Starbucks Case Study

Case 1-1 Starbucks-Going Global Fast

1) Identify the controllable and uncontrollable elements that Starbucks has encountered in entering global markets.

Controllable elements:

* Expansion Speed

In 1996, the company owned 281 overseas stores, 11 years later, it owns 16,000 outlets in 50 countries. Even though, Starbucks experiences booming expansion in the global market, it actually makes less money on those stores since they have to share the profit with local partners. Starbucks should slow down on its expansion speed and focus on profit maximization.

* Advertising Expenses

Starbucks only spent 1% of its revenue on advertising, and those ads only focus on promotion of new products or in slow seasons. While entering global markets, Starbucks needs to spend more on advertising to improve its products recognition and brand loyalty.

Uncontrollable elements:

* Economic Conditions

Even though we are told by Wall Street analysts again and again that the great recession of 2008 is over, it really does not feel that way to the majority of people. Whenever you turn on your TV or surf the web, we hear, read about layoffs, foreclosures, high fuel prices, and inflation of staple food products. There is not a lot Starbucks can do about these unusually uncertain economic times.

* Local Competition

Italian Coffee is cheaper than US Java and Starbucks faces keen competitions from local Italian coffee shops whose prices are one third of what Starbucks charges.

2) What are the major sources of risk facing the company? Discuss potential solutions.

* Employee Dissatisfaction

Back in the 80's, Starbucks not only offered health care and stock options to its employees but treated them like family, as a result, their turnover rate was the lowest in the industry . Unfortunately, Starbucks corporate culture has changed to the point that today, there is not much difference Starbucks treatment of their employees, and other fast food or restaurant chains. Management is under pressure to pursue maximum profits. Employees are only paid minimum wage and treated like a number. Starbucks needs to recognize the contribution made by employees, that differentiates them from Joe Muggs, down the street. That personal attention made by employees is the reason a customer may say let's go see Sally at Starbucks instead of just going to get a cup of coffee at the closest coffee cafe. Paying their employees a bit more than the competition engenders employee loyalty, and may make or break a store's chances of survival in these tough times. Treating