Starbucks global expansion strategy and market penetration

Starbucks

The explanation for the reversal of the franchise/company-owned split is that franchising allows for easier entry into foreign markets. With some countries, like China, dealing with the government is much easier with a Chinese partner, but even in relatively free-market countries a local partner is valuable. Local partners have better knowledge of local tastes and local working conditions, so Starbucks is able to gain faster and more effective market entry by utilizing the expertise of a local franchiser. Not only does the local franchiser have better knowledge of local workforces, but they are also able to tailor the menu and the overall Starbucks experience to the needs of locals. The result of this is that the local franchiser is more likely to succeed, by tapping into the local tastes more effectively, than the company would if it owned the stores. The government factor cannot be overlooked, however, as the entire process of dealing with the local legal and regulatory environment is likely much smoother for local companies than it is for the major company.

Starbucks has more control with a company-owned store, and when expanding internationally to countries where it is easy to deal with local officials and local culture, Starbucks is much more likely to utilize company-owned stores. For example, Starbucks in Western Europe and Canada are more likely to be company-owned than franchised, while in Asia and the Middle East the company is more likely to use a local franchise partner.

2. I agree with the two decisions that Starbucks made. The first issue, the VIA, is a good policy because the ready-to-serve market is actually quite large. This product is largely sold on the institutional market, and VIA is the first serious attempt that Starbucks has made at entering this market. It can sell more in offices, hotels and institutional settings with the VIA, allowing it to reach more customers. The company is simply taking advantage of a market opportunity that has always existed in the coffee industry but that it had failed to address effectively before.

The value breakfasts are a means of competing with McDonalds and other fast food outlets. What happened was that these companies started taking coffee more seriously because they were losing business to Starbucks, where people might eat a pastry or snack. By adding hot meals, Starbucks was not only combatting this new form of competition, but was also taking advantage of an opportunity to meet a customer need and increase the average sale in the morning. The value pricing aspect of hot meals simply reflects the fact that Starbucks is competing against companies offering cut-price breakfast items, and that Starbucks is not attempting to be an actual restaurant, but still just a place for a quick bit.