Starbucks Entering the Brazilian Market: Key Aspects, Country and Company Examples Jason Jones Marc Medina Elle Pei University of Phoenix Roy Peterson MGT/448 April 9, 2003 Starbucks Entering the Brazilian Market: Key Aspects, Country and Company Examples Traditional companies and markets are obsolete. The economy is changing. Companies are going global and initiating change in their strategy, culture, structure, and technology. U.
S. companies are expanding their presence into different nations. Different nations have different political, economic, and cultural institutions. Hill (2000) suggests that there are different strategies when a company pursues international competition.
This case study will consider the pros and cons of these strategies and discuss various factors and tactics that affect a company entering a new market. This case study will introduce a country risk analysis for Brazil describing six aspects: (1) history, (2) climate, (3) culture, (4) political risk, (5) economic and financial risk, and (6) legal risk. Next, the case study illustrates Starbucks Coffee as a new player in the Brazilian market. This case study will define four aspects of the SWOT analysis, discuss their importance, and show their impact on the organization. Next, four key aspects will be described: (1) human resources, (2) legal and ethical issues, (3) supply chain, and (4) information technology. Finally, specific company examples will be offered to demonstrate how these aspects are practiced at Starbucks.
A Intro to Business 3/26/2013 Case Study Consumer Behavior in the Coffee Industry Did you know one franchise alone dominated an entire payment-processing market in just one year? You might have heard of this giant company by the name Starbucks. Howard Schultz, CEO of Starbucks, had a significant role in the company’s growth. Starbucks has steadily dominated the coffee market and has even extended ...
Country Risk Analysis Starbucks in Brazil In order to fairly assess the risk factor of foreign direct investment, several factors are taken into consideration. One of the most crucial aspects of determining risk when entering a foreign market is gaining a clear understanding of who we are, and what is our product is. We have chosen Starbucks as our company and introduce the all around Starbucks product including atmosphere, customer service, taste, touch, aroma, and feel into the Brazilian marketplace. Collectively, we have considered Brazil a moderate risk in our analysis. Historical Background Brazil According to Nations of the World (2003), Pedro’s A lvares Cabral, a Portuguese navigator, was the first European to reach Brazil in 1500. During the next centuries, the Portuguese brought large numbers of slaves to Brazil until slavery was outlawed in 1888.
In 1822, Brazil proclaimed its independence from Portugal and was ruled by an emperor until 1889. In 1889, the United States of Brazil became the legal name of the country. This remained the name of the country until 1967 when the country was renamed, the Federative Republic of Brazil. The country’s capital was moved from Rio de Janeiro to Brasilia. Each of the successive governments pursued industrial and agricultural growth, in addition to, development of the Brazil’s interior. This continued exploitation of the country’s natural resources, as well as, a large labor force enabled Brazil to become the leading industrial power of Latin America by 1970.
According to Nations of the World (2003), the current population of Brazil is 176, 029, 560 with 65. 9 percent of the population between the ages of fifteen and sixty-five. Ethnic groups comprise 55 percent white (included in this group are Portuguese, German, Italian, Spanish, and Polish), 38 percent are mixed black and white, and 6 percent black. Predominantly Roman Catholic (70 percent), the people of Brazil generally speak Portuguese, the official language of the country.
The name Brazil comes from Pau Brasil. There are around 145 million people living in Brazil, most of them near the coast. The population is growing rapidly and half of all Brazilians are under the age of 20. By the end of the century, it is estimated that Brazil's population will have reached 180 million. Brazil borders on ten other Latin American countries. Most of the northern part of Brazil is ...
Spanish, English, and French are also languages predominantly spoken in Brazil. There are 53 Brazilians per square mile in South America’s largest country, which covers over 3, 265, 100 square miles. According to Nations of the World (2003), Brazil is the leading grower of coffee. Starbuck’s decision to enter the Brazilian marketplace is based on this and other factors. The prevalence of coffee farming functions as a positive influence on the decision making process. Other demographics of the Brazilian economy include a large producer of textiles, shoes, crude oil, cattle, and the single largest producer of the mineral iron (Nations of the World, 2003).
