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CONTINUED (REFER TO PAGE 274) Starbucks Takes Coffee Culture Around the World arbucks has also been successful in other European countries, of the city's heritage and identity. The French prefer dark espresso including the United Kingdom and Ireland. This success comes and the conventional wisdom is that Americans don't know what despite competition from local riva's such as Ireland's Insomnia Coffee good coffee is. As one Frenchman put it, "American coffee, its only Company and Bewley's and the fact that per capita consumption of water. We call it jus des chaussette-'sock juice." roasted coffee in the two countries is the lowest in Europe Also high on Starbucks CEO Schultz's wish list for Europe: an Starbucks currently has more than 1,200 outlets in Europe; tha outside-the-box coffee product that will enable him to open shops f gure includes company-operated stores in Austria, France, Germany,in italy. "That's a dream that I have yet to accomplish, Schultz the Netherlands, Switzerland, and the United Kingdom, as well as says. Some would say the CEO's dream could turn into a night icensed locations in Greece, Russia, Spain, and the United Kingdom mare. After all, Italy's coffeehouse tradition dates back more than (see Figure 9-3) Scandinavia represents a major opportunity, for 400 years, and today more than 110,000 coffee bars are scattered example, Finland leads all other countries in per person coffee con-the length and breadth of the peninsula. Sniffed a spokesman for sumption, at nearly 27 pounds per year. Nordic neighbors Norway one of Starbucks' European competitors, "The Italian café is a cul- and Sweden are also in the top five. To date, Starbucks has been ture that the Americans have repackaged. They concentrate more slow to expand in the region. However, that is changing as Sbs on their image than the coffee. partners with Norway's Umoe Restaurant Group Michelle Gass, the executive in charge of Starbucks' European unit, is determined to Starbucks Introduces Coffee Culture to China make Starbucks a household name in the region Not surprisingly, Greater China-including the mainland, Hong in January 2004, Starbucks opened its first outlets in Paris. CEO Kong, and Taiwan-represents another strategic growth market for Howard Schultz acknowledged that the decision to target France was Starbucks. Starting with one café in Beying at the China World Trade a gutsy move; after all, café culture has long been an entrenched part Center, which opened in 1999, today Starbucks operates more than GURE 9- Starbucks Global Presence: Select European Markets 600593 157 United Germany France Switzerland Austria Netherlands

Answer 1

1. Licensing is considered to be the most popular and preferred mode of expansion strategy at the global level for the following reasons.

1. Gaining the knowledge about the local preferences and tastes with the help of the licensee or the company which holds the license. For Starbucks it is very important to understand the nuances of local tastes and preferences because coffee has been perceived differently in markets that are outside the United States.
2. The brand or the company need not carry or use its own resources to the outside markets. Hence that reduces the cost structure.
3. Licensing works well when there are entry restrictions. For instance in China, Starbucks faced challenges due to regulations imposed by the Government of China so it had to partner with a local firm initially. Later, when the regulations were eased it used licensing as the expansion strategy.
4. Licensing helps the licensing brand to get hold of the target market at a fast pace and create brand awareness.
5. Licensing helps the brand to develop a competitive advantage in the target market if the demand for that product was high and no other brand was catering to that.
6. The costs associated with all the marketing and operations activities are borne by the licensee.

Hence due to the above reasons Starbucks opted for franchising for expanding its operations in the global market. And for home market it runs business with the company owned stores primarily.

2. Starbucks has been positioned as a premium coffee brand across the globe. When it came up with new brand of instant coffee Via Ready Brew, the major objective was to enter the chain of supermarkets. It was thought that this might tarnish the brand’s premium image. But to respond to the economic crisis it can be considered as a good move along with the introduction of the value meal, especially when the customers were not ready to spend on lattes and cappuccinos. Though the perception of instant coffee is not very high in the United States but with the help of a process backed by updated technology the brand was able to deliver the quality so that the brand image doesn’t get affected. During recession it was difficult for the brand to retain the customers, but Starbucks went for aggressive advertising positioning the brand not just as a coffee brand but as a brand offering holistic Starbucks experience.
3. Italians associate coffee with their cultural sentiments. They do not have a positive perception about the American coffee. Their coffeehouse culture has traditional roots that go back to 400 years. There are more than 110000 coffee bars across the Italian peninsula where as Starbucks has more than just 1200 outlets in entire Europe. The coffee market in Italy is already at a matured stage. At this point if Starbucks plans to enter the market it has to offer something that delivers exactly the same traditional coffee taste as the Italians would prefer but coupled with something new that has not been offered to the Italians till now but there is a demand. So Starbucks has to identify an unsatisfied demand in the traditional coffee market. As there is rise in the number of millennial and generation X who have been now exposed to the global tastes and culture, Starbucks definitely has a potential market that is overshadowed by the traditional coffee customers of Italy.

4. Starbucks is positioned as the global coffee brand. Mc Donald’s is positioned as chain of fast food outlets. Though some new offerings from Mc Donald’s like Mc Café can give competition to Starbucks temporarily but in the long run as far as “coffee wars” are concerned, Starbucks will remain at the leading position because of its brand image and brand equity.

5. The new Startbucks Reserve Toastery and Tasting room helps the brand transition into the concept of experiential coffee brand rather than just being an premium coffee chain. It has been termed as a combination of production facility, retail outlet and theater. This will provide customers with an exceptionally unique experience of the journey of their cup of coffee. The concept itself stands out as no other food and beverages brand or coffee brand for that matter, have come up with such an innovative concept. Starbucks decided to come up with this innovative concept at the right time when the mass coffee consumption market was already saturated and the product was at maturity stage in the product life cycle. Hence the prospect of this initiative is good and it will help Starbucks to sustain its brand image and position even at this stage of product life cycle.