Starbucks Corporation

Starbucks Corporation is an American company and the world's top retailer, marketer, and roaster of specialty coffee. It was founded in 1971 in Seattle, Washington. Over the course of 19,767 organization-licensed and operated locations, Starbucks employs about 100,000 people in sixty-two different countries (Griffin, and Pustay, 2012). Additionally, the Starbucks product mix includes a wide range of fresh foods as well as handcrafted and roasted beverages and premium tea and coffee. The fact that Starbucks Corporation intends to bring its tea and coffee brand to India in addition to opening 500 new outlets in China suggests that the company has a strategy in place for growing itscoffee brand to India. Therefore, Starbucks Corporation believes that India represents its exciting privilege and most essential with the potential of turning into its biggest marketplace. Therefore, this report identifies a conducive international market (India) for Starbuck Corporation since the organization’s agenda centers around expansion.

The Business Environment of the New Market

Businesses tend to operate in a system which is not entirely autonomous due to different environments that impact their actions and activities (Hill, 2008, 9). Some of the macro factors that could impact Starbucks includes; legislation, environment, technological, social, economic, and political.

Political Influences

International Trade regulations and tariffs: Vernon and Wells (1991) argue that the principal aim is to decrease the impacts of tariffs for nations that belong to a trading organization like G20 and APEC. However, International organizations such as Starbucks can be influenced since it operates in around sixty-two nations. Furthermore, Griffin and Pustay (2012) imply that high tariffs ought to affect Starbucks ability and reputation for sourcing the best tea and coffee beans. Since, importation of its products from various nations that could be conceded, thus, affecting its international competitiveness and sales.

Government stability: Cantwell, Dunning, and Lundan, (2010, 567) suggested that nations with political stabilities ought to be an imperative issue which Starbucks Corporation needs to put in consideration due to different indicators might illustrate to be a friendly stakeholder. Nevertheless, this would quickly change given the chance of either political or elections instability such as in Israel and Egypt. Furthermore, Cantwell, Dunning, and Lundan, (2010, 567) claimed that this might prompt massive interruption in a firm’s strategy or operations. For instance, Starbucks corporation was compelled to pull out Israel due to such issues hence adversely influencing its expansion strategy. Therefore, political impact is negative for this situation, which presents a risk for Starbucks in the international markets.

Economical Influences

Rates of Exchange Rates: Oxley and Yeung (2001, 705) claimed that the falling rates of United States dollar contrasted with different monetary currencies that were due to comparatively by the weaker fiscal arrangement would influence imports. It should be noted that majority of Starbucks’ key supplies such as milk, sugar, and coffee beans will be influenced since they are imported. For that reason, this will cause higher cost because of falling of dollar currency.

Income Supply: Furthermore, Oxley and Yeung (2001, 707) adopt that due to the aftermath of 2007 economic crises, Starbucks corporation led its workers to lose their jobs. Therefore, this influenced income disparity that ended up noticeably unequal. Henceforth individuals that were beforehand ready to manage the cost of Starbucks’ expensive claim to specialty coffee now considered it to be an extravagance hence prompting to sales in some regions. Furthermore, this in actuality influences the organization's development design. For this situation, economic influences have a negative effect in the new locations.

Technological Influences

A wave of Technological patterns: Rugman and Collinson (2009) assumes that technological progressions tend to be quick; thus, a business organization needs to reliably take after the patterns by exploiting any prospects that are implements and results in any progressions. For instance, Starbucks Corporation has grasped the new mobile payment framework, which was recently introduced and it helps in reducing the long queues during rush time. Furthermore, Hill (2008, 9) indicated that social payments strategies tend to affect the organization positively. Exploiting social websites such as Facebook offers Starbucks a platform to share and relate, engage, and communicate with communities and clients.

Buyer Power

Today, customers have a wide range of accessing various products at relative and cheap cost with better quality services, in the specialty coffee corporations (Geereddy, 2013). Therefore, this implies that people have the decision to effortlessly change from product to another, whichever is the favored one they desire. Starbucks tends to be advantages since it chooses the costs of the beverages offered to its clients through considering price-elasticity that is unequivocally affected by dependability to its brand and other costs at rival stores (Tate, Ellram, and Kirchoff, 2010). Because Starbucks is known to produce quality coffee, it is likely for the corporation to have the capacity to offer its items at high costs (Corporation, 2008).

Supplier Power

Starbucks obtained its information products from providers at a market cost that was roughly twenty-three percent for every penny lower than it presently has (BBC News Business, 2013). Additionally, Griffin and Pustay (2012) imply that Starbucks exploits its benefits and size from economies of scale from different providers because of Starbucks’ marketplace conditions. With an expanded level of competition, prices ought to be determined by the ratio of supply and demand. Additionally, Vernon and Wells (1991) concluded that substitute providers are constantly accessible if Starbucks wishes to buy at an alternate value point. In spite of all the provider conditions, Porter (2008, 30) holds that Starbucks Corporation has a superior relationship reputation with its providers compared to all other competitors.

