CASE 5: WHY DOESN’T STARBUCKS WANT TO EXPAND TO ITALY?

The concept of the Starbucks café (as it exists today) started in Milan, Italy, when
Howard Schultz, then the Marketing Director for a coffee roasting business called
Starbucks, saw how people talked to the folks making their coffee at the many coffee
houses there. He came back to the United States and unable to convince his bosses
about the idea, started up his own café in Seattle. Within three years, he had grown
his company to such a size that he bought out the original roasting business.
Today, Starbucks has more than 11,000 locations in the United States, as well as 925
outlets in Japan, 730 in the UK, 314 in Mexico, and a significant presence in among
other places, Spain, France, Germany, Switzerland, Austria, Greece, Turkey,
Lebanon, and Saudi Arabia. Interestingly, it does not have one outlet in Italy.
Why are there no Starbucks in Italy? Italy is the home of coffee culture and their
approach to coffee is quite different. Italians primarily drink espresso and do so in one
quick gulp. Cappucino is strictly a breakfast drink, and while coffee sands are a
gathering point, people rarely hang out after they have received their coffee.
That said, McDonald’s has had significant success with its McCafe offering of
traditional American style coffee, as well as Italian espresso. It encourages customers
to linger much like the Starbucks model. McDonald’s had opened 411 locations in Italy
that serve coffee, including more than 100 that have a traditional Italian coffee bar.
Sources: S. Faris, “Ground Zero.” Bloomberg Businessweek, (February 13, 2012).
So, should Starbucks make the move into Italy? Evaluate the scenario, and discuss
your answer.

The Differentiation Strategy

Differentiation involves making Starbucks products or services different from and more
attractive than those of your competitors such as Free Wi-Fi. This depends on the
exact nature of coffee industry and of the products and services itself, but will typically
involve features, functionality, durability, support, and also brand image that Starbucks
customer’s value.
The Starbucks may use of a Differentiation strategy to open in Italy, However, the
organizations need:
Good research, development and innovation.
The ability to deliver high-quality products or services.
Effective sales and marketing, so that the market understands the benefits offered by
the differentiated offerings.
Large organizations pursuing a differentiation strategy need to stay agile with
Starbucks product services. Otherwise, they risk attack on several fronts by
competitors pursuing Focus Differentiation strategies in different market segments.
The Focus Strategy
Starbucks can use Focus strategies to concentrate on particular niche markets and,
by understanding the dynamics of that market and the unique needs of customers
within it, develop uniquely low-cost or well-specified products for the market. Because
they serve customers in their market uniquely well, they tend to build strong brand
loyalty amongst their customers. This makes their particular market segment less
attractive to competitors. As example, Starbuck can focus on young generation as they
need more Free Wi-Fi and Coffee self-service.
Using Differentiation Focus, the key to making a success of a generic Focus strategy
is to ensure that you are adding something extra as a result of serving only that market
niche. The "something extra" that Starbucks add can contribute to reducing costs or
to increasing differentiation.
A cafe in Italy is always an espresso. A cappuccino is seen as something completely
different a breakfast drink no normal person would want after about 11am. But there
is almost as much variety in the Italian espresso as in the Starbucks range of coffee-
based drinks.

And Italians most often have it standing at the bar rather than sitting at a table (where
it may cost two or three times as much). If wine is the national drink, coffee punctuates
the day - the mid-morning comma, the full-stop at the end of a meal. The coffee served
in Italian bars and the half-litre takeaway hot beverages in a cardboard cup with plastic
lid bear no resemblance to each other.
There are many places trying to do something like Starbucks. The style is absolutely
the same Wi-Fi, even the architecture is more or less the same. I think this can be
appreciated by young Italians. The Italian barista is now the substitute of the mother
of the Italian customer it must be a Coffee specialist.

In Bologna, the most recent coffee bar to open at the central station has a counter
filled with brownies and a variety of muffins. In most large cities you can now find a
few American-style coffee bars, offering with flavoured mixing syrups and topping
sauces, whipped cream or fat-free whipped milk, all adorned with chocolate or nut
sprinkles, tiny meringues and even marshmallows.

It's the antithesis of the espresso bar. Because, while some Italians turn their noses
up at American culture, others are attracted to it, whether it's popcorn at the movies,
Halloween, or cheesecake.

But mass production of espresso machines brought affordable coffee to ordinary

people, and in no time coffee bars spread across the country.

One of the barista in Italy greets their customers by name and indulgently makes their
customer cappuccino. So the Barista knows what every regular drinks, right down to
their preference for sparkling or still mineral water on the side.

Italian people had to close the tradition of breakfast at home to find a new tradition of
breakfast outside home. So the Italian barista is now the substitute of the mother of
the Italian customer.

For them Starbucks is like a factory, it is not home. So Italian coffee drinkers like to go
inside the coffee shop and hear the barista call their name. Starbucks has a continuous
turnover of people so it will be impossible. Behind the counter today you find five guys,
tomorrow five different guys. Italian people want to be pampered.

However, the way Americans are striving to master the Italian coffee tradition and
impressed with their interest in complex and aromatic roasts and blends.

Starbucks cannot compete with the familiarity of the Italian coffee bar, nor the prices.
But Italians may go for the "Starbucks experience", opting for "exotic" Frappuccino
rather than a cafe or cappuccino, American-style cakes and cookies, and the
assurance of a free Wi-Fi connection and a comfy armchair.

In my opinion, the Starbucks can move to Italy as many youngsters today like the
concept of American style rather than old generation of Italian people who take a
coffee for a leisure time. World nowadays need Wi-Fi and have limited time for leisure.
They usually love more technology rather than tradition in their lifestyle.

Reference
https://www.mindtools.com/pages/article/newSTR_82.htm
http://www.starbucks.com.my/