Starbucks; An Overview

Starbucks Coffee Company is a market leader in the specialty coffee sector. It is a retailer, roaster and brand of coffee, with more than 6,000 retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim. The company’s mission statement is “to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time.”

The company has been extremely successful in introducing the “Starbucks Experience” to the world. Beginning in 1987 and under the leadership of Howard Schultz, the dominant Starbucks plan was that of growth and expansion. As a result of growing too quickly the company was in deficit for the first three years, with losses almost doubling the US$1.2 million in fiscal year 1990. Five years after its inception, the company turned profitable and Schultz continued with the aggressive expansion strategy in order to benefit from first mover advantage in each growth area, to capture market share and to establish strong brand recognition. The company has achieved much success since the 1990s with growth exceeding that of the industry average, and maintained a position in the Interbrand Best Global Brand top 100 ranking.

OLI; Entrance from U.S. to Spain Decision Factors

With the lessons of yesteryear’s losses from growing internationally, Starbucks had to consider the risks and market potential of moving into Spain. Using Dunning’s OLI model, we can get a clear sense of the pros and cons of moving into this new market.


For Starbucks, intangible resources are more valuable than tangible resources, including its brand name, reputation, technology, intellectual property and human resources.

Of these resources, Starbucks’ brand name is the most important. To illustrate its strength, in 2001, the year Starbucks entered Spain, the restaurant was rated 88 on the Interbrand Best Global Brands 100. That circular green sea nymph had become a distinctive and highly recognizable symbol all around the world including Spain.

This symbol in itself doesn’t just stand for “Starbucks” in itself, but stands for quality coffee, certain shared values based on free trade, and a sense of community. Essentially, the logo is the embodiment of Starbucks’ reputation, a reputation that is and was known both in the domestic market and abroad. The brand was also known for being “fashionable” and received free endorsements when the paparazzi managed to capture the likes of many celebs sipping on a Starbucks.  Some of these celebrities include:  Jennifer Aniston, Brittany Spears, Lindsay Lohan, and even Madonna.

Starbucks has a proven track record of improving the communities in which they operate and have pledged to only buy free trade coffee beans in order to ensure fair treatment of farmers.

Starbucks’ corporate social responsibility extends into the heart of their brand, their reputation and to consumers – and potential consumers – all over the globe.

This is done through the responsible cultivation and purchase of coffee from farmers. This practice helps to build a better future for the farming communities by also providing education programs and fair trade transactions. Starbucks endeavors to minimize its environmental footprint, tackle climate change and inspire others. This is largely supported by the company’s reliance on the supply and price of coffee beans which is highly susceptible to the degradation of the environment. Starbucks has implemented programs to help support the community and in particular, voluntary work to help youth at risk of social exclusion. These examples are among many that Starbucks undertakes to be socially responsible and contribute to the community. In addition, Starbucks strongly depends on the support from employees to increase brand reputation and to create relationships with customers. Regarding community-focused strategy, Starbucks falls into that of identity-enhancing as it is highly committed to these socially responsible values which already existed in the community and Starbucks’ actions are able to reinforce the identity of the community in each of the activities it is involved.

Although most any country would be concerned with these issues, Spain might be keener on free trade than some others, given the great number of immigrants from Latin America living in the country. Issues pertaining to farmers are likely more personal to individuals from Mexico, Colombia, Guatemala, Honduras, or Peru since these countries are all large coffee exporters.

In addition to these key values, Starbucks is proud of its competencies:  Reliability, Responsiveness, Assurance and Empathy. These core values, which are further explained in the appendix, form an integral part of the Starbucks brand. Not only are they key to maintaining customers, but they’re also a pivotal part of what makes Starbucks stand out from the other coffee shops as a quality shop.

Starbucks intellectual property includes the Starbucks Roast and the FlavourLock processes. Along with good partnerships and inviting stores, Starbucks’ roasting philosophy sets it apart from its competitors. The coffee beans that the company buys and the way they are roasted are linked.

Starbucks has invested in sophisticated equipment to roast the beans. Coffee buyers, quality experts and roasting plant partners determine how the coffee will taste. Years of experience combined with repeated sample roasts and tastings give experts the information they need to arrive at the proper “roast curve” for each coffee. Starbucks roasting plants use packaging systems that allow coffee to be sealed in bags directly after the coffee is roasted. This FlavourLock™ process protects the coffee from oxygen, light and moisture. In addition, all packages of whole bean coffee include a one-way valve that allows coffee gasses to escape while keeping oxygen out.