Climate Brazil According to Edgar (2003), Brazil is more like a continent than a country. Brazil’s climate makes it rich in its natural resources. It is geographically larger than the United States. It is the fifth largest nation in physical size and the largest country in Latin America. With ninety percent of its territory lying between the equator and the Tropic of Capricorn, Brazil is the world’s largest tropical country. The Amazon region has the world’s largest river system.
The Amazon is the source of twenty percent of the world’s fresh water. Brazil’s climate varies from arid scrubland in the interior to the impassable tropical rainforests of the northerly Amazon jungle and the tropical eastern coastal beaches. The south is more temperate. Rainy seasons occur from January to April in the north, April to July in the northeast, and November to March in the Rio/Sao Paulo area.
Brazil’s various climates have contributed greatly to its economic well being. Its dynamic climate is the cornerstone for its generous crops. Brazil is the world’s largest producer of bananas, coffee, and orange juice. It has the world’s largest iron mine and vast stores of precious minerals (Edgar, 2003).
According to Economy and Energy (2003), Brazil derives almost half of its energy from hydropower and biomass. Over 90 percent of the country’s electricity comes from hydroelectric plants and about 15 percent of total energy from renewables.
Deforestation in the Brazilian Amazon has increased 32 percent over the last decade to 18, 000 sq. kilometers per year. Deforestation is caused by the developments of highways, settlement programs, government incentives for agriculture, financing of large-scale projects such as hydro dams, and export-oriented companies. This has had a detrimental impact on the forest.
In comparing small businesses with corporations, the aspects of both types of businesses must be taken into direct consideration. By definition, a small business may be regarded as a business with a small number of employees. The legal definition of “small” often varies by country and industry, but is generally under 100 employees. These businesses are normally privately owned ...
It also results in the increase of emissions to the environment and accelerating greenhouse gases. Climate risk factor is low. Culture Brazil According to Executive Planet (2003), Portuguese is the dominant language in Brazil. Brazilians have a strong cultural identity. Brazilians do not perceive themselves as Hispanics, and will take offense if addressed in Spanish. In business culture, English is widely spoken.
Women business travelers have few problems dealing with male colleagues in Brazil. Business negotiations require several trips to arrive at a satisfactory conclusion. Brazilians have the image that North Americans jump directly to business building relationships of trust. Valuing people and relationships over business is essential. Therefore, changing a negotiating team can jeopardize an entire contract and is a major breach in Brazilian business protocol. Small talk should always precede business talk.
Leaving a business meeting as soon as it is over is another offense leaving Brazilians with the impression that they think you have more important things to do. Business cards and presentation materials should be readily available and printed in both Portuguese and English. In Brazil, personality, cultural awareness, and other interpersonal skills will win a Brazilian counterpart over charts, graphs, and other empirical data. Brazilians conduct business only through personal connections. There must be an implicit understanding that the business relationship will be long term.
According to Executive Planet (2003), decision-making is hierarchical in Brazilian business culture. Only the highest person in authority makes the final decision. Social class and status are a major influence in Brazilian society and often determine the type of job a person will have. The assumption that the powerful are entitled to special privileges is starting to be questioned. Official business hours are 8: 30 AM to 5: 30 PM.
Business appointments are generally scheduled from 10: 00 AM to noon, the 3: 00 PM to 5: 00 PM allowing time for “me io-dia” which is a two to three hour midday break. According to Executive Planet (2003), Brazilians are very personal and close in nature. Brazilians tend to stand very close to each other. Greetings are made with long handshakes and noticeable eye contact. Women most often greet men and women with a touching of the cheeks or a kiss on both cheeks. Frequently touching of the arms, hands, or shoulder occur during conversation.
Many companies today often don’t think about legal issues related to their business until they are hit with a lawsuit or decide they need to take legal action against someone else. The ramifications of a lawsuit as a plaintiff or a defendant can impact a company and even destroy a company and its reputation. This can happen if the company is not fully prepared on handling legal pitfalls that might ...
Machismo in Brazil is subtler than other Latin-American countries. It is more important for men to appear self-assured and in control at all times. Women are perceived as equals in business and society. Brazilians are one people, with a single culture. Starbucks has proven a strong ability to adapt to the cultures in which business is conducted making the overall cultural risk factor low. political risk Brazil According to Hill (2000), when evaluating the international business climate of a particular country, it is critical to review the country’s political risk.
