STARBUCKS STRATEGY IN ITALY
CULTURAL ASPECTS OF
MANAGEMENT
COMPANY SELECTED WORKING
INTERNATIONALLY DEVELOPING
ABROAD
Colotti, ALESSANDRO
Fernández Raga, CARLOTA
BBA 3
Date: 18 NOVEMBER 2016
2
INDEX
1 PRESENTATION OF THE COMPANY & EXPORT STRATEGY ........................................................ 3
1.1 Diversity at Starbucks ................................................................................................................... 3
1.2 Buy Ethics ..................................................................................................................................... 4
1.3 Environement ................................................................................................................................ 5
1.4 Diversity ........................................................................................................................................ 5
1.5 Community .................................................................................................................................... 5
2 GOALS FOR THE NEW ACTIVITY ABROAD & PROFILE OF THE MANAGER ............................... 7
2.1 Sitting not standing ....................................................................................................................... 8
2.2 Quality, taste and dimension ........................................................................................................ 8
2.3 Expanding in all of Italy ................................................................................................................ 9
3 CROSS MANAGEMENT APPROACH ............................................................................................... 11
3.1 Cultural approach of the new organization ................................................................................. 11
3.1.1 Italian culture ...................................................................................................................... 11
3.1.2 American culture ................................................................................................................. 12
3.2 Challenges of the management .................................................................................................. 15
3.3 Motivating and leading the new team ......................................................................................... 21
3.4 Starbucks Heritage ..................................................................................................................... 31
4 BIBLIOGRAPHY ................................................................................................................................. 33
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1 PRESENTATION OF THE COMPANY & EXPORT STRATEGY
We have chosen as a group to work on a very interesting case which is the Starbucks’s strategy to
develop activity abroad in a new country: Italy. This business challenge is more difficult than
everyone thinks at first due to Italian values and culture.
Starbucks Coffee company, born in 1971, has become in a few years the landmark of coffee lovers
all over the world. Its mission is to Inspire and enrich the spirit with the meetings, coffee after
coffee, in each of the districts where we are located. Here are the principles that govern their
everyday actions: Our coffee: Quality is and will always be at the heart of our concerns. We
strive to select coffees of responsible culture and ethical trade, roast them with the utmost care
and improve the lives of farmers. Our partners: Our collaborators are our "partners" because
our work is also our passion. Together, we cultivate diversity to create an environment where
everyone can be themselves. Our customers: Everything begins with the promise of a perfectly
prepared drink, but our ambition extends far beyond it: To meet our customers, with a simple
smile or by exchanging a few words to make their unforgettable day. Our coffee parlors: The
privileged connection we have with our customers allows our coffee rooms to be a true link
between home and work. A meeting point for those in a hurry as well as a place to relax with
friends and have a good time.
Starbucks Corporate Culture web page. https://www.starbucks.fr/about-us
1.1 DIVERSITY AT STARBUCKS
The business of Starbucks is not only about offering exceptional coffee, but also about creating
links, getting involved in the lives of the community, and celebrating cultural differences.
At Starbucks, Diversity is defined by the following equation:
Diversity = Inclusion + Equity + Accessibility
Inclusion: human relationships and commitment
Fairness: fairness and justice
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Accessibility: ease of use and no barriers
The diversity business strategy focuses on four sectors: partners, customers, suppliers and
communities. This happens millions of times every week at Starbucks, a Starbucks barista
serves a drink to a customer - Each contact remains unique. This is just a moment, just a hand
over a counter that shows a cup to another hand. Yet this is human relations.
Starbucks ensures that everything they do respects this relationship and our commitment to the
best coffee quality in the world, to our behavior towards our customers and the communities
where we operate. From the beginning, almost forty years ago, when they only had one coffee
shop, we always tried to improve even a little bit the places we went and the places Where we are
located.
Their history will always be linked to: Every day we will work with two goals in mind: sharing
quality coffee with our friends and helping make the world a little better. This was true when the
first Starbucks opened its doors in 1971 and this is also true today.
In 1971, the company was limited to a single coffee shop in Seattle in the historic Pike Place
Market. From this small coffee lounge, Starbucks offered some of the best coffees in the world,
freshly roasted from whole grains. The name Starbucks, derived from the novel Moby Dick,
evokes a sea of legend and the maritime tradition of the first coffee merchants.
In 1983, during a trip to Italy, Howard Schultz falls under the spell of Italian espresso bars and
their ritual around the café. He then had the idea of transferring to the United States the
tradition of Italian cafes, places of conversation and exchanges, a third place in a few ways
halfway between home and work. He will leave Starbucks briefly to found his own chain of cafes
"Il Giornale", and will return in August 1987, when he buys Starbucks with the help of several
local investors. From the very beginning, Starbucks chose to be a different company that not
only celebrated coffee and its rich tradition but also promoted human relationships. Our
mission is to inspire and enrich the spirit according to the meetings, coffee after coffee, in each
of the districts where we are located. Today, with more than 15,000 coffee shops in 50 countries,
Starbucks has become the number one coffee roaster and coffee merchant in the world. And we
strive that every cup, reflects our heritage and is an exceptional experience.
The responsibility of the company since the opening of the first Starbucks coffee shop in 1971,
has been making every effort to gain the trust and respect of our customers and partners by
acting responsibly and responsibly.
1.2 BUY ETHICS
Starbucks is committed to producers who cultivate coffee, tea and cocoa in a responsible
manner by providing them with material and financial assistance. Starbucks began buying
certified Fair Trade coffee in 2000 and today is the first fair trade certified coffee buyer in the
world.
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1.3 ENVIRONEMENT
Starbucks regularly puts actions to the benefits of recycling, ecology, water savings and energy.
For example, by offering customers recycled plastic sleeves that protect them from the risk of
burns, thus avoiding the use of a second cup, using recycled tiles or by installing low-flow taps in
salons.
1.4 DIVERSITY
Starbucks attaches great importance to its relationships with its communities around the world:
its producers, suppliers, partners and customers. Starbucks is committed to creating a
workplace that appreciates and respects people of diverse backgrounds and expects partners to
show tolerance and humanity towards all clients.
1.5 COMMUNITY
Every year, Starbucks is committed to making a positive contribution to communities and their
environments. To learn more about the community actions implemented by Starbucks in
France, download the PDF document below.
Each year, Starbucks Coffee France organizes sponsorship actions to help associations raise
funds and invites its partners to participate voluntarily in community actions. Starbucks Coffee
France has chosen to support the Fondation du Patrimoine through a commitment to social
inclusion. The Starbucks partners have committed to the Fondation du Patrimoine to
implement a number of actions:
On April 25 in Paris, a hundred Starbucks partners invested in the restoration project of the
small belt of Paris. Improvements, plantations and garbage collection on the railways have
punctuated this day. On April 26th in Marseille, Starbucks partners took part in the restoration
project at Fort d'Entrecasteaux. In June 2013, ballot boxes were placed in all coffee parlors to
collect donations, then donated to the profits of the two projects presented above.
During the Christmas period, Starbucks collaborated with the association Les Toiles
Enchantées, whose goal is to organize cinematographic screenings in hospitals in France and
thus bring a moment of relaxation and leisure to the sick children who cannot go out.
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This association, whose honorary president is Alain Chabat, organizes more than 120 screenings
a year. In order to help them, we decided to promote a product sharing, the famous gingerbread
or Christmas tree of which 1 euro is donated to the association throughout the campaign. An urn
was also made available to clients to collect spontaneous donations. In addition, as part of this
partnership, the volunteer partners were able to attend a screening and participate in the whole
organization of a typical day with the teams of Toiles Enchantées.
