Starbucks: Rapid growth strategy
Internal growth usually means expansion of a business by opening new branches, shops or factories. This is also known as organic growth. Starbucks confirmed growth plans in which they have said they are considering opening over 10,000 new cafes over the next four years. This is a great example of internal growth as they are opening cafes in countries such as Brazil and Russia. Therefore, Starbucks is going to entering new market which they do not have any knowledge or experience of, they can therefore naturally learn about the culture and attitudes of the new demographics which may be seen as a risk to some.
Adopting a rapid expansion strategy would mean Starbucks can build a customer loyalty base and attract a lot of customers as quickly as possible. This can lead to faster sales inevitably higher profits. Starbucks is less likely to fail as it would run much more efficiently since they are not forcing expansion.
China has a large population which means there are more people inevitably higher sales. If Starbucks focuses on the Chinese market they can make plenty of profit. The fact that they have a fast growth economy means that the country produces and consumes a lot which can therefore; increase Starbucks’ changes of success. This also justifies Starbucks rapid expansion strategy. The lack of strong local competition means that Starbucks can enjoy a high profit margin. Consequently, Starbuck having little or no competition consequently allows them to not have to compete in price wars, which could have had a negative effect on their customers and their sales as their prices are considerably high. Therefore, they can become the market leader and gain a higher market share.
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, ...
Starbucks is planning to reduce its reliance on selling coffee even though they are known for their coffee. They are focusing on increasing sales of non-coffee products such as cold drinks and cakes. Furthermore they want to expand their sales of audio books and music. The reason for this is because they want to strengthen their sales of other products as they are diversifying in other countries, if they do not successes they still have successful products on which they can fall back on. The products can help spreads the risk and help protect overall market share. Developing new products can help utilise excess production capacity so they can sell different products. As Starbucks moves away from selling just coffee they are creating and maintaining their reputation. For example Starbucks ‘Hear Music’ label is a innovative.
There are benefits and drawbacks of expanding rapidly. In the short-term, Starbucks can benefit from selling more of its products and increasing its customer base and profit quickly. However aiming to open 10,000 new cafes in the next four years can lead to overtrading as more capital will going out than coming into the organisation. This can lead to a shortage of capital. Expanding rapidly means that if Starbucks had any problems such as difference in attitude and culture in a different market it may have cause delays or operational problems in their new inventors. I feel that diversification is right for Starbucks through hard work and careful planning however expanding rapidly may reduce the chances of success. Forcing organic growth which is usually natural and slow by expanding rapidly it can have a negative effect on Starbucks. For example, Starbucks are designing their new cafes uniformly rather than taking into account of the local decoration in order to save time however this may not suit the local people.
The product life cycle is very important to Starbucks when bringing out new products. During the market introduction there are several things that must be done but the first and one of the most important it to let everyone know about your product. Promotion should be focused on this seasonal product the candy corn flavored coffee and mug. Starbucks must offer informative promotion to let get their ...