Has Starbucks Met its Match?

 

 

The popular coffee franchise has made a statement in a number of different markets, but has it met its match against Vietnam? The Seattle based coffee chain put its first location in Ho Chi Minh City in February. This country is known to have a very specific way of making coffee; nothing like what Starbucks has in the U.S.

The main concern here is if Starbucks will thrive in this new country, or become a complete failure. I believe The Critical Decisions of Operations Management should be highly considered.  One of the points is based on the design of goods and services. Starbucks has made a point to please the locals by making a special drink called the Asian Dolce Latte to appeal to local palates. By doing this Starbucks has a better chance to win over the locals that are so keen to stick to their original tastes.  When taking a domestic product abroad, I believe having differentiation in the good or service is also extremely important. Since Starbucks has a flavor of coffee unlike anything the Vietnamese are used to, this differentiation can potentially give them the competitive advantage they need in order to succeed. Starbucks CEO Howard Shultz quotes, “The environment that we create, the store design, the experience…they all add up to a much different position to anything that anyone in Vietnam currently occupies.”

Another critical decision is location strategy. Now, Shultz did not just wake up one morning and decide he wanted a new location in Vietnam. There are currently over 3,000 locations in Asia alone. Starbucks in fact purchases a large quantity of Arabica coffee from Vietnam, thus building a location in Vietnam makes a lot of sense. If they can move closer to the supply, this could greatly reduce exporting costs. To be even more specific, Starbucks purposely located their café in the capital’s higher-end neighborhood, District 1. Here, those that live in the area can afford the expensive taste that Starbucks has. Starbucks essentially nailed it on the head when it comes to this aspect: they are now near raw materials, and they are near to their target customers.

Going global has given Starbucks a vast amount of knowledge on how to succeed. However, they also face some cultural issues as well. As I stated before, the type of coffee served at Starbucks in the U.S. is much different than what the Vietnamese are used to. They enjoy a more bitter and higher caffeinated drink, and in order for Starbucks to do well, they must adjust to the new scene and roll with it. They have also brought a roast-duck wrap and a French baguette to the menu to achieve this goal.

Overall, I believe Starbucks has done an amazing job going global, and if they review and understand the critical decisions of operations management, they will continue to strive to new levels.

Thoughts for discussion:

Will Starbucks succeed in their takeover of Vietnam? Why or why not?
What does this mean for local coffee shops?

Sources:

http://online.wsj.com/article/SB10001424127887323582904578487192544295444.html 

http://travel.cnn.com/can-starbucks-make-it-coffee-mad-vietnam-921956

 

5 thoughts on “Has Starbucks Met its Match?

  1. I believe that any food chain restaurant or coffee shop has to do extensive planning to thrive in a new country. Companies need to research the local area and figure out what natives like, and what they don’t already have. McDonalds I think has done well going global, their menu is different in almost every country because they want to draw in natives. If Starbucks can capture the taste of coffee that the Vietnamese are used to, then I think they can be very successful.

  2. What is interesting about companies going global, especially those in the food and beverage industry,is the level of commitment to their new location’s culture as well as the company’s culture. Starbucks has clearly committed to their “tall/grande/venti” culture, but their menu additions of the Asian Dolce Latte and the food items shows a willingness to adapt. One of the articles also mentions the use of local materials for the store’s interior, which I think is great. But as mentioned, it will truly depend on if Starbucks will provide the stronger taste that is standard in Vietnam. I’m sure that Starbucks will find an audience in Vietnam (locals, implants, tourists) that will embrace the new store, meanwhile many customers will continue to get their coffee from their local coffee shops.

  3. In order for a any food chain to be successful in a new country they need to cater to the local taste. It looks like this Starbucks has done a lot of research and planning about the Vietnamese market. Not only are they creating new menu items that the locals will enjoy, but they are also cutting exporting costs by moving closer to their source. I think Starbucks will be successful in Vietnam just like they are in many other parts of the world. They chose their menu and location carefully, and it will result in success.

  4. This post made me think of other franchises that have gone abroad and become successful. Take McDonalds for example, McDonalds has successfully located itself in many different countries through adaptations of their menu to local demand. It seems to me that Starbucks is following the same path and adapted their coffee to that desired by the locals. As long as Starbucks continues to appeal to their audience, I see no reason as to why they would not be successful.

  5. I think a point you made in your last sentence is very important, “review and understand”. Starbucks’ success in Vietnam hinges on not only knowing the culture of Vietnamese coffee, but understanding it, a skill they seemed to have mastered in other foreign markets. If they find a way to assimilate with that culture (e.g stronger coffee) while still retaining some of the essential Starbucks brand it seems they would be fine. This also presents the opportunity to introduce a new way of thinking about coffee to the Vietnamese which, if accepted, can generate more interest and result in greater success. These are all steps they already seem to be taking.

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