International business management in emerging market: a case of Starbucks in Brazil

Author: Iloka Benneth Chiemelie

Published: 9/12/2013

Chapter 1

Introduction

1.1 Background of study

international business management is no longer a new case in the business setting and this is based on the understanding that increase in globalization and internationalization of firm that created a new sphere in business management. Multi-National Companies (MNCs) have now understood the importance of international business management and this is based on the setting of differences in business cultures and national cultures of different markets across the globe.

Starbucks Corporation is a coffee company that is based in Seattle, USA. The company buys, roasts, and sell whole bean specialty of coffee and coffee drinks, through its international chain of retailers. From its earliest beginning, the company began selling packaged and premium speciality of coffees. Since inception, the company has transformed into a firm that is well known for its coffeehouses, where people can easily make purchases for the beverages and food items as well as packaged whole bean and ground coffee. The company has been credited for transforming the way people in the USA and around the globe consume coffee.

In the modern settings, people are now more concerned about the need  to consume quality coffee in a nice and relaxing atmosphere that gives them the change of meeting friends, holding business meetings, relaxing on their own or even flipping through their mails. This is a concept that originally began in the USA (Aminata et al., 2006) and has since then spread across the world. In the new trend, Brazil has been changing its coffee concepts and the demand for quality services and good products has increased in the country as well, especially in the main cities. On a traditional ground, cafés have been reorganized in order to adjust their operations and help in achieving the needs of customers.

Aminata et al., (2006) made known that while it is known that the Brazilian consumers have been receptive in their view of fast food industries such as a new type of service, the cafeteria market has not been really explored, which left a huge room for Starbucks to be equally welcomed and gain competitive advantage. Studies have also made known that the consumption of coffee by the Brazilians is nearing what is obtainable in the US, which is an indication that the market is ready for more companies to enter. The company presently have 10,500 stores in North America, Europe, and Asia.

For companies that maintain operation in different countries, a number of issues need to be addressed in order to ensure that the outcome of the business process is as planned and expected. The lack of necessary measures to ensure continued business growth will mean an increase in chances of failure as a number of factors exist to be a hindrance on the chances of these companies to maintain continued growth. This defines the main idea behind the conception of this research. This is because this research is designed to gain a background understanding of how Starbucks manages its outlets across the globe with a special focus on the Brazilian market. 

1.2 Research purpose

The main purpose of this research is clearly highlighted in the research topic, and it is designed to gain an understanding of how Starbucks manages its businesses across the globe with the main focus on Brazilian market. As such, the research will present a review of both external and internal factors that have helped in establishment of Starbucks’ outlet in brazil as well as measure the extent of success the company has enjoyed in this market since its inception.

1.3 Research questions

In order to achieve the research purpose as discussed above, a number of questions will be asked with respect to the research topic and they are:

1.      How did Starbucks enter the Brazilian market?

2.      What are the factors that have helped the company to achieve success since inception?

3.      What is the competitive sphere in the Brazilian coffee market and how has Starbucks evaded this sphere to maintain business growth?

These questions will serve as the bedrock for understanding the strategies enacted by the company and the outcome of such strategies. This understanding will then be used to measure whether Starbucks is successful in the Brazilian market or not.

1.4 Significance of research

This research is significant for a number of reason and also for a number of people. The significance is measured by the fact that it is based on one of the most renowned and well established brand in the world. As such, this undertaking will help to provide global managers with an analysis of macro-environmental issues that they should expect when establishing branches in the Brazilian market and how to handle these issues. Additionally, it will provide readers on the general with a clear overview of Starbucks as a global brand and its business operation in Brazil.

1.5 Limitation of study

While the significance of this study has been above as having the potential to present a clear understanding of business management process in Starbucks with respect to its international presence in Brazil, it should also be noted that a number of limitation exist with respect to this research. The limitation comes in the form of the scope, in which the research focuses only on understand the business operations of Starbucks in Brazil, with respect to its international strategies for penetrating the Brazilian market. However, the research is lacking in respect to understanding its marketing measures, supply chain management, PR, and other external influences that might have helped enhance the company’s chances of success in the Brazilian market. While the research will provide a background understanding of business management in the Brazilian market with reference to the cafeteria industry, it will not be able to discuss on other direct influences laid in the industry by supply chain management, marketing mix, and other business strategies.

