Global Journey Into South Africa

Introduction

Starbucks Company dates back in the year 1971 in Seattle when it began its operations as a specialty coffee retailer. The corporation constitutes of about 182,000 employees all over the 19,767 licensed stores in 62 countries. The fantastic performance and growth expansion of the company has ensured it has a total of 32000 stores globally (Schultz and Gordon 2012). The company sells different tea and coffee products and legally licenses their operations in their stores' national food service and groceries. For students who are exploring the world of business, Starbucks' journey can offer the most valuable insights into strategic management and market expansion, making it a relevant case study for business dissertation help.

The advent of globalization, favourable marketing strategy, determination, good customer relation, and high-quality products all enriched the production experience both at home and abroad (Caruso 2010). The company’s entry into South Africa rests on her expansion agendas alongside the dawning globalization. Through globalisation, the Starbucks Company has expanded beyond the walls of America and now to South Africa, Africa.

Drivers of Globalisation

The rapid growth of globalisation in trade has significantly oriented the spread of production of goods and services produced within the country’s borders and without. As a contemporary issue, globalisation has led to high living standards in developing countries while opening potentials for global economic development. Through the circulation of currency, trade, and exchange of information and technology, globalisation has reduced the world into business partnerships, through compressed geographical distances (Grant 2016). The continued thriving of America’s Starbucks Company into new global nations is credited to globalisation. Globalisation thus in the contemporary era has been significantly driven by technological advancements in information and communication areas, increased economic integrations, international trades which all have contributed into efficiency in sharing and interacting without geographical barriers. Trade and the spirit investment across the world are the fundamental drivers of globalization (Gulati, Huffman, and Neilson 2002).

Global Expansion Strategies for Starbucks

In the context of Starbucks Company, the need to expand was motivated by the need for space to foray new opportunities abroad based on the fact factors such as infrastructure and communication technology had initially developed. International trade and investment are characterised by reducing the overhead costs incurred in production and effective utilisation of inputs. Other drivers of globalization including advancement in information science and technology, geopolitics, outsourcing, offshoring, telecommunication, and transportation contributed to the basketry of Starbucks expansion to the rest of the world (Hanson et al. 2016).

In conjunction with globalisation, the entry and expansion of Starbucks Company were inspired by the other number of factors. The company management and concerned stakeholders masterminded unique strategies which erupted forward the rapid growth. According to research done, the company has been doing well over the last two decades with approximated annual returns of 20%. Within the interior operations of the company lies a robust business model built on the threshold of service, in-store experience, national expansion framework, social policy strategies, and her products (Isenberg 2010). One of the strategies integrated by Starbucks Corporation since her inception is product differentiation which provides consumers with a variety of brands. Such differentiated brands

encompass locations, enticing customer service and care, premium mix, and coffee beverages habit. The company has continually embraced strategic alliance and smart procurement plans for the raw materials needed (Loppacher, Cagliano, and Spina 2011). The Starbucks did not adopt the franchising model but instead undertook her stores and joint ventures and opted for international markets. The company has secured success in the manufacture of Evolution Fresh such as fresh juice products, Teavana, and premium products including bread. The products are deemed as different and unique and therefore capture different audiences (Lasserre 2017)

Another essential strategy the Starbucks utilized has been her international strategy to breakthrough into more high and advanced markets of the world and built their market in such countries. This strategy has enabled them to establish new companies in about 60 new countries. This strategy is geared to ensure the established business deals attain the limelight of readily found markets for the produces. The company gets to thrive based on the competitive advantage the corporation has gained over her competitors (Lynch and Smith 2006).
Moreover, the company utilized their mail order catalogue to identify strategic market points. The description provided potential customers with the chances to order the coffee packages in wholesale. The company then was able to deliver the products to their customers, and this helped in the development of trust and confidence on the part of traders, which consequently paved the way for increased sales (Santini and Rabino 2012).
Starbucks’ outstanding performances are as a result of diffusing their incentives and brands from the local setting, which enabled it to obtain new opportunities into new markets; including America, Europe, Asia, Australia, and Africa. The successes began at home in the United States and spread into Canada, Mexico, and the Caribbean Sea. Internationalisation took

