Sales Management International Marketing

Question :

Questions to answer

1- What are the main marketing environment factors affecting Starbucks business in the Italian market? Why are these factors affecting the Italian market?

2- Explain the impact of these factors on Starbucks’ marketing.  Give a specific example for each factor.

3- Based on your analysis of the two previous questions, discuss the promotion strategies of Starbucks in the Italian market. What modifications to the company’s product components might be necessary?

4- For the promotion strategies that you have outlined in the previous question (Q3), suggest two specific recommendations for these promotion strategies. Give a specific example of how Starbucks should implement these two recommendations in the Italian market.

Answer :

Introduction

In this paper, the focus is on understanding the case of Starbucks entering Italy and answering a few key questions related to it. The four sections answer four questions put forth in the case.

Answer 1 

There are mainly three marketing environment factors that are affecting Starbucks business in the Italian market. These are social and cultural, political, and competitive factors. A study in 2011 found that 75% of Italians enjoy drinking coffee at home. In fact, out of home consumption had fallen from 30.3% in 1997 to 23.4% in 2011 (ICC). Regarding preferences, Italians do not like chain cafes. A Euromonitor report in 2011 identified that only 0.6% chains were there for coffee consumption. Another major concern is that people of Italy do not like foreign brands as they do not reflect Italian customs and traditions. Moreover, Italians prefer baristas who have experience. Cost is another concern. Starbucks coffees come at a premium price, whereas those found at Italian cafes are less than half of the price charged by Starbucks (Sola). People do not like the price to an extent that a complaint was filed against the company due to  its high price. The logic was that the high pricing by Starbucks will negatively influence the overall price of coffee in Milan as it may soar high. People of Italy view the franchise system with some suspicion, and this can be one of the reasons that despite brewing the best coffees in the world, no one sees a multinational Italian coffee maker dominating the world. People of Italy are creatures of habit. They enjoy spending their time with their known associates and they are very close to their territory. They do not equate big things to better quality, and this also can be a reason that more than 90% of businesses in Italy have not more than 15 employees. Saying they may not have ambition can be one thing, but it is also possible that they don’t see expanding with chains as a right way to do business and serve quality.

Even politicians are not favoring the company quite well. As per the case, Matteo Salvini backfired saying that it is a move towards “Africanization of Italy”. People chose Italy’s government, therefore, if people oppose Starbucks like companies, then political parties may not try to oppose it. The competition for Starbucks is tough in Italy. There are good coffee shops at every rest stop on the road, and the price at which Starbucks is selling, competition will be tough. Mainly it is the people who are not willing to accept foreign brands. They do not see companies like Starbucks reflecting the same vibe that the customers feel at the local cafes. Coffee culture of Italy is strongly interwoven with their values and national identity. Coffee is important to an extent to Italians that if one identifies it as a social right in the country, then it would not be wrong. People of Italy drink coffee leisurely and by taking time while engaging in lengthy conversations with known colleagues or Baristas. However, the culture of Starbucks is quite different. The customers get served coffee very quickly and efficiently, and all this due to its sheer volume. 

Answer 2

These factors have significantly impacted the marketing of Starbucks. The introduction of Starbucks requires that the people experience new things and new tastes, possibly. But they do not want to. They do not want to change their culture of drinking coffee. People of Italy take their coffee seriously, and, therefore, the marketing of Starbucks may seem like imposition of new rules to enjoy a drink that Italians did for years in their own way. Starbucks has presented itself as a superior coffee maker but it is less likely to work in Italy (Virgin). The size of coffee is an important comparison that often befuddles Italians. In Italy, it is just one size, but Starbucks has several sizes ranging from 3 ounce to 31 ounce. Starbucks would not be able to market its coffee on this ground. 

Now coming to the political factor, if the company does not keep the local parties in confidence, then it will be difficult for it to actively work in the area due to regular disruptions. One example, as highlighted in the previous answer, was decrying of the interior and deputy prime minister of Italy. And it seems it was just one instance. In future, there can be many cases where politicians do it just for the sake of gaining popularity and in turn may end up hurting all marketing efforts of Starbucks to build its brand. 