1.6 Organization of study

Figure 1.1: organization of study

From the above figure, it can be seen that this research paper is divided into five different sections. The first section is the introduction, which presents a background understanding of the research topic and the main purpose of the research, as well as expectation limitations to the research undertaking and application of findings from the study. The second section is a review of relevant literatures as it relates to the research topic. Following the review of literatures, the third section will seek to gain an understanding of how to go about the primary research. Finding from the primary research will then be analysed in the fourth section and a summarized conclusion with recommendations presented in the final section.

Chapter 2

Literature review

2.1 Introduction

Following the description already presented in the chapter 1, this chapter will seek to conduct a review of relevant literatures as it relates to the research topic. The review will also look into research models from previous studies on international management and the Brazilian coffee industry.

2.2 The global market view

A chat with few managers will reveal that organizational managers are adopting strategic thinking and strategic planning very often in their day to day decision making process (Spence, 1999). This is because knowledge management in organization has been viewed ad key to sustainable development in the current global market (Ruggles, 1998; McCann and Buckner, 2004; Ciabuschi, 2005), and high level of internationalization means that companies can longer depend on their parent market for survival but must look out to other markets as well.

Spence (1999) also made known that globalization is a concept that is now perceived by companies to be the way forward. This is because a number of institutions such as the WTO and UN have opened the economy widely by enacting policies of free trade amongst its member nation. Such an influences has creates a new global market place that is built around transforming the global market into an easy to access sphere for businesses that wish to expand their network.

Such an expansion of network has both negative and positive influence. In terms of the positive influences, it helps to enhance the business solidarity of any given company with respect to increase in market share, increase in customers, increase in brand offerings and another of other business profits. On the negative side, it is very hard to manage and failure of a business in any given country can impact on the sustainability of the business in order countries. Additionally, the international brands are exposed to numerous pressures that the stakeholders and it can negatively impact on the brand image of the company in cases where the company is deemed to be underperforming in these areas.

2.3 Starbucks Brazil: a sharp review

The shift noticed in today’s business environment, where competition and innovation is rising in the marketplace, has made enterprise to realize that strategic management is necessary for business sustainability. Drucker (1993) stressed knowledge management and strategic assets as the most valuable assets for enterprises in the modern era. Within this context, the need for enterprises to monitor their market positions and draft ways to remain competitive in the market has become very important (Kim et al., 2003, p. 296).

The story of Starbucks began in 1971. Back then, the company was a roaster and retailer of ground coffee and whole bean, tea and spices and had only one store in the Seattle’s Pike Place Market.  But currently, the company offers its products to millions of customer in 60 countries with its 18,000 retail stores.

The first make in Herman Melville’s Moby Dick is where the name Starbucks was coined from. The company’s logo is also an inspiration from the sea, which features a twin-tailed siren from ancient Greek Mythology. Its mission is to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.

Starbucks offers a range of products that customers can enjoy at their stores, at home or on the go. These products include: coffee – with more than 30 blends and single source of premium coffee, homemade beverages - Fresh‐brewed coffee, hot and iced espresso beverages, Frappuccino® coffee and non-coffee blended beverages, smoothies and Tazo® teas, and merchandize, free foods and other consumer products. In 2011, Starbucks recorded its highest revenue ever with $11.7 billion annual revenue generated. The company’s corporate store also grew by 8% and it is one of the reasons behind the massive revenue generated (Starbucks News, 2006).

2.4 PESTLE Analysis of Starbucks

The macro environment comprises external factors that influence the performance of a company in a specific market. PESTLE analysis is the most commonly used tool for analyzing the macro-environment of companies and it will be adopted for this study.

2.4.1 Political factors – the Brazilian government has been working tirelessly to help local entrepreneurs to survive and this simulation is thought to be capable of increasing the purchasing power of customers (Animata et al., 2006). This increase in purchasing power will help Starbucks to be successful as more customers are likely to patronize their products. The political scene in Brazil is also improving on a constant base, with the government encouraging foreign investors to open coffee stores and enter its coffee industry as a way of increasing the demand and consumption of Brazilian coffee. Therefore, it can be said that the political environment creates a huge opportunity for the success of Starbucks in Brazil.

