Seminar 4: International Marketing

Marketing II (FÖ1017), 7.5hp

Case study
“Resuming Internationalization at Starbucks”

Marketing II
Seminar 4 (24th February 2016)

Group paper from:

Lisa Buchholz
920225T360
Giulia Catena
921211T349
Nicoló Tassi
920210T318
 Seminar 4: International Marketing
Marketing II (FÖ1017), 7.5hp

Table of Content

1. Introduction ......................................................................................................................................... 3
2. Starbucks- a born global company? .................................................................................................... 3
3. Internationalization process & Uppsala model.................................................................................... 4
4. Standardized marketing mix vs. adapted marketing mix .................................................................... 5
5. Conclusion ........................................................................................................................................... 7
6. List of References................................................................................................................................ 7

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 Seminar 4: International Marketing
Marketing II (FÖ1017), 7.5hp

1. Introduction
Nowadays, due to globalization and its increasing demand for internationalisation strategies, it
is utterly important for companies to have a holistic knowledge in order to succeed and stably
position itself in the market.

In the following it will be examined to what extent Starbucks was and is still following the
theoretical approaches of Internationalisation, mainly focussing on the business network theory
and Uppsala model of Johansson and Vahlne.

Starbucks depicts a global coffee provider with a presence in 17,000 stores in 56 countries all
over the world. After two decades of continuously strong growth since the beginning of the
90’s, Starbucks has faced a slowing down due to the imminent world crisis which has forced
the company to reduce the foreign investments and rethink their internationalisation strategies.

2. Starbucks- a born global company?

A born global company can be defined as Oviatt and McDougall did as “a business organization
that, from inception, seeks to derive significant competitive advantage from the use of resources
and the sales of outputs in multiple countries” (Lagrosen and Svensson, 2006 p. 236). It
describes quantitatively international new ventures as companies which have foreign sales
accounting for 25 per cent and which have started export activities within three years (Lagrosen
and Svensson, 2006). These companies usually start from a small dimension and are focused
on a niche market; consequently they are characterized by a strong flexibility achieved also by
the close collaboration and partnership established by the entrepreneur. In the case of Starbucks
it has to be stated that the company was from inception focussing on its niche market, which
was depicted by the field of specialty coffee and a very unique experience of bringing “the
Italian coffee-drinking culture to the United States” (Alkema, Koster and Williams,
2010). According to Lagrosen and Svensson (2006), born globals are more devoted on
producing or offering custom made and standardized products, which is the case for Starbucks
referring to their very similiar coffee products and side products all over the world from places
like Sumatra, Kenya, Ethiopia and Costa Rica (Alkema, Koster and Williams, 2010).

Although keeping in mind that the company was established already in 1971, the main
innovative period was initiated when the current CEO of Starbucks, Howard Schultz, overtook
the Starbucks stores in 1987. His vision was clearly to be internationally oriented, which can
be proven by the fact that as soon as the home market was saturated, “Starbucks opened its
firsts outlets outside” (Ibid., 2010) e.g. in Canada and subsequently in the Far East. This suits

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 Seminar 4: International Marketing
Marketing II (FÖ1017), 7.5hp

the definition of being globally oriented from the inception on, which we would consider lies
in the entering of Howard Schultz.

Each time, after having saturated a market, Starbucks went onto another one, which is the basic
concept of a global born company and that is the reason why Starbucks could achieve a presence
in over 56 countries with 17,000 in just two decades (Ibid., 2010).

Considering the features of the Uppsala model of the following part of the paper it can be stated
that the ability to skip some of the steps of this approach can be seen as a hint for being a born
global company because it is an outstanding achievement to be able to go overseas without
continuously escalating efforts.

3. Internationalization process & Uppsala model

According to the business network theory, what does Starbucks’ internationalization process
look like? Could the Uppsala internationalization process model explain Starbucks’
international expansion?

In the following the paper sets focus on the issue of going international and expanding business
operations with the help of the outstanding successful example of Starbucks. Hereby, it is
essential to enlighten the importance of networks as well as the different processes that come
with an international expansion. Furthermore the Uppsala model will be referred to, aiming to
explain Starbucks’ international marketing strategy.

The Uppsala model define the internationalization as a developing process of gaining

experience and sufficient knowledge before considering to enter foreign markets (Lagrosen and
Svensson, 2006). Starbucks adopted various modes of entry, using local partners and licensed
joint ventures in certain countries and company-operated wholly owned subsidiaries in other
countries. The company often ended up buying out the local partner where joint ventures were
successful and the local market had potential.

Evidently, Starbucks followed the Uppsala approach, by starting to operate in the domestic
market, followed by considering business in neighbour countries and then to go on to overseas
countries. Based on the business network theory, the Uppsala model refers to the crucial
strategy behind the networking process. The main barrier is the lack of knowledge which needs
to be overcome by committing oneself thoroughly to the decisions and activities (Lagrosen and
Svensson, 2006). The process of learning from the networking partners is essential in order to

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 Seminar 4: International Marketing
Marketing II (FÖ1017), 7.5hp

exchange expertise and benefit from their knowledge about internationalization and foreign
operations.

For this reason, it can be stated that the Uppsala model explains the beginning of the
internationalization process but due to the vision of Howard Schultz and his entrepreneurial
spirit that enabled Starbucks’ great expansion, the company skipped some of the steps and
directly continued to enter overseas markets. This is possible as “later studies have shown that
entrepreneurs can choose to internationalise much faster and become global very shortly after
their inception (Lagrosen and Svensson, 2006, p. 237).

