WHAT IS INTERNATIONAL MARKETING?

International marketing is the export, franchising, joint venture or

full direct entry of a marketing organization into another country.
This can be achieved by exporting a company's product into
another location, entry through a joint venture with another firm
in the target country, or foreign direct investment into the target
country.

The development of the marketing mix for that country is then

required - international marketing. It can be as straightforward as
using existing marketing strategies, mix and tools for export on
the one side, to a highly complex relationship strategy including
localization, local product offerings, pricing, production and
distribution with customized promotions, offers, website, social
media and leadership. Internationalization and international
marketing meets the needs of selected foreign countries where a
company's value can be exported and there is inter-firm and firm
learning, optimization and efficiency in economies of scale and
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scope. The firm does not need to export or enter all world markets
to be considered an international marketer.

As technology creates leaps in communication, transportation,

and financial flows, the world continues to feel smaller and
smaller. It is possible for companies and consumers to conduct
business in almost any country around the world thanks to
advances in international trade. According to the World Trade
Organization, the volume of international merchandise trade
increased 33 times between 1951 and 2010.
Brands and products that originate in one country are
enthusiastically accepted in others. For example, Louis Vuitton
handbags, BMWs, and Columbian coffee, all foreign products, are
symbols of status and quality in the United States and many
American brands, like Warner Brothers motion pictures, have
similar footholds overseas.
However, globalization has created just as many challenges as
opportunities for brands that venture overseas. Because
consumers have so many more options for similar products,
companies must ensure that their products are high in quality and
affordability. Additionally, these products cannot be marketed
identically across the globe. International marketing takes more
into consideration than just language it involves culture, market
saturation, and customer behaviors. American and European
companies especially have turned their international marketing
efforts into something more than just exporting they have
adapted their branding to account for differences in consumers,
demographics, and world markets.
Companies who have done this very well include Coca-Cola, who
discovered that the word Diet carries a negative connotation in
Latin America and changed the name of their zero-calorie product
to Coke Lite for those countries. UPS, known in America for their
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brown trucks, issued a fleet of a different color after learning that

their flagship brown trucks resembled Spanish hearses.

INTERNATIONAL MARKETING ENVIRONMENT

What a business is partly due to its environment. In other words

everyness is a product of its environment. The influence of
environment on business is significantly significant. Take the case
of Indian business undertakings. Until 1991, they enjoyed a
protective environment. They did not Ice interest in exports, in
building competitive strength, in Research and development and
the like. Now as economic liberalization is taking place,
businesses address issues relating to total quality management,
strategic like to meet competition, and so on, Thus as
environment changes businesses change their perspectives,
strategies, etc. There is no choice, but compulsion.
Environment influences international marketing in four ways it
provides opportunities to businesses, it poses threats, it
strengthens and also it weakens businesses. Hence the
significance of business environment.
Opportunities are provided by environment. When the culture of a
society needs rites, rituals and festivals, industries catering to
these needs flourish. When home entertainment culture spreads,
businesses in home-entertainment, viz. television, tape record
players, etc. make good advances. When monetary policy is
relaxed more capital at lesser cost is made available. When laws
restricting foreign investment are relaxed, businesses can raise
easy capital abroad, as some Indian businesses are doing now
through issue of global depository receipts, Euro bonds, etc. Thus
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it is environment that provides opportunities. Opportunities must

be seized timely and regularly.
Threats are also posed by environment. When finance related
laws are relaxed allowing businesses to raise capital freely, loca1
banking businesses find no takers for credit. Whim foreign
companies set up businesses, local firms find the going difficult.
The entry of foreign brands of soft drinks, TVs, etc., is a threat to
local brands. The entry of Sony and Panasonic in India in 1995: is
a threat to the local brands like BPL, Videocon, etc.

Environment also strengthens businesses. An environment that

nurtures the culture of efficiency, competitiveness, innovation
and growth makes businesses strong. Withdrawal of agrosubsides in rich countries, strengthens the agro-export industries
in LDCs.
And, environment can also weaken businesses. A policy of the
government to protect businesses in effect makes them weak.
Withdrawal of fertilizer-subsidy has weakened both the fertilizer
and the agri-industries as they were earlier used to the comforts
of protection.

FACTORS AFFECTING THE INTERNATIONAL MARKETING

ENVIRONMENT

A Key Challenge For International Marketers Is To Develop

A Good Understanding Of The International Business
Environment. Identify The Key Environmental Factors That
Are Of Importance To The Success Of International
Marketing And Discuss Their Impacts On International
Marketing Decisions.

Due to technological advances and rapid economic growth, the

level of world trade has increased considerably over the last four
decades. Motivated by the many rewards and opportunities
international exchange offers, more and more countries and
companies have become largely involved in international
marketing. However, the implications entailed in this process of
planning and conducting transactions across national borders are
rather different to those companies usually have to face when
conducting domestic .Differences in cultures, economic
conditions, and governmental systems amongst countries mean
that the marketing activities of companies taking their operations
outside national borders are affected by a new series of
environmental factors. In order to be successful at international
marketing, it is vital that marketers attain a thorough
understanding of these factors as they impact the international
business environment and take them into account when carrying
out decisions on marketing
Various factors affecting marketing function.

