Starbucks International Strategy: Coffee International Inc.

Mission Statement and Company Overview

From a small, Seattle-based coffee shop to an international corporate powerhouse, Starbucks' growth as a company has been a genuine international phenomenon. "Established in 1971 as a neighborhood retailer of gourmet coffee beans and fresh roasted coffee, the Seattle-based coffee superpower now boasts 15,012 stores in 44 countries around the world" (Levenstein, 2010). Yet its mission statement reads: "Our mission: to inspire and nurture the human spirit — one person, one cup and one neighborhood at a time" (Starbucks, 2010).

Starbucks emphasizes community responsiveness. One of the hallmarks of the franchise was that, although it was part of a chain, every store had a slightly different character depending upon its location, customers, and layout. However, when it expanded to other areas of the world, Starbucks had to rethink even more radically its core product, marketing, and presentation.

Product and Distribution Strategy

Starbucks markets itself as an affordable luxury in the U.S. It is often said that Starbucks was the first company to "figure out" that people were willing to pay three dollars for a cup of coffee so long as the drink was called a latte. While three dollars was considerably more than what Americans were used to paying for coffee pre-Starbucks, the price was still low enough that middle-class consumers could enjoy relaxing in the store.

Even internationally, Starbucks tries to tailor its distribution strategy to the needs of the local market. Until recently, to maintain an exclusive image in Japan, Starbucks only sold its products in stores — never in supermarkets, as it does in the U.S. However, the launch of its Via instant coffee, which is marketed as tasting so good as to be indistinguishable from fresh-brewed coffee, caused Starbucks to change its approach to Japan and place greater emphasis on instant coffee.

"Japan's instant coffee market was worth about $2.3 billion in 2009, roughly the same size as the fresh coffee market… By comparison, the U.S. instant market came to about $640 million, against $7.6 billion for fresh coffee" (Layne & Sloan, 2010, p. 1). The most popular instant coffee brand in Japan is Nescafé, so Japanese consumers are already accustomed to purchasing foreign instant coffee brands.

Pricing Strategy

In 2003, Starbucks' Japanese sales were flagging. However, the company was able to rebound by reducing store expansion and raising its prices, emphasizing quality over quantity — a strategy it has continued to use. "Starbucks will sell a box of three Via sticks for 300 yen, or 100 yen per cup. A box of twelve sticks will sell for 1,000 yen… That will make it considerably more expensive than rival offerings on shelves in Japan, where a Nescafé box of 15 sticks of ready-mix for café au lait sells for just under 300 yen" (Layne & Sloan, 2010, pp. 1–2). In the U.S., meanwhile, although Starbucks has been forced to raise the prices of some drinks, it has also tried to offer more specials and deals, such as $1.50 brewed coffee (Rohrlich, 2010).

Even in Japan, cost-consciousness has become more of a concern than in the past. For customers who covet the Starbucks brand at home, Via is still a third of the price of a regular cup of coffee in the store. Starbucks' success in East Asia is reflected in the fact that, now that the company has established a winning formula in its in-store locations, it plans to further expand its operations in the region — even while cutting back the number of stores in the U.S.