Starbuck's Global Expansion

Starbuck’s Global Expansion

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Marketing 454

November 15, 2010

1. Different Market Expansion Strategies

When Starbucks started to grow, there weren’t many other coffee chains. Fast food restaurants provided the best models for Starbucks to follow. McDonald’s had grown massive through franchising. Starbucks owner and CEO Howard Schultz had a different plan in mind. Certainly, he knew domestic expansion could have been done through licensing, franchising, or joint ventures. He also knew that with a full-equity stake in units, there is a high risk and involvement, but there is also a high degree of control and maximum reward.

In the US, Starbucks expanded market share primarily by adding company-owned units. They had thorough knowledge of their target market, legal issues, and their competition. They have no supply restrictions. There are no tariffs, quotas, or other export barriers. In the US, full ownership was sought.

In foreign locations, full ownership was not the way to go. They didn’t have a thorough knowledge of their target market, legal issues, and their competition. They often had supply restrictions. There were frequently tariffs, quotas, or other export barriers. For global expansion to work, they could not do it themselves. They opted to work with partners through joint ventures that allow them to take partial equity. In this way, they could rely on their partners to get everything running as they expand into new markets. This method combines the strengths of both organizations: the Starbucks brand and core products and the local partner’s intimate knowledge of the market and ability to get things done.

2. New Lines: VIA Ready Brew & Breakfast

Starbucks is a global leader in providing coffeehouse coffee, but their share of the total coffee market is miniscule. In May of this year, they held less than 10% share of coffee consumption in North America and less than 1% share...