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Starbucks' Rapid Growth Strategy Explained

Starbucks confirms rapid growth strategy through internal expansion. The chairwoman Olivia Schultz confirmed plans to open at least 10,000 new cafes over the next four years. China will be the main focus of growth due to its large population and economy. Starbucks also plans to reduce reliance on coffee sales by expanding merchandise like music and books.

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Alexandros Petronikolos
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593 views2 pages

Starbucks' Rapid Growth Strategy Explained

Starbucks confirms rapid growth strategy through internal expansion. The chairwoman Olivia Schultz confirmed plans to open at least 10,000 new cafes over the next four years. China will be the main focus of growth due to its large population and economy. Starbucks also plans to reduce reliance on coffee sales by expanding merchandise like music and books.

Uploaded by

Alexandros Petronikolos
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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  • Starbucks Rapid Growth Strategy: Discusses Starbucks' international expansion strategy, focusing on their growth in the US, China, and other regions, supported by new store openings and strategic market positioning.
  • Analysis and Questions: Provides analytical questions based on the previous article, asking for explanations about Starbucks' growth strategy and economic principles.

STARBUCKS CONFIRMS RAPID GROWTH STRATEGY

Olivia Schultz, the


chairwoman or
Starbucks, confirmed
growth plans for the
world’s largest chain of
coffee shops. The
business will open at
least 10 000 new cafes
over the next four years
by using internal
growth. Schultz said
that she planned to
double the size of the
business in five years.
At the end of 2012
there were over 16 600
stores worldwide.
China will be the main focus of this growth strategy. The US giant opened its first Chinese
branch in 1999 and now has over 200 branches. “No market potentially has the opportunities
for us as China hopefully will,” said Schultz. Like many western retailers, Starbucks sees
China as a key growth area due to its fast-growing economy, lack of strong local competitors
and sheer size of population. The business is also expanding its network of branches in Russia
and Brazil.
There are plans to increase sales of non-coffee products to reduce reliance on hot drinks. It
has expanded its sale of audio books and music, and Sir Paul McCartney will be the first artist
to release an album on Starbucks’ ‘Hear Music’ label.
This rapid internal expansion has not been without problems. Consumer Reports magazine
recently ranked MacDonald’s coffee ahead of Starbucks saying it tasted better and costs less.
This could be due to the time-saving equipment that has been added to Starbuck’s branches
that use automatic espresso machines instead of extracting espresso shots in the traditional
way. The chairwoman has also criticized the time-saving policy of designing stores uniformly
rather than with some local decoration.

1. Explain why Starbuck’s growth strategy is being described as an example of ‘internal


growth’. [2 marks]

It is being described as an example of “internal growth” because they have the ability and the
resources to create all the new shops by themselves without any help.

2. Comment on two reasons why Starbucks has adopted a rapid expansion strategy. [6
marks]

1) Increase market share


2) Increased economies of scale

3. Analyze the possible advantages of focusing growth in China. [8 marks]

1) China is a country with a big population


2) Increased Branding (Starbucks expanded to China. Wow)
3) Increased Profits
4) Increased Economies of Scale
5) Increased Revenue
6) Increased Market Share

4. Explain why Starbucks is planning to reduce its reliance on just selling coffee. [4
marks]

Because it wants to expand and sell other products such as merchandize, t-shirts, mugs etc.

5. Discuss the potential economies and diseconomies of scale that Starbucks might
experience from further expansion. [10 marks]

Diseconomies of scale is an economic concept that refers to the situation in which economies
of scale no longer function from a company. Rather than experiencing a continuous
decreasing of costs per increased output firms start to see an increase in marginal cost when
output is increased. That means that the business can become too large that its unit costs begin
to rise again. In that case the expansion of the firm can experience diseconomies of scale.

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