The environmental factors that are affecting marketing function

can be classified into:
1) Internal environment
2) External environment

Internal Environment of Marketing:

This refers to factors existing within a marketing firm. They are
also called as controllable factors, because the company has
control over these factors :

a) it can alter or modify factors as its personnel, physical facilities,

organization and function means, such as marketing mix, to suit
the environment.
There are many internal factors that influence the marketing
function, they are :

1. Top Management: The organizational structure, Board of

Director, professionalization of management etc. Factors like
the amount of support the top management enjoys from
different levels of employees, shareholders and Board of
Directors have important influence on the marketing
decisions and their implementation.
2. Finance and Accounting: Accounting refers to measure of
revenue and costs to help the marketing and to know how
well it is achieving its objectives. Finance refers to funding
and using funds to carry out the marketing plan. Financial
factors are financial policies, financial position and capital
structure.

3. Research and Development: Research and Development

refers to designing the product safe and attractive. They are
technological capabilities, determine a company ability to
innovate and compete.
4. Manufacturing: It is responsible for producing the desired
quality and quantity of products. Factors which influence the
competitiveness of a firm are production capacity technology
and efficiency of the productive apparatus, distribution
logistics etc.,
5. Purchasing: Purchasing refers to procurement of goods and
services from some external agencies. It is the strategic
activity of the business.

6. Company Image and Brand Equity: The image of the

company refers in raising finance, forming joint ventures or
other alliances soliciting marketing intermediaries, entering
purchase or sales contract, launching new products etc.
In organization, the marketing resources like organization for
marketing, quality of marketing, brand equity and distribution
network have direct bearing on marketing efficiency. They are
important for new product introduction and brand extension, etc..
External Environment of Marketing.
External factors are beyond the control of a firm; its success
depends to a large extent on its adaptability to the environment.
The external marketing environment consists of:
A) Micro environment - The environmental factors that are in its
proximity. The factors influence the companys non-capacity to
produce and serve the market. The factors are:
1. Suppliers: The suppliers to a firm can also alter its
competitive position and marketing capabilities. These are
raw material suppliers, energy suppliers, suppliers of labor
and capital, the relationship between suppliers and the firm
epitomizes a power equation between them. This equation is
based on the industry condition and the extent to which
each of them is dependent on the other.
2. Market Intermediaries: Every producer has to have a number
of intermediaries for promoting, selling and distributing the
goods and service to ultimate consumers. These
intermediaries may be individual or business firms. These
intermediaries are middleman (wholesalers, retailers,
agents etc.), distributing agency market service agencies
and financial institutions.
3. Customers: It is duty of the company to satisfy the people at
large along with its competitors and the consumers. It is
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necessary for future growth. The action of the company does

influence the other groups forming the general public for the
company. A public is defined as any group that has an
actual or potential interest in or impact on a companys
ability to achieve its objective. Public relations are certainly
a broad marketing operation which must be fully taken care
of

B) Macro environment - Macro environment factors act external

to the company and are quite uncontrollable. These factors do not
affect the marketing ability of the concern directly but indirectly
the influence marketing decisions of the company. These are the
macro environmental factors that affect the companys marketing
decisions:
CULTURAL ENVIRONMENT
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Culture is the collective programming of the mind which

distinguishes the members of one human group from
another. Given that culture affects consumers' behavior,
understanding cultural dissimilarities is crucial for the
success of international marketing.
There are high context cultures, such as the Japanese one,
where the context is equally as important as the words used,
and low context cultures, such as the North American one,
where communication is often solely conveyed in words.
Companies need to be aware of and adapt their marketing
concepts to these differences as otherwise it can easily lead
to misinterpretations in communication. They need to take
into account the element of language which consists of a
verbal (the words used and how they are spoken) and a nonverbal part (e.g. gestures and eye contact). The challenge
for them is to attain both a thorough understanding of the
language in terms of its technicality and the context in which
it is used. In Japan, for example, IBM changed the
classification number of its series 44 computer as the
pronunciation for the word four is similar to the word death.
A further important source of culture is religion. Marketers
need to be aware of the differences between the main types
of religion as well as the variations within them. In Hinduism,
for example, people's capacity of consumption is determined
by their status. Companies need to take this into account
when making planning their marketing strategy. Also, as the
main holidays are linked to religion marketers need to
consider when they take place when planning marketing
programs. The exchange of Christmas gifts, for example,
occurs on 6th December in the Netherlands, whereas in
other countries they are opened on 24th or 25th December.
Also, companies need to take into account the values and
attitudes of countries. The more these shared beliefs or
group norms are embedded into the culture the more care
companies have to take when implementing marketing
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activities. Societies that place a high value on tradition are

