Starbucks in Japan

9 September 2016

The Starbucks’ mission: « to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time » – Timeline (general + Japon) [pic][pic] Juste max, pour le nombre de stores, sur les keyfigures japan (doc financier de starbucks japon, ils disent qu’a la fin du quarter 2 de 2011 ils en etaient a 935 et pas 911. f – PESTEL 1. Political aspects: Japan has a constitutional monarchy. That is a form of state with a monarch at the head of the country, and the prime minister who represents democracy.

The actual emperor Akihito is still very respected among Japanese in spite of his rare public appearances. The actual Prime Minister Yoshihiko Noda is head of the Democratic Party of Japan (DPJ). Until 2010, the conservative Liberal Democratic Party (LPD) was in power since 1955. Japan politics has been marked by recent instability, with six prime ministers in as many years. Japan is divided into 47 prefectures and each has their own executive power within the range of law. The 4 major topics on the agenda are: • Reducing the Japan’s debt which presently stands about 200% of GDP.

Starbucks in Japan Essay Example

Find solutions to its aging population and negative population growth rate. • Developing more bilateral trade agreements with its Asian counterparts. • Leading reconstruction efforts after last March’s devastating tsunami and around the stricken Fukushima nuclear plant. i Japan is a member of all international institutions such as WTO (World Trade Organization), ICJ (International Court of Justice), IMF (International Monetary Fund), UN (United Nations) WB (World Bank) or OECD (Organization for Economic Cooperation and Development).

Despite the efforts of the government of Japan to increase its influence on the multilateral institutions, its influence on the global economic policy architecture remains smaller than one would expect for the world’s third largest economy. The Japanese government has been liberalizing, as its basic policy, the importation of goods into Japan in recent years. Presently there are only 63 goods that are not liberalized for import. The feature of the liberalization is to open the Japanese market to foreign countries equally.

Japan does not take a discriminatory liberalization policy. In order to protect the Japanese consumer’s interest and stimulate competitiveness of Japanese industries, tariffs are set as low as possible. Besides custom duties, both national and local consumption tax will be imposed on imported goods received from the bonded area, and must be paid by the recipient of such imported goods. The Japanese Government has also set up 22 zones, that are defined as FAZ (foreign access zones) with the aim of promoting import businesses in order to attract foreign capital into Japan.

In this one, foreign companies are eligible for benefits that include, among others, the following: – Loans at reduced interest provided by the Japan Development Bank – Exemption from local taxes – real estate purchase tax and property taxes. – Increased rates of depreciation. – Guarantees from Government funds. ( important dernier paragraphe for 5 porter force ? new entrants)(LEGAL Part? ) 2. Economical aspects: At the end of 2010, Japan remained the world’s third largest economy after the United Sates and the People’s Republic of China with a nominal GDP of $5.

The main industries are motor vehicles, industrial and transportation equipment, electronics, chemicals, steel, machine tools, processed foods, non-ferrous metals In recent years, there is a deflationary spiral that tends to make wait consumers to have lower prices. Furthermore, Japan must cope with a huge public debt which account for 200% of the GDP in 2010. In 2010, Japan was ranked 15th of 183 countries in the Ease of Doing Business list (WorldBank). The economic organization is mainly characterized by: – Strong links between industry, contractors and distributors.

Exchange rates and stability of the host country: The yen is the official currency of Japan and is denoted by JPY. It is the third most-traded currency in the foreign exchange market after the Euro and the US dollar. 3. Socio-cultural aspects: Population of Japan is estimated at around 126. 4 million. Japanese society is linguistically and culturally homogenous. The urban population accounts for 67%. Indeed, the majority live in huge million’s inhabitants conurbations such as Tokyo, Osaka-Kobe or Nagoya. The age structure is the following: – 0-14 years: 13. 1% – 15-64 years: 64% – 65 years and over: 22. 9% With 1.21 children born/woman (218th of 222 countries) and a life expectancy of 82. 25 years (5th of 222countries), Japan is one of the fastest aging country, and its population is expected to drop to 96 million by 2050.

This is a major issue for Japan’s economy and particularly for the financing of the healthcare system. Even though the aging population is a common outcome of an industrialized country, this drop in fertility is also due to several socio-cultural changes in Japanese society. Women work massively and in Japan, if they have children, they are expected to stop their jobs and “fulfill their role of mother”.

So they are reluctant to choose one option or another. Furthermore, men seem to have lost confidence in themselves (due also to the economy staggering) and we account a massive part of singles in Japan. Another changes has been occurring recently (a decade) among youth. Indeed, growing part of the young people rejects the lifestyle of their parents (lifetime employment for example) and are willing to gain more freedom. We call them “freeters” since they have part-time job with no future and don’t start a career. They usually live as parasites singles with their parents.

Suicide is the leading cause of death for people under 30, which point out a “strong underground society issue”. Aside from these facts, Japanese society still has strong values, customs and beliefs (influenced by the Confucianism (respect senior People), Buddhism or shintoism) which have a direct impact on the whole life and particularly the working life. Thus Japanese have a strong hierarchical system and it seems for them natural. Individuality is not seen as negative whereas individualism is. The samurai way of living or “Budo” is still present within the society with its values such as respect toward each other and family honor.

