Transcript Starbucks - Neal Deters

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Starbucks
Morgan Phillips
Faraz Chowdhury
Mohammad Farooq
Mikaela Odell
Neal Deters
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Introduction
 Chicago
International
Consulting Group
 Objective
 Starbucks
Sweden
in
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Macro Economical Factors
Morgan Phillips
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Demographic Environment
 Language: Swedish
 Population
9,103,788
 Median Age:
 Total: 42.2 yrs
 Male: 41 yrs
 Female: 43.3 yrs
 Population growth rate:
0.1685
 Major City Population:
 Stockholm: 1.279
million people
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Ease of Doing Business
Sweden (14)
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Economical Structural Environment
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Mixed System of High-Tech Capitalism and Extensive Welfare
Benefits
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Privately owned firms account for a vast majority of industrial
output
GDP (purchasing power parity): 386.6 billion (2011)
GDP (Official exchange rate): 538.2 billion (2011)
GDP (real growth rate): 4% (2011)
• Inflation Rate: 3% (2011)
• Imports: $179.6 billion (2011)
Labor Force: 5.018 million (2011)
Unemployment rate 7.5% (2011)
Public Debt: 37.5% of GDP (2011)
• CPI: 314.81 (Sept 2012)
• Index 1980=100
• National Accounts GDP: 1.3% (2nd quarter 2012
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Sweden’s Financials 2012
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Technological
Factors
Internet and Energy
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Internet
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Sweden is one of the world’s leading information and
communication technologies (ICT) nations
Sweden is the birthplace of wireless technologies such
as GSM, WCDMA, LTE and Bluetooth
Huawei, Intel, Motorola, Oracle, Symantec and ZTE are
among the foreign companies conducting research and
development in Sweden.
Networks manufactured by Ericsson, one of Sweden’s
biggest companies, handle almost half of the world’s
mobile traffic, while in recent years many smaller
Swedish startups have broken through on the world ICT
stage
89% of Swedes have internet access at home.
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Energy
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Ever since the oil crisis in the early 1970s, Sweden has invested heavily
in the search for alternative energy sources
In 1970, oil accounted for over 75 percent of Swedish energy supply; by
2009, the figure was just 32 percent, chiefly due to the declining use of
residential heating oil
In 2003, green electricity certificates were introduced in Sweden to
encourage the use of renewable energy. To be certified green, the
electricity has to come from wind power, wave power, solar energy,
geothermal energy, biofuels or small hydroelectric plants
 In 2005, Sweden introduced a
special program designed to boost
energy efficiency in industry.
Under this program, the 180 or so
power-intensive industries taking
part are granted tax relief in
exchange for drawing up energy
plans and taking steps to reduce
energy use. To date, the program
has resulted in energy savings of
about 1.4 TWh per year at a value
of about SEK 500 million
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Political Environment
Form of government: Constitutional monarchy, parliamentary democracy
Parliament: The Riksdag, with 349 members in one chamber
Sweden has been a member of the EU since 1995
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Built Upon Decentralization
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All public power in Sweden comes from the people. This is the first sentence in
the Swedish constitution. The people are represented by the parliament
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Swedish parliament, Riksdagen, since 1970, has a unicameral system. The
foremost representative for Riksdagen is The Speaker (Talmannen)
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Sweden has a written Constitution (Grundlag) since the middle of the 14th
century, but it is not one single constitution. Instead it is now four constitutions.
They are called Regeringsformen ( form of government), Successionsordningen
(order of succession), Tryckfrihetsförordningen (press law) and
Yttrandefrihetsgrundlagen (constitution for freedom of speech)
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The present king, King Carl XVI Gustaf was born in 1946, the son of Prince
Gustav Adolf and Princess Sibylla. He became king after his grandfather's, King
Gustav VI Adolf, death in 1973. In 1976 the king married Silvia Sommerlath and
they have three children: crown princess Victoria, prince Carl Philip and
princess Madeleine
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Culture
National and Business
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National Culture
Personality
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Efficiency is combined with a laidback attitude, and old traditions
blended with openness for new
technologies.
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This sense of heritage is mixed with
open-mindedness for other cultures,
due to the facts that one-fifth of the
population has roots in other
countries, that Swedes travel a great
deal, and that they speak other
languages.
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Almost one-fifth of Sweden’s 9.5
million inhabitants have roots in
other countries. As a result — and
despite the challenge of
segregation — the growing number
of immigrants makes Sweden an
open, international and multicultural
society.
Food
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Many traditions carry a religious
significance, such as Christmas, Easter,
Pentecost and Fat Tuesday, but there is
often little reference to the Bible on
these occasions. Generally, it’s more
important to watch Donald Duck at
Christmas, dress up as witches at Easter,
get married at Pentecost and eat cream
buns on Fat Tuesday, rather than
question why you’re doing it.
