Coffee – International expansion

The company is clear that it aims at building one stores at a time as business is based on repeat purchase and loyalty. The company does not depend too much on advertising or traditional marketing rather it depends on the in store experience thereby building loyalty. In the year 1996, Starbucks decided to look at new horizons in the East and decided to venture into Japan. On the day of the opening of the first store in Tokyo, customers lined up outside the store in a weather that had almost 100 percent humidity to get a taste of Starbucks. An international brand was born not on the basis of advertising but by concentrating on one customer at a time one store at a time and one market at a time.

Late in 1988, Starbucks made a deal with Kraft Foods (Philip Morris) owner of Maxwell House, for the giant multinational to distribute Starbucks in 18,000 grocery stores throughout the United States. At the same time Starbucks introduced a lighter roast in addition to its traditional dark offering.

In March 2001, Starbucks opened its first store in Europe in the heart of Zurich. On average the company is opening three to four stores a day, serving over 16 million customers’ a week. Asia is a very different market as compared to Europe. The coffee culture was popular in Europe while large parts of Asia, especially China and India are tea drinking nations. The challenges in both are very different. For example, France, Starbucks hopes to benefit from cultural change a country where lingering at family run cafes is something of an art form. Since the company launched its first French cafe on the Avenue de l’Opera on Jan 16, 2003 nine more have opened in high traffic locations around Paris. In France, Starbucks is building its operations as a 50 – 50 joint ventures with Spanish firm Grupo Vips, also the chain’s partner in Spain.

While expanding internationals Starbucks has typically followed a policy where it seeks out domestic partners as part of establishing a marketing infrastructure. And that’s one of the keys to Starbucks’ business strategy for international expansion. When the coffee houses are not company owned or licensed they come about through joint ventures with local retailers. No matter who the partner is all of the new managers undergo 13 weeks of training. While it doesn’t take 13 weeks to learn how to pour a cup of coffee, the company believes that it takes 13 weeks to understand the nuances of this brand.

The foray into China is said to be a test for all that the brand stands for Starbucks China doesn’t plan any advertising promotions or other marketing strategies, aside from sponsoring an on line coffee club, and the occasional office tower coffee tasting. Instead, the company is counting on selecting such high visibility high traffic café locations that they market themselves.

In Hong Kong and China, coffee is till more of a social event than a daily necessity says Michael Wu, 34 the managing director of Maxim’s Caterers Starbuck’s joint venture partner in Hong Kong, Macau and southern China. In contrast to the United States where the Starbucks revenue is driven by the speed and frequency f its transactions as people grab their coffee, and maybe a sandwich before hurrying out in China, coffee is not consumed alone it must go with food. This is the reason that the sales per customer are higher than in the United States.

After entering China, India could be next on Starbucks list of hot new markets for gourmet coffee outside of the United States. Both India and China are still small players in terms of domestic coffee consumption. China has one of the world’s smallest coffee markets, whereas India ranks 36th out of 53 nations with the most sales of packaged coffee, according to market research firm AC Nielsen. The United States tops the list, followed by Germany, France, Japan and Italy.

However patterns are shifting in India and China due to changing consumer aspirations and a keenness to indulge in the Western experience. The point of entry in China was different. Consumers weren’t initially drawn to Starbucks for the coffee but for the opportunity to socialize outside of the home. Starbucks captured a niche market early in China. It’s a slightly different story. In India, where a coffee evolution has been quietly brewing and the retailer may already have lost the first mover advantage India is also a tea based culture.

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