2.4.2 Economic factors – together with India, China, and Russia, Brazil is one of the countries the new emerging market economy. Brazil has recorded an average annual growth rate of 2.4% since 1980 (1MF, 2004), New economic policies are designed in Brazil to aid stabilization of its public debts, maintenance of current account surplus and meet inflation targets. The ability of Brazil to control its inflation has resulted in an increased confidence in the Brazilian market (Animata et al., 2006). The market is constantly gaining high surplus cash and its increasing the purchasing power of customers. Thus, the economic environment is good for the survival of Starbucks in Brazil.

2.4.3 Social-cultural factors – Brazil is the second largest coffee consumer after the US (Animata et al., 2006), with 93% of the population drinking coffee on a regular bases. Brazilians tend to have a similar attitude with the Americans at work, often engaging in long hours of work in order to help support their families. Consumerism is very high and there is a high demand for quality products. It was also found that coffee customers are less likely to stay in the coffee store for long period of hours (Animata et al., 2006), thus it increases the rate of turnover. This is important success factor for Starbucks as the high number of customers who seek coffee on daily based will mean increased sales and profit for the company.

2.4.4 Technological – most of the technologies used in Brazil are imported from the United States (Animata et al., 2006), which is the parent country of Starbucks. Thus, it is expected that the issue of technology will pose little worry to Starbucks as they can make such available through their American supply center.

2.4.5 Environmental factors – in Brazil, energy supply is very stable and this increases the success of companies as they will not be investing on energy production. However, what supply is not as efficient as the energy as most of the waters are contaminated and undrinkable (Animata et al., 2006), and most companies invest hugely on production of waters for undertaking their daily business activities. Additionally, the coffee industry is becoming congested with little road side retailers who offer low priced coffee with quality taste and feel. Thus, the environmental factors pose a threat to the success of Starbucks in Brazil as the issue of water will mean added production cost, while the high competition will make gaining of more customer shares very difficult for Starbucks.

2.4.6 Legal factors - Animata et al, (2006) stated that there are well established laws designed to protect both employees and companies in the Brazilian market. such laws also monitor value chains and supply network in order to ensure quality of distribution in the Brazilian markets. Many law firms exist in the market for consultation and advices. Thus, the legal system of Brazil is good for the survival of Starbucks as they operate in a system where everything is expected to move according to the law, and this means protection of their corporate images, properties and rights while operating in the Brazilian market.

It can be seen from the above analysis that the Brazilian market offers a room for potential success as the high purchasing power and passion for coffee of the market will mean that Starbucks can stand boldly and rip continuous success through adoption of the right strategies. However, there are still issues the company will need to look into such as discussed in the environmental factors where it was found that the source of water is unreliable and competition is high in the Brazilian coffee industry.

2.5 Porter’s 5 Forces Analysis

2.5.1 Customers’ bargaining power – the Brazilian customers seek a quality coffee and relaxing environment where they can be at peace with their body and soul at coffee shops. They also like to carry out their business meetings in coffee shops at it provided comfortable ambience. They also seek diversity in coffee flavors as it increases their taste for the brand and help them to become more loyal to the brand. All these requirements coupled with high purchasing power and high competition in the Brazilian coffee industry means that customers bargaining power is higher.

2.5.2 Supplier’s bargaining power – Brazil is one of the coffee producing nations in the world, and the availability of the coffee bean in the country means that the supply network is not extended outside. However, the coffee supply network is headed by Brazil Ipanema Bourbon, which makes the coffee bean available to all other suppliers and retailers. The centralization of the coffee supply network through government regulation means that the power of suppliers is high as prices can be fixed at high rates or changed without prior notice to retailer.

2.5.3 Threat of new entrants - the threat of new entrants into the coffee industry in Brazil is low because the investment required to start-up a coffee retailing store is low as well and the main raw material (coffee bean) is relatively high in the country. This claim can further be supported by the high volume of new entries witnessed in country in recent years.

2.5.4 Threat of substitute products – Starbucks can suffer in the Brazilian market due to high availability of fresh and canned juice in the Brazil, which can be used as alternative refreshments. As Brazil is a hot country, beverages such as coffee can easily be substituted with colder drinks like Coca-Cola and ice creams. However, Starbucks offer a high range of canned and ready to drink cold drinks, thus mitigating the threats posed by these substitute products.

2.5.6 Industry rivalry – the Brazilian coffee industry is highly congested with coffee retailers of which most of them offer lower prices than Starbucks. The congestion of the industry can be attributed to the government’s efforts to increase entrepreneurship in Brazil. Thus, it is expected that the industry will continue to witness new entrants in coming years. Therefore, competition will be high and many companies will be adopting price competition as a means of gaining new customers and it can fault Starbuck’s growth in the Brazilian market.