more reluctant to change and may perceive foreign
companies with skepticism. In Japan, for example, many
bureaucrats feel that the consumption of foreign products is
disloyal to their country.
Another element of culture is aesthetics which determines
what people find appropriate and what not. This can differ
considerably from one culture to another meaning that
marketers need to be aware of them and adapt their
marketing concepts accordingly. Henkel's FA soap, for
example, modified its advertisement spot for the North
American market by having the model wear a bathing suit
instead of being naked, as in the ad for the European market
.
Furthermore, it is important that managers understand the
different manners and customs of countriesThere is also the
element of education that needs to be taken into account.
When designing products or services, for example,
companies need to be aware of the level of intelligence of
the consumer so they can adapt the complexity of the
product or the service to the user.
The best way for companies to overcome these cultural
obstacles is to embrace the local culture. They need to take
a localized approach by adjusting products to the markets,
building relationships with locals and employing them. This
allows marketers to gain information and experience at
firsthand, attain an in-depth understanding of what influence
consumer behavior in the market, and cooperate efficiently
with employees, the government, and other local partners.
This would also allow companies to avoid accusations of
cultural imperialism, which happens when marketing
approaches are seen as too radical. McDonald's and CocaCola, for example, have been accused of forcing American
standpoints into other cultures and consequently had to deal
with boycotts from consumers.
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 ECONOMIC ENVIRONMENT

International marketers equally need to be aware of

economic factors when undertaking marketing decisions.
Population figures provide a basic indication of the
attractiveness of the market in terms of size and potential
growth by looking at life expectancy, age distribution and
population growth. They allow marketers to identify the
segments and the geographical areas they should. Low
population growth rates, for example, usually characterize
highly economically developed countries with good disposal
income.
Also, income levels need to be taken into account as they
provide an indication of the purchasing power of the market
and allow companies to adapt their marketing concepts
accordingly. A packaged goods company, for example,
brought out a more economic version of its product in
countries that have lower income levels by using cheaper
raw materials. Nonetheless, marketers should not greatly
rely on this indicator as there are certain types of products
that because of the high value they create for the consumer
are not affected by income levels. In China, for example, due
to being a good upgrade for bicycles and a cheap alternative
for cars, sales of motorcycles are high in the country despite
the fact that the price of the product represents a high
proportion of salary.
Besides, marketers need to consider consumption pattern
which allow them to identify the proportion of income that
consumers spend on necessities, including food and rent,
and consequently the proportion that is left to spend on less
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important areas of consumption, such as household goods

and. Given that purchases in these areas can be cancelled or
postponed unexpectedly, companies can determine the level
of confidence in the market.
Another important economical element is inflation as it
strongly affects consumers' buying habits and ability to buy.
In markets with high inflation rates companies need to
modify their product making it less expensive to produce so
that they can lower their prices to respond to customer
needs and sustain demand.
In addition, marketers need to consider the availability and
quality
of
local
infrastructure.
Transportation,
communication, and energy networks have an important
effect on the company's functions. They also provide an
indication for the demand of industrial products and
services. The fact that two billion people live without
electricity and that the access to a telephone is very limited
in Asia, for example, informs industrial products and services
companies that there are important marketing opportunities
for them there.
Furthermore, companies need to consider regional economic
integrations as they can create both opportunities and
benefits, and threats and problems for them. The European
Union, for example, provides many benefits to companies
operating within Europe, such as economies of scale thanks
to the large single market. For non-EU companies, however,
this integration may create problems. With the aim of
protecting European farmers, for example, the EU has now
and again imposed restrictions on the inflow of certain
agricultural goods from the U.S.

A thorough understanding of these factors allows

companies to obtain a good assessment of the market
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and
reduces
the
possibility
of
implementing
marketing concepts that could have disastrous results

POLITICAL AND LEGAL ENVIRONMENT

The political and legal environment of the company's
home country, its host country and the general
international environment also has important effects
on
the
marketing
activities
of
international
companies.
The politics and regulations of the company's home country
can determine its opportunities outside national borders.
One of the main types of regulation that international
marketers need to be aware of are embargoes and sanctions
which are used to distort the free flow of trade. They need to
know where they are applicable and take them into account
when planning marketing activities so that they do not
breach them and face subsequent. Governments also
employ export and import control systems. Export controls
prevent or delay companies from selling their products in
certain countries whilst import controls are used to protect
and stimulate the domestic market. Marketers need to take
them into account so they know where the company can do
business and where it can obtain its supply from. Finally,
governments may induct special measures to ensure that
their companies behave in a correct manner in the
international business environment. One of the major areas
concerned is boycott, which is when companies reject to
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conduct business with someone. The government's control in