Gathering political risk data means understanding the country’s political history as well as what the future may hold. Furthermore, it is important to determine the likelihood that the existing political structure may cause drastic changes to the business environment. Such changes could have a negative affect on the goals of a business enterprise. According to Brazil Country Fact Sheet (2003), Brazil is a federative republic with a presidential system. The president executes policy approved by the 513-seat Chamber of Deputies and the 81-seat Senate. Constitutional review is by an independent judiciary.
Although the president wields considerable power and can resort to temporary decrees to push through legislation, the provisions of the 1988 constitution give Congress ample capacity to frustrate the executive. The president is elected for a maximum of two terms of four years each. The Brazilian political system is notable for the fragmented nature of the political parties and the efforts that governments must make to build and maintain workable congressional partnerships. This means that the existing political party will have to work any proposed changes in policy through the political “grinder” in order win approval on even the most basic of issues. According to the Latin American Monitor (2003), a new president, Luiz Inacio “Lula” da Silva was recently elected from the leftist Partido dos Trabalhadores (PT), which is the Workers’ Party.
Brazil Introduction Brazil is said to be the type of country a thousand or more words could never adequately describe. It is one of the largest, most populated countries in the world. But it's vast size, breath taking geographical features, and diverse people are not what make Brazil. Its history, economy, government, culture and resources that make it the country it is today. It is the largest ...
Investor attitude towards Brazil has noticeably improved since the new government took office in January 2003, despite the current economic downturn. This is partly due to promises of reduced inflation, lower interest rates, and lower unemployment. According to Parmar (2002), the burden is on the newly appointed president to maintain a strict fiscal policy while managing the publics’ expectations. The most difficult political problem for Brazil at this time is managing expectation. Voters chose Lula because of his promise of more jobs and increased income. However, if he does not deliver on his promises quickly, the Congress and public’s support may go elsewhere.
While the overall political outlook looks good for Brazil, the president will be faced with the difficult task of moving quickly to bring noticeable economic growth to the country. If Brazilians do not perceive that change is brought about quickly, this could have a negative impact on future business opportunities. The newly developing political stability in Brazil makes the political risk moderate. Economic & Financial Risk Brazil According to Nations of the World (2003), Brazil’s economy was one of the largest in the 1990’s; inflation and devaluation of the real, Brazil’s currency, have taken their toll on the economy. The International Monetary Fund approved a $30 billion loan in August of 2002 to help boost the economy and decrease the $260 billion debt when the country was close to meltdown.
According to the Economist (2003), Luiz Inacio “Lula” da Silva, the current president of Brazil, has since been trying to settle the country’s finances. A spending squeeze and two rises in interest rates have functioned as attempts to level out the deficit and help control inflation. Additional, attempts to increase the nation’s trade surplus are measures that will contribute to improving the economy. According to the Economist (2003), since January of 2002, Brazil’s trade surplus has quadrupled to $14.
How to Start a Coffee Shop Business For young couples, it is a good enough place for a date. For small entrepreneurs, a perfect place to seal deals. For friends, the best place to hangout. For students, a cool place to do school works and study. We’re talking about the coffee shop. For a cup of coffee, you can rest your feet, enjoy the ambiance, smell the stimulating aroma of coffee and the sweet ...
1 billion. The success of these measures could in fact be Brazil’s steppingstones on the road to first-world benefits of prosperity and social justice. For Starbucks, the absence of inflation plays as a major determining factor to entering this market. For Starbucks, the ability to source and developing a process to roast coffee in Brazil can essentially have a positive economic impact on the Brazilian economy. According to the Economist (2003), in the early 1990’s, one in four Brazilians continued to survive on less than $1 per day despite Brazil’s economy being one of the largest in the world. Currently 3.
60 real, the currency of Brazil, are equal to one U. S. dollar. One year ago the exchange was 2. 43 real to the dollar. According to the Economist (2003), the war with Iraq has been a factor in the recent slip in the value of Brazil’s currency.
