Starbucks Global Expansion: South Africa Market Analysis

This report provides a comprehensive analysis of Starbucks' international expansion, with a specific focus on its operations and growth strategies in South Africa. The introduction outlines the concept of international business and the drivers behind Starbucks' global expansion, including technological advancements, market saturation, and the pursuit of new opportunities. The report then delves into the specific strategies Starbucks adopted for entering and growing within the South African market, such as maintaining a light footprint, adopting a clear product strategy, and reinvesting revenue gains. The analysis also covers Starbucks' performance in South Africa, highlighting its competitive advantages, such as a connected customer experience, the Starbucks Rewards card, and efficient operations. Furthermore, the report examines the opportunities and challenges Starbucks faces in its international expansion, including brand image, access to cheap labor, mobile order and pay issues, food sales, and maintaining competitive advantages. Finally, the report discusses the potential of other markets and provides an overview of government strategies that affect Starbucks' expansion. This report is valuable for students studying business development and international marketing, offering insights into the complexities of global business and strategic decision-making.

Starbucks in South Africa

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK .............................................................................................................................................3
1.Drivers of globalisation and expansion strategies adopted by Starbucks. ..........................3
2.Analysation of growth maintained by Starbucks in South Africa.......................................5
3. opportunities and challenges with reference to international expansion of Starbucks ......6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
International business refers to trading of goods and services at a global level, it provides
a opportunity for organisations to increase the market share by marketing and selling products or
services in different countries. Starbucks corporation is an American coffee company that
operates its operation world wide. Now, the company is planning to expand its business globally.
Starbucks is expanding its business for increasing the customer traffic and enchaining the
number of stores in the region. Present study is based on Starbucks American coffee house
chain that operates it stores worldwide. Study will be explain drivers of expansion mission of
Starbucks to enter into South Africa and its global expansion strategies. Furthermore, it will
describe the opportunities and challenges for Starbucks in long run.
TASK
1.Drivers of globalisation and expansion strategies adopted by Starbucks.
Globalisation assist in interacting and integrating people, companies and government. It
helps in achieving growth of international culture, ideas, trade with the increased global
interactions. It is an economic process of interaction that is connected with various cultural and
social prospect(Visconti and et. al., 2015). Globalisation provides an opportunity of advancement
to the business like technological advancement, learning new culture, improve the brand
reputation and also diversifying the market and benefits in businesses to increase its competitive
position in the domestic market as well as in international market. Some of the driver of
globalisation are described as below:
Technological driver: Technology has become an important source for the modern globalisation.
Innovation in the latest transportation technology has changed the whole industry. Wit the help
of new microprocessor and telecommunication devices the communication is becoming very
effective at a low cost(Pacioni and et. al., 2018). These technological changes is helping
Starbucks in expanding business into global market.
Market driver: Domestic market is becoming more saturated. there are limited opportunities
available for Starbucks in domestic market. So that the business is expanding its operation in
South Africa for overcoming this situation. The needs of potential customers and opportunity of
using marketing channel of globe to some level works as an incentives to select globalisation.
Strategies adopted by Starbucks in relation to its expansion in South Africa that are described as
below:

Keeping a light foot print
Starbucks can hold off its essential investments in infrastructure until its foreign
operational activities have matured. this strategy can help them in determining a better plan of
actions for the generation of high return on long -term investment. The store will determine a
strong investment in human resources that is very essential for every business to determine.
Business can determine the market penetration plans and make adjustments in that plan with the
regular update on situations with the help of local employees.
Adopt clear product strategy
Before taking a product into a new market,starbucks need to make sure that product is
going to be worthy for the market. Starbucks has adopted a strategy for its coffee in the market
as “its not just a coffee, its a Gourmet”(Glibert and et.al., 2018). Starbucks is already brilliant in
several ways. It has taken a normal product -coffee and made it into a lifestyle of peoples. Coffee
as become an event in itself i.e. no longer just a drink. The stores is letting its customers buy an
experience rather than just buying a cup of coffee. They have renaming of sizes to tall and vent
to remain consistent “coffee house” experience. It is making customer feel that they are a part of
of something. They are providing customers a good ambience where they can drink their coffee
while reading a book or taking with their friends So that they can love being a part of Starbucks
brand.
Reinvest revenue gains
Starbucks first decide marketplace where its business can boom its sales of products and
have low competitors in the market that assist them in generating and attaining high revenues. It
can help in reinvesting the excess revenue for the development of its product in domestic market
and achieve success (Giudici and Rolbina, 2018) that will help Starbucks to head off any outside
source for the fulfilment of capital needs and highly beneficial for its brand equity. It will help
in reducing the chances of scarcity of funds.
Other drivers of globalisation that affects Starbucks are -
 Demand – It is a major driver for globalisation, Starbucks targets people with high level
income. Therefore, it can affect its demand in market with lower economy and it is
important to identify whether demand of Starbucks products is high or low in a particular
country or not (Glibert and et. al., 2018).

