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

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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

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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/