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When it comes to drinking coffee,
Swedes rank second in the world (per
capita, of course). People usually drink
coffee for breakfast, after lunch or
during the highly esteemed coffee
breaks (Fika), but there are also special
coffee parties (kafferep). If you are
invited to one, you can expect to find at
least seven sorts of home-made buns
and cakes, a kind of minimum amount
according to Swedish housewives
'standards
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Business Culture
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The boss is one of the team, decisions are reached by consensus, the vacations are long, and the coffee
breaks are sacred
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Business dress is on the casual side — you don’t see many suits on the train during the morning
commute — and everyone is strictly on first-name terms, regardless of their place in the company
hierarchy
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A Swedish manager tends to think of himself as a coach rather than a commander, and he often delegates
tasks and authority to his staff.
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The power distance in Swedish companies is among the smallest in the world, according to a study of 40
countries in 1984. 'Power distance' can be defined as "the extent to which people in a hierarchical situation
feel they can and should control the behavior of others, and the extent to which those others are
conditioned by reflexes of obedience". In Swedish companies, the concept of power distance is largely
replaced by personal responsibility
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Swedish executives are generally more willing to take risks than their colleagues in other countries. An
international study showed that Sweden had the lowest "uncertainty avoidance index" by far among the
countries compared, while Japan had the highest
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Being punctual is not only regarded as a sign of respect but also of efficiency and Swedish businessmen will
have little understanding for cultural variation in this case.
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Foreign businessmen often find that their Swedish colleagues talk too much business , and too little about
themselves or their interests. They might draw the conclusion that their partners are simply limited and
ignorant. The Swedish businessman, on the other hand, probably wishes his foreign business partner would
cut the small talk and come to the point. In Sweden, a direct approach is seen as a sign of efficiency and a
wish not to waste the other person's time.
Getting emotional in a business setting is
considered very inappropriate
1/5 board
members
are
women
and 1/3
managers
are
women in
Sweden.
Double
the
European
Average
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Micro Analysis & Trends
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Political Environment
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Parliamentary political
system
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Government has a large role
in the Swedish
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Economy
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Own shares in many
industries
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State own monopoly on
alcohol
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Social Systems
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Second least religious country in the
world
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Egalitarianism
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Strong welfare system
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5 weeks paid vacation a year
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Taxes
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Degree of Openness
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Exports account for roughly 50% of the GDP
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One of the top recipient of foreign direct
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Investments.
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Early adopters
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Markets in Sweden
Product Market
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Relatively small market,
around 9 million Inhabitants
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Early adopters
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Foreign policy ranked Sweden
as one of the top three most
globalized countries in the
world
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Part of EU import tariff system
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Several market research
companies
Labor Market
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Unemployment 7.2 %
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From 1980-2012 average
unemployment rate 5.68%
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Easy for people to get
education because it is Free
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Unions have great influence
over the workplace
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Business Hierarchies
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Low level of hierarchies
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“Violates” the corporate chain of
command
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Managers are more like coaches
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Business decisions based on
consensus
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Direct and open communication
style
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Host-country Global/National
Competitive Environment
Mohammed Farooq
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New Entrants to Market
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No direct corporate competitors
entering the market within segment
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Cafes in Sweden, Finland, Norway, &
Denmark
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Must look at coffee shops in near-by countries as
well
Could be potential threats within the near future for
Starbucks
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Market Threats Now
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Emmi Nordic AB
 Second largest player within the Ready to Drink (RTD)
coffee market.
 41% share of volume shares in the market as an
international player.
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Lidl Sverige KB
 Hold a 14% share (3rd in the market) within the Swedish
RTD Coffee market. However, they are a privately
controlled player.
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Negative Effects of RTD Coffee
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Threat to forecast growth
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Industry Movement
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Total Sales Increase of Coffee: 3% in 2011
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On-Trade Sales of RTD Coffee are Marginal
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Although this appears to be a small increase, it shows increase sales
during a economic crisis.
Consumers prefer always fresh coffee made on the spot.
Market Shares Increased gradually over 5 years
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Managed to increase value during the European Debt Crisis
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Starbucks in Sweden
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Starbucks History
 Starbucks was created in 1971.
 In 1996, the company began their international expansion.
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Starbucks Pros in Entrance
 Strong competitor within not only the American Markets, but
also the international markets.
 Sweden’s stability allows for an easier ability for entry..
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Starbucks Cons in Entrance
 Starbucks has shown to have created little growth within most
European markets.
 Starbucks has yet to turn profits in any of its French retail
outlets, and continues to struggle with growth even in its
profiting areas.
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Foldger’s and Maxwell House
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Host Country Industry
Analysis
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Overview of Industry
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“Coffee is worth over $100 billion worldwide,” and over 500 billion
cups of coffee are drank every year (Goldschein).
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Sweden is one of the highest consumers of coffee at 8 kg per capita
(CBI).
 An average Swedes consumes about three and a half cups of coffee
everyday (CBI).
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Even after the world economy had declined, coffee consumption
“declined marginally.”
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Since prices increased, Swedes began making it at home.
 They did not stop consuming coffee, and even during this time,
coffee had a “positive growth” (Euromonitor).
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In 2011 prices increased 25% per unit due to poor harvesting
(Euromonitor).
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Customers are loyal to their coffee brands
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Swedes typically have two coffee breaks a day
 Known as Fika
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Nature of Industry
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Recently, Swedes have began purchasing coffee makers for home.