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2 GOALS FOR THE NEW ACTIVITY ABROAD & PROFILE OF THE MANAGER
New organizational form
Office
Employees including management
Starbucks new strategy in Italy should be open-minded and flexible as coffee culture is really
strong in this country and is based in several different values and habits. Management should be
carefully planned and employees should know how to integrate the Starbucks’s spirit adapted to
Italian culture, making a combine of both culture’s more important aspects. The should not lose
the essence of the business but they should also keep in mind the principles of this new country
they will try to launch in.
Everyone knows that Starbucks is developed in almost the whole world. Starbucks has 24000
stores in more than 70 countries and the company is rooted in the main states of Europe with a
big amount of stores, around 2400; but one country is still missing.
As matter of fact, Starbucks says it plans to enter probably in the most intimidating market,
Italy. The American coffee chain said that the first Starbucks store in Italy will open in Milan in
early 2017, in partnership with Italian developer Mr Antonio Percassi.
The commercial penetration in Italy will be a new insidious and interesting challenge for the big
US coffee chain. In Italy, coffee is a strong central part of the culture, with a lot of local shops
competing to sell espresso and cappuccinos. A curious data that tell us how significant is coffee
for Italians, is that in Italy there is a coffee-bar every four/five stores!
The normal situation in a typical Italian bar works in this way: an average client enters in a bar,
goes to the counter, orders a quick espresso and after few minutes, just the time to drink it, goes
in his way.
Typical Italian bar Typical Starbuck place
The Italian process of getting coffee is completely different and opposite compared to the
mentality and mission of Starbucks stores, which are designed for customers to sit and work or
talk with friends! As matter of fact, Starbucks is not only founded on quality of coffee, but its
strength is based on the sense of welcoming, calm and clean that their shops are able to convey
to consumers.
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Therefore Starbucks will enter in a market that has coffee ideals that differs a lot from the
American company ones.
Now I will explain which are the goals and objectives in Italy and which main challenges
Starbucks will face according to this new tough adventure.
2.1 SITTING NOT STANDING
As I said before, in Italy, people prefer drink coffee standing; then, once you finished it, you
move on. This is a kind of ritual developed in all Italian cities; for Italians drinking coffee,
sometimes five times a days, is like getting a medicine. It last few moments and it’s over. People
does not need to sit (also because if you sit the coffee is more expensive) and so you will never
see laptops at bars in Italy. People don't work in coffee shops like in the US, and the most you
will see is someone reading a book or newspaper (and it is usually older persons).
This kind of approach is the Anti-Starbucks. Starbucks is very famous for welcoming clients, call
them by name when their orders are ready and threat them like they are in a third home. As
matter of fact the American company provide in the stores space where consumers can chill with
their laptop and spend several hours in them. Starbucks want to emulate and reproduce the
comfort of your home; comfy chairs, great smells, pretty people and Wi-Fi characterize the
typical Starbucks store.
All of this is very far from Italian mentality of drinking coffee and that’s why enter in Italy will
represent a unique challenge. The powerful American chain will enter in Italy trying to bring
this view of “coffee shop” as a “third place”, sensation not experienced before for an Italian in a
coffee bar.
2.2 QUALITY, TASTE AND DIMENSION
Coffee in Italy is like pasta, wine and pizza; it is seen as a fundamental part of Italian identity.
The quality, linked to the tradition of coffee, is so strong and so difficult to replace as well. Now
American coffee tastes good, that’s true, but the fact is that Italian coffee always has and always
will taste better for someone who is born in Italy.
As matter of fact, Starbucks ideal of coffee is really far from the Italian one; for instance when an
Italian hears the world “Frappuccino”, he feels disgusted because it does not exist in the Italian
culture of coffee! Un caffe, un
macchiato, un cappuccino are the
most popular ones.
The typical Italian day goes
something like this: a cappuccino
for breakfast, maybe with
a cornetto as a side, an after lunch
shot of espresso, and perhaps
another espresso after dinner. 10
minutes. And this is an acquired
process hardly replaceable
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Moreover another challenge to overcome for Starbucks in Italy is linked with the dimension of a
coffee cup.
Italian cup is always a small one, with a strong taste and the consumer finishes it in 3 ore 4 sips.
Starbucks cup instead is quite bigger and it required more time to drink it. The time that an
average Italian is not willing to spend in a bar. So another Starbuck’s goal could be this shift
from the small cup to the big cup.
2.3 EXPANDING IN ALL OF ITALY
This last goal could be the more difficult one. In fact one thing is open few Starbucks in Milan,
an international city that reminds the biggest cities in Europe where Starbucks has already
succeeded; in this case for example, Starbucks stores will be full of young people, models and
foreigners in town for work. Totally another thing is to open Starbucks stores in the whole Italy.
As far as you go to the South of Italy, people are more and more linked with tradition and will
not easily shift from Italian coffee to Starbucks one, that besides is three/four times expensive
than the normal espresso or cappuccino. Starbucks, in this context, has to focus on the
atmosphere that provides to attract clients.
The CEO manager, Mr Howard Schultz, has announced to enter in Italian market in the early
2017. He said he will enter in it with “tremendous humility and great respect for the
culture”. Although he is aware of the great challenge his company will deal with, he is optimist.
Mr Schultz has signed a partnership contract with the Italian Percassi, who know Italian culture
and tradition and so could play an important role in this commercial development.
Anyway, a failure of Starbucks in Italy could damage heavily the image of the company; so this
attempt to infiltrate in the Italian coffee market could be quite risky as well.
The manager, as location of the first store, has to choose a proper place to attract many
consumers as possible. The first impact is crucial; if Starbucks builds, since the beginning, a
good reputation in Italy, other stores could be open easily. Otherwise, if Starbucks does not
convince Italian people, this attempt could reveal a total failure.
In my opinion the manager should adapt the international standard of coffee, that Starbucks
represents, to Italy since, as I said a couple of time, American culture of coffee differs too much
from the Italian one. Some suggestion that the manager should adopt could be the following:
• Since every Italian love taking a rapid coffee and then move on, Starbucks should introduce
in their stores a counter, which reminds to the Italian people their daily attitude of drinking
coffee.
• Many Italians have their personal and trustful bar where they take coffee; as matter of fact,
since a lot of bars are very small (sometimes they have just few chairs because customers drink
coffee only at the counter), a trustful client knows the staff who work in the bar, and the staff
who work in the bar know him. And in some cases, as you walk in the bar, the staff already know
what you are going to drink and this aspect make the consumer feel better.
The manager so should invest a lot in the employees and should choose those who threat clients
well and those who emphasize the attention to a single client, in a way that the consumer feels
himself in his favorite and trustful/unique bar.
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• Since the taste of Italian coffee is far away from the Starbucks one, the manager should
invent or recreate a flavor or a special mixture that recall the taste of the Italian espresso or
cappuccino. Doing this in a proper way, the probabilities of success could increase strongly.
The manager moreover should realize that this mission is not a joke; you are going in a
geographic area where Italians think that exist only one culture of coffee, the Italian one! As
consequence, it is not quick and simple as the Americans do and think, rather it could require
time and efforts to see the first results of this operation abroad.