In terms of tangible resources, Starbucks was rapidly growing and expanding market share thus had the capital to move about the globe setting up stores along the way. A venture into Spain was a very viable option from a financial and economies of scale standpoint.


When considering the Spanish market, the size is the first consideration Starbucks had to consider. Given the large population in Spain and the amount of tourists flocking to the main cities, the potential market was unquestionably great enough. Furthermore, with the globalization of Starbucks, tourists would likely opt for a coffee at a place they were familiar with.

In terms of culture, which will be discussed in more depth below, Spaniards are certainly a social bunch. It may be due to the weather in part, but whatever the cause, Spaniards spend time out of the house socializing with others. What a great opportunity for Starbucks with its social inviting atmosphere.

Moreover, Spaniards are definite coffee consumers, but their tastes aren’t as sophisticated as their Italian counterparts. The niche of high-end coffee simply wasn’t carved out in 2001. The competitors included Dunkin Donuts and Te y Café although they really didn’t sell the same quality of coffee offered by Starbucks. The other alternatives commonly frequented by Spaniards were cervecerias (independent bars), churrerías (churros shops) or chocolaterías (chocolate shops). None of which provided either the quality coffee or the atmosphere compatible with Starbucks.

The likes of Spanish people are certainly somewhat different from the typical Americans, but not so vastly so that Starbucks couldn’t tailor its offerings – if need be – to suit the conventional Spanish tastes. Again, because of the fashion forward image and because of the vast amounts of tourists, maintaining at least the core products would be essential in making Starbucks a success in Spain. If this weren’t the case, Starbucks might be concerned with brand tarnishing or watering down that could occur with any great divergence in the menu.

With the Americanization of large cities everywhere, there was definite potential for Starbucks to attract the younger, more influenced generations. These young people are brand aware and brand conscious. On the converse, more mature Spaniards are known to be very proud of their culture – and rightly so.

Entering the market is another location factor that needs to be considered. Fortunately for Starbucks, there are few legal constraints prohibiting foreign investors from opening companies on Spanish soil. The consideration then, is how the company should enter, if it chooses to do so:  joint venture, licensing or some other option.

All things considered, there were noteworthy advantages to moving into the Spanish market.


What would be potential benefits of Starbucks being a success in Spain?  There are only two obvious answers. First, market shares and profits will increase.  Second, with more shops and more people drinking Starbucks, the brand awareness will also increase resulting in a virtuous cycle.

Ownership Location Internationalization

Following Dunning’s advice, if a company has advantages in 2 of the three OLI factors the prudent decision would be to franchise or contract in the country. With 3 of 3 factors satisfied the company should consider Foreign Direct Investment. This is precisely what followed and Starbucks Spain has proven a success.

Entering the Spanish Market

The Starbucks’ entry mode when expanding internationally is to focus on partnership, where the local company has local connections and network, while sharing in Starbucks’ values, culture, and goals about community development. Starbucks looked for a partner in Spain with restaurant experience, strong financial resources for continued rapid expansion, strong real estate experience in identifying prime store locations, knowledge of the retail market and available human resources to commit to the joint venture.

Starbucks reached an agreement in 2001 with VIPS and El Moli Vell; both of whom are leading local food service retailers in Spain.

VIPS is a leading Spanish multi-brand, multi-restaurant and retail operator. Currently, 16 brands are operated under VIPS including Starbucks, in 16 Spanish provinces and in Portugal.

El Moli Vell has expertise and skills in bakery products, particularly in the Barcelona area. El Moli Vell was the retail component of the Europastry group which is one of the most important European businesses in the industry.

Starbucks chose this strategy and entry mode into Spain due to its market potential and competitive intensity. Spain was a mature European market with high demand and a culture of coffee consumption, although consumers were not well educated regarding the quality of coffee. The Spanish Coffee Federation (Federación Española de Café, FEC) estimates that more than 24 million cups of coffee are drunk in Spain every year, or the equivalent of 599 cups per person. A Café & Té market research report “Coffee consuming habits in Spain” found that 63 percent of Spanish people above 15 years old consume at least one cup of coffee every day, which equates to approximately 22 million consumers.

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Starbucks did not use a co-branding strategy as their own brand was already strong. The company took advantage of this strong brand image when negotiating with local companies. Starbucks tried to minimize its holding and investment due to concurrent extensive international expansion outside of Spain, by investing only 18 percent into the new alliance. Investment did increase however, prior to fiscal year 2003 to a 50 percent holding with VIPS, after El Moli Vell exited the joint venture. But in September 2009, Starbucks simultaneously sold its 50 percent ownership interests to VIPS, and converted the joint venture to a licensing ...

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