Starbucks Entry into to Nigeria

Starbucks Entry Mode

International Business

Latoya Cooper 0901132

Table of Contents

CONTENTS 2

EXECUTIVE SUMMARY 3

INTRODUCTION 3

OBJECTIVES OF REPORT 3

INTERNATIONAL REPRESENTATION OF STARBUCKS 4

NIGERIA 4

EXPANSION 4

CONCLUSION 8

REFERENCES 9

Executive Summary

Starbucks is currently the leading retailer for brand specialty coffee in the world. Starbucks currently has 19,435 stores in 58 countries. Currently Starbucks plans to expand to other countries in doing so Starbucks will need to create new products in order to appeal to new unique customers. Starbucks is a coffee store and therefore sells predominantly coffee based products, although they have started to introduce a Frappuccino line targeted at non-coffee drinkers. Starbucks has the challenge of retaining a large market share and build brand recognition in a new market. From my findings I have found the key findings:

* The new Frappucino beverages will attract non-coffee customers, and as the drink is iced it will attract consumers in hot climates. Also when producing the new beverage Starbucks will need to continue to produce high quality products, however they will need to reposition themselves in the iced-beverage market.

* Due to research I have found that the target market is 25-54 year olds with children.

As it will be emerging into a new market it would be ideal to generate awareness via the web. Then the second approach could be by Print and TV. TV is one of the best vehicles to use as it reaches a mass audience without selecting a specific segment.

The reason why Starbucks has to use different types of market entry strategies are due to government polices of the host country. This is because of taxation, the cost of living, and also the manner of entering the domestic market; this all affect the profitability of the chosen country of the company.

An competitive advantage that Starbucks have is that they can minimize their production costs by using minimal labor costs and use the resources available in the host country. A strong differentiation strategy Starbucks uses it that they turn a 50p commodity into a £4 experience. Other strategies Starbucks use is Market Penetration, this uses the product placement and differentiation .. Starbucks also uses Market Development, which allows the consumer to learn about specialty coffee this allows the consumer to understand the high quality of Starbucks products. Value chain development, which the human connection gained by business ecosystem maintenance. And lastly, concentric diversification which allows Starbucks to venture into other drink markets such as bottled drinks and ice creams.

Introduction

Instant coffee and ground coffee are appealing segments in the coffee market. During the last couple of years both growth in volume and value has been experienced. Starbucks entered a competitive market, as many people also buy packages coffee and they still are the leaders in that segment as well. Starbucks has to adapt to many external factors to remain in this important place. A problem they will face is promoting coffee based products in a warm climate. Culture affects the use of coffee-based products as in Western cultures, they often like to have coffee and tea-based products at any time of the day. Where as, in Eastern cultures they are more likely to have hot drinks during winter.

Objectives of Report

The objectives of the report are to;

* Establish what entry mode strategies Starbucks may use when entering the Nigeria in the African continent.

* Identify the risks Starbucks will take.

* Identify and issues and how that overcome these.

International representation of Starbucks

(source: wikipedia)

Nigeria

Nigeria is a country situated in West Africa. They are the seventh most populated country in the world having an estimated 162,471,000 people. The economy has been expanding for many years now. Nigeria is a great candidate for Starbucks, as it has many resources. Nigeria is known for having natural resources such as Oil. This would improve jobs in Nigeria, as Starbucks will use the natural resources of oil, which local farmers would provide. The theory of FDI that Starbucks uses is Market Imperfections theory also known as the internalization theory. Also as Starbucks has only entered into three countries of the continent of Africa, it would be a great business opportunity for them to develop in East Africa. Being a LDC, Africa has low levels of internal FDI due to lack of appeal from MNEs. This is due to it having a poor infrastructure, poor labor skills, poor political stability and macroeconomic fragility, although Nigeria having oil attracts MNEs a little more than over other LDCs. Currently less than 4% total global FDI goes to Africa, and this appeals to resources that have higher value such as diamonds, oil and gold. The level of economic development is typically measured in terms of GDP per capita. GDP per capita is a useful measure of economic development because it is related to the population's wealth, extent of middle class, and level of industrial and service sector development, Alon and McKee (1999). It is said that in the next five years Nigeria will have one of the fastest growing rates of GDP in the world.

Expansion

Starbucks is currently