How Starbucks Downsizing in the USA Impacts Global Growth Strategy By: Delilah N. Wesley BUSINESS 401-INTERNATIONAL BUSINESS Dr. Joseph Thomas July 24, 2010 Starbucks believes that conducting business ethically and striving to do the right thing are vital to the success of the company. Starbucks closed more than 200 coffee shops in the U. S because they felt that the business in China had not felt the impact of the global economic slowdown and that they might eventually rival with the United States.
While they closed unprofitable stores in the U. S. , Starbucks has also downsized its plan for the number of international stores from 900 to 700 for fiscal year 2009. Two-thirds of the stores are expected to be licensed, which usually involves less cost to operate than self-owned stores. Starbucks remains 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 they work hard to continue to earn the trust and respect of their customers every day.
Some of the decision factors that Starbucks assesses when attempting to market globally with different countries would be; how they choose partners. This factor is very critical to maintaining the success rate that the company enjoys. Shared values, strategic fit, good leadership and a strong track record are among the most important qualities that they look for when choosing partners. The most pressing decision factor for Starbucks in opening a coffee shop in China is that the “Chinese are mainly tea drinkers and are unfamiliar with coffee.
China offers an immense market potential for Starbucks, since it constitutes one-fifth of the world population. Starbucks opened its first store on the Chinese mainland in 1999 and now has more than 350 outlets in 26 cities. It has become one of the, if not the, most popular coffee brands among Chinese white-collar workers. Starbucks buys coffee beans from China and roast in the U. S. and afterwards they bring the roasted coffee back to China to try to introduce the Chinese to Coffee as opposed to drinking Tea.
This also a helpful way to expand marketing for the company. One of the strategic choices and entry strategies that Starbucks adopted is to “upwardly mobile, predominantly young, and interested in consumer products, especially foreign items that have previously been unavailable “ In 1995, the company started its international expansion by entering Japan, followed by many other countries in the later years. It entered China around the mid-1990s with a distribution business.
Starbucks’ entry into China highlights the strategies of entry and expansion and also discusses some of the localization strategies followed by Starbucks in the country. At a time when the company was facing severe pressure in its home country and in certain other international markets due to a host of factors, its success in China attracted the attention of experts. This was particularly so as the Chinese market was considered a hard market to crack for Western companies and also because of the fact that China had a tea drinking culture with the beverage market predominantly controlled by tea.
References * Starbucks Calls China Its Top Growth Focus, Wall Street Journal, New York, N. Y. ; February 14, 2006 * Starbucks aims for new tier in China Cafes: Financial Times. London: February 14, 2006 * The forbidden latte Business. view, Economist. com/ Global Agenda. London: July 17, 2007 p. 1. * Waite, A. (2008) Starbucks to lay off 12,000 workers, accessed 5/23/09. * n. a. (2009) “Starbucks pushes China sales with local brew”- Starbuck’s in China grows while USA downsizes, accessed 5/23/2009, China Daily. |