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3 CROSS MANAGEMENT APPROACH
Cultural approach of the new organization
Remind the different cultures involved using theories of intercultural approaches
Present them
3.1 CULTURAL APPROACH OF THE NEW ORGANIZATION
1. Remind the different cultures involved using theories of intercultural approaches
Italian culture versus American culture
1) Italian culture 2) American culture
Power of distance 50 Power of distance 4o
Uncertainty avoidance 75 Uncertainty avoidance 46
Individualism 76 Individualism 91
Masculinity 70 Masculinity 62
Long/short term orientation 61 Long/short term orientation 26
3.1.1 Italian culture
• Power of distance
This index is perfectly in the middle of the scale. This means that some inequalities are still
present in the country since there are differences between individuals. In the North of Italy
equality prevails, decentralized power and decision making are very common and an open
management style is seen in a good way. Instead South of Italy works in an opposite way since
the levels of inequality and authority are higher. In the end we can state that in the whole Italy,
according to management, are present both personal and formal working approach.
• Uncertainty avoidance
The level of this index is quite high. It is linked with the level of stress in a society referred to
ambiguous and unknown future. Since Italians want to avoid not comfortable situation, a lot of
formal rules, laws and regulations are present in this country (a clear example is the civil code
that counts 2969 articles).
Italians are afraid of the future; according to management, they prefer having detailed plans in
order to prevent risks. Moreover the fact they are not too confident in people, state and
organizations imply a quite high level of stress.
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• Individualism
The high individualism in Italy means that people should look after themselves. Here we can
make again a distinction between the North and the South. In the former, the individualism is
higher due to the partial lack of integration into primary groups; in the latter, individualism is
less since people care more about the social aspect and since personal relationships are
“warmer” between people.
• Masculinity
Italy has an elevated index of masculinity, which implies a society driven by achievements,
challenges and success. In the work environment, competition is quite strong and it motivates
people as well. However high level of masculinity could lead to higher level of stress.
• Long term oriented
Italians culture is pragmatic and believe in the future. As matter of fact Italians citizens
consider, anyhow mainly in the Center-North, education an essential component to face in the
best way the challenges of the future.
3.1.2 American culture
• Power of distance
United States power of distance is low but still quite similar to the Italian one, which is a little
bit higher. Human inequality of United States is low, since Americans are known for “equal
rights” among individuals in the society.
Besides it is quite easy communicate with superiors and managers, who often rely on individuals
and on the team help. As matter of fact, a decentralized decision structure is something
ordinary.
• Uncertainty avoidance
It is still low and it represents the most significant gap between Italian culture. Americans are
easy doing, they are open minded and they accept new ideas and innovations in all the fields.
There are not so many rules like in Italy, to demonstrate that they are more confident in future
than Italians, and moreover the United States allow the completely freedom of speech, ideas and
thoughts.
• Individualism
United States of America are in the first position in the world according to individualism
approach. They believe they are the best and they can change the world. A strong example about
how American are confident in themselves that justify the 91 in individuality is the common
thought called “America Dream”; it is the ideal by which equality of opportunity is available to
any American so anyone should be able to raise and escape from poverty, if he deserves it. It is
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deducible that employees have to look after themselves and promotions in work are generally
based on merit.
• Masculinity
The level of masculinity compared between the two countries is almost the same. American
typical belief is “I can do it”; this leads to continuous improvements and dynamism in the
society. In addition they are such a lot motivated by money earnings and, linked with this
aspect, they try to obtain, more and more, an higher social status. They want their greatness
recognized by society and they want to show how magnificent they have became.
• Short term oriented
Here there is a very big difference with Italy! Americans expect quick results otherwise they feel
not comfortable with it.
Hofstede distinguishes 4 criteria and in the past has assigned these attributes up on 50
countries. The criteria that he has diversified are as follows;
1. Individualism vs. Collectivism
2. Large vs. Small power distance
3. Strong vs. Weak uncertainty avoidance
4. Masculinity vs. Femininity
By individualism vs. collectivism Hofstede means the level of social interaction. While Arabic
cultures for example are more collective, European are considered to be more individualistic.
Power distance is the approach of social classes and their interaction. By uncertainty avoidance
the risk seeking and risk avoiding characteristics of individuals are considered. Masculinity and
femininity represent the role of men and women in society, whether female emancipation is
developed to a large extent or men are still the dominant players in society.
Although his work has been very much criticized it is of value to consider the results of his
European outcome. Hofstede considers European citizens as individualistic. The most efficient
manner to trigger product purchase for people with this characteristic is by focusing of:
-functionality of the product
-variety of products
-novelty of the products
-experiential needs fulfilled by the product.
The most surprising but nevertheless most useful outcome of previous research on international
consumer behavior has been; Educate Your Customers! Even when a business concept conflicts
with the cultural behavior of a nation or geographic area, one can learn its customers to adapt to
the new situation. The best way to learn however is to reward. By rewarding the customer for his
preparedness to adapt to the new situation one can still be successful with its cultural conflicting
business strategy.
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In relation to the Study of Low and High Context of Ed Hall, talking about the high context, Italy
would be placed there but American culture will be of a low context. The first one is sensitive
and relational and the second one is concrete and objective, no so perdonal oriented. Low
Context would be more close to values such as consumption if convenience products, short
payment terms and less level of consumption. Wherease, High Context ones focuses on long
payment terms, many precise regulations.
About Trompenaars approach, it is based on 7 dimensions: individualism/collectivism,
objectivity/subjectivity, universalism/particularism, culture widely diffused/limited, statua
given/status acquired (latin countries as Italy versus American cultures), wish/refusal to control
nature and time shared/mixed. Both Italian and American cultures are widely diffused.
However, Italian culture is more collective while American is more individalistic. The first one is
more subjective and the second one is more objective.
1- Present them
After Hofstede evaluation of the two different cultures, I am going to summarize them in few
sentences, also pointing out some differences that I have seen.
American culture and values are based on the state of mind “quick and simple” and they seek for
efficiency and profitability. Italians core value instead still continues to be the family. While
Italians are more passionate and find in the family a shelter from the ordinary stress at work,
Americans think stress as a positive aspect since it comes from hard work, that will bring money
and social recognition.
American tendency is to judge people by their possessions, Italian tendency instead is more
linked to sentimental relations. Quite common in Italy are several generations (like sons,
parents, grandparents) living under the same roof; or if this situation does not take place,
Sunday reunions between members of the extended family are very frequent.
American society is more materialistic; they consider time as a precious commodity, they live in
hurry and their typical day is quite rigid (rigid schedule of the day). On the other hand Italians
are more flexible, they spend more time relaxing and if something is not done in a certain
moment it is not a drama, it will be done later.
For instance, leisure time in America is seen as a reward of hard work, in Italy free time is
something you need to have, regardless of how work is going on; Italians during work take few
pauses, they never skip the lunch and they always finish their coffee in the bars. Instead in
America it works in a different way: if you go to America is very probable you will see people
running among the crowd, with their plastic cup of coffee, or losing their patience when they are
driving (Americans use a lot the horn unlike the most of the Italians).
Of course these statements are not valid for everyone! People are complex and every person
forms different perceptions; to assume everyone fits neatly into one category is a grave
mistake. One of the worst things is to form predispositions about people from other cultures and
mistake those as facts.
As with all cultural differences, it is important to remember that different does not equal
bad. Different is different; it requires an adjustment. There are pros and cons to both sides.
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3.2 CHALLENGES OF THE MANAGEMENT
- list the different concepts and values in relationship to this new organization - call into questions the situation - formulate a problematic
Starbucks MISSON STATEMENT is: ‘’To inspire and nurthure the human spirit – one person,
one cup and one neighborhood at a time’’.
Values:
• Creating a culture of warm and belonging, where everyone is welcome • Acting with courage, challenging the status quo and finding new ways to grow the
company • Being present, connecting with transparancy and dignity respect • Deliver the very best in all we do
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Individual Level
Stakeholders Values Principles Guidelines
Managers Sustainability Recycling and reducing
waste
Seperate trashbacks for
starbuck cups.
