Many multinational businesses have been striving at remaining successful in the international markets as their smaller counterparts also try to expand and explore new markets in foreign countries.Exploration of international markets may seem to be a lucrative business venture, however, there are lots of challenges and difficulties that face businesses that make it into foreign markets. Some of these challenges include lack of adequate finances for business expansion, extensive advertising and marketing campaigns, bureaucratic legal procedures and strict legal requirements, stiff competition from well-established businesses and inadequate knowledge of the traditions and cultures of foreign markets (Root & Root 2008). In most cases, lack of adequate knowledge on the cultural beliefs, values and practices of the foreign consumers is the most common obstacle that hinders easy entry and smooth operations of businesses into new international markets.
According to Hess and Cateora (2006) and Wiklund (2009), most businesses often fail in the international markets due to lack of adequate understanding of the cultural difference in the target markets. Consequently, a business may involve itself in unacceptable practices that the target market considers immoral. This often leads to non-acceptance of the business in the target market, and finally, the business fails or incurs additional costs to re-establish itself in the new market.
In this essay, I will examine the various challenges that Starbucks has faced due to lack of adequate knowledge of cultural differences in target markets in foreign countries. Starbucks is a well-known international company that specializes in provision of coffee and related beverages within its chain stores in both domestic and international markets. Starbucks Corporation started operations as a small coffeehouse in Seattle, Washington D.C. Since its inception in March 1971, Starbucks Company has spread its chain stores all over the world (Starbucks Coffe Company 2005). The essay also examines the implications of cultural beliefs and practices on the operations, business strategies and growth and development of Starbucks Corporation in the international markets.
By examining the various difficulties faced by Starbucks in the international market due to cultural diversity, this essay will also determine the weak business strategies or practices that Starbucks has adopted in the international markets.
Despite, the ability of Starbucks to overcome various challenges in local markets in the United states of America, the company has been faced with various difficulties in the international markets due to lack of proper understanding of the cultures and traditions of foreign markets. Starbucks has entered various foreign markets such as Canada, Japan, United Kingdom, China, North and South Korea, Taiwan and Mexico among others (Schultz & Yang 2010).
By looking at the historical success of Starbucks in Canadian, Japanese and Chinese markets, one is tempted to examine the various challenges and difficulties that Starbucks may have faced in its attempts to serve the international markets whose cultural beliefs and practices are quite different and divergent. Therefore, this essay will look at the challenges that the company faced during its entry into the Japanese market. Great emphasis is laid on the difficulties it experienced to due cultural differences in Japan as a target market. As Glowik and Smyczek (2011) postulate, most businesses that develop a mindset for international markets often face various complications. This is because they have to change their way of thinking from less complex domestic markets to a more complex and complicated global market.
Finally, the essay will propose various solutions for the difficulties and challenges faced by Starbucks in the Japanese market.
Brief History of Starbucks. Starbucks Corporation is an international coffeehouse chain based in Seattle, United States of America. Starbucks started its operations as a small coffeehouse in 1971. In early 1980s, thousands of people across the United States walked into Starbucks’ local stores everyday for a cup of coffee. A critical analysis of this traditional practice of drinking coffee at Starbucks’ stores in U.S. reveals that the customers were not only attracted by the coffee, but also with the cheery environment within the stores and the friendly, supportive and caring staffs who provided ready assistance to customers whenever need arises. This led to a massive growth of Starbucks into a premier coffeehouse company. Because of the need for a greater and stronger market, Starbucks expanded its business into more than 43 countries. Starbucks has also been targeting various emerging markets for coffee such as India and Brazil. Schultz and Gordon (2011) approximate that by the end of July 2012, Starbucks Corporation has expanded and spread its coffeehouse stores to fifty eight countries worldwide.
Apart from brewed hot coffee, Starbucks also sells coffee beans, salads, snacks and accessories such as coffee mugs and tumblers. In addition, Starbucks Corporation also markets books, music and films through its entertainment subsidiary called Starbucks Entertainment (Starbucks Coffee Company 2005).
Today, people all over the world buy Starbucks coffee because of the status symbol it presents. The global success and recognition of Starbucks coffee in both local and international markets presents a suitable model for further analysis of impacts of culture on operations of international businesses.
Due to the massive amount of consumers for the coffee industry in Japan, there has been a lot of competition for consumers. According to Joliffe (2010) and the United States of America (2007), stiff competition for coffee retailers in Japan sprouted recently with coffee sales rising above sixty five percent by 2010. The main competitors in Japanese’ coffee industry include Starbucks, McCafe (owned by McDonalds) and Dunkin Donuts Coffee.
Problem Identification. Consumers of Coffee in Japan responds poorly to Starbucks’ Takeout Coffee. Starbucks Corporation opened its first coffeehouse store in Japan in 1996. According to Abe and King’s College London (2011), the store was opened after a market research that targeted the Japanese market. After two years of successful entry into the Japanese market, Starbucks decided to introduce take-out coffee in paper cups to its consumers. The move was undertaken due to increase in the number of consumers. According to Clark (2007), the number of consumers of Starbucks coffee in Japan was swelling rapidly.
However, the company had not expanded adequately to enable it accommodate all the customers. Additionally, Starbucks had not acquired new stores in Japan. In response to the ever-swelling number of consumers, Starbucks opted to introduce takeout coffee in take-away cups. Customers who bought the takeaway coffees were expected to leave the premises after a purchase, hence more space could be created within the stores for incoming customers. The takeout coffees were made of disposable plastic cups. This implied that consumers of the take-out coffees would throw away the cups after use. Moreover, Starbucks expected that customers who purchased the take-out coffees would drink the coffee as they walk along the streets as Americans do in U.S.
