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IB GP Starbucks

Starbucks Corporation is the world's largest coffeehouse chain, founded in 1971 in Seattle, Washington. As of 2021, Starbucks had over 33,000 stores across 80 countries. Starbucks has rapidly expanded globally since the 1980s, opening over 1,800 new stores annually. Starbucks offers hot and cold coffee and tea drinks, along with snacks and food items. While globally successful, Starbucks faces challenges from increasing coffee bean prices and rising operating costs that require periodic price increases, risking loss of some customer base.

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133 views4 pages

IB GP Starbucks

Starbucks Corporation is the world's largest coffeehouse chain, founded in 1971 in Seattle, Washington. As of 2021, Starbucks had over 33,000 stores across 80 countries. Starbucks has rapidly expanded globally since the 1980s, opening over 1,800 new stores annually. Starbucks offers hot and cold coffee and tea drinks, along with snacks and food items. While globally successful, Starbucks faces challenges from increasing coffee bean prices and rising operating costs that require periodic price increases, risking loss of some customer base.

Uploaded by

me khud
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Starbucks Corporation

Starbucks Corporation is an American MNC of coffeehouses and roastery reserves. It was


founded on 30th March, 1971 by Jerry Baldwin, Zev Siegl and Gordon Bowker and it’s
headquartered in Seattle, Washington, U.S. It is the world’s largest coffeehouse chain with
more than 383000 employees working under it. Its revenue for the last financial year was
US$29.06 billion.

Area of Business in International Business

As of November 2021, the company had almost 33,833 stores in 80 different countries,
15,444 of which were located in the United States. Out of all the stores of Starbucks in U.S.,
over 8,900 are company-operated, while the remainder are licensed.

Between 1983-1987 when Schultz acquired Starbucks, the company had opened 17 stores.
More than 30 years later, at the end of the first fiscal quarter of 2019, Starbucks owned and
operated 29,865 stores worldwide. The company opened 1,826 stores between the financial
year 2018-19. As of last September, California had 2,001 Starbucks stores, and was the third-
highest total overall, behind the United States and China. Starbucks owns or licenses nearly
15,000 stores in the U.S.
Entry of Starbucks in India
In January 2011, Starbucks and Tata Coffee, Asia's largest coffee plantation agency,
announced plans for a strategic alliance to bring Starbucks to India and also to source and
roast coffee beans at Tata Coffee's Kodagu facility. In January 2012, Starbucks created a
venture with Tata Global Beverages and named it as Tata Starbucks. Tata Starbucks owns
and operates Starbucks outlets in India as Starbucks Coffee "A Tata Alliance." Starbucks
opened its first store in India in Mumbai on October 19, 2012.

Area of Operations in International Business

The rise of the wave of coffee culture is usually attributed to Starbucks, which introduced a
wider range of coffee experiences. The company serves hot and cold drinks, whole-bean
coffee, micro-ground instant coffee, espresso, latte, full and loose-leaf teas,
juices, Frappuccino beverages, pastries, and snacks. Few offerings are seasonal, or specific to
the locality of the shop. Depending on the nation, most stores also provide free Wi-Fi internet
access. Selling premium products, the company has been a brand of selling items with top
quality. So, the level of branding and authenticity differentiates Starbucks business model and
strategy from other coffee chains. Since the Starbuck business model does not compromise
with its taste and quality, it charges relatively high for its services. As a result, this shows a
high-end loyal customer base for the company. Starbucks cup size ranges from small (240
ml) to Trenta (890 ml). In 1997, Starbucks initially offered non-dairy milk at its U.S. stores
with the introduction of soy milk. Starbucks ceased using milk from cows treated with rBGH
in 2007. In June 2009, the company started to sell salads and baked goods without high
fructose corn syrup or artificial ingredients. This move was expected to draw in healthy- and
cost-conscious consumers and prices. In 2015, Starbucks started serving coconut milk. In
2016, it began serving almond milk. In January 2020, oat milk became available
globally. Starbucks also offers non-dairy creamers at retail in partnership with Nestle SA.
Ethos water, a brand of drinking water was acquired by Starbucks in 2003, and is sold at
stores throughout North America. 
Business Expansion in International Business

Starting in FY23, Starbucks expects company-operated comparable store sales growth of 4%


to 5% annually, both globally and in the U.S Expected incremental returns from investments
in retail store partners, industry-leading digital capabilities, and a planet-positive agenda have
pushed the stock up from 3% to 4%. In 1995, due of the saturation of the United States
market, Starbucks, the global coffee house chain, started to expand its business overseas.
Starbucks first entered and tested the Japanese market by establishing joint ventures with
local retailers. By 2001, Starbucks had quite 150 stores and plans to expand its success at a
fast pace.
In July 1996, the first Starbucks outlet opened outside North America, in Tokyo, Japan in the
Asian continent, after which Starbucks expansion grew rapidly. In 1998, Starbucks entered
the European continent and acquired the UK based Seattle coffee company, and rebranded all
its stores as Starbucks. In July 2000, the first outlet in Australia was opened in Sydney. But
after a massive downturn in 2008, the remaining Australian Starbucks stores were sold to the
Withers family in 2014, with the company planning a more restrained expansion. In
December 2010, Starbucks opened their first-ever Starbucks at sea. In partnership with Royal
Caribbean International, Starbucks opened a store aboard Allure of the Seas, Royal
Caribbean's second-largest ship and therefore the second-largest ship in the world. Starbucks
has automation systems in many areas. These machines have around 280 possible drink
combinations to choose from.

Challenges faced by Starbucks in International Business

Success is not a one-time game. For becoming a successful company, a company has to face
many challenges. Starbucks also battled a lot of challenges and is still battling from many
challenges. Some of the challenges faced by Starbucks are:
1) Losing Customers- Starbucks has been continuously increasing its prices because of the
high cost of coffee beans and wages. To keep the appropriate profit margin, it regularly
increases its price, as a result a lot of customers who were loyal to the company slowly
started losing interest.
2) Higher wage Payment- As mentioned, the increase in prices of end product is mainly due
to higher cost of raw material and labour. It is argued that an increase in the minimum wage
will adversely impact the company and its already thin margins, especially at licensed stores. 
3) Rising prices of coffee beans- Coffee prices, after being on a slump for a while, have
started going high again. The primary contributor towards the increase in prices of coffee
beans is the drought in Brazil and Vietnam, the largest producers of coffee beans. Further, the
increased demand for coffee has led to a decrease in the inventory levels of coffee beans for
the past twelve consecutive quarters. As a result, we have seen a rise in the prices of the
commodity. Since coffee is the main raw material used, a hike in the coffee bean prices,
coupled with supply shortage, affected Starbucks margins negatively. 

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