this area can force companies to decide whether to stop
transactions and lose profit or to continue trading and pay
charges. The Arab nations, for example, have blacklisted a
number of companies who conduct business with Israel. In
response, the United States imposed several laws to prevent
U.S. companies from complying with the Arab boycott as it
has political ties with Israel. Companies may lose out to firms
whose home country does not employ such measures.
Nonetheless it is best to avoid adopting inappropriate
behavior as it may lead to damages to the company's
reputation, boycotts by consumers and cancellation of
transactions. This might cost the company more money than
it gained through adopting such behavior.
Companies are also affected by the legal and political
environment of the host country. Marketers firstly need to
determine the level of political risk, i.e. the likelihood of
political changes that could adversely affect the company,
by looking at the host country's government, its political
actions and its. U.S. companies, for example, who are a
major target for terrorist attacks because of their home
country's actions and capitalistic image, need to particularly
take into account the stability of the host country . Marketers
also need to be aware of the actions of the host country's
government. Price controls, for example, which are used by
the government to respond to inflation, can put international
companies into a difficult situation where it has to decide
whether to stop their operations or to carry on in the hope
that the controls will be changed and they can regain the
sacrificed profits. Companies also need to be familiar with
the laws of the host country and the restraints they place on
their operations. In France, Canada, Brazil, and Indonesia, for
example, there are laws that restrict imports of U.S.
entertainment to protect and preserve their cultural
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industries. However there are also laws that are aimed at

assisting companies with their international operations, e.g.
subsidies. Shortages of regulations can also create problems
for companies, e.g. the lack of intellectual property rights in
China. Therefore, companies need to attain a good
understanding of how the country's legal and political
systems work to reduce the impact of the problems they
cause. By undertaking in-depth research on the country's
history, culture and political setting before entering it allows
companies to avoid making investments that could have
disastrous outcomes. An in-depth knowledge of the country
would also allow the company to anticipate, plan and adapt
into the local community. Hiring locally, undertaking local
charity work and joint ventures with local businesses show
the government that the company cares about the local
community and does not just see it as an object it can
exploit. This reduces the amount of interference by the
government giving the company more freedom in its
operations.
Marketers must also consider the overall international
business environment. Relations between countries and
governments have important effects on the operations of
international companies. The U.S. government's differences
with South Africa, for example, forced U.S. companies to
leave their operations in the country. Relations between
home and host countries are governed by bilateral
agreements, as well as by multilateral ones between sets of.
Marketers need to continuously monitor the international
political environment keeping up to date with political affairs
so that they can anticipate changes and plan and modify
their marketing strategy accordingly. In terms of the legal
environment, managers need to be aware of certain laws
and treaties which because of the respect they receive from
many countries have a strong influence on the way
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companies operate. The World Trade Organization, for

example, gives an outline on the behavior that it finds
acceptable from its member states
International marketers are faced with quite many and quite
a range of factors in the international business environment
that can have profound effects on their marketing activities.
They need to be aware of the main sources of culture, such
as religion, language, education, values and attitudes,
aesthetics, and customs and manners. Given that they are
embedded into societies and individuals it is necessary for
companies to adapt their marketing activities to the market
and not force a different standpoint on the consumer.
International marketers also need to consider economic
factors, such as population, income, inflation, economic
integrations and infrastructure. They allow them to assess
the attractiveness of the market and identify the segments
and the geographical areas they should target. This reduces
the risk of investing money in marketing activities in markets
that are unprofitable. Finally, companies need to take into
account the legal and political factors affecting the home
country, the host country, as well as the overall international
business environment. They need to be aware of the
different governments, their political actions, their stability,
and their relation with other countries, and constantly
monitor them by keeping up to date with economic affairs
around the world. This allows them to determine the level of
political risk so that they can anticipate and plan for threats
and take advantage of opportunities political changes offer
them.

FACTORS INFLUENCING PRICING STRATERGY IN

INTERNATIONAL MARKETING ENVIRONMENT
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Some of the most important factors influencing pricing strategy in

international marketing are as follows:
Pricing decisions are complex in international marketing. A firm
may have to follow different pricing strategies in different
markets. Whatever might be the strategy followed, pricing has to
reflect the proper value in the eyes of the consumer. Pricing is an
important strategic and tactical competitive weapon that can be
used by a firm in international marketing.
It represents that element of the marketing mix, which is
controllable by the firm to a large extent. A firm should integrate
pricing strategies with the other elements of the international
marketing mix.
Choice of a pricing strategy is dependent on:
1) Corporate goals and objectives
2) Customer characteristics
3) Intensity of inter-firm rivalry
4) Phase of the product life cycle
Having considered the factors influencing the choice of strategy,
let us now turn specifically to different strategies:
Skimming Strategies:
One of the most commonly discussed strategies is the skimming
strategy. This strategy refers to the firms desire to skim the
market, by selling at a premium price. Skimming refers to the
objective of achieving highest possible contribution in a short
time. To use this approach, the product has to be unique and the
target market should be willing to pay the high price. Success of
this strategy depends on the ability and speed of competitive
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reaction. A firm with a small market share can face aggressive

local competition when using skimming. Maintenance of high
quality requires lot of resources. If the product is sold cheaply at
home, then the problems of gray market can surface.
This strategy delivers results in the following situations:
When the target market associates quality of the product
with its price, and high price is perceived to mean high
quality of the product.
When the customer is aware and is willing to buy the product
at a higher price just to be an opinion leader.
When the product is perceived as enhancing the customers
status in society.
When competition is non-existent or the threat from
potential competition exists in the industry because of low
entry and exist barriers.
When the product represents significant technological
breakthroughs and is perceived as a high technology
product.

