Term Paper on "Starbucks Coffee"

Term Paper 10 pages (2713 words) Sources: 3 Style: APA

[EXCERPT] . . . .

Globalization and International Business

The cultures in the age of globalization now cross each others path. Globalization has brought the cultures together where they take influence from each other. Yet some common element that is the like for American brands such as Starbucks, Pizza Hut, and Subway etc. dominates the taste buds of many a nations. American brands are at times in contrast to the traditional ways of different societies. For example, Coca-Cola is making confrontation on the tea culture of India by making an effort to convince people to swallow more of its carbonated beverages. Similarly, McDonald's is waging war with the French notion of a lengthy mealtime. Starbucks is not just targeting and hitting carbonated beverages category but they are waging a war with traditional drinks, meals and other food items. Another case is that of red drinks that were very popular in the South East Asian subcontinent but now cold drinks ads explicitly hit easy to make red drinks or red syrups. In a way it is also fight of Modernism with the traditions of certain societies and the rise of international business.

International Business

Organizations that conduct business operations across national borders are called international firms or multinational corporations. International operations can be as simple as exporting a product to a single foreign country or as complex as operating manufacturing, distribution and marketing facilities in many countries. U.S. firms are acquiring foreign companies, forming joint ventures, opening franchises as well as managing full fledged international operations.

Starbucks Example

<br />Starbucks started with nine stores in 1987 in Seattle and with time CEO Howard Schultz exported the company's cafe throughout the country. Service and the taste became Starbucks hallmark. The product that started in Seattle became the world's most famous coffee brand Starbucks. First international branch was opened in Tokyo in 1996. After the opening shops in other places in Asia, Starbucks ventured into UK by purchasing the Seattle Coffee Company bringing a coffee revolution in the UK.

By the turn of the century Starbuck started entering in internationally with its branches being opened on the European continent in Zurich, Switzerland, Spain, Germany and Austria. This was just the beginning and the plan included opening shops worldwide. The company however is based in Seattle, Washington but currently holds operations in North America, Europe, the Middle East, and the Pacific Rim. "Starbucks employs 72,000 partners in 7,200 stores. It hires 200 new employees and opens two or three new stores each day. Annual turnover among store employees is approximately 80%. Partners process 25-million transactions a week, each trying to deliver on the promise of quality and consistency inherent in the Starbucks brand. And the brand is not only about coffee: It's about the Starbucks experience. Customers trust the brand and that trust fosters growth. Starbucks' founder was clear from the beginning: As the connection to customers, partners (employees) are the key to success" (Stopper, 2004).

Starbucks expansions resulted by company owned or licensed businesses as well as joint ventures with local retailers. Business partners join hands with Starbucks for its brand equity and has partner like the Bon Appetit Group in Switzerland and Austria, Delek Group in Israel, and Shinsegae Department Store Co., Ltd., in Korea. Joint ventures have also been established joint venture with companies like Grupo Vips, the leading Madrid-based restaurant and retail company, and Europastry, S.A., a Barcelona-based owner of one of Europe's largest bakery business etc. These reputed business partners all over the world have helped Starbucks in establishing and maintaining its brand name and quality.

The ideology of Starbucks is to provide quality coffee in a relaxed atmosphere for those seeking a respite between home and work. Starbucks has positioned itself as the second home away from home. The interior decor can be considered as a one-time novel experience while Music also is a vital component in capitalizing on experiential branding. The same ambience and service is maintained everywhere. It is the experience that Starbucks offers differentiates it from other coffee shops because the look and feel of the store can be copied but experience cannot be replicated as Starbucks has emerged as a very intimate brand. It is the same reason why millions of people everyday, voluntarily make their way to a Starbucks to buy a $5 coffee that costs all of a maximum of 40-50 cents. They maintain their standards by applying the highest standards of excellence to the purchasing, roasting, and fresh delivery of coffee. Starbucks also invests greatly in employee training by area and region and Training is done online also to support operations in different regions. "Starbucks is irrefutably the largest specialty coffee company in the world, with reported revenues of 2.6 billion dollars in 2001. In the whole world of coffee, though, Starbucks represents only one percent of the coffee supply, and all coffee shop purchases together account for about 5%. By contrast, Phillip Morris (owner of Kraft Foods) and Sara Lee together account for 25% of the world market. In Uncommon Grounds (see review, page 37) Mark Pendergrast quotes Howard Schultz, the mastermind behind the Starbucks empire: 'Starbucks is going to be a global brand, in the same genre as Coke and Disney.' They play hardball, Pendergrast reports, moving in across the street from small independent cafes and in some cases buying out the buildings where competitors operate" (Starbucks: To Drink or Not to Drink, 2002).

Adapting to Local Cultures:

Even though Starbucks has strict principles to follow when it comes to the application of its service and management standards, they also allow some experimentation and adaptation according to the norms and culture of the country in which the store is set up. That's how Starbucks became a widely known brand name in the industry. Starbucks also shows its sensitivity towards the religions of the world. In order to operate in Arab or other Muslim countries they make sure that the food is served in a way that does not hurt the religious sentiments of the people. It is true that there are certain standard procedures and values that Starbucks sticks to but they also try to adjust to the different cultures. Starbucks is sign of American culture and there is no two ways about it but whether it is helping in propagating American Cultural is a debatable topic. Starbucks opens its branches in different countries of the world but they also try to adapt to local customs and norms. Their wish is to serve the same coffee around the world but there are some local flavors to accommodate differing tastes. International program like the Coffee Ambassadors and Masters Program have been launched. Star Team status is given to different teams already working in a country to earn the opportunity to set up and open up new stores in other countries. Had they not done so they would not have become such a huge success all over the world?

The Starbucks business model has become so successful that businesses form around the world refer to it for their own improvement and success. Business consultants all over the world have made Starbucks as their prime example for not just succeeding locally but internationally as well. The giant has made other coffee chains made them take notice of this business phenomenon worldwide.

Pros & Cons of Going International Business

The greatest advantage that a firm can get through international operations is gaining new customers for their products and services resulting in the increases in revenues. Growth in revenues and profits is a common objective of international business. In addition to this main objective foreign operation may also spread economic risks over a wider number of markets. Competition for international firms in foreign markets may not exist or it may be less than in domestic markets. However, there might by favorable as well as unfavorable political treatment in foreign countries.

Management Challenges

In recent years, many forces have combined to change the face of international business. Several of these forces are loosely grouped under the rubric of 'globalization'. These include the expansion of global finance and financial markets, the spread of knowledge facilitated by improved communication, the widespread availability and use of technology, the active expansion of multinational firms, the decoupling and decentralization of economic activities within and between firms, the blurring of nationality of multinationals, reductions in barriers to trade and investment Social, cultural, demographic, environmental, political, governmental, legal, technical, and competitive opportunities and threats that face an international organization are limitless and the number of complexity of these factors increase dramatically with the number of geographic areas served. More time and efforts are required to identify and evaluate external trends and events. Geographic distance, cultural and national differences and variations in business practices often make communication between domestic headquarters and overseas operations difficult. Strategy implementation can be more difficult because different cultures have different norms, values and work ethics.

To successfully compete in world markets, managers must obtain a better knowledge of historical, cultural and religious forces that… READ MORE

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