Any sharp devaluation of the real will raise the debt burden of Brazil, regardless of a heightened primary surplus. Thus, the exchange rate for both Starbucks and Brazil becomes a critical factor in the successful fortitude of this global business venture. The overall economic and financial risk factor of Brazil is definitely moderate at this time. As noted above, there is great opportunity for both financial success and economic hardship for the country and Starbucks. Legal Risk Brazil When legal risks in a country are high, an international business might hesitate entering into a long-term contract or joint-venture agreement with firms in that country. This is due to the likelihood that a trading partner will opportunistically break a contract or expropriate property rights.
This is not the case with Brazilian Corporate Law. According to Brazilian Corporate Law (2003), Brazilian law provides for several different forms of business venture organization. Most foreign investors doing business in Brazil invest in either a Sociedade por Quotas de Responsabilidade Limit ada (SRL) or a Sociedade Anonimo, Lei das Sociedades por Acres (LSA).
The quota holders of SRL have ample flexibility to draft provisions into the corporate charter that would elaborate on or modify the otherwise simple structure of an SRL.
Indeed quota holders can make the company more like a partnership or a corporation, or something in between. Therefore the charter document of an SRL permits minority quota holders to obtain extensive protection on a negotiated basis. According to Brazilian Corporate Law (2003), the basic statute regulating Sociedades Anonimas is the Brazilian Law of Corporations, LSA, which significantly extended the protection afforded to minority shareholders of both closed and public corporations. Under LSA, public corporations are those with securities authorized to be publicly traded through the Stock Exchange Commission, or in other alternative exchanges markets, such as Mercado de Bal cao.
The development of these reforms was part of reconstruction of turmoil and misguided plans with foreign investors. The deposition and determination of the Brazilian government to put aside political interest in favor of sound economic measures is now paying off. Brazilian government has not only accomplished bringing inflation down to record lows, it has put Brazil back on the map of foreign investors, who have been flooding the country with tons of cash. The question that has been asked by this new reform is, “Is Brazil selling its soul to foreign capitalists? According to Alvim (2002), Price Waterhouse was the buyer in 70% of the acquisition deals that took place in the country during the first quarter of this year.
Numerous multinational companies already doing business in Brazil can attest to the market’s potential. Some examples of successful performances by foreign investors are, American Phillip Morris, French Rhodia, Korean Samsung, English Glaze Wellcome, Swedish Electrolux and the list goes on and on. The financial sector has also seen an increasing participation of foreign banks, English Lloyds, Spanish Santander, German Dresdner and Hong Kong Shanghai Bank Corporation. Many other institutions await Banco Central’s authorization to begin operations in the country (Alvim, 2002).
According to Alvim (2002), in spite of the risks, analysts believe that the Brazilian economy is on firmer ground now than in the past. As long as the government keeps its consistency and commitment to the economic reforms, Brazil will remain a top choice for foreign investors.
Recent research released by Site Selection, the official publication of the International Development Research Council, shows that Brazil is the fifth investment destination recommended by 24 percent of the world’s 100 largest corporate advisors. It shadows only to the United States and China, tied in first place, and chosen by 47% of the consultants; Mexico, with 30% and the United Kingdom, with 27%. The Brazilian market is preferred over Malaysia, Thailand, Japan, Canada and Germany (Alvim, 2002).
From a legal perspective, the risk is low. SWOT Analysis According to Mind Tools (2003), a SWOT analysis is a very effective way of identifying a company’s strengths and weaknesses, and of examining the opportunities and threats faced. Carrying out an analysis using the SWOT framework helps a company focus specific business activities where there is strength and where the greatest opportunities lie.
SWOT consists of five basic areas: (1) strengths, (2) weaknesses, (3) opportunities, (4) threats, and (5) trends. We will discuss the first four key aspects and give specific examples. We will approach the SWOT framework using Starbucks Coffee entering a new market, Brazil. Strengths Starbucks Starbuck’s is an organization that is able to bring several strengths to the Brazilian marketplace. Starbucks mostly purchases premium green coffee, certified as Fair Trade Coffee. The Fair Trade Coffee Agreement ensures local farmers receive a guaranteed price for their harvest above the prevailing market price, thus helping to improve their economic stability.
Commitment to Origins is Starbuck’s strong commitment to coffee producers, their families, communities, and the natural environment to help promote a sustainable social, ecological, and economic model for the production and trade of coffee (Starbucks, 2003).
