International trade and economic transactions between countries. Commonly traded items include consumer goods, such as televisions and clothing; capital goods, such as machinery; and raw materials and foodstuffs. Other transactions include services, such as travel services and payments for foreign patents. International commercial transactions are facilitated by international financial payments, in which the private banking system and the central banks of commercial nations play important roles. International trade and accompanying financial transactions are generally carried out for the purpose of providing the State with goods that it lacks versus those that it produces abundantly; such transactions, which work with other economic policies, tend to improve the standard of living of the nation. Much of the recent history of international relations relates to efforts to promote free trade among nations.
Coffee is now a fun experience that anyone can have at any time of the day; thanks to Starbucks. When one buys a Starbucks coffee, they don’t just buy a cup of coffee; they buy an experience. From the strong aroma of the coffee, the laid-back atmosphere, and the rich taste of any combination you like, Starbucks customers understand the difference between regular coffee and Starbucks coffee experience. Starbucks, although technically the American name, is a well-known name and is spoken by people no matter where they are or from any language they speak. Originally just a narrow facade at Seattle’s Pike Place Market, Starbucks has become one of the largest companies in the world, with more than 15,000 stores in 50 countries. Since 1971, Starbucks has been offering some of the best coffee in the world for anyone who wants to pay the price stepped for a cup. Starbucks did not rise to the top with just luck; it did so through acquisitions, differentiation from its competitors, and protecting its name fought hard to create.
The macroeconomic environment in which Starbucks operates is characterized by the ongoing global recession, which has weakened the purchasing power of consumers. However, market research conducted in the past few months has shown that consumers have not reduced their coffee consumption and instead are moving to cheaper options. This means that Starbucks can still take advantage of consumers’ purchasing power in a way that will give it a huge advantage over its competitors by offering cheaper alternatives. Apart from this, Starbucks has already taken some steps to leapfrog the emerging mobile computing revolution by linking it with Apple to offer discounted coupons in applications used on iPhone devices. Furthermore, this exercise is also accompanied by co-branding and cross-selling, which means that Starbucks is well-positioned to reap the benefits of the smartphone revolution. Having said this, it should be noted that consumers around the world are increasingly turning to “ethical verification”, which means that the products they buy and the brands they consume need to prove that they follow social and environmental standards in their manufacture. This is the main challenge for Starbucks as it faces the emerging challenges of the new era of consumer awareness and the stagnant smartphone revolution.
The main political imperative faced by Starbucks is concerns about access to raw materials that have attracted the attention of politicians in the West and in the countries from which their raw materials are transported. This is why Starbucks is keen to adhere to social and environmental standards and to adopt appropriate sourcing strategies in accordance with “fair trade” practices agreed upon by international companies and governments of developing and developed countries. Another political imperative faced by Starbucks is the need to abide by the laws and regulations of the countries from which their raw materials are exported. This was necessary because of the activism and increased political awareness in developing countries, which form the basis of Starbuck’s sourcing strategies. The third political imperative faced by Starbucks is regulatory pressure within its home market in the United States due to further scrutiny of the business operations that are now subject to US multinationals.
The most important external economic driver for Starbucks is the ongoing global recession, which has reduced the profitability of many companies. However, studies have shown that instead of reducing their coffee consumption, consumers are turning to low-cost alternatives, an opportunity for Starbucks. Of course, the company still has to face rising operating and labor costs because the inflationary macroeconomic environment coupled with lower profitability is pressing the company from both ends of the spectrum.
Social and cultural
Although Starbucks can offer cheaper alternatives as previously mentioned, it must do so without sacrificing quality. This is the company’s main social and cultural challenge as it expands its consumer base to include lower- and middle-class consumers the income pyramid. Apart from this, the ‘green’ and ‘elegant ethical’ consumers who are concerned about the social and environmental costs of the brands they consume mean that Starbucks must be aware of this trend. Third, older consumer spending is likely to dwindle, so Starbucks will have to look to exploit the younger generation as part of its strategy.
Starbucks is poised to reap the benefits of the emerging wave of mobile phones, and since they are tied to Apple to offer discount coupons on the app, you can expect to ride a portable wave easily. The company has already incorporated Wi-Fi capabilities into its outlets so that consumers can browse the web and do their job while having coffee. It’s really an added value for the Starbucks brand and something, which enhances the consumer experience. It can also make mobile payments, which is something that it is already testing at pilot sites in the United States.
Starbucks must ensure that it does not conflict with laws and regulations in the countries from which its raw materials are exported as well as local markets in the United States.