In adopting the skimming strategy the firms objective is to

achieve an early break-even point and to maximize profits in a
shorter time span or seek profits from a niche.

Penetration Pricing Strategies:

As opposed to the skimming strategy, the objective of penetration
price strategy is to gain a foothold in a highly competitive market.
The objective of this strategy is market share or market
penetration. Here, the firm prices its product lower than the
others do in competition. Penetration pricing uses deliberate low
prices to stimulate market growth and capture market share. It
can be useful when there is a mass market and price sensitive
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customers. Japanese companies increasingly resort to penetrative

pricing due to intense local competition.
This strategy delivers results in the following situations:

When the size of the market is large and it is a growing

market.
When customer loyalty is not high customers have been
buying the existing brands more because of habit rather
than any specific preferences for it.
When the market is characterized by intensive competition
When the firm uses it as an entry strategy
Where price-quality association is weak.

Differential Pricing Strategies:

This strategy involves a firm differentiating its price across
different market segments. The assumption in this strategy is that
different market segments do not communicate or have different
search costs and value perceptions of the product. In other words
heterogeneity in the market motivates a firm to adopt this
strategy.

Geographic Pricing Strategies:

This strategy seeks to exploit economies of scale by pricing the
product below the competitors in one market and adopting a
penetration strategy in the other. The former is termed as second
market discounting. This second market discounting is a part of
the differential pricing strategy where the firm either dumps or
sells below its cost in the market to utilize its existing surplus
capacity. So, in geographic pricing strategy, a firm may charge a
20

premium in one market, penetration price in another market and

a discounted price in the third.

Product Line Pricing Strategies:

These are a set of price strategies, which a multi-product firm can
usefully adopt. An important fact to be noted is that these
products have to be related, in other words belonging to the same
product family. Faced with multi-products and fluctuating demand,
the firm may adopt a combination of the following strategies to
effectively manage its product line or maximize its profits across
the product line.

Price Bundling: This strategy is used by a firm to even out

the demand for its product. This is useful strategy for
perishable; time-bound products like food, hotel room or a
seat on a flight and for products cannot be substituted, like
the package of stereo music system. Off-season discounts
and, season tickets for music festivals are examples of price
bundling strategy. This is a passive strategy aimed at
correctly bundling the prices of related items so that the firm
is able to maximize its profits.
Premium Pricing: This strategy is used by a firm that has
heterogeneity of demand for substitute products with joint
economies of scale. Consider the example of a colour
television set. There are different models available with
different features, like the one with a remote control and
another without it. Both are substitutable and satisfy the
customer needs. But the firm may opt to premium price the
21

first model and position it as the top of the product line for
high income or upper income group of customers or for
whom communicating that they have arrived is important
Image Pricing: This strategy is used when consumers infer
quality from the prices of substitute models or competing
products. The firm varies its prices over different brands of
the same product line. This strategy is commonly used in
textiles, cosmetics, toilet soaps and perfumes.
Complementary Pricing: This strategy is used by a firm
that has customers with high transaction costs for one or
more of its products. Transaction costs are all those costs
that a customer has to incur to buy the product, like the
registration fees that a flat buyer has to pay in order to be a
legal owner or the processing fees that the bank may charge
to give a credit card to the customer.
Captive Pricing Strategy: Here a special price deal is
offered to loyal customers or those who are regularly buying
one of the products of the firm. A typical example is the
Gillette shaving system, which offers two twin blades free
with its razor to induce the buyer to purchase its blades.
Kodak adopted this strategy, when it offered a film roll free
to all buyers who bought its camera. As may be observed
this is a strategy aimed at building customer loyalty.
Loss Leader Strategy: This is another example of
complementary pricing strategy. This strategy involves
dropping the price on a well-known brand to generate
demand or traffic at the retail outlet.

