Global expansion
When Starbucks was founded as simply one local coffee realtor in Seattle, Washington, the company did not have immediate goals of global domination. This all changed when Howard Shultz, now current Starbucks CEO, assumed the role of Director of Marketing and Chief Global Strategist. Although Shultz briefly left Starbucks to start his own coffee company, he soon raised the capital to buy the still local Starbucks Company from its founders in 1988. Consequently, Shultz' return to Starbucks as CEO entirely altered the mission and corporate strategy of the brand; no longer was the company devoted to selling coffee beans and remaining a local neighborhood shop. Instead, Shultz defined Starbucks' newfound objective as immediate and aggressive domestic expansion that quickly grew into a goal of transforming the local coffee shop into a worldwide empire. Today, Starbucks has over 19,000 coffee shops in over 60 countries thus signifying the undeniable success of Shultz' plan for global expansion.
Following the Starbucks Company 1992 IPO, the number of Starbucks coffee shops increased nine fold and the company was thus prepared to enter global markets. With already 700 coffee shops across the United States, Starbucks opened its first overseas coffee shop in 1995 through a joint venture with a local Japanese retailer, Sazaby Inc. Through this agreement, both of the two companies held an equal 50% stake in "Starbucks Coffee of Japan," which received a license to the Starbucks format and a $10 million direct foreign investment from the Starbucks Company. Whereas many skeptics doubted that Starbucks would be able to replicate its North American success overseas, but by the end of 2009 Starbucks’ had some 850 stores and a profitable business in Japan.
Although the United Kingdom, Canada, and Japan are the immediate largest foreign markets, Starbucks CEO believes that rapid expansion in China and the entering of the Indian market will be the most effective and profitable strategy for the company. The choice to focus on expansion in China and India over currently strong markets may be the due to the growing economy, large populations, and growing interest in coffee of those countries. In 2011, the Chinese coffee market increased by 20% from the previous year, leading to an increase in sales of over $900 million. As customers in China are gaining more economic buying power, they are developing a constantly growing interest in affordable luxuries ranging from “designer” coffee to “designer” lifestyles. As a result, Starbucks has the obvious incentive to capitalize on the expansion of the Chinese coffee market and interest in consuming the experience of affordable luxury and capitalistic culture offered by Starbucks. Ultimately, according to John Culver, President of Starbucks Coffee China and Asia Pacific, Starbucks “will continue to accelerate the new store buildup and so go from 500 stores today to over 1,500 by 2015.”
Furthermore, India’s economic growth has led to an increasingly large middle-class that has been accompanied by an amplified interest in foreign goods and consumption. In a 2010 interview, CEO Howard Shultz stated that, "Asia clearly represents the most significant growth opportunity on a go-forward basis." Starbucks consequently believes that Indian consumers will turn to their company as an easily recognizable American brand and subsequently buy into the experience. From the perspective an India-based reported for the New York Times, by entering the Indian market with its first store in 2012, Starbucks signaled the ultimate stamp of globalization and the international transcendence of American consumerist ideals. India may profoundly differ from America in attitude and philosophy, but the growth of the country’s economy and middle class has led to the burgeoning desire to assume the American culture of consumerism. Furthermore, the New York Times opinion piece continues to explain the effects of Americanization in India:
Following the Starbucks Company 1992 IPO, the number of Starbucks coffee shops increased nine fold and the company was thus prepared to enter global markets. With already 700 coffee shops across the United States, Starbucks opened its first overseas coffee shop in 1995 through a joint venture with a local Japanese retailer, Sazaby Inc. Through this agreement, both of the two companies held an equal 50% stake in "Starbucks Coffee of Japan," which received a license to the Starbucks format and a $10 million direct foreign investment from the Starbucks Company. Whereas many skeptics doubted that Starbucks would be able to replicate its North American success overseas, but by the end of 2009 Starbucks’ had some 850 stores and a profitable business in Japan.
Although the United Kingdom, Canada, and Japan are the immediate largest foreign markets, Starbucks CEO believes that rapid expansion in China and the entering of the Indian market will be the most effective and profitable strategy for the company. The choice to focus on expansion in China and India over currently strong markets may be the due to the growing economy, large populations, and growing interest in coffee of those countries. In 2011, the Chinese coffee market increased by 20% from the previous year, leading to an increase in sales of over $900 million. As customers in China are gaining more economic buying power, they are developing a constantly growing interest in affordable luxuries ranging from “designer” coffee to “designer” lifestyles. As a result, Starbucks has the obvious incentive to capitalize on the expansion of the Chinese coffee market and interest in consuming the experience of affordable luxury and capitalistic culture offered by Starbucks. Ultimately, according to John Culver, President of Starbucks Coffee China and Asia Pacific, Starbucks “will continue to accelerate the new store buildup and so go from 500 stores today to over 1,500 by 2015.”
