks wouldn't normally be able to aggressively expand in the market or fund further product research and development.
Another important component of the business enterprise model is the firm's core competence. Central competencies are thought as a proficiently performed interior activity that is central to a firm's strategy and competitiveness (Piercy, 2008). The core competency can also lead to lasting advantages. To be a sustainable edge, the center competency must be hard to imitate or copy by competitors (Piercy, 2008). For Starbucks, its primary competency can be explained as high quality caffeine and products at accessible locations and affordable prices, providing a community the espresso taking in experience. Its lasting advantages resides in the intellectual capital of defining and leading the market. Starbucks sticks out as a innovator, mainly because of its good business model that can make impressive products that consumers desire.
Starbucks is able to leverage its resources, both tangible and intangible, to create competitive functions and central competencies to form its business design. Starbucks achieves this through the use of its human being capital and experience to constantly strive for superiority in product invention. Furthermore, Starbucks can internally account its growth strategy from acoustics financial performance.
However, Starbucks needs to take more initiatives to innovate its business model. Specialty coffee retailers copy or adopt the Starbucks model, which leads to Starbucks' competitive benefit shrinking and this poses a serious threat to the company. In addition, the distance between customer's goals and perceptions of Starbucks is bigger. Many customers aren't satisfied with Starbucks' offerings as these were before. They think Starbucks charges a premium for espresso and experience, but actually it falls behind its promises. This may be because customers become more demanding while Starbucks' capacity to innovate value offerings is weakened. Therefore, to keep its acceptance and consistent progress, Starbucks needs to innovate its value-adding activities so as to innovate its business model.
SWOT Analysis
A SWOT research is a powerful tool to judge a firm's tool strengths, its competitive deficiencies, the opportunities which exist in the market, and the exterior threats to the organization's future well-being (Gamble and Thompson, 2011). The talents of Starbucks result from an internal source and are chosen as beneficial to Starbucks reaching its target targets. The weaknesses of Starbucks are grouped as operational areas and activities that reduce Starbucks being able to achieve strategy execution. Starbucks must leverage these advantages to conquer their weaknesses and realize potential opportunities. Risks are regions of matter in the external environment that can affect how Starbucks, and the coffee industry as a whole, can do business.
Diagram x: SWOT Matrix for Starbucks
Internal External
Strengths*
Weaknesses*
-Brand image is really important to Starbucks.
-Good mood and convenience are two of the foundations that Starbucks grew on.
-International Marketplaces offer lower risk investment and creativity opportunities.
-Cheap alternatives like
McDonalds threaten the convenience factor.
-Founders of premium coffee and an industry leader
-Product diversification
-Excel in product development
- Valued and motivated employees, good work environment
-Strong financial foundation
-Absence of internal target (too much focus on expansion)
-Self-cannibalization
-Overdependence on the united states market
-Aggressive expansion contributes to managerial or financial problems (e. g. customer experience is watered down)
-Prices is relatively greater than customers' expectations
Opportunities*
S-O Strategy
W-O Strategy
-Co-branding with other famous brands
- Increasing need of high grade coffee in growing markets
-Rising awareness on CSR issues
-Acquiring new markets (retailing) and new consumer groups
-To increase market talk about in emerging markets
-To make full use of cross-broad marketing
-To revamp brand image and work on brand extension
-To be a more socially accountable brand
-To coordinate and change expanding speed
-To innovate its business model so as better package with new challenges
-To think about new ways to distinguish itself
-To integrate syndication channels
Threats*
S-T Strategy
W-T Strategy
-Stiffening competition
-Possible saturation in the caffeine market
-Volatility of espresso price
- Blamed by green lobby and moral lobby
- Downturn would affect
customers' willingness to spend
-To consider further vertical integration
-To consider creating a sub-brand to provide less pricey coffee
-Continue to use fair trade espresso as materials and pay more focus on environmental and ethical issues.
-To shrink products and rinse out less favourable products
-To provide customized products and combinations
-To close down less profitable locations
*Source: Dataminitor and http://www. businessteacher. org. uk/business-resources/swot-analysis-database/starbucks-swot-analysis/
Being a innovator in the espresso industry, Starbucks is power by its frequent product innovation, customer service aptitude, capability to expand internationally. Apart from the basic strategies utilized by Starbucks, the external environmental conditions and the inner characteristics of the Starbucks organisation present a favourable condition for expansion. Even though Starbucks revenue has declined in the last year, credited the growing power of competition and the financial crisis aggravating the situation, Starbucks is still the dominating player in the niche caffeine sector through its years of experience and brand reputation. Thus, the business can use this position to leverage itself and put pressure onto its opponents. Nevertheless, proper change is the call for Starbucks. Perhaps, it is the time for the business to revisit its existing business models, practices and strategies also to verify whether these models still conform to the conditions of the market. Since market conditions change as evidenced by current occasions and the continuing globalisation of markets, the company may need to reform its strategy.