This precedence setting commitment sends a strong message to the world economy that Starbucks is committed to preserving the best interest of farmers, the economy, and the environment. According to Starbucks (2003), with nearly 900 coffeehouses in 22 markets outside North America, it is clear that Starbucks passion transcends language and culture. Expertise and experience in entering new markets is another strength that Starbucks brings to the table. Starbucks further magnifies this ongoing business practice by its dedication in supporting communities around the world where Starbucks lives and works, as well as in the origin countries where Starbucks coffees are produced. Weaknesses Starbucks As with any new idea, one must consider both the obvious and the subtle areas of marketing vulnerability.
One of the most obvious weaknesses for Starbucks market in Brazil would be that they do not exist. It is the South and Central American countries that provide Starbucks with coffee beans along with all the other specialty coffee companies in the United States. It is understandable that these countries are probably not the most likely for coffee companies, of other countries, to invest in their markets. The fact that there is no research from the Specialty Coffee Association of America, or other coffee companies doing business in Brazil can make it very expensive for Starbucks. A tactic to overcome this is to develop roasting and distribution processes in Brazil to avoid importing and exporting associated costs, thereby reducing costs while continuing the product offering of neighboring countries. Another weakness for Starbucks is dealing with a country that is very traditional.
Researching a countries culture is one of the most important factors before “starting up shop.” What is the success rate of any other American beverage product in that country? Like many other South American countries, new products are foreign as well as expensive and Brazilians may not find themselves susceptible to change, or opt to purchase specialty coffees. Extensive and appropriate research that determines the appropriate Brazilian niche can combat this weakness. Opportunities Starbucks It is clear that Starbuck’s has been successful in appealing to all five senses of its customers – through the enticing aroma of the beans, the rich taste of the coffee, the product displays and attractive artwork adorning the walls, the contemporary music playing in the background, and even the cozy, clean feel of the tables and chairs. Though the startling success is evident, every company has weaknesses when entering a new market. According to its Annual Report (2002), Starbucks expanded its international presence by opening 294 new international licensed stores, including the first stores in Austria, Oman, Spain, Germany, Indonesia, Mexico, Puerto Rico and Greece. Net revenues from international customers totaled $458, 258, 000 US.
Starbuck’s has identified and created opportunities around the world. Doing business in Brazil requires time and building relationships of trust. Since Brazil manufactures one-third of the world’s coffee beans, the supply chain can be shortened. Instead of shipping beans from Brazil and other South and Latin American countries to the United States, Starbucks should build its own roasting plant and distribution facility in Brazil. Despite it’s popularity, coffee is not the most popular beverage of the people. It is Guarana, a beverage produced from dried berries, water, and sugar.
Brazilians have historically consumed their coffee, strong, thick, and simple. It will be an opportunity to introduce the various and sweeter tastes of Starbucks various coffee drinks to the Brazilian market. Coffee in Brazil has long been inexpensive and readily available at the price of pennies. Brazilians drink coffee at home, in restaurants, cafes, even in tiny villages. Thousands of coffee vendors line the streets of Rio de Janeiro, Sao Paolo, and other large cities. For example, Starbuck’s challenge is to convince an entire market that paying 3 to 4 dollars per cup is normal.
Starbuck’s must change the Brazilian consumer’s perceptions of value. Building brand loyalty and adjusting the pricing structure to align with the culture, especially during the initial product offering, can achieve impact the perception of value. Regardless of the business, brand loyalty is the fundamental building block to ensure an organization’s long-term success. According to Starbuck’s Chairman Howard Schultz (2002), Starbuck’s understands the significance of building brand loyalty. It begins with a commitment to the business philosophy that your customers are precious. Customers are at the heart of the business and winning their loyalty is your first objective.
The customers have many choices for beverages and will dictate what they want, why they need it, and how they want to do business with Starbucks. Success can only be gained by listening. Customer loyalty will depend on Starbuck’s ability to understand and cater to the needs of the Brazilian people. Brand loyalty will ultimately drive long-term, profitable customer relationships. Threats Starbucks All organizations face threats in the marketplace. Threats and change are two things that can be ultimately relied upon.