Challenge towards the
new market (Italy)
Water and energy
conservation
New strategies depending
on the culture
Conserving the
resources they use and
purchase renewable
energy credits.
Employees Unique experience Trust and comfort Give the employees the
feeling that they belong
to the company by
incorporate them with
trainings.
Organizational Level
Stakeholders Values Principles Guidelines Acts
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Global Level
Stakeholders Values Principles Guidelines Acts Governments (The
countries where
the starbucks has
farmers and
stores)
Responsibility Improve supply
chain
management
Serve
communities,
engaged young
people. Decrease
the environmental
footprint
Director CEO
Howard Schultz
(1/2)
Customer
Transformational
leadership
Responsibility
Trust
Quality
expectations
Inspirational
motivation
Intellectual
stimulation
Individualized
consideration
Comfort and
social
interaction
Good service
and high
quality coffee
Motivate
followers to
become team
players and
dreamers that
things are
possible
Challenge
members of the
team to solve
problems. Teach
them to be
creative and
innovative
Accept
differences
between
employees
The stores are
designed to give
you the ‘This
feels like home’
Coffee with your
own twist,
special made for
you with your
name on it
Give them
comprehensive
health insurance
and an option to
own stocks.
Respect cultures
and encourages
diversity.
Hire people with
different
nationalities and
design every
store with an
culture twist
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BICEP
(Business for
Innovative Climate
& Energy Policy)
Sustainability Ethical sourcing
in coffee
Sustainable
stores
- Renawble energy
- Invest in a Clean
Energy Economy
- Support Climate
change
Adaptation,
Technology
Transfer and
Forest
Preservation.
- CAFE (=Coffee
and Farmer Equity
Practices)
- Opening LEED-
stores
(=Leadership in
Energy and
Environmental
Design)
QUESTIONS
- Is the idea of entering the niche market of Italian country a positive alternative overall?
- Will the strong Italian culture around originally coffee-making be an obstacle?
- Will Starbucks lose their essence in this new strategy country trying to get its niche?
PROBLEMATIC
This strategy of exporting in such a difficult market as it is Italy, needs a research based upon
the concept of international marketing in practice. International marketing is defined as ‘The
performance of business activities designed to plan, price, promote, and direct the flow of a
company’s goods and services to consumers or users in more than one nation for a profit ’
(Catereo, P., R., & Graham, J., R., International Marketing, 12th ed., 2005, Irwin, McGraw-
Hill, p. 9). International marketing is of great importance since borders are vanishing bit by bit,
and the rise of an open economy is increasing competition among business’s. Not moving
forward for companies means standing still, since other firms within the industry are growing
and the new best hit from foreign rivals might be lurking around. For businesses this obviously
is a stimulation to expand internationally. Starbucks is an amazingly successful company that is
known for being located all over the world. This new strategy should be considered as a
challenge.
However even as a consumer, a citizen of the world, we expect to find our daily consumed global
brands and products to be available wherever we go. Not the presence, but rather the
nonattendance of the products and services that form our individual lifestyle is remarkable
nowadays.
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A continuous movement towards globalization has triggered businesses to expand
internationally. Even though many motives for international marketing operations might exist
for a firm, still the question is whether it is wise to expand to a certain nation or not, keeping in
mind the difficulties of cultural factors within a country.
Adjusting certain facets of business operations and product lines to satisfy regional consumer
taste might be a good option. But in some cases it might not be enough to successfully expand to
a nation.
A great example of this statement is Starbucks Coffee Company, which within 15 years has
successfully opened many coffeehouses all over the world. However the absence of Starbucks
coffeehouses in Italy has been notable. Especially since the concept of the Starbucks coffee
house finds its roots in the Italian coffee drinking experience.
This absence has not stayed unnoticed. Many reasons are given for the lack of Starbucks
coffeehouses within the country of Italy. Some claim the Italian cultural preference for slow-
food rather than fast-food is the reason. But the numerous number of fast-food restaurants in
Italy should speak for their own, including the McDonalds restaurants from which many if not
all in Italy include a McCafé department offering freshly brewed coffee and tea. Reason enough
to reject this statement.
To summarize, why and how can one use a cultural tradition and introduce it in another country
within a business concept, adjust the concept to local taste, expand the idea worldwide and
successfully launch the modified concept within the country of origin?
First of all we should identify the reasons for international expansion, the difficulties and
opportunities which lie within the expansion and the possible strategies for international
marketing concerning globalization. The aim of obtaining this knowledge is to create a strategic
framework which can be applied for the implementation of Starbucks in Italian cities. The
results of these applications should lead to a successful implementation proposal.
Questions for Starbucks:
In order to reach the aim of the research the following research question should be answered;
What international marketing strategy will lead to the best suited introduction of Starbucks in
Italy?
The following sub questions will help answering the research question;
- What are the advantages of international marketing?
- What are the disadvantages of international marketing?
- In which ways can expansion to foreign markets take place?
- Which aspects of consumer behaviour are different across countries?
- What is Americanization?
- What are the benefits and disadvantages of protectionism?
We should think of a simple framework with which international expansion possibilities can be
valued from the point of view of marketing. Since the theoretical framework is based up on a
mixture of different information channels and is specifically focused on international expansion
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issues, rather than the presently available broad subject orientation of international marketing,
it could provide as a straight to the point problem solving tool. Since increasing globalization is
of great importance when it comes to the cultural aspects of international marketing, the more
recent the studies the more relevant the material.
Social relevance
This research can contribute to the overall decision making process of country specific
international expansion. Marketing now a days is of great value to social behaviour,
consumption and expression of consumers’ personal characteristics. Marketing is one of the
most important driving forces of the current world economy. Trough international marketing
activities consumers have a wider range of products among which to choose and with which to
identify one selves. The use of more favoured consumption goods and the reflection of income
increase by means of national economic growth trough increasing profits (increasing
consumption) reflects itself in increasing utility. Increasing utility of inhabitants is in an
increase of the social welfare of a country. Trough this research international expansion can take
place more efficiently and less time costly as done previously. This will stimulate international
expansion of business’s, in this case Starbucks. This will lead to more satisfied consumers.
Practical relevance
This research provides a solution for the Starbucks corporation on how to enter the Italian
market as successfully as possible keeping in mind cultural differences. Not only will this
research give a solution on the literally covered material on Starbucks, it will also provide tools
which can be used by other firms when deciding to enter the global market with their products.
Advantages of going abroad
‘Two hundred giant corporations, most of them larger than many national economies, have
sales that in total exceed a quarter of the world’s economic activity. On that basis, Philip
Morris is larger than New Zealand and operates in 170 countries. International trade in 2003
accounted for over one-quarter of U.S. GDP, up from 11 percent in 1970’ (Kotler, P., & Keller, K.
L., Marketing Management, 12th ed., 2006, Pearson, Prentice-Hall, p. 668).
For companies there are several benefits of expanding towards international operations. When
discussing international operations trough out this thesis whole products are meant, rather than
outsourcing or relocating part of production to foreign countries.
o Since market size increases production will increases as well enabling the firm to benefit
more intensively from economies of scale
o Diversification trough market expansion leads to risk reduction for the company. Keeping
in mind economic, political and weather conditions for example
o A bigger market size results in higher sales and profits, when market expansion is done
successfully
o Operating in different countries demands a deeper understanding of cultural differences,
These knowledge benefits bring more potential to the already operating home country
processes. As an example of cultural understanding benefits one can think of Red Bull
bringing home the Indian energy drink concept and Starbucks introducing the Italian coffee
drinking experience to the USA
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o Trough globalization the competitive structure of market operations are changing.