Two-Part Pricing: This strategy is used by products that

can be divided into two distinct parts. For example,
membership of a video library has two parts one is the
membership fee, which is annual and the other is rent for
each time frame for which a videocassette is rented. As may
be observed the price has two components, the fixed fees
and the variables usage fees.
22

CASE STUDY: INTERNATIONAL MARKETING STRATERGIES

OF STARBUCKS

Starbucks one of the most internationally renowned coffeehouse,

based in Seattle, United States , specialises in buying , roasting
and selling speciality coffee and coffee based drinks all over the
world with the help of retail chain outlets. Starbucks, the worlds
largest coffeehouse company earned the credit of altering the
way people all around the world consumed and perceived coffee
and this is the reason why Starbucks has always been under
limelight globally. The swiftness in its growth, lead to its
expansion internationally and it targeted international markets of
Europe , Middle East , new Zealand, Australia, Asia-Pacific and
Latin America. This international expansion needed strategic
planning which could face the challenges and utilize the
opportunities hidden in these markets for Starbucks to earn
revenues.
Here we are going to find out the problems and issues which
Starbucks had to face while tapping the specialty coffee markets
23

worldwide and what kinds of changes in the strategy already

planned might prove beneficial for Starbucks in future. The first
step towards diversification worldwide was to organize Starbucks
in to two separate business units corresponding to organizations
operational segments: North America and International. Thus in
the year 1995 Starbucks Coffee International which was wholly
possessed by Starbucks Coffee Company was created to handle
the sole international businesses of Starbucks except for North
America. Its main tasks included creating a niche for Starbucks by
opening solely company owned, licensed and joint venture based
retail stores worldwide. In order to be the leading coffeehouse all
over the world Howard Schultz framed a distinct and unique
Starbucks model whose goals is to Establish Starbucks as the
premier purveyor of the finest coffee in the world while
maintaining uncompromising principles as we grow. It is very
important to mention that Schultz still considers Starbucks in
growing stage worldwide as they plan to open one or two stores
everyday all over the world. This clearly indicates his vision and
the guiding principles on which the organization works. The few
things which they ensure for permanent and long term growth of
the stores are:

Securing the finest and high quality coffee Arabica beans

from all over the world.
Vertically integrating the roasting process of coffee beans
just like an art form.
Making a cup of coffee A Starbucks Experience and not just
selling it.
Building a unique culture of happy employees.
Leveraging the brand using brand extensions and multiple
channels of distribution
International Marketing Strategies of Starbucks

24

After expanding and growing in the U.S. markets, the need of the
hour is global expansion for continuous growth of Starbucks and
that is why International Marketing Strategies were being framed.
Starbucks coffee International has hired multi lingual and
multinational managers to work towards the worldwide expansion
in a planned manner. This group has the responsibilities like:

Developing new businesses

Financing and planning new stores across the world
Managing operation and logistics
Merchandising
Developing trained International mangers for Starbucks

Starbucks hold the honor of opening first non-North American

store in Tokyo , Japan in 1996 and here its no-smoking policy
served as an oasis in Japan and helped in creating a brand
recognition in Japan. From 1996 off shore Starbucks stores are a
force to wrecken with as now they have more than 7,800 units
worldwide and mostly on the prime locations like shopping
centers and airports.

Most of the products offered overseas are seasonal and locality

specific across various countries. A global Marketing Strategy Mix
has been designed for effective global growth and impact. This
says:

Follow the same retailing formula all across the world

The product offerings are modified and catered to local tastes and
it tries to make them according to the local taste.
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The advertising strategy of Starbucks is quite unique as it does

not follow any international campaign or formula for advertising
rather it focuses on using stores as their brand ambassadors.
Thus the strategy of advertising is differentiated and localized
rather than standard.
It follows the store expansion very rapidly all over the world thus
not giving any time to other local organizations to imitate their
concept. They follow the strategy of Starbucks Everywhere
approach while expanding their
Follow extensive employee training and recruitment programs
where they have a proper system of recruiting, hiring and training
baristas and store managers.
Focusing on the store design, planning and proper construction of
the stores across the world. There is a broad range of formats
which are adopted for store designs. Mostly the stores are located
or planned in high traffic and high visibility and most prominent
areas of the city.
The bottom-line of the strategy is to spread the American flavor of
coffee all around the world by developing a diverse international
business portfolio along with profitability and growth. Thus
Starbucks keeps on adding new stores and that too in all the
prime locations across all the fastest growing economies of the
world (Starbucks International Strategy, slideshare.net).

Starbucks does not introduce its products in one go; it follows the
product innovation and introduction in phases. Thus introduces
the whole range of products of coffee and tea one by one, so that
all the products get visibility and the customers get to relish the
taste of every product of Starbucks and then choose and decide
their favorite one. Starbucks is selective about introducing certain
specific products which are not introduced worldwide like the
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ready-to-drink coffee beverages in just few countries like Japan,

Taiwan, and Korea etc. to increase its profits.
Since North America just caters to just 20% of coffee markets so it
was imperative for Starbucks to enter markets which had
dedicated coffee and tea drinkers.

Framing a Starbucks way

According to US news and World report it has been found that

venturing overseas, Starbucks has its own way. It first searches
for local business associates in foreign countries and then does a
test run by opening handful stores in trendy and chic districts with
the help of well trained and experiences Starbucks managers.
Then the local baristas are sent for a 13 week training program in
Seattle. Now it starts opening stores by dozens in numbers while
maintaining the same coffee line-up in each store. However the
food is modified as per the local gourmet. Like in Britain it serves
mince pies and even won awards for them, while in Asia it serves
meat buns and curry pies. On the other hand the interior decor is
also altered as per the local architecture mostly in the historical
buildings.