Some of the most prevalent threats are discussed in more detail below such as finding the right people, overcoming differing legal, cultural, and ethical issues, developing a local production, roasting, and distribution operation. In addition to these threats, there are the aspects of pricing, product offering, and competition. Starbucks must identify a pricing structure that is profitable, differentiates Starbucks from any other cup of coffee, and is still economical in the Brazilian marketplace. Finding the right unique product offering that is just similar enough to Guarana, the Brazilian drink of choice, is another task at hand to ward off potential threats.
One of the last threats to anticipate is competition. Once the Starbucks craze catches on, there is always the potential threat of copycats. Copycats coffee houses are no stranger to Starbucks history. Nonetheless, Starbucks almost always prevails.
Human Resources Starbucks In the case of Starbucks, a potential challenge is sourcing, hiring, and training employees to model the Starbuck’s genre. There needs to be a synergy of Starbuck’s mission and values with Brazilian work ethics, employment laws, culture, and language. It is recommended that key members of Starbucks International operations expatriate to Brazil and work with local legal counsel to create Starbucks University Training Facility, employee handbooks, and ensure compliance with business and employment laws. According to Country Watch (2003), Brazil is ranked number 69 of 174 in on the Human Development Index far ahead of the United States, ranking 117.
A notable measure of human development is the Human Development Index (HDI), which is formulated by the United Nations Development Program. The HDI is a composite of several indicators, which measure a country’s achievements in three main arenas of human development: longevity, knowledge and education, as well as economic standard of living. This measurement demonstrates the opportunity for sourcing and staffing a native workforce that is appropriate to the Starbuck’s culture, yet experts of the Brazilian culture. The true test is to see where the two can mix to create a workforce that can benefit both.
Overall, the long-term success of the organization is contingent on Starbuck’s commitment of acknowledging people as its greatest asset. Starbuck’s goal is to meet and exceed the needs of its Brazilian customers, its Brazilian employees by providing them the overall Starbuck’s experience. Legal and Ethical Issues Starbucks Legal and ethical issues are sure to arise that differ from the standards in the United States. Finding ways to conduct business in alignment with these differences will be crucial to Starbuck’s ongoing success in Brazil.
Some of the legal and ethical issues to consider when conducting business in Brazil are the presence of bribes and government subsidies. In the Brazilian marketplace, it is a common practice to issue and accept bribes in order to continue conducting business. These types of transactions are considered unethical in the United States and in the Starbucks corporate culture. As a result, Starbucks may need to pay higher taxes or expediting fees in order to get the products on time and avoid unethical business practices of bribery until roasting, production, and distribution processes are developed in Brazil. A current Starbucks business practice is to protect the workers within the coffee industry by setting and adhering to Fair Trade agreements with the organizations and countries in the global coffee marketplace. Subsidies are another trade barrier the Brazilian government could impose which would protect the Brazilian coffee industry and ensure that Starbucks is paying a fixed price in order to acquire, roast, produce, and distribute Brazilian coffee products.
Supply Chain Starbucks According to Starbucks (2003), the company is committed to sourcing the highest quality coffees from around the world. It searches mountain trails in Indonesia, Kenya, Guatemala, and all over the world for the highest quality Arabica beans. Starbucks requires zero defects in grade, good even color, and consistent bean size. Starbucks has limited their sourcing by applying strict, more environmentally beneficial guidelines to their suppliers.
Starbucks has a specific purchasing philosophy. In order to become a Starbucks preferred supplier, these qualifications must be met: (1) verifiable quality of product, (2) minimal environmental impacts, including soil management, water reduction, clean water, forest conservation, use of shade and energy use, and waste management, (3) social conditions, including wages, benefits, health and safety, and living conditions, (4) economical issues, including transparency from supplier to farm level. , and (5) price incentives. Starbucks believes that all these criteria are crucial to creating a sustainable coffee production system and improves the coffee market.
According to Starbucks (2003), the company participates and encourages the Fair Trade Certified label. Starbucks purchases 59 percent of their coffee directly from farmers and small-scale coffee farming cooperatives while paying higher than prevailing market prices. Its participating farmers democratically run these cooperatives. Starbucks pays an average of $1.