Competition has increased, wetter one decides to go international or not, it will still have to
deal with the competition increase by foreign business’ entering the current market
o Globalization also reflects in more international movement of consumers who’s needs can
than also be fulfilled abroad
Not only do companies benefit from internationalization, but consumer benefit as well. More
diverse and specific products and services are available through internationalization. But
foremost the disappearance of borders results in consumer power. Prices cannot be kept
artificially high by local and national companies since foreign companies could offer the
products and services cheaper. Industries will bit by bit move towards perfect competition.
These financial benefits and wider availability of consumer goods result in higher standards of
living. The higher standards also account for companies who have cheaper and a wider range of
raw materials and services to their reach.
Disadvantages of going abroad
However offering a company’s products abroad also brings some possible difficulties. To name
some of the most important;
o Sufficient investment should be made in order to be able to expand operations
internationally. To attract capital for financing international expansion shareholders must
be convinced of the benefits from the expansion.
o Foreign customers preferences might differ from the current customers, one might fail to
offer a competitively attractive product.
o Foreign country’s business culture might differ from the current business atmosphere. One
needs to be able to understand the new business culture and still be successful within it.
o Managers with international experience are required, who might not be present in the
currently and should be attracted. Keeping in mind that these managers will most probably
be more costly for the firm to hire.
o Laws might change in the foreign country, currencies might devaluate and political
circumstances might occur.
o Cultural differences could drive the company in to changing current business activities.
Using halal meat in Islamitic countries for example, or adjusting slogans to prevent
miscommunications.
o Political, cultural and economic shocks are not easily predicted as done at the home
country.
To sum up, it is difficult to operate in foreign countries since the knowhow and the experience is
lacking. Many adjustments must take place for a product and a concept in order to fulfil the
needs of the customers in the foreign country. All results in uncertainty and possible unforeseen
costs. This makes the firm fragile, as it does a firm’s profits. Considering the investments that
need to be made in order to expand internationally the uncertainty does not contribute
positively.
3.3 MOTIVATING AND LEADING THE NEW TEAM
- Indentify the risks and class them (low, middle, important)
- Propose solutions to each of risks
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Values are explicit or implicit distinction of an individual or characteristic of group. It defines
the desirable influences in the selection of available models. Values are programmed early in our
lifes and are non rational. They can differ according to nation, social class, occupation, industry,
organization and people. In this case, latin culture is known for the aspect of passion. American
culture -Starbucks- is more focused on "fast and simple", efficiency.
The main risks around this strategy are that the Italian culture is a very strong one based on
family and the culture of meals with all the members of the family. Italian coffee is one of the
symbols of the country, in every single region. In this strategy Starbucks face the risk of not
being able to enter in the Italian market as the product might not be suitable for the consumers.
In this specific case, consumers might not need the product because there is no single market
niche.
Overall this would be an important risk as the company would face a negative welcome in this
market. So we believe that this is a very important risk to take into account before deciding to
enter the market. A proposal in this sense would be to open several stores in the main airports of
Italy, so in this way tourist could consume the products they are familiar to (as Italy is one of the
country that is more visited around the world). At the same time it would be an opportunity for
Italians to get to know the brand little by little when they need to travel and they see it in the
airport as an new option to try.
Family life is very important in Italy, maybe Starbucks should adapt a bit his strategy in a
national way but without losing their essence. The brand is made for spending time after work
and enjoy time there being in a cosy environment. Maybe this aspect of the brand should be
highlighted to Italians so that they can spend time there with the member of their families, in a
nice place.
Religion and art are also two very important subjects in Italian culture. This might be related to
the sense that Italian might prefer to spend time in a traditional and classical café and not in a
new kind of American concept. They might see it as an hostile alternative. This could be
considered a middle important risk.
Moreover, Starbucks main product is coffee but they also sell a wider range of products. Italian
cuisine is another important value for Italians so we think that this might be a low risk in the
sense that the consumers would prefer to buy they products that originally belong to their
culture. However, we live in a globalized world so we considered that this risk would just be of
low importance as almost all the young people will be used to different styles of cuisine.
Protectionism
A very important aspect playing a role in the decision of wetter to go international or not is the
level of protectionism in the industry in which one plans to operate abroad. Although
economists argue the fact that free trade is more efficient in all cases, except in the situation of
infant industries, national defence and industrialization of underdeveloped countries, still the
consumer is the one bearing the burden.
‘To encourage development of domestic industry and protect existing industry, governments
may establish such barriers to trade as tariffs, quotas, boycotts, monetary barriers, nontariff
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barriers, and market barriers. Barriers are imposed against imports and against foreign
businesses. While the inspiration for such barriers may be economic or political, they are
encouraged by local industry. Whether or not the barriers are economically logical, the fact is
they exist’ (Catereo, P., R., & Graham, J., R., International Marketing, 12th ed., 2005, Irwin,
McGraw-Hill, p. 39).
When deciding to offer company’s products and services abroad the firm has to plan how to
enter the new market. To give a better understanding of what the aim of the expansion is, first
an overview of the Ansoff matrix will be shown.
Current products New products
Current markets Market penetration
strategies
Product development
strategies
New markets Market development
strategies
Diversification strategies
As can be seen from the table representing the Ansoff model by expansion possibilities the focus
of this thesis will be on market development strategies.
‘Expansion into new geographic markets, particularly new countries, is a primary growth
strategy for many firms’ (Mullins, J., W., & Orville, C., W., Marketing Management, 7th ed.,
2010, Irwin, McGraw-Hill, p. 51).
The first step when deciding to expand internationally is to evaluate the potential markets to
which one could expand. The factors that are of great importance are the nations’ economic
environment, the political-legal environment and the cultural environment.
An analyses of the economic environment plays a very important goal, since in economic
downturn the purchasing power of consumers will be low. Depending on the industry and the
target market one can decide if it would be beneficial to expand to a country. It is more logical to
offer a low-budget good in economic downturn rather than expanding to a nation in a period of
economic depression when the product or service that one is offering are high-end purchases.
However investments in economic downturn might be less costly, but only efficient if analyses
shows future economic growth.
Political-legal environments differ per nation and play a great role in the decision to enter a
market. Tax systems, labour laws, rules for advertisement, FDA and many more facets of this
environment make it difficult for firms to expand to a nation. If one can adapt to the rules and
laws of a country still this might be very costly. To give an example of the incurring costs; In
France it is forbidden to show any commercials or advertisements in which the character is
actually drinking or has its glass full of alcoholic liquid. For firms selling liquor planning to
expand to France this would bring extra advertisement costs, since they will be needing to make
new advertisements and commercials that are allowed for publication in French media. Another
subject of this broad term is the political stableness of the nation in terms of international
politics. Some countries might be more sensitive for future boycotts and more of the like. An
analyses of the political-legal environment will help account for the otherwise unforeseen costs
that, when accounted for, might make it less beneficial to enter a certain market.
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The cultural environment is one which cannot be neglected either. By this term the laws,
language and culture of the inhabitants of a nation are meant. Even small cultural missteps may
result in tremendous negative effects in terms of sales and profit. For example, many marketing
communication tools fail to succeed when translated from the language of origin into another
language. An example of this being Nescafé, meaning ‘not coffee’ in Spanish.
According to professor Roberta de Sanctis,(lectures sales management Universita Bocconi
2009) professor at the SDA Bocconi school of management, who was involved in the sales
management team of the Fiat Punto in India, the cultural differences were the reason for this
model to fail in India. This very compact car would be perfect for woman to drive, however
emancipation of woman in India was not far enough at the time being. Another important
reason was the cultural clothing of men, since many men in India were a Turban, head towel,
they hardly fit in the car comfortably because of the car’s size.