the course later on, and Starbucks spread her wings into the United Kingdom, the Middle East, and Russia (Santini and Rabino 2012). The company managed to establish stores that were well captured by the target group in the new countries. Such efforts were based on need assessments concerning people’s demands, and sound market strategies in new areas; and loyalty conveyed initially from their quality produce. Through customers’ motivation and a culture that satisfied her employees, much success was brought forth (Santini and Rabino 2012). The company assimilated customers and employee’ demands on an equal measure and understood that these classes of people are the fundamental drivers of their processes. The corporate management staff elevated the health care benefits of employees and internally developed a robust communication strategy that instigated a healthy working environment (Schultz and Gordon 2012). Additionally, Local collaborations and partnerships between the Starbucks’ central administration and her branches have always resulted in a positive effect. Local involvement in decision-making processes ensures that the consumers’ tastes and preferences are rendered attention. Thus, the produce finds a readily found market, which increases the returns at a relatively fast rate (Schultz and Gordon 2012).

The Starbucks’ Triumphant Entry into South Africa

The Starbucks penetration into Africa began in Egypt and permeated down into South Africa. South Africa by then was characterised by other striving brands including Zara, McDonald's, and Burger King which imposed competition against the Starbucks. Despite the presence of such brands, the triumphant entry of Starbucks into South Africa rests on the threshold of her market leadership, supply chain processes, and strategic locations. Being a dominant market share of familiar brands such as Frappuccino, their superior retail location permits them high abilities as opposed to their competitors (Thompson and Arsel 2004).

Starbucks’ penetration into South Africa is subjected to competition, and her survival will greatly depend on her strategy to produce differentiated brands with international cognisance. The company has trailed to study people’s preferences in terms tastes and brand to ensure their industry produce relevant products. The Starbucks is doing well because of entering into partnerships with the local industries that already exist. The partnership with the Taste Holdings Corporation throughout the 25 years will induce much success (Lynch and Smith 2006). The connection between the Starbucks and the local enterprises provides an added advantage against the struggling competitors.

The Starbucks Company has a solid branding image that resonates higher than their opponents. The robust financial background of the company enables it to enjoy the massive economies of scale. The large economies of scale, possessed by the company, highly trained experts and excellent customer care services have all influenced the firm’s success amidst the competitive environment in South Africa. The Starbucks’ creativity arts of decorating their stores and sales points have attracted more customers. Such creativity draws local people into their business operation through procuring artists and painters, which consequently lures a broad market Trkman 2

Opportunities for the Starbucks to Conquer Africa Nations

The Starbucks has potentials to percolate through Africa based on their lucrative business deals. The company’s ability to choose excellent retail locations provides better chances for rapid spread across Africa. The corporation’s demand to conquer into new areas will be supported by many factors that will motivate this ambition. First, the company has a robust market position and international brand recognition both in the United States and over 60 nations. The recognized product brands in the coffeehouse segment will be positively adopted in new areas of the continent (Trkman 2010).

The elemental establishment of customer loyalty has initiated the abilities of the company’s success in new countries. The corporation has implemented loyalty-related programs tailored to enact customer loyalty such as Starbucks Card and Starbucks Reward Programs. The Starbucks Card renders, motivates rewarding, convenience and induces an increased number of stores visits by the holders and incorporated with their respective mobile application. The application of technologies in production and mobile outlets such as “Starbucks App” compatible with android and apple software will significantly impact the potential of succeeding in new countries (Caruso 2010).