In addition to that Starbucks explored throughout the years that fast expansion cannot be the
only focus of their business which was even enhanced by an analysis of the ROA. A more stable
and controlled expansion is aimed to achieve higher ROA, which is evidently more beneficial
for the company (Alkema, Koster and Williams, 2009, Exhibit 11). Furthermore it was
criticised that Starbucks was growing too fast and pacing out small independent competitors
and losing on their product quality and brand image. A slower and more carefully considered
expansion would hence soften the criticised aspects.

4. Standardized marketing mix vs. adapted marketing mix

What are the advantages and disadvantages of the standardized marketing mix and the adapted
marketing mix in a foreign market? And how has Starbucks worked on the marketing mix in
different country markets?
In general it is to state that standardized marketing mix is clearly focussing on meeting the
needs of the customers in terms of product, price, place and promotion in almost every location
the company is operating in by keeping the same standards. “Standardisation of the product or
service, communication, and distribution channels promises the lowest costs” (Kotler et. al,
2009). Especially due to the increasing needs and wants of the market, determined by buyers,
it can be a competitive advantage taking into account the economy of the company.
Advantages of the standardized respectively global marketing are, that you can more easily
reach economies of scale, the power and scope of the business is widened, marketing processes
are very similar and the overall brand image is consistent and therefore more approachable for
the customer (Kotler et. al, 2009).

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 Seminar 4: International Marketing
Marketing II (FÖ1017), 7.5hp

Common disadvantages of standardized products are that the likelihood of losing customers
due to disrespect of the local preferences, the ignorance of feedback from the customer side and
brand and product development in general (Kotler et. al, 2009).
However, it is not always sufficient to rely on standardised products as, in terms of cultural
differences, certain adaptations are needed in order to fully commit oneself to the expectations
of the consumers. Therefore, sophisticated knowledge and experience is beneficial and crucial
to possess and continuously improve in order to be successful in entering new markets.
Customers are assumed to appreciate adaptations when they are created in favor of their needs
and wants, which could give the company a competitive advantage, good reputation or even
increase in demand and sales.
In case of Starbucks, the company adapted its brand logo in Muslim countries (Alkema, Koster
and Williams), to not reject the citizens by religious issues from scratch. This can be referred
to the psychic distance, respectively factors “preventing or disturbing the flow of information
between firm and market” (Lagrosen and Svensson, 2006, p.237). By respectfully treating and
implementing different cultural or religious factors into the business, a company can achieve
and enhance trust and loyalty.
Furthermore, the company is adapting its product offerings because of different consumer
preferences and tastes. For instance, Starbucks is serving tea in China and offers other kinds of
sweet treats (Alkema, Koster and Williams, 2010), according to the underlying preferences.
The above mentioned religious and cultural differences are relating to Hofstede’s cultural
model, which gives a holistic overview about the diversity of culture and the specific
characteristics that have to be kept in mind when devoting oneself to a new market and its
culture as a company.
Additionally, the strategy of the marketing mix comprises development of products, like for
example Frappuccino with seasonally changed flavours or cookies as well as cold and hot
sandwiches (Buchanan and Simmons, 2009). By following this product changing strategy and
mutually adapting the communication in the different countries, a combination of dual
adaptation and new development is reached, referring to Kotler et. al (2009).
Another part of the marketing mix is depicted by special promotions and offers which can be
found in the Starbucks stores, for example local souvenirs and merchandise articles that can be
found especially in capital cities (Buchanan, 2009).
A special standardized aspect in Starbucks’ strategy seems to be the relationship practices
applied between employees and with customers, aimed to recreate the “Italian bar atmosphere”
aspired by Schulz since the early day of the business.
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 Seminar 4: International Marketing
Marketing II (FÖ1017), 7.5hp

5. Conclusion
The paper has explored the internationalization strategy of Starbucks and the aspects concerning
the processes of entering foreign markets. The fast expansion of Starbucks was enabled
throughout the sophisticated and innovative vision of the CEO Howard Schultz, who initiated
the internationalization focus of the company and constituted to the development of Starbucks
as a born global company. By following the main approaches of the Uppsala model, the
company was first operating in and saturating the domestic markets before continuing to
neighbour and even overseas countries, which became the main strategy.

The appropriate mix of standardization and adaptation enabled the company’s strength and
success by appealing their target groups in the niche market of specialty coffee.

However, it is very difficult to maintain a strong position in the market, considering the
recession periods due to the world economic crisis and the superfluity of competitors in foreign
market but by continuously improving and implementing new internationalisation strategies,
the success of Starbucks can be facilitated.

6. List of References

Alkema, R., Koster, M., & Williams, C. (2010). Resuming Internationalization at Starbucks. Richard
Ivey School of Business Foundation.

Buchanan, L., & Simmons, C. (2009). Trouble Brews at Starbucks. Ivey Management Services.

Kotler, P., Keller, K., Brady, M., Goodman, M., & Hansen, T. (2009). Marketing Management (13th
ed.). Upper Saddle River : Pearson Education Limited.

Lagrosen, S., & Svensson, G. (2006). Marketing-Broadening the Horizons. Lund: Studentlitteratur.