2.6 Critical Success Factors for Operating in the Brazilian Coffee Industry

It has been identified from the above analysis that in order for Starbucks to successfully operate in the Brazilian market coffee industry; certain factors must be taken into consideration if they are to be successful in the market.

2.6.1 Marketing – due to the high competition that exists in the Brazilian coffee industry, marketing is crucial for success as it will help in communicating the value or Starbucks products to the market, creating awareness and persuading customers to patronize as well as be loyal to Starbucks brands.

2.6.2 Distribution network – with Brazil being a big country with high spending power and passion for coffee, it is important that a quality distribution network be designed to make Starbucks’s products available to the market. The availability of their products in all segments of the market will ensure increased sales and high profitability.

2.6.3 Quality customer services  and product offerings -  it was discussed in the customer’s bargaining power above that Brazilian customers seek quality coffee in a comfortable environment as they seek to escape from their daily hustles and bustles. Therefore, a quality customer services is important as it will make customers fell relaxed and increase their loyalty towards the brand. The products are also expected to be high in quality as it will increase demand and aid in differentiation as well as added product values.

2.7 Service marketing

2.7.1 Nature and characteristics of service marketing

The nature of service marketing and its characteristics is reflected on the concept of service as defined to be any help given to make a product or experience more valuable. There are numerous characteristics of services as it reflects on its nature in comparison with products and this is applicable in the concept of service marketing. These characteristics are as presented by a number of researchers (Archer and Yuan, 2000; Bauer et al. 2002; Berry, 1991; Bitner and Hubbert 1994; Bitner, 2001; Bonk, 1996; Champy, 1993; Dabholkar, 1996; Dabholkar and Bagozzi, 2002):

2.7.2 Lack of ownership – unlike products, services cannot be owned or possessed by the person to whom it is being rendered to. On that account, the concept of service marketing is applicable in the same manner in the sense that it deals with properties that cannot be owned or retained by the users.

2.7.3 Intangibility – unlike products, services cannot be touched as it is offered in the form of s support to an event or enhancement of the value obtained from a product. Still on the concept of service marketing, it deals with the marketing of things that cannot be touched.

2.7.4 Inseparability – services cannot be separated from the service owner and any services offered cannot be retrieved. It is something that comes and goes on its own without withholding factors or external influence.

From the above presentations, the nature of service marketing has been highlighted to be the marketing of things that cannot be owned, touched or separated from the person offering it. This is different from the marketing of products because the product can be owned, touched and also separated from the person offering the product.

With the nature already understand, the next step will be to move towards the understanding of the characteristics of service marketing.

2.8 7Ps of service marketing

The first 4Ps focuses on the marketing of products in the sense that they deal with things that can be touched, owned and separated from the person offering it as discussed below.

1.      Product – this is the goods used to fulfill customer needs.

2.      Place – this is the place where the good is sold.

3.      Price – this the price that must be paid in order to obtain the value of the goods being sold.

4.      Promotion – this covers different aspects of the product process that is geared towards creating awareness for the product and persuading customers to make purchases for that particular product.

The focus will be on the remaining 3Ps discussed above as it entails the marketing of the services.

1.      People – this deals with understanding the people that needs these services and what purpose the services are designed to fulfill (Fletcher, 1990; Hackett, 1990; Hartland-Swann, 1990; Heun, 2001).

2.      Process – once the first step has been achieved, the next step is to design the best way to deliver service and use it to satisfy the customers’ needs. In the modern setting, services unlike products can be delivered through online platforms (e.g. downloading software after purchases (Heskett et al., 1990; Jackson, 1990; Johnson, 2001; Keller, 2003; Kench and Evans, 1991).

3.      Physical evidence – this is the symbol used to identify the company that offers such services. This can come in the form of an office (offline identification) and website (online identification) (Kotler, 2002; Leek et al., 2003).

2.9 Issue in service marketing

Considering the fact that it has been highlighted earlier that the services are intangible, inseparable and cannot be owned, a number of issues have been identified in that case as highlighted by Kotler (2002) and discussed below.

2.9.1 Highly duplicable – because of the vast information available online, the service marketing approaches can be adopted and imitated across the globe. The significance of such can also be reflected on the fact that the manipulators and imitators cannot be easily tracked online as a result of the fact that these penetrators cannot be traced easily because they can come from any part of the world.

