In the era of globalisation, it has become inevitable for businesses to survive without expanding in the overseas market. With the passage of time, businesses have witnessed severe competition in the market due to the change in the perspective of the business owners (Hill, 2010).
The objective of this study is to incorporate the concept of internationalisation while taking into account the most feasible overseas markets. In addition, the study encompasses several factors that are severely important to expand the business. Some of the prominent factors that are incorporated within the study include political, economic issues, cultural issues, entry strategy and strategic alliance. This description of the factors will help in evaluating whether the business should expand in a single country or two, or none, or both.
Providing the consumers with a cup of energetic coffee is one of the most flourishing businesses in today’s competitive business environment. Starbucks is an eminent player in the coffee industry due to which it has consistently been associated with terms like quality, and experience from time to time. With over 20,000 coffeehouses around the globe, Starbucks has significant opportunities for growth through its expansion plan. The disciplined expansion of the business has always been the strength of Starbucks. As a result of continuous expansion, Starbucks has consistently been provided with an ability to retain its leading and dominant position in the coffee industry (Starbucks, 2012).
International Expansion Plan
Starbucks is an eminent quality-coffee provider in the international market. This ultimately has allowed the organisation to attract millions of consumers daily. Although, Starbucks has 20,000 coffeehouses across the globe (Starbucks, 2012), but still, Starbucks has significant room for expansion in the international market. The two overseas markets for the expansion of Starbucks include ‘Pakistan’ and ‘Nigeria’.
Pakistan is a sovereign country located in South Asia. The geostrategic location of Pakistan has eventually provided her with several opportunities – for instance, Pakistan acts as a gateway to several countries. Pakistan is ranked among the list of top-20 emerging economies and has the potential to move upwards in the ranks. The immense resources along with the qualified people are the core strengths of Pakistan and are constantly working to join the Next-11 emerging economies (The News, 2013).
Some of the prominent factors that must be taken into consideration before expanding Starbucks in Pakistan are as follows;
- Political Economic Issues
Pakistan has continually faced different political issues from time to time. Pakistan is a developing nation and has always faced setbacks due to the unstable political environment. Much of the politics in Pakistan is based on different ethnic groups that have constantly crippled the country to become a leading nation of the world. In addition, the interference of foreign countries in the politics of Pakistan did nothing except making the country weaker day by day (Zaidi, 2005). The absence of constitution in Pakistan has eventually allowed the peoples with power to take control while manipulating the political system along with constitutional institutions as per their desire. This clearly reflects that the political system in Pakistan is weaker than that of any other developing country (Easterly, 2001).
Despite the stiff challenges faced by the government of Pakistan, the country made significant comeback in terms of economic stability. The economic performance of the sectors revealed that large scale manufacturing along with agriculture and service sector grew by 2.8 percent, 3.3 percent and 3.7 percent respectively (Tribune, 2013). Although, the corrupt political system has played a negative role for over decades but the economic growth reveals that the government has taken sufficient measures for the elimination of corruption within Pakistan (Haider, 2013).
- Cultural Issues
The most prominent cultural issue that Starbucks would have to overcome in Pakistan will be the traditional family breakfast. Starbucks is known for its superior in-store and state-of-the-art environment, but the traditional family breakfast culture will eventually restrict the sales of the company. In addition, the inclination towards tea rather than coffee is another issue that Starbucks would have to overcome simultaneously.
- Entry Strategy
Pakistan is a developing nation due to which the most feasible strategy to enter the market will be franchising and joint ventures. Starbucks is associated with terms like quality and experience due to which the company cannot take any risks. This reflects that the use of franchising along with joint ventures can significantly allow Starbucks to operate smoothly within Pakistan. In addition, the sufficient knowledge regarding the country and the needs of the individuals can be gained from the partners while reducing the political risks that can significantly impact the operations of Starbucks.