As can be concluded cultural differences are an essential role in the level of success that a firm
might face when deciding to introduce its product to a certain country.
After evaluating the potential markets the company has to decide to which countries it plans to
expand. Kotler and Keller argue that it is better to launch in fewer countries, but with a deeper
commitment (Kotler, P., & Keller, K. L., Marketing Management, 12th ed., 2006, Pearson,
Prentice-Hall, p. 674). It is indeed more logical to launch to limited number of countries
successfully, rather than offering your products in many countries incurring the costs but not
reaping the profits.
Following the list of (the limited number of) nations to expand to one can proceed with the
the preliminary strategy plan. The target market must be evaluated, the factors of significance
are the size of the target market, the structure of the target market and the firms’ behaviour or
goals in terms of:
- Planned product positioning
- Sales
- Market share
- Profit goals
After the preliminary strategy one can decide if expansion to this geographical area will be
beneficial for the firm. Some firms continue with a process of market testing, to see if and what
aspects of the marketing communication and the product itself will be needing changes to be
more favoured by local consumer taste. However this is not an essential step, and its usefulness
depends very much on the industry in which one operates.
Even though culture is of great influence on the liking of a certain type of product, still one
should focus on differences in behavioural dimensions rather than assigning these dimension to
a culture. The reason behind this is that consumer behaviour is based upon three studies, from
which only one addresses to culture. Namely cultural anthropology. Psychology and sociology
are equally as important. While cultural anthropology focuses on a culture, a very large group,
and social class, psychology is centred around the individual. Factors that play a role in this field
of science are individuals’ values, attitude, experience and needs. Sociology is assigned to the
study of small groups, that consist of interacting individuals. Here one can think of families.
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Keeping in mind the relevance of consumer behaviour one should be able to make an
international overview of the characteristics of these differences among consumers in terms of
an international atmosphere. Nevertheless this has not yet been accomplished to a satisfying
degree. Due to the fact that individual behaviour differs to such a large extent that it cannot be
reliable if added up to a geographical area. However T. Clark thinks differently about this matter
and believes in the so-called National Character.
‘People of each nation have a distinctive, enduring pattern of behavior and/or personality
characteristics’(Clark, T., International Marketing and National Character: A Review and
Proposal for an Integrative Theory” Journal of marketing 54 (October 1990) P.66)
The Italian market
Italian Culture and demographics
In 2009 Italy had over 60million inhabitants, from which 2.6 million living in Rome, 1.3 million
in Milan and 1.1 million in Naples (2004). It has the 5th largest population density of the
European countries.
The language that is spoken in Italy is Italian. Although Italy does not have a state religion,
almost 90% of inhabitants are Roman Catholics. Italy has the largest per capita count of
churches worldwide. 66% of inhabitants are within the age group of 15 to 64. Italian people can
be viewed in terms of national character as collectivistic, since family is the centre rather than
the individual. However Italian people are very self aware when it comes to appearance. The
first impression is of great meaning. Appearance in terms of clothing, attributes and gesture
represent, according to the national character, the social class, family statement and educational
level. Since appearance is a great deal, Italians tend to be trendsetters in fashion and design,
being the first wanting to have a newly available good.
Business Culture
Italians prefer to work with people they know. Face to face contact is essential in having
business conversations. Not only will the subject be formal business, asking and being asked
about personal issues, family life etc. is done usually. Since intuition is the driving force of
business decisions, a feel-good conversation is fundamental to convince parties.
Italian Economy
National GDP per capita Italy is higher than the the average EU GDP per capita, resulting in
high standards of living. Although GDP did decline in 2009 as compared to its 2008 GDP, still
on the world list of large economies Italy ranks 11th . The World Bank claims that Italy has a free
business environment and categorizes Italy in the list of open trade and openness for
investments.
Italian Coffee
Italy is well-known for its coffee culture. In Milan alone there are thousands of espresso bars.
But the Italian coffee culture differs from the rest of the world since it is very distinctive. Rather
than having a coffee on the way in a plastic cup, Italians gather in their local espresso bar and
drink an espresso standing next to the counter. Usually people go to the same espresso bars and
know the barista, waiter. The Italian coffee drinking culture is very sophisticated.
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Even the Senseo and the Nespresso machines that are used in households all around western
Europe are not integrated in the Italian households as they are elsewhere. Italians prefer to use
their metal coffee makers that need to be placed on the stove.
Is Entering the Italian Coffee Market critical?
As discussed in the introduction of this thesis, it is not critical for business’ to enter the Italian
coffee market if one takes McDonalds as an example. In Italy almost all McDonalds restaurants
have a McCafé corner where freshly brewed coffee, coffee specials and treats are being served.
Even though Italians are fond of their coffee drinking habits, they have shown to be very open
for new discoveries. Besides the coffee consumption in Italy accounts for 14 billion cups of coffee
per year, that is 3.7 kg per year per person. Catching only a small fraction of the current
consumption would be interesting enough to enter the industry.
Limitations of Starbucks entering Italy
Examining culture as a whole is too broad to be useful. But examining only a single culture is to
limited to be informative. For this reason research which is done on culture so far has been
informative but only limited in serving usefulness.
While one theory informs about how to adjust to a culture, another theory explains that
anything can be thought to consumers. Another limitation of this study is the fact that the
current coffee industry in Italy consists of thousands of privately held companies. This again
limits the usefulness of the information. While overall consumer consumption numbers are
available on the internet.
Another limitation is the fact that this research is done trough a literature study. Literature is
based up on a personal understanding. Misunderstanding these ideas could result in a biased
outcome.
Recommendations
As I already explained in the section results and discussion, I believe it would be an opportunity
for Starbucks Corporation to enter the Italian market.
The Italian market is definitely a desired market with high potential for Starbucks. Not only
because a cup of Starbucks is not just a cup of coffee but a way of expressing identity. The Italian
national characteristic shows that appearance of great deal to Italian. They enjoy living, enjoy
looking good. And even judge by the way other appear and live. The above average GDP makes it
financially interesting to operate in this market. As not to forget does the Italian passion for
coffee. With a consumption of 14 billion cups of coffee per year, and a high density of people per
square meter. A single coffee house could book enormous success.
Entering the Italian market would be best done by using the market development strategy of
creating a joint venture with a local entrepreneur. Since the basic idea of the Starbucks
Corporation finds its roots in the Italian coffee drinking experience, and many European
countries by know have Starbucks nationwide, except for Italy, the pressure for success is
extremely high. If Starbucks fails to succeed in Italy the corporate image might be damaged, for
this reason more control would be better than less. So rather than licensing a joint venture
should be created. Direct investment does offer more control but since Italians are not open for
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business interaction with 3rd parties, a local entrepreneur will most probably reach better
results. Currently in joint venture partnerships Starbucks leaves the options of the locations to
the domestic entrepreneur. For Italy I would recommend the same tactic. Local partners have
more domestic experience and know-how.
A small footnote would be to pay careful attention to the appearance of the personnel in terms of
clothing, since it should be fit for Italian taste.
What international marketing strategy will lead to the best suited introduction of Starbucks in
Italy?
The outcome provided through this research is that a partnership in the form of a joint venture
between a domestic firm and Starbucks Corporation will lead to the best possible introduction
for both parties. Starbucks Corporation remains control over the process, while interaction with
Italian business people is done more efficiently trough the domestic partner. Both can benefit
from the joint venture. The other facets of international marketing can be done in the current
way of operations done by Starbucks, meaning, several high-traffic locations will be purchased
which will fulfil the role of brand awareness in the first three years of operation. The price of the
products can remain constant as compared to the other EU Starbucks prizes. The product line
can stay the same as well, consisting of hot and cold beverages, whole-beans and local side
dishes.
