Critical Issues in Business Management

This report evaluates the growth strategy of Starbucks in South Africa, including drivers of globalization, global expansion strategies, and ways in which the company maintained its growth. It also discusses opportunities and challenges for Starbucks in the South African market.

Running Head: Critical Issues in Business Management
Critical Issues in Business Management
[Type the document subtitle]
Laptop04011
[Pick the date]

Critical Issues in Business Management 1
Contents
Introduction......................................................................................................................................1
Analysis of Growth and Performance..............................................................................................1
Part 1............................................................................................................................................1
Drivers of Globalization for Starbucks in Australia................................................................1
Global Expansion Strategy......................................................................................................2
Part 2............................................................................................................................................3
Maintenance of Growth by Starbucks.....................................................................................3
Part 3............................................................................................................................................4
Opportunities...........................................................................................................................4
Challenges................................................................................................................................5
Conclusion.......................................................................................................................................5
References........................................................................................................................................6

Critical Issues in Business Management 2
Introduction
Starbucks Corporation is a coffeehouse chain based in Seattle United States that is one of the
largest coffeehouse company present worldwide. The company was originated in the year 1971
in USA and now holds more than 17,000 stores worldwide. The aim of the organization is to
provide best quality and finest coffee in the industry. The report evaluates the analysis of the
company Starbucks in the country South Africa. The company entered in the market of South
Africa in the year 2016. They found overwhelming response from the people of South Africa due
to which they resumed the plan of opening 12-15 stores in the South African market. The
company aimed to accommodate large number of stores around 150 in South Africa. The report
includes the analysis of drivers of globalization and global expansion strategies used by the
company to enter in the market of South Africa. Along with this, it also discusses about the ways
in which the company maintained its brand name in the country (Bates, and Buckles 2017).
Opportunities and challenges are also analysed for Starbucks while entering in the African
continent for long run. More details about the report are discussed below:
Analysis of Growth and Performance
Part 1
Drivers of Globalization for Starbucks in Australia
Many factors acted as a driver for globalization for the company Starbucks in the market of
South Africa. These factors are mentioned below:
Increasing Demand of Coffee: The coffee industry is growing due to increasing demand of the
customers in the target market. More and more people are connecting to this industry which is
insisting the company Starbucks to expand the scope of business in the international market. As
the coffee industry is growing so it is attracting the interest of the companies in the market to
expand their scope of business and increase the level of profit in the market. Customers present
in the South African market have started demanding rich and authentic coffee from the industry
(Bezuidenhout 2018). There were few such companies that successfully satisfied the customers

Critical Issues in Business Management 3
in the market due to which the company Starbucks thought this as an opportunity for the
company to grow and expand their scope of business in the international market.
Trade Liberalization: The international economic position of the companies is managed by the
trade policies and controls initiated by the government of different countries. The government,
the import facilities is mainly monitored with strict barriers as well, monitors the import and
export facilities of the companies. As an impact of globalization, the companies have started
coming in contact with various other companies present in different parts of the world and
initiating contract with them. So, liberalization in the trade barriers in the country South Africa
acted as an opportunity for the organization to grow and succeed in the environment (Misati, et.
al., 2017).
Rapid Change in Technology: Technological advancement in the recent years has initiated a
major improvement in many fields that has increased the competence of the companies to act in
the society. Technology advancement has given opportunity to the company Starbucks to
successfully expand their business by inputting various technological advancement in the
business. IT has started increasing the satisfaction of employees and reducing the burden of
employees due to which companies have started getting advantage to efficiently expand their
scope of business in the international market (Hartmann 2016).
Global Expansion Strategy
The company Starbucks expanded their scope of business using the franchising strategy with the
company Taste Holdings (Taste). The company is involved in providing Starbuck’s coffee to the
customers in the target market. Further, below mentioned are the global expansion strategies
used by the company after analysing franchising as the market entry mode used in South Africa:
Vertical Growth in Low Cost Countries: as discussed above that the coffee industry is growing
day by day which is increasing the opportunities for the company Starbuck in the market. For the
purpose of globalization, the company entered in a low cost country that is South Africa with
basic menu and services as well. The company has a positive and strong brand that helped them
to vertically spread their scope of business by providing high value products at nominal rates.
Due to this aspect, the company earned better that expected response in the market that insisted
them open more stores in South Africa (Alon, et. al., 2016).