The Japanese consumers are probably one of the most discerning consumers in the world. Having a high expectancy toward products and services, they are willing to pay more if they think the product/service worth it. Though, this statement has to be taken with caution for the crisis and the staggering economy has brought “a cut back on spending” behavior. In terms of education, the Programme for International Student Assessment coordinated by the OECD currently ranks the overall knowledge and skills of Japanese 15-year-olds as sixth best in the world.

The literacy rate (age 15 and over can read and write) is close to 100%. Here is below important business customs that have to be respected when dealing with Japanese. • Japanese people are very reluctant to take risks in business, they must be kept confident. You need to plan ahead and foresee all sorts of problems. • You have to show them that our project is healthy on the long term and you need to show constant results in order to keep them calm. • In Japan the decision process is very long, you need to be patient and persevere.

When you strike a deal you need to respect every single clause and engagement in it, it is a guarantee of quality in the Japanese culture. • The form plays a very important role in Japan. Your company needs to have a good image, your products need a good packaging and the overall appearance / behavior of your employees need to be neat. • Most Japanese businessmen speak little English; speaking Japanese is often a key asset in order to avoid misunderstandings. • Japanese people tend not to admit it when they do not understand something; this can lead to various problems within the company.

We can define a class structure scheme consisting of four classes: the capitalist class, new middle class, working class, and old middle class. The gaps between rich and poor are not as glaring in Japan as they are in many countries, and a remarkable 90 percent or more of Japanese people consider themselves middles class. Japanese Education: First of all education is an extremely important thing for the Japanese nation, the Japanese consider it as essential and priority, which generates excessive behavior sometimes as evening classes in the extreme.

Sport: Baseball, football, and other popular western Sports were imported to Japan in the Meiji period. These sports are commonly practiced in schools along with traditional martial arts. Baseball is the most popular sport in Japan. Football is becoming more popular after J league (Japan professional soccer league) was established in 1991. Work Environnment: Employees are expected to work hard and demonstrate loyalty to the firm, in exchange for some degree of job security and benefits, such as housing subsidies, good insurance the use of recreation facilities, and bonuses and pensions.

Wages begin low, but seniority is rewarded, with promotions based on a combination of seniority and ability. Working conditions vary from firm to firm. On average, employees worked a forty-six-hour week in; employees of most large corporations worked a modified five-day week with two Saturdays a month, while those in most small firms worked as much as six days each week. 4. Technological aspects: Japan is a leading nation in scientific research, particularly technology, machinery and biomedical research. Nearly 700,000 researchers share a US$130 billion research and development budget, the third largest in the world.

Japan is a world leader in fundamental scientific research, having produced fifteen Nobel laureates in either physics, chemistry or medicine, three Fields medalists, and one Gauss Prize laureate. Some of Japan’s more prominent technological contributions are in the fields of electronics, automobiles, machinery, earthquake engineering, industrial robotics, optics, chemicals, semiconductors and metals. Japan leads the world in robotics production and use, possessing more than half (402,200 of 742,500) of the world’s industrial robots.

The Japanese society has first-rate public transportation, educational, and medical systems that are relatively inexpensive to use. Japan is putting in a lot of money in constructing schools and recreation centres that both benefit the community and creates employment situations. Japan has also developed a well-functioning railroad system throughout the country. The overcrowded roads in Japan have improved lately and cars, buses, and taxis swarm from early morning to late night. Subways are also extensively used. Furthermore, Japan has a network of airlines that carry both domestic and international customers and goods.

Environmental aspects: Japan is one of the world’s leaders in the development of new environment-friendly technologies, and is ranked 20th best in the world in the 2010 Environmental Performance Index. As a signatory of the Kyoto Protocol, and host of the 1997 conference which created it, Japan is under treaty obligation to reduce its carbon dioxide emissions and to take other steps to curb climate change. Though, as the world’s third largest economy, Japan has a huge impact on the environment (fishery for example) and is coping with new problems.

Namely, its nuclear power plants. After the March’s disaster, Japan has been entirely reviewing its energy policy, stopping the majority of its nuclear power plants. Japan has been implementing for many years a thorough recycling policy called “3Rs”: – Reduce: Reducing the amount of waste by increasing the efficiency of resource use and extending the useful life of products. – Reuse: Using the “recyclable resources” from used items again, as products or parts, after giving them proper treatment. (“Recyclable resources” are the useful parts or components of waste, used products and byproducts.

Using the “recyclable resources” as the raw materials to make new products. [pic] ? logo qu’on pourra integrer au PPT 6. Legal aspects : Japan initially patterned its modern legal system after those of continental Europe with the introduction of a series of written codes (the Civil Code (Law No. 89 of 1896), the Penal Code (Law No. 45 of 1907), the Commercial Code (Law No. 89 of 1899), the Code of Civil Procedure (Law No. 29 of 1890 as amended by Law No. 109 of 1996) and the Code of Criminal Procedure and later on, as a result of the post-war American occupation, assimilated Anglo-American legal concepts.