While planning overseas expansions it has left the sole ownership

strategy as adopted in North America, in other countries they go
for local partnerships. The main focus and the key point which is
followed during international expansion is partnership first,
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country second. The main policy that they follow is to establish

local connection for getting everything done and working. The
main focus is to hit upon the apt local partner who can help in
negotiations with local regulations and other country specific
issues. They search for partner who carries the same values,
goals and culture related to effective community development.
The main features that they are interested in local partners are:
Parallel guidelines regarding the corporate citizenship, shared
values and commitment to business for long term just like
Starbucks.
Vast multi unit restaurant experience in the industry.
Extensive financial resources so that they can expand the
concept of Starbucks with a jet speed before competitors
imitate it.
Unparalleled real estate experience along with great
knowledge too, in order to pick and choose prime locations
in real estate.
Good knowledge of retail market
Strong commitment to the Starbucks project along with the
availability of people.
In case of Starbucks way of international ventures they give the
partners whole sole responsibility of preparing and selection work
and that includes the store sites too. Then the Starbucks retains
the rights to approve the location. Then after entering the new
market they start searching for different things and start brand
building for Starbucks. The stores are treated as biggest means of
advertising as they do not spend extra cot on advertising
anywhere.
Then they start looking for sites which have high visibility like well
and heavy traffic areas focusing on major points like:
i)
ii)

Demographic factors
Branding potential
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iii)
iv)

Financial aspects
Establishing Starbucks as International Brand Worldwide

According to Business Week (2000) it has been highlighted that

Starbucks has been rated the topmost brand amongst top 100 all
over the world and has never faltered, satisfying millions of
customers.
Starbucks franchises worldwide only if it has to contribute less
than 20% of the gross income of the franchisees and are not
diluting the brand image. They could easily foray into the
Japanese markets as Japan is the country which adopts American
culture like Blue Pepe jeans and Coca Cola was accepted very
easily but finding a market for paper cups and coffee in tea
dominated country was a task but around 30% of Japanese now
adopt the nonsmoking policy and carry takeaways in throwaway
cups (Starbucks International Strategy, slideshare.net).
Similarly they had to cater to the historical cafe culture driven
markets of France but Starbucks caramel coffee created its magic
over there too. Chinese traditional market which is highly
dominated by tea is also going crazy for Starbucks coffee as the
young generation wants to flaunt their lifestyle and status
through these expensive luxuries like Starbucks coffee.
Starbucks Cultural Diversity
It follows the rule of creating human connections by involving the
whole community and celebrating all the cultures in each and
every country. That is why it has become the most diversified and
admired coffeehouse in the world . Here diversity is defines as:Diversity = Inclusion + Equity + Accessibility
That is why it has global presence in about 50 countries where
passion for specialty coffee, communities connect and reliable
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service surpasses cultural and language barriers. They follow a

supplier diversity programs by trusting and welcoming warmly the
suppliers and create a culturally diverse workplace where people
from varied backgrounds are values and respected. That is why
they developed committed and highly motivated employees to
create a motivated pool of HR. They do so by framing employee
friendly human resource policies like:
Supportive work environment and employee friendly policies
Extension of earned benefits to its part time workers which is
not done by most of the companies.
Create most productive employees with comparatively very
low turnover of employees.
Provide employee training to regular as well as part timers at
all levels of hierarchy.
Employees completing the Coffee Master Course wear black
aprons depicting Coffee Master in front.

It does effective Global Knowledge Management by using Onyx

system for managing the activities related to corporate sales
which means effectual management of leads and delivery,
effective pipeline management, quick activation of new accounts
and faster resolution of Foodservice business by resolving
customer issues as quickly as possible. That is why it has installed
Blue Martinis order management system for its retailers and
channel partners.

It has distributed Starbucks cards to loyal customers and

mystarbucks iPhone App can be used on iPhones for various
special services by the Starbucks cards owners ( Starbucks
International Strategy, slideshare.net).

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Pros and Cons of Strategies

But this comes with a risk factor too as Starbucks has to share its
profit with the local retailers in each and every store worldwide.
Since they establish operations with local partners the
opportunity to earn money becomes lesser because of joint
ventures. If partnering with local partners makes easier
establishments on foreign soil, the profit share gets reduced to
50% to 20%.
At the same time the firm is becoming an open target by the antiglobalization firms. Even Starbucks had to face and is still facing
the perils of globalization and the biggest one is protest by antiglobalization activists against Starbucks global presence. The
reason behind the popular global brands being soft targets of antiglobalization protestors is that these are convenient symbols
which can be easily targeted and the common man will know the
protestors. The Starbucks was targeted for its overseas activities
like paying fewer wages to its workers in Third world countries,
involving labour into activities and environmental practices which
are totally banned in U.S. These protestors blamed the company
or cultural imperialism and said that Starbucks was driving local
competitors out of business and was taking their share of market.
Then Starbucks is many times accused of hiring child labour or
bonded labour but if we see the brighter side they give jobs to
people who are poverty stricken in developing.

