Case Study Description of Resuming Internationalization at Starbucks
Starbucks enjoyed tremendous growth over the previous two decades. In 2007, it had a global reach of over 17,000 stores in 56 countries. Between 2007 and 2009, however, Starbucks' relentless march was slowed by three forces: increasingly intense competition, rising coffee bean prices and a global economic recession. In order to remain profitable, the company started to scale back its overseas operations. In 2010, Starbucks was faced with a critical strategic decision: Should the company resume its international expansion and once again intensify its commitments in overseas markets? If so, what approach should the company take? Had the pace of Starbucks' internationalization (i.e. the rate of opening new stores abroad), the rhythm of its internationalization (i.e. the regularity by which stores were opened abroad) and geographical scope of its internationalization (i.e. number of new countries entered) had an impact on the company's performance in previous years? Could Starbucks learn from its prior internationalization within the coffee industry in order to guide its future international strategy?
Authors :: Rob Alkema, Mario Koster, Christopher Williams
Swot Analysis of "Resuming Internationalization at Starbucks" written by Rob Alkema, Mario Koster, Christopher Williams includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Starbucks Internationalization facing as an external strategic factors. Some of the topics covered in Resuming Internationalization at Starbucks case study are - Strategic Management Strategies, International business, Marketing, Strategy and Global Business.
Some of the macro environment factors that can be used to understand the Resuming Internationalization at Starbucks casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, supply chains are disrupted by pandemic , geopolitical disruptions, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, increasing energy prices,
challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Resuming Internationalization at Starbucks
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Resuming Internationalization at Starbucks case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Starbucks Internationalization, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Starbucks Internationalization operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Resuming Internationalization at Starbucks can be done for the following purposes –
1. Strategic planning using facts provided in Resuming Internationalization at Starbucks case study
2. Improving business portfolio management of Starbucks Internationalization
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Starbucks Internationalization
Strengths Resuming Internationalization at Starbucks | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Starbucks Internationalization in Resuming Internationalization at Starbucks Harvard Business Review case study are -
Strong track record of project management
– Starbucks Internationalization is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Resuming Internationalization at Starbucks Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Analytics focus
– Starbucks Internationalization is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Rob Alkema, Mario Koster, Christopher Williams can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Superior customer experience
– The customer experience strategy of Starbucks Internationalization in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Starbucks Internationalization is one of the most innovative firm in sector. Manager in Resuming Internationalization at Starbucks Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Training and development
– Starbucks Internationalization has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Resuming Internationalization at Starbucks Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Effective Research and Development (R&D)
– Starbucks Internationalization has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Resuming Internationalization at Starbucks - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Starbucks Internationalization is one of the leading recruiters in the industry. Managers in the Resuming Internationalization at Starbucks are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Global Business field
– Starbucks Internationalization is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Starbucks Internationalization in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Starbucks Internationalization has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Learning organization
- Starbucks Internationalization is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Starbucks Internationalization is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Resuming Internationalization at Starbucks Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Starbucks Internationalization has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Starbucks Internationalization has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses Resuming Internationalization at Starbucks | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Resuming Internationalization at Starbucks are -
Capital Spending Reduction
– Even during the low interest decade, Starbucks Internationalization has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Products dominated business model
– Even though Starbucks Internationalization has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Resuming Internationalization at Starbucks should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Starbucks Internationalization has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– It come across in the case study Resuming Internationalization at Starbucks that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Resuming Internationalization at Starbucks can leverage the sales team experience to cultivate customer relationships as Starbucks Internationalization is planning to shift buying processes online.
Lack of clear differentiation of Starbucks Internationalization products
– To increase the profitability and margins on the products, Starbucks Internationalization needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Starbucks Internationalization has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Need for greater diversity
– Starbucks Internationalization has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Resuming Internationalization at Starbucks, it seems that the employees of Starbucks Internationalization don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Resuming Internationalization at Starbucks, is just above the industry average. Starbucks Internationalization needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow to strategic competitive environment developments
– As Resuming Internationalization at Starbucks HBR case study mentions - Starbucks Internationalization takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the segment, Starbucks Internationalization needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Opportunities Resuming Internationalization at Starbucks | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Resuming Internationalization at Starbucks are -
Developing new processes and practices
– Starbucks Internationalization can develop new processes and procedures in Global Business industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Starbucks Internationalization in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Starbucks Internationalization to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Loyalty marketing
– Starbucks Internationalization has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Starbucks Internationalization can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Starbucks Internationalization can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Buying journey improvements
– Starbucks Internationalization can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Resuming Internationalization at Starbucks suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Using analytics as competitive advantage
– Starbucks Internationalization has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Resuming Internationalization at Starbucks - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Starbucks Internationalization to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Starbucks Internationalization can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Starbucks Internationalization can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Starbucks Internationalization can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Starbucks Internationalization can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Creating value in data economy
– The success of analytics program of Starbucks Internationalization has opened avenues for new revenue streams for the organization in the industry. This can help Starbucks Internationalization to build a more holistic ecosystem as suggested in the Resuming Internationalization at Starbucks case study. Starbucks Internationalization can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Starbucks Internationalization in the consumer business. Now Starbucks Internationalization can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Resuming Internationalization at Starbucks External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Resuming Internationalization at Starbucks are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Starbucks Internationalization in the Global Business industry. The Global Business industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology acceleration in Forth Industrial Revolution
– Starbucks Internationalization has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Starbucks Internationalization needs to keep up with the evolution of technology in the Global Business sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Starbucks Internationalization can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Starbucks Internationalization needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Starbucks Internationalization can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Consumer confidence and its impact on Starbucks Internationalization demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Starbucks Internationalization in the Global Business sector and impact the bottomline of the organization.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Starbucks Internationalization will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Shortening product life cycle
– it is one of the major threat that Starbucks Internationalization is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Starbucks Internationalization high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Stagnating economy with rate increase
– Starbucks Internationalization can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Starbucks Internationalization needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Starbucks Internationalization can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Resuming Internationalization at Starbucks .
Weighted SWOT Analysis of Resuming Internationalization at Starbucks Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Resuming Internationalization at Starbucks needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Resuming Internationalization at Starbucks is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Resuming Internationalization at Starbucks is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Resuming Internationalization at Starbucks is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Starbucks Internationalization needs to make to build a sustainable competitive advantage.
