Essays on Starbucks - International Business Case Study

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The paper 'Starbucks - International Business" is a great example of a business case study.   Starbucks can be said to have expanded too fast to levels that it could not manage effectively. An account of the expansion and its impacts is given by Gray and Wal (2012, p. 43). The two authors note that in the early 2000s, Starbucks was focused on expansion, increasing its presence across the globe, opening additional stores, and populating stores with a wide variety of products, including books and music. New stores were opened on a daily basis and an apparently new list of new products was introduced into the stores until Starbucks could be regarded to be doubling as a gift shop.

Gray and Wal (2012, p. 43) also quotes the chief executive officer (CEO) of Starbucks, Howard Schultz, who indicated that the company was obsessed with growth and that they took “ our eye off operations and became distracted from our core business” . With the increase in presence in different regions and the number of stores, Starbucks was able to realize increased profits. As well, every incremental product resulted in increased sales plus productivity in every store. The increase in the number of stores and products was however detrimental in some way.

As indicated by Gray and Wal (2012, p. 43), the incremental changes caused Starbucks to slowly lose touch with what its customers wanted – that is efficient and high-quality service, a high-quality product (coffee) and a good place to enjoy it. The result was that the company did not offer customers the types of products and services that they desired. Eventually, Starbucks was forced to close 600 stores in the United States in 2008 and to reduce the number of its employees by 7 percent because of an overall decline in productivity across the stores in light of the global economic crisis (Gambardella 2009, pp.

3-4; Tovstiga 2010, p. 31; Booker 2011; Mascarenhas 2011, p. 167). In addition to this, the company’ s share price fell substantially because of a decline in the company’ s overall performance (The Economist 2008; Tovstiga 2010, p. 31). The problems facing Starbucks can be attributed to the point that although businesses must make money so as to survive and be successful, their sole purpose should not be to make money (Speegle 2010, p.

77). Rather, it is important for businesses to focus on having the most desired products in the market, offer them to customers at a fair price, and ensure that the customers are satisfied. Even today, the problems of expansion still confound Starbucks. Although the company has been able to deal with the problems associated with the overexpansion in which it was engaged in recent years (Booker 2011), it has still opened 500 more stores across the Asia Pacific region, notably China (FlorCruz  2013).

Also, in terms of the density of stores, Starbucks seems to be reaching customer saturation since it has very many stores operating close to each other (Gambardella 2009, p. 4). Hence, as the company continues opening new stores in different regions, it needs to ask itself a number of questions so that it does not repeat the decline that it experienced during the global financial crisis. These include how it can increase its size but still remain true to its customers, how far it can extend the brand before it dilutes it, how it can innovate without compromising its legacy, how it can spread its reach without losing control of the business environment, and how it can offer customers a sense of discovery while growing at a high rate among others (Simmons 2005, p.

106). Starbucks must address these questions in order to ensure that its expansion strategy in the Asia Pacific region and in other areas in which it will venture in the future becomes successful.

References

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FlorCruz, M 2013, Starbucks sees China growth despite tea-drinking culture’, International Business Times, 2 August, viewed 26 October,

Gambardella, P 2009, Application of strategy dynamics: Starbucks Corporation, viewed 25 October 2014,

Gray, D & Wal, TV 2012, The connected company, O’Reilly Media, Sebastopol, California.

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Mascarenhas, OAJ 2011, Business transformation strategies: the strategic leader as innovation manager, New Delhi, SAGE.

Simmons, J 2012, The Starbucks story: how the brand changed the world, Marshall Cavendish Business, Singapore.

Speegle, M 2010, Quality concepts for the process industry, 2nd edn, Delmar Cengage Learning, New York.

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