Starbucks: A Brief Analysis of Competitive Strengths and Expansion Failures

Starbucks: A brief analysis of competitive strengths and expansion failures

Submitted BY: Moksha Mathpal|16110|BMS 3GBO

Submitted to: Mr Tushar Marwaha

Date of Submission: 5th November 2018

SHAHEED SUKHDEV COLLEGE OF BUSINESS STUDIES UNIVERSITY OF DELHI Index

Literature review

Title: Starbucks a Strategic Analysis: Past Decisions and Future Options

Authored by:  Ryan C. Larson from Brown University

Publication year:  2008

Summary:  This paper starts by giving a brief background about the speciality coffee industry and how starbucks ventured into the same. It even carries out the Michael Porter’s 5 force analysis on the same both in the past and present and finds out how the environmental factors in the  specialty coffee industry have changed overtime. It provides certain reasons which can be seen as the drivers of success for the organisation. It even undertakes a competitors analysis and states that strbucks faces competition not only from within the specialty coffee market for eg. by Tully’s coffee, Seattle’s Best Coffee, Peet’s Coffee, CaribouCoffee but also from those outside the specialty market include, Folgers, Proctor & Gamble, Dunkin Donuts, McDonalds and numerous other coffee serving establishments. Ultimately it concludes that Starbucks leverages its customer loyalty, premium quality coffee and the homey atmosphere of its stores to fend off competition.

Methodology used: Bar graphs and line graphs

Title: Pouring Israel into a Starbucks Cup

Authored by: Arturs Kalnins and Laure Stroock from Cornell University

Publication Year: 2011

Summary: An analysis of Starbucks’ failed venture into the Israeli market which serves  as a lesson of emotionally driven decisions that go awry. It talks about the composition of the two firms and how they are leaders in their own uncorrelated fields. It fundamentally asks the question of why would an american coffee brand would enter into an agreement with Delek Israel Fuel Company (DIFC), an operator of gas stations and convenience stores in Israel, among other ventures. It gives three major reasons for that question (1) emotional commitment, (2) escalating commitment, and (3) overconfidence. It ultimately concludes by saying organisations must choose their partners wisely, shouldnt let emotion get into the way of doing business and should be willing to leave joint ventures when they see the ends failing.

Keywords: Starbucks; Israel; international joint ventures

Methodology Used:

Title: How the local competition defeated a global brand: The case of Starbucks

Authored by: Paul G. Patterson, Jane Scott, Mark D. Uncles School of Marketing, Australian School of Business, University of NSW

Publication Year: 2011

Summary: This paper starts with na intorduction the expansion history of starbucks and further goes on to describe the coffee culture in australia. It concludes that Starbucks overestimated their points of differentiation and the perceived value of their supplementary services; their service standards declined; they ignored some golden rules of international marketing; they expanded too quickly and forced themselves upon an unwilling public; they entered late into a highly competitive market; they failed to communicate the brand; and their business model was unsustainable.

Keywords: Service brands Service quality Global branding International business Starbucks

Coffee

Methodology Used: Qualitative analysis and interviews

Abstract

This paper has a simple approach. It aims to understand the rise of starbucks and how it became to be known as a global brand synonymous to coffee. For this the paper begins with a brief background about starbucks and speaks of its history. It also undertakes a swot analysis of the company to have an overall view of its position in the market. It then talks about its expansion ventures and traces the timeline of its expansion. It then focuses on the two major geographic territories where the venture failed to establish itself and had to/still is closing down its ventures. Namely, Israel and Australia. In Israel, starbucks failure could be attributed to selection of a wrong partner for their joint venture which ultimately led to it closing down its store and moving out of the partnership. Whereas in Australia, it could attributed to a lack of good market research and inability to dwell into the coffee culture of the kangaroo nation and carve its place there. At the same time we briefly look at the other competitors and see who if anyone else is able to survive the market. Drawing on research already done, this paper colates and presents the lessons to be learnt from these two prime market expansion failures.

Key words: starbucks, expansion, failures

Objectives

Outline a brief history and background of starbucks

Run over its expansion practices

Anaylse the reasons for failure in Israel market

Anaylse the reaons for failure in australian market

Takeaways from these failures

Introduction

The inception

Starbucks started back in 1971 with their first store in Pike Place Market, Seattle, United States of America. It was founded by three academia, Jerry Bladwin, Zev Siegl and Gordon Bowker from university of San Francisco. These three men were deeply inspired by alfred peet who was an entrepreneur in the coffee roasting business. Peet, a dutch immigrant, had started importing arabica coffee in the US in the 1950s. It can be said that it was peet and his business model which inspired the three men qt starbucks to follow an almost similiar strategy. They used to import coffee beans and equipments in their initial days. Starbucks wasnt the cafe chain back then as we know it today to be. In fact, it was peet only who used to supply starbucks withe their key ingredient, green coffee beans. The three men then purchased a coffee bean rooster and experimented with their own flavours and blends.