Except for the strategy of joint venture rather than licensing pretty much all business operations
can go uniformly as done in other European countries.
For further research it would be of great importance to obtain a better description of the profit
potential and the costs of launching in Italy. If these numbers are not added, investors cannot be
convinced.
The Italian espresso culture
The big turning point for Starbucks occurred when Howard Schultz visited Italy on the mid
1980s. He was marveled at the atmosphere he encountered within the espresso bars. People
talking to each other like close friends, the barista pulling shots of espresso coffee with a smile
stamped on his face and the clerk joking around and calling the clientele by their names. More
than a bar those places were active community spaces. Schultz compared the experience to
being inside of a “great theater”, and he was absolutely sure that he would have success if he
managed to export it to United States.
The evolution of Starbucks certainly absorbed some of the Italian coffee tradition, but it was
structured around the American society. Despite being inspired on the Italian culture, therefore,
it is probable that the Starbucks model would not fly in Italy.
The coffee experience for Italians is much more personal and intimate than what any Starbucks
store would be able to offer. It is about “slow food” as opposed to the American “fast food”. Just
think about the plastic cups, for instance, Italians do not like them. Why? Because they do not
even consider the possibility of taking the coffee outside of the bar and drinking it while walking
or driving.
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Seek a proactive attitude from top management
The members of the management can be involved with internal communication. They do not
have to do it every day but they do frequently and use the internal info media frequently (post,
newsletters, letters, etc). They have to promote a culture of communication (learning to
communicate with employees). Everyone is clear that you have to communicate with customers
and communication with employees give less importance, only if we have a strong culture of
external and internal communication will get a good action in the market and be competitive.
To convey a good exterior image, the company has to have a good interior image
Projecting the intentional image of the company through internal communication pq is the
easiest way for our employees to transmit that intentional image to the outside.
Ensure consistency between internal communication and external communication
To avoid harmful (negative) effects. In an org usually two things happen quite often: a)
organzaons that transmit an idea to customers and another to employees, customers tell you
that the company is doing very well and employees to the contrary. This is very negative because
it generates mistrust. Bb) employees sometimes find out about important organizaion issues
through the media.
We must try to revalue the internal communication by extending it beyond the scope of the
company (making it reach the family of employees, society, etc.). We do this by creating
attractive communication media: electronic support, magazine, etc., take them home and see
families. It allows us to extend the image of the org and the internal communication to the
outside.
Objectives of internal communication:
- Involve the org in the development of its strategic vision. It is achieved by trying to get
employees to identify with the organizaon, promote the sense of belonging to share the
values of the org and use the internal communication to extend the values.
- Project a positive image of the orgaizaton beyond the natural areas of the organzation.
Employees of an org can be their main enemy because if they speak badly about it they can
29
destroy it. There are pages where org employees put their opinions on org. Your opinion can
reinforce or destroy our corporate reputation. Your opinion will depend on the image you
have of the company and the internal communication has a very important role in creating
that self-image that the employees will develop.
- Balancing upward, downward and transverse communication within the org, we must
first inform each employee about all aspects of the organization that concern him / her. We
must try to get feedback from employees. It is fundamental for the good performance of the
organization.
- Involve the members of the organization in the business project. We all like to be
recognized for our work. We must explain to each employee in a precise way what their
work serves within the organzation, in the most personalized way possible.
- It is important to consolidate a managerial style based on teamwork, employee
participation and commitment. For this we must use internal communication and create
team.
- It should be used to favor the adaptation of the organization to changes in the
environment, whether technological, cultural, social, economic, etc.
A dynamic conception of internal communication: companies spend a lot of money in
implementing a series of internal communication tools and during the first few months is going
well but then people lose interest because those means are not fed properly. For employees to
have an interest we have to tell you things that interest them. In order for us to use them to
communicate, a series of conditions must be given. There are also tools that are to transmit
corporate info to the employees (newspaper or newsletter) and others like the email that are
more suitable for communication. If we want to develop an effective internal communication
strategy we must articulate the internal communication around 3 fundamental concepts:
INFORMATION MARKET (org understood as an information market in which there is an
offer and demand for information products and services and as a place of meeting of people that
exchange of communication and info, for example we enter when there is something that
interests us in the virtual campus, we must apply contents of interest becasuse is the only form
that they want to enter to read us). We enter when we know that there is info that interests us.
We offer content of interest by configuring an information offer that fits the interests of
employees, to the demand. If I sell something I do not want in the market, I am less likely to sell
it. COMMUNICATION SPACES (intended to promote internal communication) and THE
INTERNAL PUBLIC OPINION (result of the market of info and communication spaces).
THE SPACES OF COMMUNICATION: they aim to put in contact the people who work
together and all members of the org with the aim of knowing and exchanging values. When we
talk about spaces of communication we always refer to places or events where the org brings
together their employees or part of their employees. We speak mainly of 2 communication
spaces: meetings, whose purpose is the exchange and contact between different members of the
org and the meeting points that are meeting spaces within the organizaton, its objective is the
direct contact between employees and with the stakeholders. There are many meeting points in
an org, intranet, in many companies are replacing this by corporate social networks to put all
employees in contact. The café is a meeting point.
Should Starbucks risk its image?
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If Italy was all about “slow food” McDonald’s or Burger King would not be selling there right?
Starbucks could try to enter the Italian market and use a clever marketing strategy to change the
customer perception about its product offering, proving to everyone else that its espresso coffees
are good even for Italians!
There is one simple reason why they are reluctant to do so. The benefits of trying and succeeding
at the Italian market are by far smaller than the losses of trying and failing. Should they win the
bet they would increase their international revenues, Italy drinks a lot of coffee after all. Should
they lose the bet, however, they would lose not only money but they would be damaging the
corporate image.
The whole Starbucks deal was inspired by the Italian coffee tradition. Starbucks is tremendously
successful because it is not selling coffee but rather a charming experience. When you order a
Cappuccino inside a Starbucks store you will not just get some espresso coffee topped with
steamed milk, hell no! What you will get instead is a bit of Florence, a bit of Rome… and the
experience will recruit all your senses, making you feel unique and sophisticated.
Now, should people start reading on the newspapers that Starbucks is having trouble to sell its
coffee in Italy it is very likely that the whole glamorous experience just described would get
shattered.
Starbucks’ decision to not enter the Italian market could be strategically correct. The Italian
people would be reluctant to abandon their traditions, and the risks of an eventual failure out
weight by far the possible rewards of succeeding. The image about the espresso experience is a
corner stone of Starbucks’ business model, and they are not risking to damage it.
Italians take great pride in their coffee culture. It makes a lot of sense considering that the
espresso machine was invented and patented in Italy in 1884 by Angelo Moriondo.
With this in mind, the coffee market in Italy was a mature one with “penetration reaching
almost 100%.” According to the USDA, “Italy is the 7th largest coffee consumer in Europe with
5.8 kilograms per capita or … approximately 600 cups of coffee per capita per year.” That is an
enormous market. For comparison, the “average American consumes an estimated 441 cups
yearly, while the Finns and Norwegians both consume over 1,000 cups annually.”
Italians mainly consume coffee in the form of espresso at coffee bars at 10 a.m. during their
coffee break, and once more after lunch, with the exception of a cappuccino or macchiato for
breakfast. Coffee bars are exactly what they sound like – a bar where consumers line up to shoot
a shot of espresso, maybe have a quick word with the barista, and leave. The concept of cushy
chairs and patrons lounging around is foreign, except for a few locations that I will expound
later. Therefore, to add the idea of a sweet Frappuccino beverage that would be sipped slowly
was almost unfathomable. To curb this century-old habit would be difficult.
