CASE STUDY 5
Starbucks- Going Global Fast
Identifythe controllable and uncontrollable elements that star bucks haveencountered in entering global markets.
Starbuckshas faced many challenges in its attempt to enter global markets.Among them includes protests from the World Trade Organization in1999. The protesting crowd joined with police officers to trash theirstores, smashing its windows, and left its green and white decoratedstalls smelling of teargas instead of their sweet smelling espresso.Its branches opened overseas have exposed the company to great riskssuch as reducing the profit share of the company despite making iteasier to open up many companies. In addition, its customers arebeing turned off by the image and power of its brands like itssophisticates who sip and have drinks late at night together with itsKenny G music.
Theirhigh prices of foods and drinks (such as a coffee cup costing $3)discourage many of its customers, mostly because of the decliningeconomy of the country. Declining morale is another major challengein Starbucks Company since its employees are burnt out together withits store managers and its cherry army of baristas. Workers aregreatly dissatisfied over low pay and extra pay during odd hours. Lowpay affects the quality of the well-offered sterling service and thecoffee offered. Refusal of Starbucks Company to pay store managershas led to its poor reputation resulting from it being sued by storemanagers.
Workersalso complain of being overworked and unappreciation. Competitionfrom large Companies such as McDonald and new McCafes is among thechallenges faced by Starbucks since it has poor tactics of expansion.It has embarked on predatory real estate strategy of paying highermarket rates to keep off competitors. For example, it paid almostdouble rate of opening a coffee shop in Espresso Vivace building andhas paid leases on empty stores to avoid competitors from moving inthe same store.
Whatare the major sources of risk facing the company?
Hypnotizationis among the great risks facing the company since younger coffeedrinkers are feeling unwelcome in Starbucks. Hypnotizing among coffeedrinkers has come as a bad news since the young generation cannotfind their peers because they work behind the counter. Some peoplecomplain of the grade Italian terminology and their venti coffeesizes and the sayings that small, medium, and large is fine foreveryone. Workers are paid low wages that demoralize them since itdoes not match with the workload offered. Workers complain ofdifficulties to earn a living while in the company and are only leftwith the option of having to transfer from the company. Theirovertime work is not paid and has for a long time been ignored by thecompany.
Newproducts offered in the company are a great risk especially becausethe young people are very cold towards it. Though many people arepositive towards its new products, many young people are commentingthat their coffee houses at Vienna are old and costly. Imitators oftheir products are a third risk since they have an aim of stealingtheir market share. Fourth, entering big markets is tough for everynew company in the business since there are other already establishedand well known industries. For instance, Starbucks are faced with achallenge of competing with well-known Epicenter of European coffeeculture in Italy. In addition, it is almost impossible for Italiancustomers to abandon their coffee and consume one from Starbucks.
Starbucksmay only prosper in their sale of coffee by gaining extra skills ofserving food, such as those in Italian Coffee bars. Secondly, cuttingcosts of their products will attract more customers from other coffeebars.
Lastly,increasing the pay of wages to their employees and store managers andpaying extra work done during part time will create comfortableconditions for workers and increase the production and profits.
Case1-1 Starbucks -Going global fast