2.9.2 Value is not easily measurable – since the production of services doesn’t necessary require the purchase of raw materials as is needed in the case of products, it is very difficult to determine the real value of services. This can be reflected in the high level of differences with respect to the pricing of services across the world but in the same service sector.

2.10 Summary

From the above literature, the concept of globalization has been presented with respect to international business management and the Brazilian market has been described as having the potential for successful business operation because of the huge market size and increase in GDP per capita experienced in the country in recent years. Additionally, brazil is well endowed with coffee bean, which is the main ingredient needed in Starbucks and this give the company the needed advantage of supply both for its Brazilian market and its business in the international scene. 

Chapter 3

Research methodology

3.1 Introduction

In this chapter, the focus will be to present an analysis of the approaches that will be adopted for the primary research. This will detail how data will be gathered and analysed, as well as how the gathered data will be measured.

3.2 Reflection on hypotheses

Considering the discussions in the introduction and literature review, it is expected that Starbucks will be able to take advantage of these opportunities to ensure sustainability and profitability of its business in the Brazilian market. As such, the expectation will be a well-established and profitable business in the Brazilian market.

3.3 Research methodology, approach and strategy

The research will be purely from primary sources. There will be no interview or questionnaire of whatever kind; instead the research will be based on gathering original information about the company and its business in the Brazilian market. The information will be sourced from the company’s original websites and other reliable sources.

3.4 Summary

From the above analysis, it is now clear that the focus will be to gain an understanding of how Starbucks manages its business across the globe with special focus on the Brazilian marketing and this understanding will be gained by sourcing information from reliable mediums such as the company’s official website.

Chapter 4

Findings

4.1 Introduction

Following the guideline set in the chapter 3, a number of information were sourced and the finding from this sourcing of information will be analysed in this chapter.

4.2 How Starbucks internationalized

From the earlier discussions, it was made known that the strategy adopted by the company is FDI. This strategy can be considered a success because following their initial two outlets in Sau Paulo; the company had enjoyed tremendous success since 2006 and now has 26 coffee outlets in Brazil (MyStore411.com, 2013). FDI has a number of benefits with the highlight being that it allows the company to control all operations in the market and gain full advantage of all profits that will be achieved from the business process.

4.3 Strategic Analysis

4.3.1 Starbuck’s Organizational Analysis

In order to analyze the Starbuck’s core competences, the MctKinsey 7S will be adopted to conduct an organizational analysis of the company. The mode was developed in early 1980s by Tom Peters and Robert Waterman, two consultants that worked for MctKinsey anf Company consulting firm, with a basic idea that they are seven internal aspects of an organization that will be synced together for the organization to be successful. This 7S is as illustrated in the figure (4.1) below.

Figure (4.1): 7S of an organization

  

Source as adapted from: Harold (2011)

4.3.2 Organizational Structure

Starbucks operates a divisional organizational structure, and this implies that employs the best personnel for its business and each operation is divided according to divisions. For instance, the marketing division is solely responsible for marketing activities, while the supplier division controls all supplier related issue (Nwabueze, 2011). This ensures efficiency in management, as staffs will be placed in each management based on their competences.

The decision process is however decentralized. This means that low key staffs can make decisions that are related to their business activities. This is risky as decentralized decision system can create un-uniform output, thus, Starbucks must keep tad on the actions of its employees so that the business is not put at risk. Starbucks maintains control of this issue by treating employees as their partners and making sure that all employees are treated well (Starbucks, 2012).

4.3.3 Organizational Strategy

Starbucks adopts a broad differentiation strategy as its business process. This strategy is meant to offer the company, the opportunity of not focusing on its market position because of the cost structure or segmentation, but to focus on brand loyalty created through product innovation and brand image (Grant, 2009). Through this strategy, Starbucks is able to reach as many customers as possible with its broad range of products and service mix.

4.3.4 Shared Values

The corporate shared valued of Starbucks, which forms the DNA for its daily operations is built in its corporate culture. Starbucks has an adaptive culture that includes positive traits of internal entrepreneurship, supportive managers and employees, seriousness to issues identification, quick decision making process and option evaluation (Gamble and Thompson, 2011). This has proven to be a beneficial tactics as it has helped Starbucks to maintain its market share despite the recent recession.

