Principles of International Business: Starbucks' Localization Approach

This report delves into the principles of international business, specifically examining Starbucks' localization strategy as a key factor for success in global markets. The report highlights the importance of adapting to local cultures, languages, and traditions to build trust and attract consumers. It uses the example of Starbucks' initial failure in Australia due to a lack of localization, contrasting it with its more successful approach in China. The discussion covers the advantages and disadvantages of both localization and global standardization strategies, emphasizing the need for international managers to hire local employees, define clear organizational goals, and offer unique product mixes. The report concludes by recommending the adoption of a localization strategy to increase consumer attraction, improve profit margins, and ensure sustainability by respecting local cultures and needs. References to relevant literature on international business and marketing are also provided.

Running Head: PRINCIPLES OF INTERNATIONAL BUSINESS 1
Principles of International Business.
Name:
Institution

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Introduction to the issue that international managers face
at the chosen company
Globalization is a process that, using international strategies, assist businesses to expand
into the global markets. This is due to the proliferation of transport and communication
infrastructures, facilitating the connectivity between different countries in the world. The
purpose of globalization is to offer businesses with a competitive advantage through widening of
the consumer markets and reducing the operating cost. The main strategies used by organizations
to take the advantages of globalization are localization and global standardization strategies
(Patel & Lynch, 2013). Localization is a more effective strategy for an international manager to
facilitate the acceptance of product or services for the international market. It will also facilitate
the performance of the organization by building the reputation of the brand and attracting new
consumers to the brand. Starbucks is a coffee making company that has its operations in
Australia. The company has faced the issue of applying localization when venturing into new
global markets.
Discussion in more detail of the issue
Despite the onset of globalization, many consumers are very much concerned with the
happenings of their local area. It is, therefore, necessary for businesses seeking to venture into
the international markets to connect with the consumers in their playing field, this means
understanding the culture, language, and traditions of the local market and tuning the product or
services in line with the needs of the local consumers. Localization is all about building trust
with the consumer through optimization of the brand in ways that it can relate with the customers
(Oh & Ahn, 2014). Other benefits of localization include enabling the business to meet the
consumer needs effectively. Localization also attracts more consumers to the product as they can
relate to the products that are in line with their cultural ways. In their initial attempt to enter the

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Australian market, coffee giant Starbuck failed miserably by not considering the Australian
culture and food patterns. Starbucks failed to localize into the Australian market by not offering
food menus, as so was the norm of the local coffee shops. Another reason for its failure was
because rival coffee shops had already introduced the concept of “third place” long before
Starbucks had been founded in America (Lee, Madanoglu & Ko, 2013). The Australians were
already enjoying espresso lattes in coffee shops set up by Italy and Greek immigrants. Starbucks
was therefore viewed as an imitation of these other coffee shops. Perhaps Starbuck picked
valuable lesson from the Australian experience and consequently applied localization in the
Chinese market. As of 2014, there were approximately 1,367 Starbucks stores in China
(Radomska, 2014). In its China market, there are different offing in the menu such as traditional
Chinese cookies. Also, the layouts of the stores are arranged in such a way that they can
accommodate a large group of people. This is because contrary to the Australian and American
culture, Chinese people come in a large group and prefer to sit and relax.
The main difference between organizations that normally engage in international
practices and one which is successful in its growth and performance is the use of localizations. In
implementing localization, the international manager should employ the following strategies.
The managers should hire local employees as they best understand the demographics and culture
of the area (Roudometof, 2016). These employees can effectively employ the mandate of the
organization by tuning the product and services of the organization to suit the taste and needs of
the consumer. The managers should also be clear in defining the goals and objectives of the
organization. This, in turn, should be embedded in the operations of the organization in order to
make the brand stand out from the competition (García, Gaitán, Cataluña & Moreno, 2016). An
already established brand attracts more consumers as they carry an aura of legitimacy. In