There have been many concerns about the business practices of Starbucks from activists, international advocacy groups, and consumers themselves. Therefore, Starbucks should be mindful of these concerns if it is to continue to uphold the trust it enjoys with its customers.
PESTLE analysis proves that Starbucks operates in a relatively stable external environment. The main reason for this is the fact that it works in the food and beverage field, which means that despite the recession, consumers cut consumption somewhat rather than completely. The task before Starbucks is to reduce costs and increase value so that it retains its consumer base and attracts consumer loyalty.
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Globalization of Starbucks
Global expansion is essential for successful businesses Starbucks is no exception. Despite the success of Starbucks in its domestic market, the company’s leaders knew they would have to exploit globalization and expand the company to foreign markets to take full advantage of the company’s potential. In 2003, Starbucks quickly expanded into overseas markets and began to develop into the global company we know today. Countries are beginning to experience the Starbucks Impact, the constant emergence of new competitors with superior business models that force companies to reconsider the feasibility of what they have always done. In short – if your company can’t keep up with the efficiency of Americans, it won’t work. Since globalization helped establish Starbucks as an international company, the company faced problems. These problems arose internally, within the company’s international business model, and abroad, in the form of external competition. Competing cafes began to copy Starbucks’ business practices, name,s, and even company logo. Starbucks had to use intellectual property laws to dispel customer confusion with competitors.
When Starbucks first expanded internationally, it used the same aggressive business model it developed in the United States, but soon discovered that the same tactics that established the market in the domestic market were not conducive to international expansion. In addition to cultural disputes between the organization’s retail practices and different regions, many cities opposed the establishment of Starbucks as a means of protesting against the larger trend of globalization. Because of this resistance in some areas, Starbucks had to create ways to adapt to foreign countries and seek the support of their populations. Starbucks does this, and it does so well, by listening to its customers. Starbucks experienced difficulties when trying to enter the European market. What Americans found strange did not translate well into Europe. Europe has been a trading hub for some of the world’s most exotic goods from distant regions for centuries. While beans from foreign locations were perceived as allergic to Americans, Europeans were thinking differently. Initially, Starbucks in Europe began to head to the United States, like a coffee shop/restaurant offering a Starbucks experience. Over time, Starbucks evolved to suit the demand of European citizens. Starbucks staff on the sidewalk will educate pedestrians on how to “make your own coffee”, in an effort to attract a classic French sense of art and creativity. The Starbucks strategy in Paris encourages the purchase of its coffee as an economic endorsement for foreign coffee bean producers that embody the unique characteristics of soil and light … which blends the classic French concept of pride in individual craftsmanship and professionalism, and land products, with the promise of a green and sustainable brand.
Starbucks not only listens to its customers; it also listens to and appreciates its employees. Starbucks was the first company in America to offer comprehensive health benefits and stock options to every employee, including more than 65% of those who worked part-time at the time. In addition to providing employees with a significant benefit plan, Starbucks also provides its employees with comprehensive training that enables the organization to promote its products through its employees. Starbucks, by recruiting words, is able to save big money on marketing costs and redistribute them to improve the company elsewhere. Starbucks spends $ 30 million a year on advertising or nearly 1% of revenue. Most consumer companies scale up to $ 300 million annually. This is an enormous advantage, not only in low spending but also in foreign countries where the recruiting of verbal words replaces traditional marketing methods that are not effectively available.
Since the beginning of Starbucks, the growth trend has been visible. After continued growth within the United States, the saturated market made it necessary to find alternatives in order not to decline. The result was the company’s international focus. In order to succeed in business, in the domestic market as well as in overseas markets, there are various factors of importance. These factors can be described and analyzed on the basis of Porter’s five forces model. The Porter Framework includes five key factors affecting business: the threat of alternative products, the bargaining power of suppliers, the bargaining power of buyers, competition between competitors, and market entry barriers.
Alternative products affect demand for a company’s product. More alternatives provide a greater choice for customers. As a result, as price elasticity increases and given the same benefit of the commodity, lower alternate prices will result in lower sales. In the ideal market, the lowest-priced competitor will attract all customers. To be successful, customers must be able to see greater benefit from using a particular item in order to be willing to pay a higher price for it. A different type of alternative is the alternative use of money, so instead of going to the cafe, visiting the cinema may be an alternative to spending money. However, most customers go to Starbucks for a drink and most likely will not give up a cinema visit for a cup of coffee making the threat of alternatives offering different experiences smaller.