Furthermore, India’s economic growth has led to an increasingly large middle-class that has been accompanied by an amplified interest in foreign goods and consumption. In a 2010 interview, CEO Howard Shultz stated that, "Asia clearly represents the most significant growth opportunity on a go-forward basis." Starbucks consequently believes that Indian consumers will turn to their company as an easily recognizable American brand and subsequently buy into the experience. From the perspective an India-based reported for the New York Times, by entering the Indian market with its first store in 2012, Starbucks signaled the ultimate stamp of globalization and the international transcendence of American consumerist ideals. India may profoundly differ from America in attitude and philosophy, but the growth of the country’s economy and middle class has led to the burgeoning desire to assume the American culture of consumerism. Furthermore, the New York Times opinion piece continues to explain the effects of Americanization in India:
The tangible signs included an increase in the availability of American brands; a noticeable surge in the population of American businessmen (and their booming voices) in the corridors of five-star hotels; and, also, a striking use of American idiom and American accents. But the intangible evidence of Americanization was even more remarkable. Now it is infused with an energy, a can-do ambition and an entrepreneurial spirit that I can only describe as distinctly American
Starbucks’ was incredibly strategic in their decision to etner the Indian markets at a point in time when the nation has begun moving towards Americanization; across the world Starbucks serves as a tangible, consumable symbol of American culture, ideals, and experience. As more people around the world are becoming increasingly interested in consuming American culture, they can turn to the ubiquitous Starbucks in order to fulfill their desires.
Although the foreign stores have never been as profitable as the stores in the United States, Starbucks’ global expansion has served to successfully further its image as a paradigm of mass American culture. In order to ensure the success of implementing the “Starbucks experience” in their foreign ventures, the company was strongly dedicated to investing in the training of employees and also replicating the design of North American stores in the coffee shops overseas. The goal of Starbucks’ foreign expansion was to further brand loyalty and recognition across the globe and subsequently secure Starbucks’ position as piece of America that foreigners could buy and experience for themselves. Foreign customers are willing to pay $5 for a cup of coffee not because of the coffee itself, but instead because they want to feel associated with American culture of consumerism. Culver noted, “We want to provide a consistent experience for customers across all channels.” Essential to the success of Starbucks’ global expansion is the fundamental belief by foreign customers that by going to Starbucks they are receiving the same experience appreciated by customers in America. Foreign societies look to the United States as a beacon of capitalization and luxury, and customers consequently believe that they are buying into the concept by going to Starbucks.
Although the foreign stores have never been as profitable as the stores in the United States, Starbucks’ global expansion has served to successfully further its image as a paradigm of mass American culture. In order to ensure the success of implementing the “Starbucks experience” in their foreign ventures, the company was strongly dedicated to investing in the training of employees and also replicating the design of North American stores in the coffee shops overseas. The goal of Starbucks’ foreign expansion was to further brand loyalty and recognition across the globe and subsequently secure Starbucks’ position as piece of America that foreigners could buy and experience for themselves. Foreign customers are willing to pay $5 for a cup of coffee not because of the coffee itself, but instead because they want to feel associated with American culture of consumerism. Culver noted, “We want to provide a consistent experience for customers across all channels.” Essential to the success of Starbucks’ global expansion is the fundamental belief by foreign customers that by going to Starbucks they are receiving the same experience appreciated by customers in America. Foreign societies look to the United States as a beacon of capitalization and luxury, and customers consequently believe that they are buying into the concept by going to Starbucks.
Bibliography
1) http://www.forbes.com/sites/walterloeb/2013/01/31/starbucks-global-coffee-giant-has-new-growth-plans/
2) http://www.dailyfinance.com/2013/10/26/how-starbucks-built-a-coffee-global-empire/
3) http://online.wsj.com/news/articles/SB10001424052702304604204575181490891231672?cb=logged0.6430785541888326
4) http://www.nytimes.com/2002/06/01/business/international-business-an-american-coffeehouse-or-4-in-vienna.html?action=click&module=Search®ion=searchResults%231&version=&url=http%3A%2F%2Fquery.nytimes.com%2Fsearch%2Fsitesearch%2F%3Faction%3Dclick%26region%3DMasthead%26pgtype%3DHomepage%26module%3DSearchSubmit%26contentCollection%3DHomepage%26t%3Dqry805%23%2Fstarbucks%2Bglobalization%2Fsince1851%2Fallresults%2F2%2F
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6) http://www.forbes.com/sites/panosmourdoukoutas/2013/04/25/starbucks-and-mcdonalds-winning-strategy/
1) http://www.forbes.com/sites/walterloeb/2013/01/31/starbucks-global-coffee-giant-has-new-growth-plans/
2) http://www.dailyfinance.com/2013/10/26/how-starbucks-built-a-coffee-global-empire/
3) http://online.wsj.com/news/articles/SB10001424052702304604204575181490891231672?cb=logged0.6430785541888326
4) http://www.nytimes.com/2002/06/01/business/international-business-an-american-coffeehouse-or-4-in-vienna.html?action=click&module=Search®ion=searchResults%231&version=&url=http%3A%2F%2Fquery.nytimes.com%2Fsearch%2Fsitesearch%2F%3Faction%3Dclick%26region%3DMasthead%26pgtype%3DHomepage%26module%3DSearchSubmit%26contentCollection%3DHomepage%26t%3Dqry805%23%2Fstarbucks%2Bglobalization%2Fsince1851%2Fallresults%2F2%2F
5) http://www.nytimes.com/2012/03/11/opinion/sunday/how-india-became-america.html?pagewanted=all&action=click&module=Search®ion=searchResults%230&version=&url=http%3A%2F%2Fquery.nytimes.com%2Fsearch%2Fsitesearch%2F%3Faction%3Dclick%26region%3DMasthead%26pgtype%3DHomepage%26module%3DSearchSubmit%26contentCollection%3DHomepage%26t%3Dqry805%23%2Fstarbucks%2Bglobalization%2F
6) http://www.forbes.com/sites/panosmourdoukoutas/2013/04/25/starbucks-and-mcdonalds-winning-strategy/