Starbucks Coffees Shop

2)Give TWO (2) sources of risk facing by the company? Discuss any potential solutions.

Starbucks coffees shop also being well managed by a well-seasoned management team. The management trio known as H2O from a small group with three name Orion Smith (CEO) Howard Behar (Head of North American Operations) and Howard Schultz (Chairman and Chief Global strategies. At initial stage of Starbucks was remarked as successful organizational during that time.

The company experienced a rapid expansion in the market through 1990s. But as a company it’s a normal situation if having many problems and Starbucks experienced numerous of problem to make a strong between Starbucks name and image within million of customers around the world. It also can achieve dominance over the market in home market and new market.

The first sources of risk facing the company;

The biggest risk for Starbucks is market saturation  

During growth spurt of the mid-late-1990s, Starbucks had the lowest employee turnover rate of any fast-food company, largely thanks to its unheard-of policy of giving health insurance and modest stock options to part timers making barely more than minimum wage. That perks are not longer enough to keep all workers happy. Some of Starbucks’s staff are complaining their pay are doesn’t come close to matching the workload it requires such as Overtime Work (OT). Starbucks are paying their workers based on store profit-and-loss statement. If the store not making higher profit, the store cannot pay their workers more than certain amount. If Starbucks store had higher expenses than profit, it will loss in their business. This problem, make employee discontent is far from the image that Starbucks wants to project of relaxed workers cheerfully making cappuccinos. But it is inevitable.  The business model calls for lots of low-wage workers. And the more the people who are hired as Starbucks expands, the less they are apt to fell connected to the original mission of higher service.

The potential solutions for this problem is;

Make the staff and manager happy by increment in the salary and keep motivated with incentives and rewards such as provide health insurance, bonus for good workers after every six months or on yearly basis. Starbucks also should provide systematic system during pay salary for their workers fair on their works. Next, Starbucks needs re-arrange their product according to the middle-class family and budgeted oriented people rather keeping the target high income categories people. So that the price of the product will be average that can affordable by ordinary person and focus on improving the quality according to the young generation tastes and level. Starbucks have to do more investment on advertisement and publicity for bringing the improvement of the Starbucks image. This, solutions can make Starbucks showed to public that their worker are relaxed and cheerfully during making coffee.

The second source risk facing by company is;

Improving profitability in Middle East market.

Howard Schultz, expand the Starbucks store in Middle East market. Starbucks outlets already in Kuwait, Lebanon, Oman, Qatar and Saudi Arabia. This make a mild uproar among the Palestinian supporters. But, Schultz quickly backpedalled saying that he is “pro peace” for both side. There are plenty more minefields ahead. For Starbucks entering Middle East market are challenges because they had unstable political and sensitive cultural. Middle East people believe that Starbucks provides financial support to the Israeli Army but this company absolutely deny it. Starbucks having challenging situation to attract their customer and increasing their profit when enter this market.

The potential solution for this risk is;

Starbucks company must do positioning in their customer mind about they are really not provides financial support to Israeli Army. This is important part to attract their customer because Middle East people are really sensitive with organization or party who help Israeli. Starbucks should hire Muslims worker at Starbucks store to attract more customer because majority of Middle East are Muslims. Having Muslims worker will convinced customer believe that Starbucks are provide Halal’s food and beverage. Next, Starbucks should provide more campaign and proof that they are really not supported financial for Israeli Army.

3.Discuss four (4) appropriate strategies to Starbucks penetrate the global market.?

 There are four appropriate strategies to Starbuck penetrate global market that is licensing, investment, joint venture and investment via equity stake or full ownership.

Firstly, Starbuck can apply licensing strategies to penetrate global market. Licensing is a contractual arrangement whereby one company (the licensor) makes a legally protected asset available to another company (the licensee) in exchange for royalties, license fee, or some other form of compensation. The licensed asset may be a brand name, company name, patent, trade secret or product formulation. For example, In October 1998, Starbucks extended its operations in New Zealand, through licensing its store concept to Restaurant Brands New Zealand, an authorised licensee of KFC and Pizza Hut brands at the time (Morrison, 2013). Due to its enthusiasm of bringing the Starbucks experience to consumers in the country, Restaurant Brands New Zealand was the ideal partner for Starbucks in positioning itself in the Asia Pacific market in an incipient stage of the coffee industry in this geographical region. The relatively low popularity of the coffee shop industry at the time in the region was a risk that could have deterred the success of a wholly owned market entry (Field, 2011). The leading position and market knowledge of the partner firm that Starbucks licensed its store concept to ensured the minimal risk and lead to the success that the brand is enjoying in New Zealand presently, operating 22 stores in the country, with a $25.1 million sales annually (Morrison, 2013). In return for royalty payment; the corporation sells a particular right to introduce and advertise the good under these criteria. Starbucks does not need to undertake any monetary actions for partnership investment under this particular method. It is an amicable way to get access in international market. Starbucks can also benefit from granting license to a licensee that is more familiar with the market.