4.3.5 Skills, Staffs and Style

These three components are combined because they fall under Starbucks’s human resources competences. The management of Starbucks is made of highly skilled and qualified personals that have done their best at all times to ensure continued growth in the company. Most notable of these people is the CEO, Howard Schultz, who returned back to the position after eight years of absence. Starbucks was in the mist of economic downturn and under performance when Schultz came into the picture to power it back to its glory paths (Finz, 2011). Shultz was largely blamed for the downturn as he initiated the concept of personal accountability as the base of a fundamental leadership value (Caliendo, 2010). Starbucks’s employees are selected from the best available option in relation to their skills and put through different training programs that place them in better position to contribute towards the successful growth of the company.

4.3.6 System

The Starbucks family presents a clear image of whom they are, what they do and why they do it, through its corporate mission: “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time (Starbucks, 2012).” This model is the building block of its business operations, which is designed to represent an organized system where things follow a sequential and consistent flow instead of a zigzag outlook.

The whole process begins with the growing of the coffee bean. Starbucks ensure that their products are made from the finest quality, and this they do by growing their ingredients under high quality control. Once the crops are ready for consumption, they are carefully brewed by some of the best baristas in the United States and serves in a very inspiring atmosphere at any of the Starbucks outlets. Customers who opt for a home drink can be assured to have products that are carefully packaged and enriched with the necessary nutrients.

4.4 Strategic Analysis of Starbucks in Brazil

The success of Starbucks in Brazil is high as the company has numerous resource, competences and financial support to back such. These resources can be further analyzed below.

4.4.1 Tangible Resources

Starbucks have different assets such as retail stores, warehouses, coffee farms, brewing and roasting machines, inventories and transportation equipment in Brazil. The company also recorded huge financial gains in 2011 at the value of $11.7 billion as announced in their 2012 annual report (Starbucks, 2012). These resources will without a doubt help Starbucks to quickly make a stand in Brazil and operate at such ease as compared with their competitors who are not endowed with these resources.

4.4.2 Intangible Resources

Starbucks maintains huge global presence and the company have gained high number of customer bases in Brazil during their short period of operation of about 6 years now. The company maintains high quality image, skilled staff and management expertise that are amongst the best in the industry and also invest heavily in marketing and public relationship. Since the company has been in operation since 1871, they have gained huge management expertise and experience that will ensure strategic management of its customers and assets in Brazil towards a path of increased productivity and growth.

4.5 Core Competences and Value Chain Analysis

Besides the resources discussed above, Starbucks adopts some of its other core competences as well as a well-managed value chain in its chase for greater success in the Brazilian market. These core competences and value chain are as discussed below.

Figure 4.2: Value chain of organizations

Source as adapted from: Rusty et al, (2012)

4.5.1 Firm infrastructures – Starbucks currently have numerous infrastructures in Brazil such as stores, houses for staffs, production units and farms (Starbucks Brazil, 2012). These infrastructures are key success pillars for the company as they will aid their competitiveness in the market through supply of customer demands and overall improved performance.

4.5.2 Human Resource Management – over the years, Starbucks has created its business environment and organization around its employees and it’s a great source of sustainable advantage (Rusty et al., 2012). The company has an empowering culture, pays employees above industry standards, ensure their safety and work and maintain close relationship with them in relation to understand their individual needs in workplace. These qualities of Starbucks will ensure a low employee turnover in Brazil and thus, increase productivity and profit in return. 

4.5.3 Procurement – Starbucks is yet to purchase or acquire any company in Brazil, but it has a vast network of farmers who sale their output directly to the company. The company also supports these farmers by providing them with needed skill and tools to ensure product quality.

4.5.4 Inbound logistics - coffee beans are highly available in Brazil and it makes production easier for Starbucks. The company also has a high volume of supply network through collaboration with local cultivators and maintaining of its own farms. All resources for production are easily accessible and the company operates an advanced logistics system to ensure reduction in supply cost.

4.5.5 Marketing – Starbucks has been successfully in creating a brand that exceeds the expectations of its customers, people’s value, lifestyle and needs. The company’s attention to external factors has been crucial to their success, and Starbucks continually communicate this brand image by investing heavily in marketing and public relationship related activities. It is one of the top spenders in marketing activities in Brazil.

4.5.6 Sales/retail location – Starbucks’s facilities such as stores are located in big cities and in close proximity to their customers. Products sold at these stores are chosen in relation to the tastes of the Brazilian markets. These features means that the company is well positioned to make huge success in the market as customers can easily access them and order products that contained their preferred flavors anytime.