 Government strategies - There are various strategies implemented by government on
businesses , these strategies or regulations including tax, laws etc, varies in different
countries. Starbucks needs to identify a country with less dominating and stable
government policies on business to effectively enter into a new market. Growth – It is important for every business to grow and expand to achieve more success,
Starbucks wants to be a leader in the industry that influence it to expand its business as
much as possible.
Methods to enter into a new market
There are various methods for entering into international market such as Exporting,
Licensing,international franchising. international joint venture method will be appropriate for
Starbucks to enter into new market (Oh and Contractor, 2014).
Starbucks generally uses franchising method to by giving rights to use its brand name and
copyrights to others in order to expand its business.
2.Analysis of growth maintained by Starbucks in South Africa
Performance of Starbucks
Starbucks expanded its operation in the South Africa by utilizing the aggressive business
model that it had formulated in the US. It has taken support from the residents of those country
in order to adopt foreign international. it has established its brand as “its not just a coffee; its a
“Gourmet” in the target market(Visconti and et. al., 2015). It is genuine in several different ways.
By taking a simple product coffee and add it in a lifestyle of the people.
Starbucks provide better taste that no other competitor is offering. The company is
starting its business with the help of its franchisee, taste holding which will be cost saving and
already established organisation. Also organisation can use aggressive promotion and marketing
to sustain in the marketplace. One of the main reason of achieving and maintaining growth in
South Africa market is due its strong community that it has built around itself(Pacioni and et.al.,
2018. ). They have realized that no one is buying coffee at $5.00. then they relied on their happy
customer that people played big part in the success of the Starbucks. the business use social
media more and more like twitter in order increase the importance of its community. And also
they had done effective advertisement of its product that helped Starbucks in competing with the
Zara. Zara spend very less in promoting its product through advertisement. in the major countries

airport, Starbucks have set its logo to promote its brand and that always remind people about the
taste of star bucks coffee. The same technique of putting logo on airport and reminding people of
Starbucks products taste. they have used in other countries airport. Starbucks global presence is
much more higher than the presence of Mc Donald (Glibert and et. al., 2018).
Comparative advantages
1. Connected customer experience – Starbucks seeks to offer a connected customer
experience to develop and maintain a strong long term relationships. Starbucks stores are
designed to provide a great ambience to its customers. This has hugely helped it to
sustain in African market. As compared to other players in the industry Starbucks has
high level of customer loyalty.
2. Starbucks Reward cards – Starbucks has also introduced the Starbucks Rewards Card
that offers great benefits to its customers. It attracts customers to visit Starbucks for
making purchases building customer loyalty. This concept is not adopted by other
companies therefore it helped Starbucks to sustain and achieve success in African market.
3. Operations – Starbucks is also very effective in terms of business operations, such as
production of coffee. It utilise the finest beans of its coffee, the company's professionals
travel to search suppliers that meet its standards. Therefore, the taste of Starbucks coffee
is unique and attract customers.
3. Opportunities and challenges with reference to international expansion of Starbucks
Opportunities:
As Starbucks is known for its coffee productions and is spread over most of the areas due
to its good brand image. It has many opportunities to establish its product in African continent
for example
 Strong brand image: Starbucks can take advantage of its brand image to establish its
coffee product in African continent. Through there brand name more and more
customers are going to be attracted by there organisation due to which their coffee's
productivity is going to be increased and this will support the organisation to make a
profitable market and also to establish its company in African continent Cheap labours: if Starbucks sets its empire in African continent than according to
economic condition of Africa, they can use cheap labours for the production of coffee
appliances. Through this, they don't need to spend a lot over workers and within the

time the organisation will be able to generate more revenue with a larger expansion in
most of the area (Patel, Criaco and Naldi 2018). This can also supports the unemployed
people living in South Africa to get employment which is quite good for both entity as
well as people residing in Africa.
Challenges
Starbucks CEO has address some challenges that are holding them in order achieve
success and growth.
 Mobile order and pay: In the current report of Starbucks, management has made a
complaint regarding its new mobile order & pay service,that is allowing its customers to
order remotely after then coming and picking up orders and then go. This has been very
successful that cause choke point in companies services. The customers were getting
discouraged because of standing in long lines due to that reason, sometimes people used
to leave without ordering(Pacioni and et. al., 2018).The business has been using counter
station, that will show mobile orders so customers can easily come and avail services but
again there has been some problem involved with the coffee chains.
 Food: it has been a big challenge for Starbucks. The business had pulled their food menu
many times. Such as pulled its breakfast sandwich from the card because they evaluated
that the sensation interfered with the coffee's fragrance. The over all percentage of
revenue generation from food sales was too low in comparison with the Starbucks
competitors. The store consider food as an opportunity(Ruokonen and et. al., 2018.).
Then Starbucks acquired La Boulange chain that has improved the food sales. Maintaining competitive advantage: the major problem faced by Starbucks in main
maintaining its competitive advantage in market. They were trying to satisfy the needs of
their customer due to local demand conditions. They were trying to satisfy the consumers
needs by inspiring them-”one person, one cup and one neighbourhood at at a
time”(Pacioni and et. al., 2018). But in the market there are companies trying to satisfy
the needs of its closest customers and increasing their competitive advantage by
developing their policies of strategic management.
Potential of other markets
It is also important analyse the potential of other markets, it helps in planning various
strategies such as production, channels of distribution, marketing etc. Starbucks can choose a

market that has low cost of labour, high availability of resources, effective channels of
distribution that can assist it to perform its business activities in the best possible way. These
potential of markets plays an important role in operating as well as expanding it into particular
market.
CONCLUSION
From the above study it can be concluded that Starbucks is an American coffee company
that is operating its operation world wide that can deploy their business worldwide. Starbucks is
expanding its stores in international market in order to increase its target market. For achieving
success in operation,business has used various strategies such as Starbucks has adopted all the
legal rules and regulation of other country in order to legally operates its functions and also used
approach of being proactive than reactive. Starbucks is using international joint venture method
in order to enter into international market. Technological driver and market driver t are reason
for the expansion of Starbucks. however, it has also faced the challenges of high risk involved
while opening stores in South Africa.

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