Starbucks Confronting Possible Market Saturation

Starbucks

Confronting possible market saturation in its domestic market, one of the largest sources of opportunity for Starbucks is to optimize operations on a world-wide scale by minimizing costs and maximizing revenues. This can be accomplished by leveraging it tremendous technology, manufacturing efficiencies, brand name, and capital across countries. The major thrust of Starbuck's global strategy is to build a global brand to target customers in all major markets throughout the world. However, even with instant name recognition, the company will face enormous challenges in applying its domestic business model to work in many foreign markets where it has limited experience and faces threats of cultural clashes that could impede market acceptance.

Starbuck's aggressive expansion strategy of adding more than 18,000 stores is risky and it ought to consider a more manageable pace. To reduce risks, Starbuck is currently forming alliances in some countries, unlike its domestic strategy where the stores are largely owned by the company. Relying on experienced partners abroad should help Starbucks identify successful locations, sift through local tax and legal issues, give Starbuck stores more community support and make necessary cultural adjustments to operations. but, it will most likely be more difficult for the company to control expenses such as real estate and labor costs and to standardize operations where desirable.

As a global company, Starbucks has tremendous opportunity to leverage its brand across the world. However, to do so, it's going to have to learn to act like a global company, one that adjusts products, prices and services to local markets. There's ample evidence that standardized menus and stores may not work well in France where there is a preference for dark espresso and in China where people consume tea. and, Starbucks is clinging to charging prices similar to those in the United States even though the incomes in countries such as China are dramatically lower. High prices in low-income countries will certainly prevent the type of mass consumption that Starbucks has created in the United States. On the service side, Starbucks may have to accommodate local traditions. For example, French cafes serve to facilitate social interaction just as much as offering coffee.