Resuming internalization at starbucks..In this following questions are answered: How did the pace, rhythm and scope of Starbucks' internationalization in the coffee industry affect its performance? how Starbucks approach internationalization? Was Starbucks too aggressive in its internationalization?

1. Resuming
Internalization at
Starbucks

2. Q(a). How did the pace,
rhythm and scope of
Starbucks'
internationalization in the
coffee industry affect its
performance?

3. Pace… relative growth in foreign stores each year
• Negative association between pace and performance
• Seemingly no relationship between pace and ROA
Rhythm… regularity in internalization
• Irregular rhythm more volatility lower performance
• Regular rhythm higher ROA (exception: 1994-97)
• Performance more sensitive to rhythm of foreign
expansion than domestic expansion
Scope… growth of number of countries entered
into over a period of time
• Negative relationship between scope and returns
• Exceptions: 1998, 2000, 2008-09 (economic recession)

4. Performance
PaceRhythmScope
This graph is a mere depiction of the generalized relationship between the
variables in concern, to aid understanding of the concept

5. Q(b). Was Starbucks too
aggressive in its
internationalization?

6. Yes, Starbucks was too aggressive because:
• 56 countries, approx. 17,000 stores
• Created a joint venture with a reputable and
capable local company with retailing know-how
in the target host country
• Targeting local demands & Culture in the host
country, for instance; serving tea in Japan, China
omitting the Siren from the logo in Muslim
countries

7. The other side of the coin…
• Focusing more on expansion and not on
improving customer service
• ROA was declining in spite of foreign operations
• Involvement of child labor in their operations
• Decreased product quality
• Problem in retaining their core service and
product offerings

8. Q(c). How should Starbucks
approach internationalization
going forward?

9. • The company should recognize the problem and the
need to make a decision
• The company had been too concerned with competitors
and had focused on expansion instead of improving
customer service
Identification
phase
• A solution is formed to solve the problem identified in
the previous phase
• Need to slow the pace of U.S. store growth and renew
its focus on the store-level unit and also determine a
way to deal with extreme competition as well as build a
name with their customers again
Development
phase
• During this phase, a decision is chosen
• Launching a cheaper alternative to the market,
Starbucks Via, an instant coffee
• Should also launch a program for all of its stores to
help with the customer service issues
• Should train all the store managers and employees to
deal with customers in a uniform way
• Community outreach programs to build their
reputation with customers again
Selection
phase
Incremental decision model should be used to evaluate their
current situation and move forward

10. • “Slow and Steady wins the race”
As experienced from past, Starbucks should not rush in opening new
stores, rather it should focus in improving the customer service and
satisfaction, as suggested by Howard Schultz.
• Enter in only those countries who seem to have been less affected by
the economic slowdown and where a steady economy is forecasted in
future.
• Should try to enter new markets only with local partners as the local
partners will have thorough knowledge of the market and risk will
also be divided.
• Should have a flexible rate structure from country to country without
compromising with the quality i.e. each country has varying
affordability and willingness to pay. A country like India can give
Starbucks huge business but people here hesitate to pay heavy
charges just for coffee.

11. • Invest in only those assets where they expect high return.
• Try more to create a difference between Starbucks and its
competitors.( In India, may be a customer will go to
Starbucks once to try it because of its reputation, but that
does not mean he will keep on coming again and again.
He might instead got to CCD where he will get a good
ambience , good coffee and that too at a cheaper price.)
• Try building strong bonds with the customers for
customer retention.
• Should take corporate responsibility very seriously, as it
will give a very good face to Starbucks in new markets

12. Thank You!
Presented by:
Swasti Bardhan
Monika Bansal
Sulagna Dutta
Tania Ann Koshi