Critical Issues in Business Management 4
Using Experienced Employees: Further, it should be noted that no organization is good enough
without loyal and experienced employees. So, the company utilized the experienced staff present
in the industry to work with them and initiate their sales as well. Employees are the biggest asset
for any organization, so the company made use of similar strategy to make sure that they
successfully grow profitably in South Africa. The employees helped the company to analyse the
potential market growth that the company achieve and then helped them to attain the same
(Solberg 2017).
Differentiate and Use High Brands: Currently the coffee industry is at its peak with high
degree of competition as well. Resulting in which, it emerged as a need for the companies
present in this industry to differentiate their products and services in the market and grow. Thus,
the company in South Africa started their business by serving basic products and ended with
initiating diversification as well (Schuler, Khilji, and Ruël 2015).
Diversification to related business: The Company is involved in the business of coffee making
which that made them completely dependent on single product. So, with this expansion, the
organization aimed to increase their diversification in related products so that their dependency
on single product can reduce. Providing passterries and cookies along different kinds of
beverages initiated the sales of the company from different direction (Welsh, and Alon 2015).
Part 2
Maintenance of Growth by Starbucks
The market of South Africa is considered as a difficult market where many companies have
failed to create their foot impressions. Companies like Zara, McDonalds and Burger King
struggled in initiating their success in the market of South Africa however, Starbucks managed to
create their position in the market due to various activities that they initiated in the environment
(Hoffman, Watson, and Preble 2016). Further, the ways in which the company managed their
growth in the tough market of South Africa are discussed below:
Strong Market Entry: The Company strongly presented themselves in the market of South
Africa by making use of franchise mode of entry. Before actually entering in the market of South
Africa, the made the market presence by posting their thoughts on social media. Everybody make
use of social media in the current environment due to which, it acted as a strong tool to prepare

Critical Issues in Business Management 5
people for the entrance of the company in the market. Further, franchising strategy of the
company helped them to grow with the help of the company Taste that was already a part of the
industry (Glowik 2017).
Creation of Brand Presence: Starbucks is an expensive brand whose products every person
wants to have. The strong brand position of the company in the international market base,
insisted the customers to purchase the products from the company. Further, the products served
by the organization are true to their value, thus it can be said that the quality of the products also
instigate the customers to initiate sales for Starbucks. Promotional strategies of the company also
acted in favour of them in the South African market (Oetzel, and Miklian 2017).
Decreasing in Product Prices: This is one of the most important strategy that helped the
company to increase its sales in the target market. The company is known for its artisan product
and premium quality values as well. Being a premium product company, the amount of the
products also increases in the market. So, the company initiated the strategy of decreasing the
prices of their products in South African market so that people can purchase products from them.
The company relatively reduced the prices of the product due to which customer initiated sales
for them even when the competitors were serving the same products at lower rate (Spillan, and
King 2017).
Part 3
Opportunities
Working under un-captured market: The market of South Africa only has local companies
working with the people. There is no international brand as such present in the coffee industry
due to which the company gets the opportunity to capture the un-captured market. It gives the
opportunity to frame the interest of the customers on the basis of products and services that they
provide in the environment. This aspect will help the company to increase the sales in the market
and make people choose their product as the first priority. Working under the un-captured market
helps the organizations to mould the interest of the customers according to the products that they
provide in the environment (Hansen, Jensen, and Petersen 2016).
Strong Brand Value Attracting Customers: As discussed above, that the company has a strong
market presence that attracts the customers to the maximum level. From the time when the