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However some multinational supporters say that the entrance of

Starbucks in international markets has positive effects on the
economy and the livelihood as these multinationals offers and
create new job opportunities and pay their employees good pay
packages which are better than the local organizations. The best
part of these multinational organizations is that they share their
market share with local retailers with whom they partner and
follow all the environmental norms and local labour laws fully
without any glitches and shortcuts. It has been found the better
they perform on foreign turf the more they plan to invest their
capital and reduce the poverty. In order to counter the blames
with which they have been charged Starbucks has developed:

Corporate code of conducts

Partnerships with nongovernmental organizations
Corporate social responsibility programs etc.
But it has become a regular feature that whenever it tries to open
a new store the global concerns are presented sugar coated with
local issues. Like when Starbucks planned to open a store in
Cambridge it was opposed by local activists along with
community push backs against Starbucks. In London to the
Primrose Hill case is living example of mixing local issues like the
local community never wanted a price rise in that area of the rent
so they never wanted Starbucks to open a store in the Primrose
Hall but they created a media hype by opposing and saying that
Starbucks is not paying the coffee growers well and any such
issues. This is the most prominent kind of disadvantage Starbucks
has to face in other countries. Finally Starbucks had to withdraw
their proposal from Primrose Hall, London.

Suggestions to the company

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In order to improve relationship between coffee producing nations

and US I would take some steps like launching schemes for
workers working in coffee fields and work towards community
development of the coffee growing nations.
Since recession has been a constant phenomenon all across the
world the disposable incpo0me has influenced the purchasing
levels so, design new products which are pocket friendly and are
of good quality. Before consumer shifts its preference from coffee
to any other beverage why not do some product innovation and
develop a brand which attracts not just the youth but each and
every section of society.
Reduce the serving time of the orders so that the customers do
not have to wait for longer time for their order. Make the coffee
vending machines technology driven by blending tastes with
technology using Knowledge Management in order to stay in the
growing markets all across the world.
They should become a bit stringent in allowing smoking in special
smoking zones, because the percentage of people who smoke is
growing day by day and they either drop the idea of buying a cup
of coffee or do not enter the cafe because they cannot smoke.
Same way if a group of friends want to enjoy a cup of coffee
sharing quality time at Starbucks and some of them smoke, then
they would ditch Starbucks for their friends and might enter
another coffeehouse where they can enjoy with their friends.
The market getting technology driven they should plan on some
advertising and use at least internet or social media for gathering
more customer base. Like Procter and Gamble and many more big
companies are creating global presence by joining esteemed
social sites like Facebook or Twitter. Here they can use many
marketing strategies like contests, iTunes downloading section
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etc. This will promote them all over the world and that too
amongst all the sections of the society.
They need to learn to manage cultural diversity more strategically
like they need to tap the Indian market where the whole South
Indian market is great coffee lovers and they would love to enjoy
their cup of coffee in a traditional ambience, so they can focus on
region specific ambience development to enhance their customer
base.
Growing economies like India have more scope in tier two cities
too where the spending power of people has grown and they love
to spend on luxury and leisure activities and for that they travel
all the way down to metros, which is quite expensive experience
for them, So Starbucks can now plan to expand in tier two cities
where people have spending power and want to spend money
and flaunt their rich lifestyle by visiting coffeehouses like
Starbucks.
Products can be diversified as per the cultural aspects like in India
people love giving unique gifts to their friends and families on
most auspicious occasions and festivals. So they should launch
new products like coffee hampers and gift hampers for festivals
like Diwali, Christmas etc. which will help them in increasing sales
by multiples during the festival seasons. These hampers can be
marketed in shopping malls, individual stores and can be
distributed as festival gifts in big offices to their employees too.
I would like to add some greenery too, since globalization means
caring for the community as well as the environment too. So they
can launch few new products just like green tea etc. which are
much popular amongst environment conscious and health
conscious people. Something like Eco-Coffee is a great idea which
will be much appreciated and will show Starbucks concern
towards environment.

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BIBLOGRAPHY

http://www.bms.co.in/what-is-the-significance-ofinternational-marketing-environment/
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 http://www.yourarticlelibrary.com/marketing/factorsinfluencing-pricing-strategy-in-internationalmarketing/5800/
http://www.ukessays.com/essays/marketing/environm
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170650-15184025-starbucks-plans-to-send-itsemployees-to-college-for-free
INTERNATIONAL MARKETING ENVIRONMENTINTERNATIONAL MARKETING BY MICHAEL VAZ AND
MEETA SETA

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