- Strategic Alliances – banks, malls
Pakistan is an emerging nation with significant potential to grow. Promotion of Starbucks in Pakistan will require significant promotion through different channels. For instance, banks and malls in Pakistan can provide Starbucks with outstanding support to attract and retain consumers in the market. In addition, the advertising agencies can help Starbucks in promoting its products in the market. This strategic alliance in Pakistan can help in the evaluation of consumers’ needs and wants from time to time.
Nigeria is one of the most populated countries in Africa. With one of the fastest growing economies in the world and the second largest in Africa, the opportunities to growth are significant in Nigeria. Despite being the eight most populous countries, Nigeria’s capital Abuja is a home for attraction in terms of natural beauty and sceneries. Abuja is one of most well planned cities in Nigeria with significant potential to grow in the competitive landscape (Meagher, 2011).
- Political Economic Issues
Nigeria gained its independence from Britain in the year 1960. Since then, the country had to suffer severely through corruption and military rule from time to time. Despite all the hurdles and tensions, the first democratic elections were held in 1999 (Meagher, 2010). Being the most important country in West Africa, Nigeria holds an important position in terms of politics and economy. Due to the rich resource availability, Nigeria has been provided with significant power with the passage of time. The well-developed financial and communication sectors in Nigeria significantly extends the importance of the country. However, the factors that are constantly becoming hurdle between the country and her growth includes healthcare, education and poor living conditions (Lewis, 2009).
- Cultural Issues
Tea is dominantly consumed in Nigeria. Changing the cultural preference would be one of the issues that Starbucks will have to overcome in Nigeria. In addition, Nigerians have developed a habit of drinking tea to remain active all the day long. Meanwhile, the tea manufacturers operating in Nigeria have constantly encouraged the people, especially youth, to focus on the consumption of tea through differentiation i.e. instant tea and fruit/herbal tea (Euromonitor, 2013).
- Entry Strategy
- Strategic Alliances
Being a well-developed and well-planned country, Starbucks should create alliances with multi-national organisations to promote the concept of coffee. In addition, the strategic alliances with restaurants and shopping malls can also fuel the growth of Starbucks in Abuja. Meanwhile, banks can also be taken into consideration for the promotion of the products in the market.
In addition, the political and economical conditions of the country are getting stronger and stronger. This will eventually provide Starbucks to operate smoothly in Nigeria. The only hurdles or threats that are between Starbucks and its desired success in Nigeria are the lack of educational standards, poor healthcare along with living standards. Despite these threats, Starbucks should expand its business in Nigeria.
List of References
Easterly, W. (2001). The political economy of growth without development: A case study of Pakistan. Paper for the Analytical Narratives of Growth Project, Kennedy School of Government, Harvard University.
Euromonitor. (2013). Tea in Nigeria. Available from http://www.euromonitor.com/tea-in-nigeria/report [Accessed 11 September 2013]
Haider, M. (2013). Major points of economic survey 2012-13. Available from http://www.thenews.com.pk/Todays-News-13-23408-Major-points-of-Economic-Survey-2012-13 [Accessed 11 September 2013]
Hill, C.W.L. (2010). Global business today. Boston: McGraw Hill
Lewis, P. (2009). Growing apart: Oil, politics, and economic change in Indonesia and Nigeria. University of Michigan Press.
Meagher, K. (2010). Identity economics: social networks and the informal economy in Nigeria. Boydell & Brewer Ltd.
Meagher, K. (2011). Informal economies and urban governance in Nigeria: popular empowerment or political exclusion?. African studies review, 54(2), 47-72.
Starbucks. (2012). Fiscal 2013 annual report. Available from http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-reportsannual [Accessed 11 September 2013]
The News. (2013). Pakistan to join next 11 emerging economies. Available from http://www.thenews.com.pk/Todays-News-3-173661-Pakistan-to-join-Next-11-emerging-economies [Accessed 11 September 2013]
Tribune. (2013). Survey of the economy 2012-13. Available from http://tribune.com.pk/story/561967/survey-of-the-economy-2012-13/ [Accessed 11 September 2013]
Zaidi, S. A. (2005). Issues in Pakistan's economy. OUP Catalogue.