Starbucks Coffee: Expansion in Asia (Case #16, Notes)
Overview
Many Singaporeans view Starbucks as a young and trendy American coffee shop. Therefore, it would be to Starbucks greatest advantage to market the brand as a sophisticated and trendy coffee. Starbucks should continue to set up additional stores in shopping districts where tourists and locals shop. Furthermore, other potential store locations include hotels and the financial district area. Setting up a Starbucks in a hotel will service tourists, as well as the local people. Many locals frequent the restaurants and coffee shops within the various hotels. Finally, Starbucks could open a store in the financial district. This will allow Starbucks to be exposed to the high volume of pedestrian traffic.
Though Starbucks has plans to eventually open a roasting plant in Japan to reduce costs, we recommend that Starbucks look into a plant in Singapore instead of Japan. Singapore is at the crossroads of international shipping and air routes. They would then have a roasting plant in Asia that could supply the coffee beans for Starbucks' retail stores in those countries. With their plans to expand into Malaysia and Thailand, Singapore is an ideal country to set up a roasting plant because Malaysia, Thailand and Singapore are linked together with roads and rails for easy transportation. Also, Singapore would be a more cost efficient country to set up a plant relative to Japan because of lower fixed costs.
As with any new company, Starbucks must market itself effectively in Singapore to be successful. Starbucks has already received free press coverage due to its recent entry, as well as through competitors' reactions. In addition, Starbucks will need to rely on customers' word-of-mouth to get its name out there. Furthermore, they should concentrate on in-Store promotions to lure the tourists, shoppers and other pedestrians into the stores and keep them coming back. A promotion like a frequent buyer card might be effective in drawing in repeat customers. Such a promotion will reward those loyal users, and further increase their consumption of Starbucks coffee.
Finally, Starbucks should continue to form joint ventures with well-established companies in Asia. This will give Starbucks additional resources to work with, as well as further build its brand equity. In order to insure its success in Singapore, Starbucks must plan its next step carefully. It is important to take into account the obstacles that the company will face as it enters this competitive environment. At the same time, Starbucks' success lies in its ability to build a strong presence for itself in Asia.
Discussion Questions
1. How does Starbucks create brand equity?
2. Why enter the Asian market? Why enter Singapore?
3. Who is the target market?
4. Is Starbucks facing cannibalization?
5. Who are some of Starbucks joint venture partners?
6. Is Starbucks a socially responsible company?
7. How does Starbucks market themselves?
8. What are some substitutes?
9. How did they come up with the name Starbucks?
10. Why did Starbucks choose to enter a predominantly tea consuming market like China?
11. Why did Starbucks place its outlets in China in mainly commercial areas?