Starbucks and Cultural Distance
Coping with the four dimensions of distance in the international expansion of Starbucks.
Maarten de Graaf, s1861263
Tom Breteler, s2022117
Group 12
13-10-2010
Introduction to International Business
Ms. Wilhelm
1. What are the four dimensions of ‘distance’ in Starbuck’s international expansion?
The four dimensions are culture, administrative, geographic and economic distance.
2. How did Starbucks reduce the ‘distance’ vis à vis host countries?
Starbucks used many tactics to reduce its distance from foreign markets. Firstly, Starbucks conducted extensive research in each country. They used focus groups, and quantitative analysis, to evaluate local cultural sensitivities and preferences. But it also used specific local adaptations. For example in Japan and China, Starbucks decided to market its chic western image, rather than it coffee. Secondly, in order to reduce economic distance, Starbucks primarily expanded into developed countries. And in those countries they focused on major cities first, since there are consumers with the necessary disposable income. Thirdly, to reduce criticism, Starbucks established a policy of paying premium prices for coffee beans from local farmers in Mexico and Peru who use environmentally friendly techniques. And finally, Starbucks sometimes partnered with local businesses.
3. Looking only at the four dimensions of distance, should Starbucks invest in Japan or China? If yes, give the reasons why; if no, why not?
Looking at cultural distance, Starbucks should not invest in Japan or China. The preference for coffee drinks is very low. People are used to drinking tea and not coffee. Therefore, we think Starbuck should not invest in China or Japan.
Looking at economic distance, we also think Starbucks shouldn’t invest. People in China and Japan have a culture of saving, possibly limiting the amount of profit made. Besides that, the Yen is also very expensive. ‘’The yen is criminally expensive,” Euan Munro, the 40-
Maarten de Graaf, s1861263
Tom Breteler, s2022117
Group 12
13-10-2010
Introduction to International Business
Ms. Wilhelm
1. What are the four dimensions of ‘distance’ in Starbuck’s international expansion?
The four dimensions are culture, administrative, geographic and economic distance.
2. How did Starbucks reduce the ‘distance’ vis à vis host countries?
Starbucks used many tactics to reduce its distance from foreign markets. Firstly, Starbucks conducted extensive research in each country. They used focus groups, and quantitative analysis, to evaluate local cultural sensitivities and preferences. But it also used specific local adaptations. For example in Japan and China, Starbucks decided to market its chic western image, rather than it coffee. Secondly, in order to reduce economic distance, Starbucks primarily expanded into developed countries. And in those countries they focused on major cities first, since there are consumers with the necessary disposable income. Thirdly, to reduce criticism, Starbucks established a policy of paying premium prices for coffee beans from local farmers in Mexico and Peru who use environmentally friendly techniques. And finally, Starbucks sometimes partnered with local businesses.
3. Looking only at the four dimensions of distance, should Starbucks invest in Japan or China? If yes, give the reasons why; if no, why not?
Looking at cultural distance, Starbucks should not invest in Japan or China. The preference for coffee drinks is very low. People are used to drinking tea and not coffee. Therefore, we think Starbuck should not invest in China or Japan.
Looking at economic distance, we also think Starbucks shouldn’t invest. People in China and Japan have a culture of saving, possibly limiting the amount of profit made. Besides that, the Yen is also very expensive. ‘’The yen is criminally expensive,” Euan Munro, the 40-