 Increased demand for fresh coffee pods.
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“Standard fresh ground coffee” is still the most popular in Sweden and it accounts for a
“93% share of total volume sales” (Euromonitor).
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Specialty coffees are becoming more and more popular.
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Major coffeehouses keep price competitive.
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Recently there has been a high demand for strong coffee.
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Swedes tend to sit down and drink coffee, as opposed to Americans who like to grab and
go
 Seen as being rude if a guest leaves before drinking coffee
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Three major chain coffee houses are Wayne’s Coffee, Bishop Arms and Espresso House.
 These three players alone accounted for 71% of chained value sales of coffee in
2011(Euromonitor).
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These coffee houses also provide a quick bite to eat (cookies, sandwiches, cupcakes).
 Menus change frequently due to trends and demand
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Charts
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Future of Industry
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It is estimated that there will be approximately a 1% decrease in the
growth of coffee sales.
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Perhaps due to coffee makers at home.
Price of coffee is expected to decrease in the next 5 years.
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The increase was because the world economy had declined as well as the poor
harvesting in 2011.
 Coffeehouses keep price competitive
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Swedes have always been concerned for their health and they will
continue to, but this will not affect coffee sales.
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Competitors are expected to come out with new items, but it is not
going to have no effect in the near future.
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Overall, there is no foreseeable threat to the coffee industry in Sweden
in the next few years.
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Barriers of Entry
 Competitors
are well established
 Will
be costly doing research, building stores,
marketing, etc.
 Customers
are loyal to their coffee brand
 Three
major competitors have plans to expand in the
next few years.
 Finding
“hot spots” or prime locations with most foot
traffic that have not been taken yet.
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Risk Analysis
Faraz Chowdhury
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Risk Analysis
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Political
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Levels of corruption and bureaucracy are low.
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The quality of the judiciary is high and the legal code is well
developed.
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Sweden is welcoming to foreign investment, although regulation
inhibits competition in some of sectors.
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Politically Sound: Disputes settled
within legal framework
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Broad agreement between parties
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Legal system not open to political
interference
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Excellent relationship with their
neighbors
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Potential Risks
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Financial Sector is strong despite the EU
turmoil.
 Strong Financial Network and plans to
establish stability
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Large Automobile industry struggling due to
EU struggle
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Increased involvement of international
organizations
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Strict policies on intellectual property
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Here are few restrictions on foreign ownership
of companies and property, and the main
regulations do not discriminate between
domestically- and foreign-owned firms.
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Other Potential Risks
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The tax environment
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Favorable for companies more than that for
individuals:
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The corporate tax rate was reduced from 28% to
26.3% in 2009.
High unit labor costs – weakness
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More skilled workers, less lost time and higher
productivity
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Transportation and Logistics is excellent
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Sweden is one of the most technologically
advanced countries in the world, and
consistently ranks among the leading nations in
terms of internet and phone communications.
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Composite Risk Analysis Score
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Composite Risk Analysis Score
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Regional Real GDP Growth
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Risk Forecast for International
Businesses
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Recommendation & Entrance
Strategy
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Starbucks “All in One”
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Currently only 2 franchised outlets
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Will need to provide Strong, gourmet, premium coffee
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Private Sit down outlets because swedes like to sit down and
drink tea
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Effective way to get market share is to open outlets
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Keep up with trends
Heavy Marketing to relate with Swedes and get our message
across
+ Strategy to Start Starbucks in
Sweden
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Import coffee from Brazil,
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Use Starbucks’ International
distribution
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Ownership
 Greenfield
 No franchising
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Labor
 Half and half
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Location and Property
 Stockholm and Popular
markets based in market
analysis
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Risk Assessment
 Adapt
 Change content
 Get out
Conform to host
country customs
such as less
hierarchy and
more equality
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High labor
costs, low
business
taxes
National
Competitive
Advantage
by Porter
Export
alliances to
streamline
supply
High end
Coffee
Demand to
be met
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Thank you!
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Sources
CIA Factbook
https://www.cia.gov/library/publications/the-world-factbook/geos/sw.html
10/29/2012
Last updated oct 22 2012
. ISSN 1553-8133
Sweden.Se
http://www.sweden.se/eng/Home/Business/Business-culture/
10/29/2012
Sweden Information Smorgasbord
http://www.sverigeturism.se/smorgasbord/index.html
10/29/2012
Photos: Copyright © Kamerareportage
Invest Sweden
http://www.investsweden.se/North-America/Advantage-Sweden1/10-reasons/
10/29/2012
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Sources
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http://www.portal.euromonitor.com.ezproxy1.lib.depaul.edu/Portal/Handlers/accessP
DF.ashx?c=77\PDF\&f=S-20164021369277.pdf&code=h8Djsev35wmlOFst1Kh9UgNS1CQ%3d
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https://docs.google.com/file/d/1PMG1OIcbXoQW14EeWlqvgs_8zj-RG7S3DTBzV0eciLegKaK9aC4Mp8xds6G/edit

http://www.smartplanet.com/blog/smart-takes/starbucks-struggles-to-compete-ineuropean-market/24904