Starbucks' Global Strategy and Ghemawat’s AAA Framework: A Case Study

This essay explores Starbucks Corporation's global strategy, particularly in China, aligning it with Ghemawat's AAA framework (Adaptation, Aggregation, Arbitrage). Starbucks has strategically invested in China, recognizing its growth potential and adapting to the local environment by integrating e-commerce and digital technology. The company's initiative to create a '4th place experience' and its e-store on Tmall exemplify the adaptation strategy, increasing market share in China. The essay further explains the three components of Ghemawat's AAA framework, highlighting how Starbucks utilizes the adaptation strategy to penetrate the Chinese market by embracing digital technology and e-commerce, ultimately leading to increased market share and growth.

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Name of the Student
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Author Note

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In current times, there are various factors which have led the market to become
volatile in nature. These factors such as the economic conditions of the countries and the
nature of the market, companies are facing challenges to develop global strategies. The
formation of the right global strategy could be a huge investment for the company since it
would help the company to compete globally. The global strategy would help the company to
increase their customer base, which in turn will increase their revenue as increasing the
customers would increase the sales. This essay will discuss about the global strategy of
Starbucks and align it with the Ghemawat’s AAA global strategic framework.
Starbucks Corporation have a set strategy which helps them in their international
expansion especially in the country of China. Their strategy is built on the fact that China has
extreme potential to grow and expand their corporation and provide new opportunities to
them. Starbucks have tried to adhere to the local environment of China since they have been
placed in China (Lemus et al. 2015). Starbucks has planned to start an initiative of building a
4th place experience which aligns the store with the ecommerce and digital technology of the
country. They opened an e-store in Tmall which has attracted a lot of customers due to its
feature of social gifting. These global initiative have been taken to increase the market share
in China.
The Ghemawat’s AAA Framework consists of three A’s which are Adaptation,
Aggregation and Arbitrage (Appendix 1). This framework is adapted by several organisations
for their international integration. Motohashi (2015) states that adaptation strategy is used to
increase the revenue and the market share of the company by integrating certain components
in their business model. This is the most used and common strategy among the three
strategies of the framework. This strategy can be used by companies for penetrating any new
market or increasing their share in an already established market. With the help of this
strategy, the company would be able to make changes which would be accepted by the local

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people and hence would be favoured by the local customers. Willcocks (2013) proposes that
aggregation strategy is used by companies the economies of scale by creating the efficiency
globally. The companies would provide certain competitive advantage on the part of their
products and services so that a substantial increase is found in the economy of the company.
Motohashi (2015) discusses that arbitrage strategy is developed by the companies by creating
a global value by creating a profit margin with their products or services. The strategy does
not adhere to the demands of the local market and gives chance to the customers to bargain
for their products. These strategies would be helpful for the organisation in increasing their
market horizon and establishing themselves in the international market so that they could
increase their profit margin and their share in the market that they have penetrated (Motohash
2017). These strategies would help the company to grow in the international context with
certain changes that would be designed by the company.
Starbucks have taken the adaptation strategy to establish themselves in the China
market. They have done this by making changes in their services by taking advantage of the
growing digital technology and e-commerce proficiency of the people of China (Huang and
Benyoucef 2013). Starbucks have started their own e-commerce site which have attracted
more customers and have helped in increasing the market share thereby taking complete help
and utilization of the adaptation strategy to do so. Thus it can be said that the Ghemawat’s
AAA strategic framework is efficient in helping the company to develop successful strategies
which would help them in their growth and development.

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References:
Huang, Z. and Benyoucef, M., 2013. From e-commerce to social commerce: A close look at
design features. Electronic Commerce Research and Applications, 12(4), pp.246-259.
Lemus, E., von Feigenblatt, O., Orta, M. and Rivero, O., 2015. Starbucks Corporation:
Leading Innovation in the 21st Century.
Motohash, K., 2017. Management of offshore R&D in China: Cross country differences in
motivation and performance. Institutions and Economies, pp.101-120.
Motohashi, K., 2015. Management Strategies for Global Businesses. In Global Business
Strategy (pp. 21-40). Springer, Tokyo.
Motohashi, K., 2015. Global business strategy: Multinational corporations venturing into
emerging Markets. Springer Science+ Business Media.
Willcocks, L.P., 2013. Business and management in a global context.

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Appendix:
1. Ghemawat’s AAA strategic framework