Threat of Alternatives Products

For Starbucks corporation, generic substitution and product to product examination tend to be critical for consideration, and this is because roughly fourteen percent of coffee consumers have a favorable opinion (Oxley and Yeung, 2001, 715). Furthermore, Vernon and Wells (1991) indicated that immense diversity of the accessibility of various refreshments like water, juices, energy drinks, or soda, in contrast to coffee ought to be considered. Nevertheless, should not be a major concern to the organization since Starbucks offers an extensive determination of these refreshments inside its stores, the greatest one being tea which is an immediate substitute to coffee. These immediate competitors are difficult to separate since they likewise genuinely pride themselves on client administrations and the nature of their drinks. In the case of food chain competition, an example of McDonald's is known for having a negative connotation of being economical, hence regularly trading off on the nature of coffee production (Starbucks, 2011).

Threat of Entry

Griffin and Pustay (2012) claimed that the entry barriers in the coffee markets have gradually increased. Therefore, this has decreased the potential danger of new competitors. It should be noted that entry mode has its downsides and it is not perfect, yet Joint Venture appears the most appropriate in for Starbucks Corporation. Vernon and Wells (1991) give an insurance for Starbucks can be made in that every single uncertain detail amid arrangement ought to be obviously expressed in the agreement with its accomplice, to maintain a strategic distance from any unnecessary and petty conflicts.

Industry Rivalry

Despite the fact that the competitive risks from the specialty coffee market tend to be minimal, other sectors like hotels and restaurants remain to impact competition. The predominant risk from different competitors particularly McDonald's which was as of late found to offer great coffee at a lower price exhibits competitive treats to Starbucks (Starbucks, 2013). Furthermore, other fast food chains such as McDonald's are key contenders who are enhancing their beverage products. The immediate contenders like Café Nero and Costa Coffee contend on a substantial competition with Starbuck, which in contrast to restaurants since they tend to have some similar buyer preferences.

Bhatt (2012, 60) claimed that Starbucks separates itself from different cafés for the fact that it harvests higher productivity from its beverage products. Therefore, this ought to lead to exploiting economies of scale, creating an alternate cost structure conversely with different market competitors.

Corporate Social Responsibility

Corporate Social Responsibility is an undertaking reasoning which focuses on the prerequisites for organizations to carry on as right organization residents, through obeying of rules and regulations defined Hill (2008, 9). Tate, Ellram, and Kirchoff, (2010, 20) illustrated that the accompanying accurate information would demonstrate the developing household espresso utilization in India, consolidated to consider related statistic factors. As indicated by the Indian Consumer Lifestyles Report, which expresses that despite the fact that India is customary a tea-drinking nation, drinking coffee has turned into a basic piece of the day by day routine among individuals living in southern India. Additionally, Tate, Ellram, and Kirchoff, (2010, 19) urge that coffee has regularly been devoured by those in the urban territories most particularly by the more youthful populace. Despite the fact that bistros are seeming all finished India, Indians still respect going by a bistro or bar as a unique trip and has turned out to be exceptionally well known among youthful. Additionally, urban Indians who visit coffeehouses from occasionally consume coffee together with their business associates, patterners or friends (Prediction of 2010-2011 coffee production in India).

Law and Regulation Risks

Despite the fact that the Indian market ought to be liberalized, some firms keep up approval requirements of an international speculation. For instance, global investment recommendations in roughly thirty-four high-priority organizational corporations surpass approximately fifty-one percent as coordinated by the Indian government (Starbucks, 2013). Besides, particularly after the financial crisis in 2008, the Indian government has gradually enhanced the levels of tax in support of the massive deficit within its budget. Therefore, Starbucks’ entry mode is constrained in connection to Indian laws. Additionally, Starbucks could endure if controls are taken care of later on.

Cultural Difference

Tate, Ellram, and Kirchoff, (2010, 18) claimed that being established in American, henceforth Starbucks Corporation when it enters India, it ought, to know about conceivable issues caused mostly by social differences. For this situation, Starbucks ought to pick an appropriate approach to take in more about the Indian market and customer desires (Coffee Consumption in India, 1999-2008). Nevertheless, regardless of what entry mode Starbucks may enter India, managing the management and relationship of Indian workers will be a precarious undertaking.

Summary and Conclusions

Recommendations

Hill (2008, 9) suggested that regardless of whether Starbucks corporation tends to have actual quality in attracting clients or whether there is only an impression of it being superior to anything that of competitors. Regardless of that, some conceivable systems to be considered by Starbucks with a specific end goal to keep up its market position are as per the following:

1) Procedure to recommence the Starbucks brand name.

On a different note, Tate, Ellram, and Kirchoff, (2010, 20) urge to keep up a solid brand name, Starbucks should guarantee individuals that their product is superior to anything every other drink, be it Costa Coffee or McDonald's coffee. Through presenting a more forceful publicizing effort to instruct and familiarize clients regarding the uniqueness which Starbucks produces its quality offers. Additionally, by methods of differentiating promoting channels such as the using of websites, online platforms, media as opposed to relying upon representative client contact (Starbucks, 2013).