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carrying this communication strategy, it is, however, important to understand that each market is
different. The organization should also be unique in its product mix. Even though the market
may be saturated with fierce competition, good quality product attracts more consumers to the
brand. It is important for an organization to find ways of countering competition through value
addition and giving bonuses to consumers.
Localization is not only applied in the physical environment but also in the online
platform through search engine optimization (SEO). This can either be global or local SEO.
Global SEO involves choosing keywords and targeting traffic to the global consumers which
include making the service available to the potential consumers worldwide (Ghauri, Wang, Elg
& Ríos, 2016). This is mostly used by a business that can offer goods and services without being
physically in the local area. Global SEOs are used by e-commerce companies such as Amazon
(Drori, Höllerer & Walgenbach, 2014). On the other hand, local SEO targets the audience of a
specific area. The businesses using local SEO have to optimize the search results as per the
requirements of each specific target market. This type of service has significantly grown due to
increase connectivity. This type of localization help in improving the ranking of the website of
the organization and make the content more relevant depending on the demographics and
geographical location of the user.
Advantages /disadvantages of different approaches
Apart from localization, another strategy that can be used in globalization is the global
standardization strategy. This is the ability to use a standardize market strategy worldwide.
Those using these methods apply the same techniques of marketing from one country to the
other, across different cultures (Hussain & Khan, 2013). The benefit of this method is that a
company saves on marketing campaigns as it uses one marketing strategy in every country. The

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company saves the cost of developing multiple marketing strategies (Rao & Khan, 2017).
Another advantage is standardization is in the protection of brands. Local standardization ensures
that the brand maintains an optimum level of function since altering the products may expose the
brand to risk especially in terms of product quality. The disadvantage of this method is that it
leads to a lack of adaptation since each market has its individual needs based on culture. Global
standardization also limits uniqueness since each product has to conform to the global operation
of the organization.
Conclusion and recommended strategy
When business ventures into the international market, it is easy for the business to lose
touch with the consumer. Each and every market has a local taste based on the culture and the
demographical of the population. By adopting globalization, international managers may
increase the growth and performance of the organization by tapping into the potential new
market. The advent of technology facilitates globalization but these technological tools would
not be effective if the language, taste and feel and user experience are not incorporated into the
mix. I recommend the adaptation of the localization strategy because it helps in attracting more
consumers and improving the profit margin. Additionally, localization is sustainable because it
helps in conservation of the culture of the local people and involves the needs of the local
community in the production process while also adhering to the demand of the consumers.

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References
Drori, G. S., Höllerer, M. A., & Walgenbach, P. (2014). Unpacking the glocalization of
organization: From term, to theory, to analysis. European Journal of Cultural and
Political Sociology, 1(1), 85-99.
Ghauri, P., Wang, F., Elg, U., & Rosendo-Ríos, V. (2016). Market driving strategies: Beyond
localization. Journal of Business Research, 69(12), 5682-5693.
Hussain, A., & Khan, S. (2013). International marketing strategy: standardization versus
adaptation. Management and Administrative Sciences Review, 2(4), 353-359.
Lee, K., Madanoglu, M., & Ko, J. Y. (2013). Developing a competitive international service
strategy: a case of international joint venture in the global service industry. Journal of
Services Marketing, 27(3), 245-255.
Navarro-García, A., Arenas-Gaitán, J., Rondán-Cataluña, F. J., & Rey-Moreno, M. (2016).
Global model of export performance: Moderator role of export department. Journal of
Business Research, 69(5), 1880-1886.
Oh, K. K., & Ahn, H. S. (2014). Formation control and network localization via orientation
alignment. IEEE Transactions on Automatic Control, 59(2), 540-545.
Patel, F., & Lynch, H. (2013). Glocalization as an Alternative to Internationalization in Higher
Education: Embedding Positive Glocal Learning Perspectives. International Journal of
Teaching and Learning in Higher Education, 25(2), 223-230.
Radomska, J. (2014). Model of successful strategy execution: revising the concept. Problems of
Management in the 21st Century, 9(3), 213-222.

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Rao-Nicholson, R., & Khan, Z. (2017). Standardization versus adaptation of global marketing
strategies in emerging market cross-border acquisitions. International Marketing
Review, 34(1), 138-158.
Roudometof, V. (2016). Theorizing glocalization: Three interpretations1. European Journal of
Social Theory, 19(3), 391-408.