Page 304 - Introduction to Business

278 PART 3 Marketing

Global Business

Starbucks Seeks Growth Overseas

Starbucks Corporation realized that if it Four hundred of the 1200 planned openings in
wanted to grow as it did in the past, it 2002 are earmarked for overseas markets. Even with
would have to increase the pace of its expansion into close to 1400 Starbucks in foreign countries, company
international markets. Starbucks had 17 coffee shops executives feel that there is room for growth. By 2006,
in Seattle in 1987; in 2001, it had 5689 outlets in it expects to have close to 10,000 stores worldwide,
28 countries, with 4247 in the United States and with most growth coming from expansion overseas.
Canada. Revenues reached $2.6 billion in 2001 and On the near-term horizon are outlets in Athens,
profits were $181 million, for a healthy profit margin Mexico, and Puerto Rico.
of almost 7 percent. Expanding overseas has its downside. Most of the
Domestically, Starbucks executives believe that international shops are operated with local partners;
they are close to the saturation point. While there are this means that the company’s share of profits is only
eight states that do not have Starbucks, most large 20 to 50 percent.
cities are awash with them. Seattle has a Starbucks
Source: Stanley Homes and Geri Smith, “To Keep Up the Growth, It
for every 9400 people—considered to be the upper Must Go Global Quickly,” Business Week, September 9, 2002, pp.
limit; 124 Starbucks are in New York City, although at 100–110.
12,000 people per shop, only a slight opportunity for
additional expansion exists. While executives know
that flooding the market with new shops will result in Questions
a loss of 30 percent of revenues for existing outlets, 1. What other problems besides lower profit margin
this blanketing strategy is believed by company is Starbucks likely to encounter as it goes
executives to result in marketing dominance. The overseas?
CEO, Orin Smith, maintains that the company’s 2. What countries should Starbucks emphasize as it
clustering strategy eventually leads to sales above goes international?
what could be obtained by one store and increases 3. How might Starbucks try to obtain higher shares
total revenue and market share. of profit from its overseas partners?

number of households, the greater the potential sales of a wide variety of prod-
ucts and services: candy bars, canned soup, automobiles, life insurance, banking
services, oil changes, houses, furniture, dining out, soft drinks, clothes, shoes,
and so on. Rates of growth in population are also examined. The World Bank esti-
mates that the rate of population growth in the United States from 2000 to 2015
will be 0.8 percent. For some countries, like Italy, little growth is forecast; for oth-
ers, mainly countries in Africa, large increases of over 3 percent annually are
expected.
When companies analyze their markets, they examine differences, because not
all people are equally interested in buying the same products or services. Fre-
quently, they want to know where people live, how old they are, what their race is,
and what gender they are.
In 2002, the seven most populous states in the United States had the following
populations:
California 35.1 million
Texas 21.8 million
New York 19.2 million
Florida 16.7 million
Illinois 12.6 million
Pennsylvania 12.3 million
Ohio 11.4 million

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