2) Product Differentiation

Bhatt (2012, 60) believed that product differentiation is exceptionally key keeping in mind the end goal to grow new flavor, mixes and furthermore cook combinations. Therefore, Starbucks should proceed with its products improvement program endeavors through broad research. This should keep on being finished by giving free specimens, at in the first place, prompting propelling their products in different stores (Oxley and Yeung, 2001, 715). Because of the retreat, shoppers attempt to cut their spending and are more averse to purchase some coffee, and hence, separation can be a helpful apparatus to conquer financial downturns. Rugman and Collinson (2009) claimed that Starbucks could advance new cost-effective items by offering them at bring down costs, henceforth not be influencing the organization reputation. Furthermore, this system can enable Starbucks to hold its clients and extra intensify their image name.

3) Rewards Program and Privilege Card

Rugman and Collinson (2009) assure that Starbucks' Card system for buyers in reloading credit online tends to be executed to not only benefit the clients with corresponding beverages after some particular number of purchase but also offers customers with online registering rewards. Nevertheless, different contenders have comparative procedures for customers, this creating Starbucks to offer particular rewards to convey motivating forces for espresso purchasers when contrasted with its adversaries. For example, Starbucks could coordinate with aircraft organizations and different expansive retail organizations to join their prizes program with Starbucks (Oxley and Yeung, 2001, 705).

4) Concentrate on the coffee

Therefore, Hill (2008, 9) assume that Starbucks ought to consider cost decrease and potential development systems particularly at the season of a financial downturn. For instance, Starbucks has started to put resources into new organizations other than espresso, for example, movies, music, and books (Retail Sales of Coffee in India, 2011). Starbucks Corporation in the long-run drives higher expenses which lowers overall revenues yet this can be forestalled through concentrating on various advertising procedures to contact a more extensive gathering of people. In these recessionary circumstances, Geereddy (2013) thought that fewer organizations such as can enable Starbucks in reducing expenses and gaining more assets could be used to enhance their coffee product.

In conclusion, concerning Starbucks choice to participate in the international markets. It can be assumed that Starbuck corporation has an effective position of expanding especially after productively ascending through the influences of economic crisis. For that reason, India ought to be the next nation for Starbucks subsequent expansion because it offers a conducive opportunity for strategic placement, increases market share, and high profitability about Starbucks resources.

Bibliography

BBC News Business 2013. Starbucks rejects tax row threat after Cameron Speech. BBC News Business available from: http://www.bbc.co.uk/news/business-21219823 Accessed 12 April 2013.

Bhatt, J.K., 2012. Retail Industry in India. International Journal of Retailing & Rural Business Perspectives, 1(1), p.60.

Cantwell, J., Dunning, J.H. and Lundan, S.M., 2010. An evolutionary approach to understanding international business activity: The co-evolution of MNEs and the institutional environment. Journal of International Business Studies, 41(4), pp.567-586.

Coffee Consumption in India (1999-2008), the Coffee Board of India [Online]. Availablefrom: http://www.indiacoffee.org/indiacoffee.php?page=CoffeeData [Accessed 12thJanuary 2011]

Corporation, S., 2008. www.nytimes.com. [Online] Available at: http://topics.nytimes.com/top/news/business/companies/starbucks_corporation/index.html [Accessed 2013].

Geereddy, N., 2013. Strategic analysis of Starbucks corporation. Harward [Електронний ресурс].–Режим доступу: http://scholar. harvard. edu/files/nithingeereddy/files/starbucks_ case_analysis. pdf.

Griffin, R.W. and Pustay, M.W., 2012. International business. Pearson Higher Ed.

Hill, C., 2008. International business: Competing in the global market place. Strategic Direction, 24(9).

Oxley, J.E. and Yeung, B., 2001. E-commerce readiness: Institutional environment and international competitiveness. Journal of International Business Studies, 32(4), pp.705-723.

Porter, M.E., 2008. The five competitive forces that shape strategy. Harvard business review, 86(1), pp.25-40.

Prediction of 2010-2011 coffee production in India, the Coffee Board of India [Online].Available from: http://www.indiacoffee.org/indiacoffee.php?page=CoffeeData [Accessed2nd January 2011]

Retail Sales of Coffee in India (2011) , Euromonitor International: Country Sector Briefing[Online]. Available from:http://www.portal.euromonitor.com/Athens/Magazines/Topic.aspx [Accessed 22nd January 2011]

Rugman, A.M. and Collinson, S., 2009. International business. Pearson Education.

Starbucks (2011) Tackling Climate Change [Online]. Available from:http://www.starbucks.com/responsibility/environment/climate-change [Accessed: 22th January 2011].

Starbucks, 2013. www.starbucks.co.uk. [Online] Available at: http://starbucks.co.uk/ [Accessed April 2013].

Tate, W.L., Ellram, L.M. and Kirchoff, J.F., 2010. Corporate social responsibility reports: a thematic analysis related to supply chain management. Journal of supply chain management, 46(1), pp.19-44.

Vernon, R. and Wells Jr, L.T., 1991. Economic environment of international business.