Starbucks is not just a cafe but offers an experience. With regard to these alternatives, they should be measured in the package provided by Starbucks to its customers: a large selection of coffee, a pleasant atmosphere, great decor, and access to a wireless LAN in most of its American and European stores. It is difficult for a supermarket or regular cafe to offer hot and cold drinks to imitate Starbucks, for example in Britain, other different retailers have a similar assortment, similar music, decor, and ethics, they cannot equal the Starbucks brand and the associated image. Thus, Starbucks can request a premium on their offer. Problems appear when Starbucks is converted into a cafe. Then any other cafe equals Starbucks and the cheapest price or coffee culture is the main factor for customers, especially in countries with a large coffee culture where Starbucks is new and rare.
The bargaining power of suppliers is determined by their chances of influencing the price they get for their product. If suppliers are concentrated or low or if the costs of switching between suppliers are high, their impact will be significant. Today, as in past years, coffee is the second most traded commodity behind crude oil. In the coffee industry, there are many small suppliers, competition is high, and products are subject to global price fluctuations making it difficult for farmers to make long-term calculations. As a result of the increasing number of countries that began to produce coffee prices, they dropped from more than $ 1 in the 1980s to less than 50 cents per pound of coffee today. Since there are only two types of coffee beans, Robusta and Arabica, where the latter is used only for premium coffee, suppliers wishing to serve Starbucks should create and maintain a high-quality standard and offer good prices. Since prices are too low, their profit margin is too small, or may sell with a loss. Therefore the strength of suppliers can be considered weak. As a minimum of protection, Trade Fair coffee was established in the second half of the 20th century. It is a not-for-profit program that ensures coffee producers in poor countries get a fair price for their goods. But despite Starbucks paying higher prices for their grains, fair-trade contributes only a fraction of Starbucks’ business.
For high quality, Seattle trains suppliers specifically to meet their standards, and samples are taken to determine quality differences in the early stages. In addition to fair trade, prices pay above the market average in order to maintain their quality standards and get a good relationship with their suppliers. But with regard to the expansion strategy of Starbucks, maintaining a steady supply of high-quality coffee will become difficult. High-quality coffee is a rare resource and crops are naturally limited. Through this supplier, you may get a stronger position to negotiate with Starbucks and the coffee industry in general.
At the other end of the customer value chain. The average customer visiting a retail store has no negotiating power. Its price is fixed. Clients who enjoy a stronger position are those who demand large sums to give them a better position. Starbucks deals with both types. Besides the retail store customer, Starbucks has partnered with major companies such as Pepsi, and Barnes & Noble, and so on. They can improve Starbucks’ image and gain strategic value as they help develop new products and increase their Starbucks market share. Because of this, they are able to place orders towards Starbucks and negotiate prices.
Apart from these factors, great competition in retail between coffee chains. Starbucks’ biggest competitor is McDonald’s. They have an extremely large infrastructure, one of the largest networks in existence, but a different picture. They have a fairly simple picture and the presentation is still geared towards meeting needs quickly. In contrast to this Starbucks provides an environment where spending time is the key point. Different coffee chains try to imitate Starbucks and are able to attract customers because their focus is slightly different. One of the biggest contenders, the second Canadian Cup, has focused on shopping malls but is now expanding to one location. Even in general competition is very large. Despite this fact, Starbucks has succeeded in becoming the biggest player in this business, so its success in the United States is not only clear but a certain contribution from its international business is also included in this success. Since there is no supplier power, very few buyers can put pressure on Starbucks but the great competition with many different coffee cultures around the world is a very difficult expansion strategy.
Overall, Starbucks is a strong company in a growing industry, it takes a strong position in the coffee industry and launches promising strategic and environmental goals. Over the next few years, Starbucks will continue to grow in the international market. Although two-thirds of its stores are local at the moment, the percentage of foreign stores will rise over the next few years. Starbucks handles the transition from a local company to an international company very smoothly. It is taking the right steps to allow it to successfully achieve its long-term goals. Starbucks’ strong business model can and should be replicated by international companies. Starbucks is a company that takes its global products and specializes in them to suit the local and cultural needs of different regions and communities. They have a transnational business model that allows them to have a global product that can be tailored to national needs. Starbucks’ corporate learning system allows you to gain knowledge of new marketing or product ideas that can then be transferred to other national areas within Starbucks. Starbucks must be responsive to its different markets. Economic meltdowns and political instability can ruin the business market. Starbucks must be aware of the changes in government and culture in order to better predict the problems it will face. It is important for Starbucks to continue its robust communication system in order to continue to grow as a business.