Starbucks International Business - Assignment Example

? Starbucks International Business Introduction The world of the 21st century is undergoing a continuous transformation at a rapid pace. Because of the evolution of the high speed internet powered connectivity over the past couple of years, the world has become a highly connected global entity. The global connectivity has increasingly created the platform for evolution and dispersion of various kinds of global trends in the developed and the developing markets around the world. Because of the emergence of global trends, consumers in the various markets around the world are becoming increasingly demanding in nature and this is creating a significant amount of business opportunity. The rise of business opportunity in different markets is creating a strong appeal in terms of market attractiveness to the firms located in the global markets. The factor of market attractiveness is resulting in the entry of firms in to new geographical locations. It is important to highlight that the entry of the firms in different foreign markets around the world is continuously raising the level of competition in the marketplaces. This assignment focuses on the international business aspects of Starbucks. In a more elaborate manner, it can be said that this assignment focuses on analyzing the international business activities of Starbucks as well as understanding the challenges that they face for being present in an international business. This assignment also aims to evaluate the business stage of Starbucks and make necessary recommendations. Analysis of international business activities Starbucks is a widely popular beverage brand of the United States, which has presence in multiple markets around the world. Talking in regards to statistical data, it can be stated that the company which has a product portfolio comprising of coffee, tea, fresh food and other merchandises is present in more than 60 countries with a retail presence of over 17,000 stores (Starbucks Corporation, “Starbucks Company Profile”). It is important to highlight that the international business activities of the company Starbucks Corporation is multi dimensional in nature. Talking in a more specific manner, it can be stated that the international coffee company has ventured into vertical integration for the purpose of sourcing of its raw materials. In the current times, the company produces and sources its highly specific Arabica coffee from various international markets like Latin America, Africa as well as Asia (Pashman, “Do You Know Where Your Coffee Beans Come From?”). While analyzing the international business activities of Starbucks, the factor of international expansion of Starbucks also has to be taken into account. The highly popular news site Forbes has reported that under the leadership of President and CEO, Howard Schultz, the company has designed some very ambitious international expansion plans. The international expansion plans are highly organic in nature and focuses largely on penetrating in the emerging markets of the east like India and China. The company has plans of opening around 1300 stores in various markets around the world, out of which around 600 stores will be opened in the market of China (Loeb, “Starbucks: Global Coffee Giant Has New Growth Plans”). Talking in regards to the long term expansion plans of the company, it can be stated that the current management aims to open around 1500 stores in China by the close of the year 2015 (Trefis Team, “Starbucks U.S. Growth Will Remain Solid While Overseas Expansion Continues”). Challenges for Starbucks as an International Corporation While analyzing the challenges that exist for Starbucks, focus has to be given to the fact that Starbucks is an international brand which enjoys presence in multiple global markets. The most important challenge for Starbucks is the level of competition. Since the main offering of Starbucks is beverage, hence the brand faces competition of both primary and secondary nature. The primary competition of Starbucks arises from the multiple Quick Service Restaurants (QSR) and specialty coffee shops which has presence in markets around the world. The secondary competition emerges from the sellers of specialty coffee and tea products like supermarkets, specialty retailers and club stores. It also has to be stated that since Starbucks is an international company, the challenges for the company also exists in regards to the effect of the various macro economic factors of the global markets where the brand has a presence. Explaining in an elaborate manner, it can be highlighted that the success of the product and service offering of the company is very much dependent on the discretionary spending of the consumers of the global market. From the economic point of view, the discretionary spending is an outcome of the disposable income of the masses, which shares a strong connection with various regional as well as macro level economic factors like the economic growth rate, bankruptcies, job losses, and fluctuations in energy prices, interest rates, tax rates and inflation. A prolonged period of negative economic influence will significantly lower the disposable income of the consumers and will create threats for the growth prospects of the company’s offerings. A key challenge for the international company is that Starbucks though has presence in various global markets, yet is largely dependent on the American markets for its strong financial performance in the current times. As of the year 2012, the American segment of the global company contributed to around 75% of its revenues. It is important to highlight that if the company fails to diversify its revenue focus from the American markets, which has slowly started to become a mature market for the company’s products and services, it will become a significant challenge for the company in the upcoming days. Another major challenge for the company, which enjoys presence in the international markets, is the fact that Starbucks is highly dependent on the success prospects of the newly emerging markets all over the world. It might so happen that the various international market business units (MBUs) which are defined by Starbucks in regards to the markets in which they operate may fail to attain the desired amount of success that are projected by the company. The failure to attend the projected levels of business success in the emerging markets around the world will significantly impact the growth prospects as well as financial aspects of the highly popular international company in a negative manner (Starbucks 16-18). Evaluation of the business stage While evaluating the business stage of Starbucks, it is important to highlight that the company has presence in various markets. Starbucks has categorized the various markets in which it has presence in to three broad segments. The Americas segment comprises of the markets of US, Canada and Latin America and generates around 75% of the company’s revenues. Starbucks has identified this particular segment as being into the matured stage of business. The other segments are the EMEA and the CAP segments. The EMEA segment comprises of markets like Europe, Middle East and Africa while the CAP segment comprises of markets like China and Asia Pacific. It is important to highlight that though these market segment currently generate a small amount of revenue for the company, yet it has to be said that they are in the introduction phases of the business and are supposed to graduate to the growth phase of the business in the upcoming future. Recommendation A recommendation for Starbucks can be given in regards to the challenge faced by the company in regards to the factor of high dependence of the company on the American market. It can be recommended that the globally popular brand Starbucks should focus on developing financial strengths in the emerging markets, which are bound to have high growth prospects because of the rising middle class. For diversifying the financial dependence to the emerging markets, Starbucks can focus on product as well as market development. Works Cited Starbucks Corporation. Starbucks Company Profile. August 2012. Web. 15 Nov 2013. Loeb, Walter. Starbucks: Global Coffee Giant Has New Growth Plans. Forbes. 31 Jan 2013. Web. 15 Nov 2013. Trefis Team. Starbucks U.S. Growth Will Remain Solid While Overseas Expansion Continues. 23 July 2013. Web. 15 Nov 2013. Pashman, Heidi. Do You Know Where Your Coffee Beans Come From? 13 Sept 2013. Web. 15 Nov 2013. < http://www.shape.com/blogs/fit-foodies/do-you-know-where-your-coffee-beans-come> Starbucks. Annual Report. United States. 2012 Print. Read More