However, if you think about it, the U.S. was a lot like Italy in terms of coffee habits. Before
Starbucks, coffee was drunk in a similar fashion, except as a brewed cup in the U.S. opposed to
an espresso shot in Italy. Dunkin Donuts and McDonald’s blanketed the U.S. market. At the
time, coffee was just coffee. There was no differentiation. And most importantly, there was no
mainstream place to just hang out in a comfortable setting. Starbucks’s value proposition was
not only providing high-quality coffee, but also a destination to commune. In fact, Starbucks has
31
a name for it, “third place between work and home … a place for conversation and a sense of
community.” It was part of Starbucks’s heritage. Looking through these frames, there’s potential
value to capture in Italy, but Starbucks needs to be prudent in its approach.
Because it’s worth repeating, Schultz emphasized that “we were never in the coffee business
serving people; we were in the people business serving coffee.” Therefore, can the near 140,000
coffee bars in Italy make room for comfortable lounges where patrons can hang out for a chat?
If coffee is intimately woven into Italy’s culture, why not enjoy it leisurely? Contradictory to the
Italian fast-paced espresso culture, locals value enjoyment in an unhurried fashion. According to
a local, “it’s important to visit Rome in slow motion … Absolutely.”
Options in Italy
Schultz believed that “people around the world, they want the authentic Starbucks experience.”
Apparently, that wasn’t always the case.
If Starbucks decides to expand to Italy, it faces a number of issues. First, if it fails, Starbucks
could damage its corporate image because Starbucks was supposed to have been inspired by
Italy’s coffee culture. On the occasion that Italians reject Starbucks’s coffee, then there’s the
question of whether it would adversely affect the brand globally. Second, Starbucks needs to
keep in mind that Italy’s economy has been shrinking continuously and that the country faces
roughly 12.2% unemployment. Plus, the market is mature and saturated with local competition.
The data looks dismal.
Regardless of its decision, Starbucks is trying to be more global; it is driving success by adopting
a “lens of humanity.” But can it see eye-to-eye with Italians? To say Starbucks purchases and
roasts high-quality whole bean coffees is very true. That’s the essence of what we do – but it
hardly tells the whole story.
3.4 STARBUCKS HERITAGE
Every day, we go to work hoping to do two things: share great coffee with our friends and help
make the world a little better. It was true when the first Starbucks opened in 1971, and it’s just as
true today.
Back then, the company was a single store in Seattle’s historic Pike Place Market. From just a
narrow storefront, Starbucks offered some of the world’s finest fresh-roasted whole bean
coffees. The name, inspired by Moby Dick, evoked the romance of the high seas and the
seafaring tradition of the early coffee traders.
In 1981, Howard Schultz (Starbucks chairman and chief executive officer) had first walked into a
Starbucks store. From his first cup of Sumatra, Howard was drawn into Starbucks and joined a
year later.
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In 1983, Howard traveled to Italy and became captivated with Italian coffee bars and the
romance of the coffee experience. He had a vision to bring the Italian coffeehouse tradition back
to the United States. A place for conversation and a sense of community. A third place between
work and home. He left Starbucks for a short period of time to start his own Il Giornale
coffeehouses and returned in August 1987 to purchase Starbucks with the help of local investors.
From the beginning, Starbucks set out to be a different kind of company. One that not only
celebrated coffee and the rich tradition, but that also brought a feeling of connection.
Our mission to inspire and nurture the human spirit – one person, one cup, and one
neighborhood at a time.
Expect More Than Coffee. We’re not just passionate purveyors of coffee, but everything else that
goes with a full and rewarding coffeehouse experience. We also offer a selection of premium
teas, fine pastries and other delectable treats to please the taste buds. And the music you hear in
store is chosen for its artistry and appeal.
It’s not unusual to see people coming to Starbucks to chat, meet up or even work. We’re a
neighborhood gathering place, a part of the daily routine – and we couldn’t be happier about it.
Get to know us and you’ll see: we are so much more than what we brew.
We make sure everything we do is through the lens of humanity – from our commitment to the
highest quality coffee in the world, to the way we engage with our customers and communities
to do business responsibly.
MILAN — Standing in the art-soaked splendor of a Milanese parlor as an array of A-list Italian
business leaders listened intently, Howard D. Schultz, chairman and chief executive of
Starbucks, recited a remarkable statistic on Friday: Each week, roughly 90 million people pass
through a Starbucks somewhere on earth.
Equally remarkable, given that Starbucks operates in 70 countries, is this: Not one of those
people is in Italy, a country where coffee culture is central to daily life, and that represents
something of a coffee holy grail to Mr. Schultz. Italy, land of the perfect espresso and the
exquisitely frothy cappuccino, is a Starbucks-free nation.
Or it was. Mr. Schultz swooped into Milan during Fashion Week to announce that Starbucks
would open its first coffee shop in Italy early next year, in Milan. Given that Starbucks is
opening 500 stores a year in China, the Milan venture might seem like a nice little ornament.
But for Mr. Schultz, coming to Italy is personal. It is also delicate — and a bit of a risk.
“There are very few markets and stores that I’m as intimately involved in as this,” he said in an
interview after the announcement. He added, “We’re going to come here with great humility.”
Starbucks has always been careful in Europe, aware that the Continent’s coffee aficionados have
refined tastes and an abundance of good coffee shops — and might take offense at the idea that
an American company is needed for a better espresso. Yet Starbucks has marched successfully
into Britain, France and Germany, and it has even found success in Vienna, the Austrian capital,
which gave birth to the coffeehouse.
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4 BIBLIOGRAPHY
The Guardian, 29 February 2016
https://www.theguardian.com/business/2016/feb/29/taking-the-plunger-starbucks-to-open-
first-store-in-italy
The Guardian, 4 March 2016
https://www.theguardian.com/world/2016/mar/04/arrival-starbucks-may-have-perks-italys-
coffee-traditionalists
The Federalist, 17 March 2016
http://thefederalist.com/2016/03/17/why-starbucks-will-not-flourish-in-italy/
BBC News
http://www.bbc.com/news/magazine-35728428
Il Post It, 1 March 2016
http://www.ilpost.it/2016/03/01/cosa-fara-starbucks-in-italia/
Values and Beliefs System
http://pspl.culture-quest.com/pspl/index.php/italy-local-culture/italy-values-and-belief-
system-local-culture
10 Core American Values
https://www.andrews.edu/~tidwell/bsad560/USValues.html
Huffington Post, 6 November 2015
http://www.huffingtonpost.com/2015/11/06/things-americans-can-learn-from-
italians_n_4455377.html
When in Florence
https://wheninflorenceblog.wordpress.com/tag/cultural-differences-between-americans-and-
italians/
Starbucks Corporate Culture web page. https://www.starbucks.fr/about-us
(Catereo, P., R., & Graham, J., R., International Marketing, 12th ed., 2005, Irwin, McGraw-Hill,
p. 39).
(Mullins, J., W., & Orville, C., W., Marketing Management, 7th ed., 2010, Irwin, McGraw-Hill, p.
51).
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Starbucks Corporate Culture Web Page
WWW.STARBUCKS.COM
Joseph Chris Blog, Driving Business Connexions
http://www.josephchris.com/7-howard-schultz-leadership-style-principles
Starbucks Global Assets
http://globalassets.starbucks.com/assets/ee8121c1a6554399b554d126228d52ed.pdf
Innovation Zen, Business Strategy, Innovation and More
http://innovationzen.com/blog/2007/01/15/why-starbucks-is-not-present-in-italy/
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