To the surprise of Starbucks Corporation, the business of takeout coffee did not boom as expected. The main reason behind the failure of Starbucks’ take-out coffee in Japan was the eating culture of Japanese people. According to Abe and King’s College London (2011), Japanese locals do not like eating while walking along the streets, thus, the takeaway coffee was against their traditional eating habits and culture. Unlike Americans who could eat anywhere, Japanese limit their eating spots to cafes, hotels and restaurants.
Additionally, an environmental lobby group in Japan filed a law case against Starbucks for attempts to pollute the environment using its plastic cups. This led to a legal battle between the company and the environmental watchdog. Daviron, Ponte and the Technical Centre for Agricultural and Rural Corporation, Netherlands, (2008) further assert that Starbucks failed to understand that environmental pollution is a great taboo in Japan, and consumers have made it a habit not to purchase products that may lead to environmental pollution. In my view, these two factors made it impossible for Starbucks to succeed in introducing take-out coffee in the Japanese market.
Causes of Poor Response to Takeout Coffee by Japanese Consumers. In my view, Starbucks Corporation experienced difficulties when introducing its take-out coffee in the Japanese market as a result of lack of adequate understanding of eating taboos, cultural values, beliefs and practices and general perception of the Japanese people with regard to environmental pollution. A few months before introducing the takeout coffee into the Japanese market, critics warned Starbucks that consumers would not purchase it. However, the company ignored the warnings! Similarly, Starbucks presumed that the Japanese consumers would like the takeout coffee just as the Americans did. From my part, it is this presumption on eating habits that led to the failure of Starbucks’ takeout coffee in the Japanese market.
Proposed Solutions. In my opinion, I would ensure that the business carries out adequate research on the traditions and cultures of the local consumers before introducing new products into foreign markets. Through market researches, the organization would be able to identify, determine and develop products that are in line with prevailing cultural practices and beliefs in the target markets. This also includes determination of the likes and dislikes of the consumers with respect to certain good and services. Moreover, market research also assists in determining both legal and socio-ecological requirements of starting businesses in foreign markets. An adequate understanding of these requirements would help in limiting various legal battles that may arise between a company and the government or the society at large. Market research would also lead to continuous assessment of the environment with an aim of gaining adequate knowledge about the foreign markets.
Secondly, I would ensure that the company collaborates or partners with firms in the target markets so that it can be able to alleviate some of the difficulties it may experience due to expansion into international markets. For example, the company would form joint ventures with local firms that fully understand the culture of consumers in the target markets. Collaboration with local companies would also facilitate the ability of the company to understand cultures of the target consumers. This would also entail licensing local firms or franchises to operate in the foreign markets due to their deep understanding of the local cultures.
Thirdly, I would ensure that the company embraces cultural diversity as an essential component in the business. Embracing cultural diversity would entail integrating the values and beliefs of the consumers into the company’s values and culture. In my view, through embracing cultural diversity, Starbucks Corporation would modify its operations in order to fit into the new culture of customers, without necessarily comprising its core business values and strategies. Thus, the company would treat its customers with great respect and dignity. Jeannet and Hennessey (2009) also assert that every society has different sets of cultural values, beliefs and practices that determine what members of a community or society can purchase and consume. An understanding of these cultural values and beliefs would thus provide a reliable foundation for the type of goods and services that should be produced for such communities.
Fourthly, I would ensure that the company makes a positive contribution to the environment and the community as a whole. For example, through corporate social responsibility, Starbucks would assist the local communities in cleaning up the environment, planting trees to conserve the environment, helping the needy and supporting various communal initiatives such as educating bright but poor students in the society. According to Czinkota and Ronkainen (2010) and Shoemaker, Lewis and Yesawich (2007), a company that supports activities of the community always receive quick acceptance into that particular society. This further enhances mutual relationships between the company and the communities.
Fifthly, I would ensure that the company develops and introduces specific products to each specific market, depending on the market needs. For example, a particular product may be developed specifically for Muslim consumers in Middle East countries while a different product would be developed to serve the needs of Christian consumers in Central Africa. As Kaynak (2012) and Ottman (2011) put it across, companies must develop and market specific products that meet the varied and unique needs of customers, a process commonly referred to as target marketing. This would ensure that the company adequately responds to the unique preferences, needs and taste of consumers from different cultural backgrounds. For instance, it is important for Starbucks Corporation to create differentiated products for markets in different geographical areas, so that it may suit the varying cultural tastes amongst such markets.
Last but not least, I would ensure that the company recruits employees from diverse cultural backgrounds. In my view, this would assist the company in managing various cross-cultural issues or problems that may arise from business operations. Such employees would also assist the company in managing differences in cultural diversities that may arise from international marketing.
From my part, the coffee industry is unquestionably growing at a fast pace, and the company that can embrace and integrate cultural differences within the international markets would become the market leader amongst the thousands of competitors. With the increase in competition in the coffee industry, businesses have to find effective ways of embracing cultural diversity and differences amongst the international communities in their practices. For example, despite Starbucks Corporation being a successful international business in the coffee industry, the company has to work extra hard in order to gain greater presence and acceptance in emerging international markets. In my view, embracing and assimilating cultural diversity within the objectives of a company would allow the company to gain a competitive advantage over other competitors in the international market for coffee.
Moreover, companies must formulate and deploy various marketing strategies for penetrating evolving coffee markets such as India and Russia. This would entail conducting extensive market researches in every target market that the business intends to expand its operations into, hence insuring its capability to succeed in the new markets.
Finally yet importantly, it is important to note that the various difficulties and challenges, for example, cultural differences in international markets, that most businesses face while expanding into or exploring new global markets are varying, complex and complicated, hence a business entity must work very hard to identify and determine the causes and sources behind such problems. Thereafter, the business must formulate and implement appropriate strategies for handling the problems in order for the business to succeed in its exploration of international markets.