Course Project Part One – Project Proposal
NAME:
GRANTHAM
UNIVERSITY
Professor:
Abstract
The main purpose
of this report is to find out different entry modes and marketing strategy used
by the Starbucks Company in a global market in Cost Rica. Primarily internal
and external factors were analysed in order to understand the factors which
have an impact on Starbucks entry mode decision. Starbucks global expansion had
successfully developed and it is very important to decide its entry mode when
enter into a new market as impact a long term operation in the foreign country.
Marketing strategy of Starbucks in overseas market is the mixture of
standardization and adaptation. A key to enter into a new market for any
company is ready for expansion in the foreign country is proper selection of
entry modes and marketing strategy.
1.INTRUDUTION
Starbucks, today’s global coffeehouse, has one
of the best coffee chains and providers in the world. It was started in 1971 by
3 friends (Jerry, Zev and Gordon), they were passionate about the idea of
selling fresh coffee beans. Things started to change when Schultz wanted to
develop this business into coffee serving with friendly sitting environment.
The idea of serving coffee along with sitting culture made a hit and started
its own development in fast-paced way.
According
to the statics showed, Starbucks are operating 17,706 stores in more than 50
countries across the world, with 8950 company operated and 7956 licensed
stores. People are used to have a cup of coffee in Starbucks while they demand
a place to sit and relax. For these young generations, they prefer sitting,
drinking coffee with Wi-Fi internet, and that is what Starbucks is trying to
create these facility in near future.
2. ENTRY MODES OF
STARBUCKS
Globalization in recent years enabled big
organizations to develop and expand their business outside their home country
i.e. Asia, European Nations or Latin America. At certain point of time many
firm realize a limited growth in its current market and this leads a firm to
think about going global market. Starbucks felt the same in North America and
they started expanding their business in overseas market. However, a good entry
mode strategy can decide how good business can go in overseas. An entry `How to
enter or expand into foreign markets it is one of the most important strategic
decisions international firms have to make. There are many factors influencing
the entry modes.
Major
factorsinfluence the decisions of entry modes. One factor in the entry mode
strategy and why it influences Starbucks entry mode strategy in Costa Rica is
the location. Finding a place big enough for about 200 square meters, will be
used in the least of 25 people and will have the same features as the other
three stores in Costa Rica. Starbucks launched in Liberia, Costa Rica, north
about 4 h 51 min (164.4 miles) across Route 1 from the capital. Even further
north to the Nicaragua border, Costa Rica has seen an increase in international
franchising. Other foreign chains include recently opened Spanish Saboreate and
Espresso Americano.
A. Internal Factors
The size of a firm decides its entry modes. The bigger
the firm is, the ability to control business is higher. Starbucks is a
comparatively large firm with its enriched assets and years of international
experience. Starbucks have the ability to expand resources and absorb high
risks with full control on the profit and responsibility.Product
and service characteristics have decided what type of entry mode is suitable
for companies. As Starbucks is selling soft drinks in coffee industry and then
it’s belongs to a soft industry. The right way to enter a foreign market is licensing
or contract manufacturing.
B. External Factors
Sociocultural difference can influence the operation
of the company. Due to distant location, local government policies, and cultural
issues, Starbucks in Costa Ricaprefers partnership on the global expansion.
Starbucks’ believe this can help them to understand better of local people and
their culture.
“Starbucks’ have faced country risk, demand
uncertainty, and a community rollback; this made its decision of opening a
store to be withdrawn. They have to consider and balance properly the culture
of Costa Rica. Starbucks acquire majority joint-ventures or company owned
operations due to foreign market size and potential growth in Costa Rica.
C. Desired Mode Factors
Starbucks
in the process of global presence is mainly in favour of joint venture and
company-owned franchises. Some reason, they are sharing risk with each other,
have a control of the market with resource commitment, and its adaptation and
standardization strategy to the local market.
D. Transaction Specific
Factors
Starbucks
looks for the partnership in the foreign marketof Costa Rica, and they also
care for the other party sharing the same value and vision. This will keep them
trustworthy to the company and each other, and there is no need to monitor
other sides tightly. This makes Starbucks show preference towards licensing
agreement.
CONCLUSION
Entry
mode is not the only element to be considered when entering another country.
There is another challenging task in international marketing; it will be same
or different from domestic market. This is important as it determines how firm
operates in the market and how it competes with other firms.
Starbucks
has built its global image through various expansion scheme year by year. Global
market experience has already led them into the combination of standardization
and adaption. To sustain the success of coffee business, it has to consider the
research and innovation into the account. In expansion of Starbucks global
market, the common strategy revolves around standardization whereas it has
blended its products with localization. It is believed at Starbucks that the
core product must be genuine and comply with the standardization whereas the
other elements can change its shape according to the local environment. Going
to Starbucks in Asia, France, Greece, Kuwait or European Nations and you will
drink the same espresso, but food will have a local flavor. But where adaption
is needed to fit cultures, also Starbucks believe in keeping the local staff
and managers as they can build a good relationship withother customers.
REFERENCES
Anonymous.
(September 9, 2002). Starbucks Corporation: Competing in a Global
Market.
Business Week , p. 100-110.d
B,
C. L. (2007). The choice of entry mode strategies and decisions for
international
market expansion. Journal of
American of Business , p. 322.
COLLINS,
ALLISON. Mergers & Acquisitions Report.12/3/2012, Vol. 25
Issue 49, p4-4.
1p. Retrieved from Grantham
University
Congcong
Zheng. Journal of International Business Research. Jun2012, Vol. 11 Issue 2,
p129-141. 13p. Retrieved from
Grantham University
Marketing
Week. 7/14/2011, Vol. 34 Issue 28, p4-4. 1/4p.Retrieved from Grantham
University
Fridell, Gavin. Journalof Business Ethics.May
2009 Supplement1, Vol. 86, p81-95.
15p. DOI:
10.1007/s10551-008-9759-3. Retrieved from Grantham University
Starbucks
Corporation SWOT Analysis.Jan2014, p1-12. 12p. Retrieved from Grantham
University