Critical Issues in Business Management 6
company circulated the news that they are come in South Africa, the people became very
excited. The brand is famous worldwide, so it eventually attracts the interest of premium as well
as normal income level customers in the market. Strong brand image acts as an opportunity for
the company to enter in the un-captured market and initiate sales just by the name of the
company only (Burns 2016).
Diversification opportunities: The company Starbucks attains the opportunity of diversification
with the expansion strategies in the country. With the expansion in the South African region the
company gets the advantage to attract people from that region and people present in
neighbouring countries as well. This aspect also promotes the brand name of the company in the
target market. The coffee market of South Africa is small and basic that gives an advantage to
the company to enter in this market and upraise the taste of coffee lovers in the South African
region.
Challenges
Small Customer Segment: there is small customer segment in the South African market due to
which the company gets less number of people to target. One of the report stated that there are
around 250,000 people only in South Africa whom the company can actually target. Having such
small target market initially will increase the sales and profit margin of the company but it will
subsequently decrease. If the premium client will purchase coffee from the company on daily
basis then also the company will face problem after a specific period of time (Parboteeah, and
Cullen 2017).
Short-term growth and High Competition: There is short term growth in the market because
after that the customers will think of their pocket while purchasing the products from the
company. The products offered by Starbucks are not economic so the customers cannot purchase
it on a daily basis. So, the company will ultimately face crunch after a specific period of time.
Apart from this, there are many baristas present in the market along with local café that are ready
to capture the market of Starbucks. Surviving in highly competitive market is one of the biggest
challenge for the company Starbucks (Glowik 2017).

Critical Issues in Business Management 7
Conclusion
Thus, in the limelight of above mentioned events, the fact should be noted that the report
explained the growth strategy of the company Starbucks in the market of South Africa. Starbucks
is a profound company that entered in the coffee industry of South Africa by the way of
franchising. The report evaluated the market entry features of the company along with drivers of
globalization and global expansion strategies as well. It further evaluated the ways in which the
company maintained their growth in the South African industry. Opportunities and challenges of
the company for entering in this are also evaluated. The report adequately satisfies the
requirements of the task.

Critical Issues in Business Management 8
References
Alon, I., Jaffe, E., Prange, C. and Vianelli, D., 2016. Global marketing: contemporary theory,
practice, and cases. UK: Routledge.
Bates, M.O. and Buckles, T.A., 2017. An examination of market entry perspectives in emerging
markets. International Journal of Business and Economic Development, p.20.
Bezuidenhout, S., 2018. Should you buy a franchise?. DIY Trade News, 2018(Oct 2018), pp.17-
21.
Burns, P., 2016. Entrepreneurship and small business. UK: Palgrave Macmillan Limited.
Glowik, M., 2017. 4.9 Case study: Boehringer Ingelheim. Global Strategy in the Service
Industries: Dynamics, Analysis, Growth, p.173.
Glowik, M., 2017. Global Strategy in the Service Industries: Dynamics, Analysis, Growth. UK:
Taylor & Francis.
Hansen, M.W., Jensen, P.D.Ø. and Petersen, B., 2016. 10. drivers and strategies of international
service firms in emerging markets. Handbook of Contemporary Research on Emerging Markets,
p.223.
Hartmann, A.M., 2016. Strategic Options for MNEs Operating in Emerging Markets.
In Multinational Enterprise Management Strategies in Developing Countries (pp. 34-49). IGI
Global.
Hoffman, R.C., Watson, S. and Preble, J.F., 2016. International Expansion of United States
Franchisors: A Status Report and Propositions for Future Research. Journal of Marketing
Channels, 23(4), pp.180-195.
Misati, E., Walumbwa, F.O., Lahiri, S. and Kundu, S.K., 2017. The internationalization of
African small and medium enterprises (SMEs): a South-North pattern. Africa Journal of
Management, 3(1), pp.53-81.

Critical Issues in Business Management 9
Oetzel, J. and Miklian, J., 2017. Multinational enterprises, risk management, and the business
and economics of peace. Multinational Business Review, 25(4), pp.270-286.
Parboteeah, K.P. and Cullen, J.B., 2017. International Business: Perspectives from developed
and emerging markets. UK: Routledge.
Schuler, R.S., Khilji, S.E. and Ruël, H., 2015. 6. Role of human resource management in
international mergers and acquisitions and international joint ventures in emerging
markets. Handbook of Human Resource Management in Emerging Markets, p.122.
Solberg, C.A., 2017. International Marketing: Strategy development and implementation. UK:
Routledge.
Spillan, J.E. and King, D.O., 2017. Commercialization. In Doing Business In Ghana (pp. 201-
225). Palgrave Macmillan, Cham.
Welsh, D. and Alon, I., 2015. International franchising and other forms of
entrepreneurship. Global Entrepreneurship, 2, pp.196-228.