Starbucks Global Expansion Strategy

Grande Latte, Frappuccinno, and Espresso Regalo Ð'- all words related to the specialty coffee business. Chances are, if you've been to an airport, grocery store, mall, or the downtown area of a large city, you've been to or seen a Starbucks. Without a doubt, Starbucks is the de facto leader in the specialty coffee market, and not just in the United States. In 1999, Starbucks expanded into China. Today, their expansion continues in China and around the world. Starbucks now has stores in 47 countries. Their global expansion strategy and performance is stellar. Let's examine some possible components of Starbuck's global expansion strategy that enables them to determine how, why, and where they expand.

According to their Annual Report, Starbucks opened up 2,571 new stores in 2007 (www.starbucks.com). They now operate over 15,000 stores around the globe. In China, their aggressive expansion continues. In 2006, Financial Times quoted Howard Schultz as saying "China has emerged as the strategic priority within the company today and in the long term. The opportunity we have in China is like no other" (17).

To succeed globally, companies must analyze and choose from many strategic plans. One way they do this is by using a SWOT analysis Ð'- a strategic planning tool used to evaluate Strengths, Weaknesses, Opportunities, and Threats. The goal of a SWOT analysis is to identify key internal and external factors that affect the desired outcome. Strengths and weaknesses are internal to the company and include things like wage/benefits, corporate culture, leadership, marketing, and operations. Opportunities and threats are external to the company and include things like government regulations, competition, and economic and social forces.

Applying a SWOT analysis to Starbucks global expansion strategy shows why they have been successful. Consider the internal factors. First is corporate culture. Starbucks aims to "develop enthusiastically satisfied customers all the time." They do this by excelling at customer service, being environmentally friendly, and through corporate social responsibility. Also, they consistently have been named one of the Top 100 Best Places to Work. This makes them a very likeable company, both in the U.S. and abroad. Marketing is another key factor to consider. Starbucks focuses on quality and experience rather than price. Customers are not buying a cup of coffee, they are buying an experience. Starbucks aims to be the Ð''third place,' a welcoming place between home and work where people gather to engage and connect (www.starbucks.com). Another factor to consider is production and operations. Starbucks strategically places their retail stores in high-traffic areas. Additionally, they have established relationships with other parties that allow them to reach customers where they shop, travel, and work. Starbucks also offers its products through direct-to-consumer methods (catalogs and the web) and a few joint ventures.

All of the above factors are strengths that Starbucks has implemented in their global expansion strategy. Of course, there are external threats they could face. One such threat is government regulation, such as tariffs and taxes. "Some analysts say import tariffs as high as 20 to 60 percent are the reason why companies such as Starbucks are considering sourcing coffee from China" (Reuters). To overcome this threat, Starbucks is considering sourcing coffee from China. Another threat is economic factors. When coffee prices tend to increase, consumers usually reduce their consumption. This is true, even in China. Starbucks does have a few threats, but overall, they are outweighed by the number of strengths, proven by their expansion numbers for the last few years. 2005 saw 1,672 new stores, in 2006, 2,199 stores were opened, while 2007 saw 2,571 new stores, their highest number yet.

Another