Challenges Inhibiting Starbucks from Conquering New African Nations

The gradual increase of coffee beans price globally has induced the effect of high costs for the Starbucks produce. Over the recent past, the company has been forced to increase the rates of her products to meet the operations cost and fix the gap created by the overshoot in raw material price and labour. Between the years 2014 to 2016, there witnessed a hike in the amount of the products which aimed at safeguarding the company’s operating margins (Santini and Rabino 2012). The continuous growth of the products significantly discourages the middle and low-class people from enjoying their brands. The company has initially built a premium reputation and become a critical converging point for casual meetings associated with worker study while sharing a cup of coffee. With the increment of price, the company cramps and consequently limits its spread across Africa (Caruso 2010).

The entry into more Africa countries has not been an easy task for many foreign corporations. The efforts are crumpled by unfavourable political ideologies which do not inspire foreign investments. The replacement of Howard Schultz the Company reduced the share price by 4%, but this will not impact the company a lot in the long run. The incoming Chief Executive Office, Johnson is a rich reservoir of experience in technology. He is deemed to introduce more prominent technology such as expanded use of Mobile Apps to fetch more returns (Gulati, Huffman, and Neilson 2002).

Stiff competition will also counter the pursuit of Starbucks from elongating her quest to conquer new states. Many international brands that have already established their market statue will impose high competition which will narrow down the chances for survival. The local industries which sell at a relatively lower price will also introduce stiff competition against the Starbucks. The company will opt to lower their costs which will, in turn, compromise their returns and profitability (Lasserre 2017).

Conclusion

Starbucks Company is one of the living proofs of such corporations that have grown under the influence of globalisation. The dawn of internationalisation as discussed above paved the way for the simplified exchange of information and trade in general, which consequently affected the transition of Starbucks processes into Africa, Asia, Europe and the rest of the world. The corporation’s sound financial background and market strategies did influence her success. The desire to break through the walls of the United States to abroad nations is equally accredited to robust mutual partnerships with already established companies (Trkman 2010) Additionally, the penetration of the Starbucks into Africa and the rest of the world may be challenging due to stiff competitions, unfavourable geopolitics, and an increase in coffee beans price. However, as globalisation, science and technology advances, such barriers are likely to crump, where the environment for trade will thrive. Sound internal organisation and structures are also vital in the company’s quest to blossom.

References

• Boons, F. and Lüdeke-Freund, F., 2013. Business models for sustainable innovation: state-of the-art and steps towards a research agenda. Journal of Cleaner production, 45, pp.9-19.
• Caruso, G., 2010. A new alliance for the city? Opportunities and challenges of a (globalizing) right to the city movement. Cities for All, 99.
• Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
• Gulati, R., Huffman, S. and Neilson, G., 2002. The barista principle: Starbucks and the rise of relational capital. Strategy and Business, pp.58-69.
• Hanson, D., Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2016. Strategic management: Competitiveness and globalisation. Cengage AU.
• Isenberg, D.J., 2010. How to start an entrepreneurial revolution. Harvard Business Review, 88(6), pp.40-50.
• Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
• Loppacher, J.S., Cagliano, R. and Spina, G., 2011. Key drivers of buyer-supplier relationships in global sourcing strategies. International Journal of Procurement Management, 4(2), pp.156-180.
• Lynch, R.L. and Smith, J.R., 2006. Corporate strategy. Harlow,, England: FT/Prentice Hall.
• Santini, C. and Rabino, S., 2012. Internationalisation drivers in the wine business: a RBV perspective. International Journal of Business and Globalisation, 8(1), pp.7-19.
• Schultz, H. and Gordon, J., 2012. Onward: How Starbucks fought for its life without losing its soul. Rodale Books. Thompson, C.J. and Arsel, Z., 2004. The Starbucks brandscape and consumers'(anti-corporate) experiences of globalisation. Journal of Consumer Research, 31(3), pp.631-642.
• Trkman, P., 2010. The critical success factors of business process management. International Journal of Information Management, 30(2), pp.125-134.

Dig deeper into Gender Pay Gap in Barclays with our selection of articles.