4.6 Strategic Fit Analysis

This will cover a review of how Starbucks have created or can create a sustainable position through its strategic resources as discussed earlier. It will be measured by adopting the SWOT framework.

4.7 Strengths of Starbucks in Brazil

4.7.1 Differentiated products – the quality of Starbuck’s coffee are different from those available in the Brazilian market, and the company also offers a wide range of other products which its competitors don’t offer.

4.7.2 Brand recognition – Starbucks brands are easily recognizable due to its high marketing expenditures. This offers the company the benefit of increasing its market share through high repurchases intention.

4.7.3 Low employee turnover rate – due to its corporate commitment towards employees’ growth, there is a high level of employee turnover in Starbucks. This offers the company high strength as employees can adopt skill acquired over the years towards contributing to the overall performance of the company.

4.7.4 Customer services excellence – high customer service is part of Starbuck’s business strategy and it is behind the company’s increased global dominance. This is also strength to them in the Brazilian market as it has been discussed earlier that Brazilians value an atmospheres that offers them comfort while trying to escape from the daily hustles and bustles.

4.8 Weaknesses of Starbucks in Brazil

4.8.1 High cost of product – in the Brazilian market, Starbucks offers one of the most expensive coffee products and this a weaknesses to the company as most retailers offer lower prices which they can use for competition. Additionally, the Brazilian market is structured to demand for high products with low cost.

4.8.2 Starbucks doesn’t allow smoking in its stores – some Brazilians like to enjoy their coffee while smoking and this limits their choice of Starbucks coffee because they will not be allowed to smoke in their stores.

4.9 Opportunities for Starbucks in Brazil

4.9.1 Change in life style – there is a growing trend in the demand for quality coffee amongst Brazilians. This is an opportunity for Starbucks to increase its market share as they offer quality coffee that are luxurious and provide high taste.

4.9.2 High population size and passion for coffee products – the Brazilian market is very big and the passion for coffee is high in the country. Therefore, the company can develop measures to take advantage of these opportunities and increase its market.

  

4.10 Threats Faced by Starbucks in Brazil

4.10.1 High competition - the Brazil market is congested with cheap retail stores in the industry and majority of the Brazilians don’t attach value to purchase but are instead more prices conscious. Thus, this is a big threat to the success of Starbucks as competitors can adopt price competition as a means of reducing Starbuck’s market share.

4.10.2 High availability of substitute products – as discussed earlier, there are high availability of substitute products in the form of fresh and canned juice as well as other cold drinks and beverages. This is a threat to the success of Starbucks because customers can make impulse or willing purchase of these substitute products when they seek refreshments.

Thus, it can be deduced from the SWOT analysis that there are numerous factors that will aid the success of Starbucks in Brazil, but the company will also need to address its weaknesses and threats faced in order to ensure sustainable profit.

4.11 Summary

From the above analysis, it is now clear that Starbucks has been able to establish successful business in the Brazilian market and they have been able to do so by adopting some of the most renowned strategies that is built around some of the most outstanding resources in the industry. just like they did in the USA, the company is slowly but sure transforming Starbucks into a household brand in the Brazilian market.

Chapter 5

Conclusion and recommendation

Earlier on, it was made known that the purpose of this research is to conduct an analysis of Starbucks’s business in the Brazilian market with a clear view being laid on understanding the international business management approaches and strategies that the company has adopted in the course of establishing successful business in the Brazilian market. This research has been successful in achieving the aim because it has been shown that in 2006, Starbucks adopted FDI to enter the Brazilian market with its first shop in Sao Paulo. However, the company has been able to expand its outlets in the country and now has 26 stores in Brazil, with high potential for converting Starbucks into a household brand in the Brazilian market.

Additionally, it was found that the company has been able to achieve such success by adopting a number of strategies that is designed to integrate its international competences and resources with the demands of customers in order to better meet the needs of customers and increase their level of satisfaction.

In conclusion, it will be stated that the company has been successful to increase its market share with establishment in the Brazilian market and it has slowly transformed itself to becoming one of the most renowned brand in the Brazilian market. Additionally, it was noted earlier that this research omits areas such as understanding the influence of supply chain management, marketing mix and other business forces on the company’s success. On that ground, it is recommended that future researches on the company with respect to the Brazilian market should look to address these omitted areas.

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