Starbucks Global Strategy

Starbucks began in 1971 as a roaster and retailer of whole bean and ground coffee, tea and spices with a single store in Seattle’s Pike Place Market. In 1996, Starbucks opened its first store outside of North American in Japan. Today they welcome millions of customers through their doors everyday and are currently operating in more than 50 countries. It is this move into the global market that we will be exploring; most notably its expansion in China and the Asian markets. In April 2010, Starbucks CEO Howard Shultz said that China is setup to usurp Japan as its biggest market outside North America, as well as crack the potential lucrative Indian and Vietnamese markets, where it doesn’t yet have a presence. This move into the international markets was a necessary step following the retrenchment in the U.S., where they saw the closing of hundreds of underperforming stores and cutting nearly $600 million of costs. Shultz stated that the company would plan its China growth carefully. “Over time there will be thousands of stores in China, but it’s a complicated market that requires significant discipline and thoughtfulness”. (Sanchanta, 2010) Despite its long presence in the Chinese market (Starbucks opened its first shop in Beijing in 1999), the company only has 376 stores on the China mainland, compared with 878 in Japan. In Japan, the company has taken a similar strategy of cutting costs and overall sales for the current fiscal year ending on March 31 is forecast to have stayed flat at 96.4 billion yen ($1.03 billion) from the year before. But operating profit is forecast to rise at 12% to 6.1 billion yen, due largely to the cost cuts. Sales have also seen a tentative turnaround and the coffee chain plans to open 50-60 more stores in the country this year. The challenge in the Japanese market has been keeping consumers loyal to the Starbucks brand which can cost three times as much as its competitors. To counter this problem, Starbucks Japan