The PSETEL and Porter's five-force examination show that coffee firms are incredibly sensitive to the macro environment. The overall competitive stresses are modest and companies can be successful if they are productive and effective in the execution of strategies execution.
Starbucks achieves its objective through the decentralized management that emphasizes distributed decision making and information sharing to promote product invention and customer service. One concern about Starbucks' organizational culture is the fact Starbucks over relies on Schultz's talented command. Schultz could turn the business back again by several proper steps, but without Schultz and his control capabilities, Starbucks may have dropped into a tragedy. Overall, it might be a pitfall for Starbucks; Schultz is to Starbucks what Jobs is to Apple.
The SWOT examination of Starbucks reveals that the effectiveness of Starbucks lies within their strong financial performance. The weakness of Starbucks can be an over reliance on the saturated U. S. market with a declining market talk about because of this of intensified rivalry in the marketplace. This weakness can be triumph over through the use of Starbucks' strong money to realize today's opportunities to broaden into emerging markets.
Overall, Starbucks has preserved a competitive benefits since it created its original blue ocean of getting quality, bistro-style coffee choices to the masses. The main element issues facing this organization were its efforts at massive extension and creating new value creativity. The aggressive enlargement could cause the organization to be over open and adversely have an impact on its ability to improve. To be able to enhance sustainable development, it requires to give attention to its main competencies. Facing fierce competition with McDonalds and other espresso chains, Starbucks must create new value creativity by enhancing the customer experience and investing in online content and interactivity. Rather than creating more services, it is better to enhance the connection with their dedicated customers and distinguish it from its rivals.
6. Recommendations
Viable advice must have the ability to solve Starbucks' greatest issues. The first is the more and more saturated US market and another is the need to penetrate attractive international markets. Furthermore, degrading customer belief must be avoided both in america and abroad. Here, a great concern is how to re-establish a positive customer attitude towards the company in america and wthhold the still positive image overseas. Currently, Starbucks' earnings are generated by a fairly small band of key products. In order to make the business less vulnerable to shifts in consumer personal preferences, the company needs to always keep an eyeball on customers' needs and innovating its offerings, especially providing products that can fulfill different international tastes and practices.
The next part centres on the strategic initiatives that Starbucks should undertake in order to improve sales and the market position. Two recommendations will get, the first will answer what Starbucks needs to do to respond to market and competitive forces in the exterior environment, and the second recommendation will answer what Starbucks needs to do to work with its collective inner strengths to triumph over its inner weaknesses and realize present opportunities.
The first recommendation comes from the external research. Starbucks needs to pay more focus on product innovation. Among the determinant driving forces in the espresso industry that works as a positive impact is product technology. The industry must continuously make an effort to innovate new product offerings for two reasons: to continue to attract new customers that not buy from the existing product mix and also to offer differentiated products from rival businesses. Starbucks must meet its customers' requirements because they are part of the product innovation formula. Also, product development serves as a key success factor for success in the industry since product innovation is the primary means to differentiate companies from rivals. It really is through differentiation that firms can build brand electricity, customer loyalty, and earn above average revenue.
Starbucks has two most important weaknesses based on the SWOT analysis. They are really an overdependence in the saturated U. S. espresso market, and a declining market talk about in the U. S. procedures. Starbucks needs to improve its international expansion strategy to overcome these weaknesses. Therefore, the second advice for Starbucks is to further expand internationally into emerging marketplaces utilizing its unique expansion strategy. Global development into emerging markets is one opportunity that exists for Starbucks.
Entering into China, India, Russia, and Brazil can be very satisfying for Starbucks, both fiscally and strategically. Starbucks will make full use of its financial strength, namely free cash flow, to fund this growth plan without requiring new personal debt to be increased. Some people think Starbucks needs to execute the franchising strategy to stretch its retail footprint and create brand electricity quickly. Starbucks, as the leader in the espresso industry, can charge premium franchise fees to create additional revenue channels. However, the franchising strategy may cause huge debt for Starbucks' value proposition and business design. If Starbucks uses the franchisees as the principal means to enhance international expansion, the foundation of its business design, premium quality and good customer experience, may suffer from. Hence, Starbucks' expansion strategy needs to be predicated on corporate and business stores and accredited niche stores, so that Starbucks will keep full control over the Starbucks flagship brand in foreign markets.
Moreover, one essential area of the Starbucks development strategy is to engage a glolocal strategy. The glolocal idea is dependant on a balance between standardisation and version, and between homogenisation and tailoring business activities in the neighborhood marketplaces (Svensson, 2001). Starbucks needs to think local, act local but with global expectations and views. This enables Starbucks to really have the mind-set to adjust to the local needs they are serving while having a worldwide high standard.