20 per pound for green coffee purchased through long-term contracts. For Brazil, Starbucks should provide incentives to local farmers and cooperatives to grow premium coffee that meets their standards. It has successfully convinced many farmers to do this. According to Hill (2000), Starbucks in 1992 set a new precedent in the coffee-purchasing world by outbidding European buyers for the exclusive Nari no Supremo bean crop.
In Brazil, Starbucks intends to establish a production operation to roast the coffee beans and package the products. Starbucks will seek local suppliers for paper goods and other necessary raw materials. A distribution warehouse will be established to track the supply chain process and distribute its retail locations and new local joint ventures with hotel, airports, and grocery stores. Information Technology Starbucks Advanced technology is essential to the success of collaborative relationships. Starbucks uses the same point-of-sale system in the stores, the manufacturing system, and distribution system. Coffee beans are tracked all the way through the roasting process using a silo management system and production control.
The distribution system tracks the roasted beans. And it also tracks receipt in the stores. The point-of-sale system feeds back into the corporate office where a replenishment order is generated. It is a full circle process. According to Starbucks (2003), some examples of in-house Information Technology (IT) training are Unix-based systems and software, life cycle methodology, database query tools, and AS/400.
Starbuck’s goal is to have an enduring and innovative, state of the art integrated supply chain system that would reduce costs by an undisclosed amount, improve customer service, and maintain consistent quality. According to HighJump Software (2002), Starbucks began using HighJump Software’s Internet-based Supply Chain Execution Software solution to automate its product distribution network. This software provides warehouse management and data collection solutions that can be easily and precisely tuned to fit Starbuck’s operational needs in its three primary U. S. -based distribution center. We will connect the new Brazil warehouse and distribution center with the same technology to streamline business-to-business transaction in real time.
Starbucks will be in constant communication with Brazilian employees. The latest technologies using the Internet, E-Mail, and Business-to-Business and Business-to-Consumer software will also be implemented. According to Hewlett-Packard (2002), Starbucks and Compaq Computer Corporation have a five-year strategic relationship in which Compaq provides the information technology structure and hardware for Starbuck’s retail stores and corporate headquarters. Starbucks and Microsoft have created a wireless, high-speed connected internet environment in more than a thousand U. S. locations.
This wireless internet service will be made available in all the Brazilian retail locations as well. Overall Risk Factor Starbucks in Brazil Brazil, Vietnam, and Colombia account for more than 50 percent of world exports of green coffee. Starbucks creating a presence in the Brazilian market place is ideal. From a political aspect, the country has renewed leadership strength. Economically, foreign investment is increased.
The new president’s goals are to keep inflation down and decrease the national deficit. Export is good. The Brazilian Real is low compared to the U. S. dollar. This is advantageous for Starbuck’s to fund business growth in Brazil.
However, the devaluation of the Real also means that Brazilians will have a difficult time paying premium prices for Starbuck’s products. Sourcing beans and raw materials in Brazil will be financially opportune for Starbucks. From an economical and environmental perspective, Starbucks can help Brazilian coffee growers zero in on better premium beans in a ecologically improved environment. From a financial perspective, Starbucks coffee shops are sprouting on every street corner in our part of the world, it is inevitable that it will do the same around the world and especially, in Brazil.
These benefits financially outweigh the risks. Summary and Conclusion As this case study has shown, the country risk analysis key aspects were described for Brazil: (1) history, (2) climate, (3) culture, (4) political risk, (5) economic and financial risk, and (6) legal risk. Next, we introduced Starbucks Coffee as a potential new product in the Brazilian market. Starbucks served as an example for a SWOT analysis. Four key aspects of a SWOT analysis were described: (1) strengths, (2) weaknesses, (3) opportunities, and (4) threats. Finally, Starbucks illustrated the importance of understanding these aspects: (1) human resources, (2) legal and ethical issues, (3) supply chain, and (4) information technology.
In conclusion, it is our view that introducing Starbucks coffee into a new market, Brazil, would be a difficult challenge. However, it will be a profitable venture. It is our recommendation that Starbucks enter the Brazilian market creating a local roasting and manufacturing plant, a distribution warehouse for all its South American suppliers and distributors, and to open the initial Starbuck’s retail locations in Sao Paolo, Rio de Janeiro, and Brasilia. References Alvim, Maria.
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