Regarding the competitive factor, the company is likely to face competition on coffee price and tastes. Example is the complaint filed by a consumer group regarding the high price of coffee. Though it is not exactly a competition induced response but at least in that direction. Moreover, customers of Italy want low priced good taste coffee as it is considered luxury there. Therefore, the cafes that are able to provide coffee at low price and good tastes are likely to be the winner.

Answer 3

Starbucks has to present itself humbly among the Italian customers. It cannot show an element of pride that it knows better than the people of Italy on how to make a great coffee. There is no doubt that as far as tastes and price of coffee are concerned, it is doubtful that Starbucks will ever be able to beat the locals. However, what it cannot provide customers in tastes and prices, it can make up for in other things. Company can focus on promoting itself as a brand that people would love to carry around in the form of paper cups. It should be conveying the busyness and a go getter attitude. Starbucks should promote itself as a place where business people would love to stop by to write an urgent email. It should promote itself  as a place where people would like to come to escape their regular local bar. It should focus on selling a status symbol instead of coffee (Wang). Instead of coffee and price, promoting and selling experience can be a helpful promotional strategy.

As far as modifications of the product components are concerned, Starbucks should serve the coffee at the cup size that are considered normal in Italy. Moreover, it should rethink its pricing strategy as it may scare away most of the customers. However, this price can be justified if a sense of exclusivity is attached to the coffee served (Virgin). And for this, the company has to work on its promotional strategies quite well. 

Answer 4

It should be understood that no strategy is a perfect strategy. With this in consideration, the first recommendation for Starbucks is that it should build a proper timeline to implement the defined strategy. And the second recommendation is that a constant monitoring of the implemented strategy should be done so that timely changes can be made where needed. In order to implement the suggested strategy, the company can choose an online platform in the initial stage as a test pilot period. Instead of directly releasing the promotion at a large scale, the company should first test the water to understand whether it is working or not. In the offline situation it can be done by having a small test group, and in the online scenario, the promotion can be released for limited viewability. During this test period, the company can ensure to understand that the promotion activities are generating the intended outcome. If it is, then large scale implementation of strategies should be carried out, else necessary changes should be made. For example, the company can release an ad reflecting status symbol in visiting and drinking coffee at Starbucks, and then record the responses of the focus groups (Cyr). 

Conclusion

Overall it can be said that successfully operating in Italian market will be tough for Starbucks, but it is not impossible. With persistence and right strategy implementation, it is possible that it will succeed. The persistence of the company led it to open its first shop in Milan, and it is hoped that the same will take it into the heart of the customers. There is no doubt that there is unwillingness among Italians to accept foreign brands selling coffees that are so close to their heart. However, change can be expected. But only time will tell what the future holds for Starbucks in Italy.

References

Cyr, Jennifer. "The pitfalls and promise of focus groups as a data collection method." Sociological methods & research 45.2 (2016): 231-259.

ICC. Trends In Coffee Consumption In Selected Importing Countries. 2012, p. 11, http://www.ico.org/documents/icc-109-8e-trends-consumption.pdf. Accessed 3 Apr 2020.

Sola, Katie. "Six Challenges Starbucks Must Address To Succeed In Italy". Forbes, 2016, https://www.forbes.com/sites/katiesola/2016/03/01/six-challenges-starbucks-must-address-to-succeed-in-italy/#4c7ab93135b3. Accessed 3 Apr 2020.

 Virgin, Michelle. Cheers! Starbucks Strategy in Italy and the Global Market. Diss. University of Oregon, 2016.

Wang, Jenna. "Why It Took Starbucks 47 Years To Open A Store In Italy". Forbes, 2018, https://www.forbes.com/sites/jennawang/2018/09/13/why-it-took-starbucks-47-years-to-open-a-store-in-italy/#1356fc43fc00. Accessed 3 Apr 2020.