The law is only written in Japanese. Japan’s judicial institutions consist of the Supreme Court; high courts, whose primary function are appellate; district courts, which are trial courts exercising general jurisdiction over all actions, criminal and civil; family courts; and summary courts. The current system in which all lawyers, including judges and public prosecutors, are graduates of the Legal Research and Training Institute is to be replaced by a law school system.

The Institute currently accepts about 1000 trainees annually as selected through the National Bar Examination, which is known for its pass rate of less than 3%. The right to form and belong to unions is constitutionally protected and is implemented by the Labor Union Law (Law No. 174 of 1949). The basic unit is a labor union organized on a company basis. There are only a few craft unions. In general, unions are not very political or aggressive. The unionization rate has been continually declining with 34. 4% unionization in 1975, 24. 2% in 1993 and 20. 7% in 2008.

The key factors in this decline are the increasing importance of the service economy and the increased use of part-time and temporary workers. Today, Japan permits 100 percent foreign ownership in a company established in Japan. Ultimate responsibility for exchange controls lies on the Ministry of Finance (MOF) and the Ministry of International Trade and Industries (MITI). Japanese law controls the import of goods that can negatively affect Japanese industry, economy, health, hygiene or public safety and moral. There are mandatory standards that products sold in Japan have to comply with in order to be allowed on the Japanese market.

These standards, primarily concerned with consumer protection and safety, are legally fixed. Nationally produced products, as well as international products cannot be sold unless certified through the standards relevant for the product category of significance. – Hofstede –Monochronic – (comparaison Jap/USA) The Hofstede Dimensions : http://geert-hofstede. com/ Power distance: the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally. US: 40 Japan: 54 Both countries have an average score which means that they are mildly hierarchical.

Both societies are meritocratic which means that they think that everyone can succeed if they work hard. In American companies, managers are accessible and the information is shared easily. Individualism: the degree of interdependence a society maintains among its members US: 91 Japan: 46 The American culture is strongly individualistic: people should look after themselves and it is their fault if they are in trouble. On the opposite Japanese culture shows characteristics of a colloectivistic society: the group is placed before the individual.

Moreover, there is a strong sense of company loyalty. Masculinity: the society will be driven by competition, achievement and success vs Feminity: the dominant values in society are caring for others and quality of life US: 62 Japan: 95 Both societies are considered masculine but Japan is one of the most masculine in the world. Both societies are very competitive and kids are taught to be as good as they can be. People have an eager to success, even though their motivations are not the same: American compete for themselves and Japanese for the success of the group they are part of.

Uncertainty avoidance: The extent to which the members of a culture feel threatened by ambiguous or unknown situations US: 46 Japan: 92 Japan is one of the most uncertainty avoiding countries in the world, life is highly ritualized and everything is prescribed by codes and etiquette. Consequently, changes are difficult to happen in this type of culture. On the other hand, American culture is uncertainty accepting, they are not reluctant towards new ideas and innovation. They do not need a lot of rules.

Long-term orientation: the extent to which a society shows a pragmatic future-oriented perspective rather than a conventional historical short-term point of view. US: 29 Japan: 80 The United States is a short-term oriented culture. The businesses usually measure their performance using a quarterly basis. Americans usually need to get results quickly. On the other hand, Japan is one of the most long term oriented societies. They think that their life is very short and that they will accomplish what they can do. Japanese people serve the durability of the company. Monochronic People * Do one thing at a time

Take time commitments (deadlines, schedules) seriously. * Are low-context and need information. * Are committed to the job. * Adhere religiously to plans. * Are concerned about not disturbing others; follows rules of privacy and consideration. * Show great respect for private property; seldom borrow or lend. * Emphasize promptness. * Are accustomed to short-term relationships. Polychronic People * Do many things simultaneously * Are highly distractible and subject to interruptions. * Consider time commitments an objective to be achieved if possible. * Are high-context and already have information.

Are committed to people and human relationships. * Change plans often and easily. * Are more concerned with those who are closely related (family, friends, close business associate) than with privacy. * Borrow and lend things often and easily. * Base promptness on the relationship. * Have strong tendency to build lifetime relationships. American people are strongly seen as monochromic: they would rather take a “step by step” approach and do one task at a time. Moreover, they are strongly committed to the job they are doing and take deadlines seriously. Finally, they are focused on having things done quickly.

Usually it is said that Northern countries are monochromic and Latin countries are polychromic. It is usually difficult to put a label on Asian cultures. As for the Japanese people, they are considered monochromic as they focus on punctuality and will do what it takes to do the job right. Nevertheless, as they want to do the job right, they also think that things will take the time they need to take. – How STARBUCKS entered in Japan ? Strategy Joint Venture (flo) Back in mid 90’s, Starbucks figured out that the domestic market (The U. S) was quite saturated (though profitable) and it was time to go abroad.

It was initially drawn to Japan by its large market, consumers’ high disposable income, and affinity for Western Brands. Yet, considering the prospects of potential entrants into the Japanese coffee market, the Wall Street Journal was not very optimistic when providing its analysis in 1995: “The Japanese have not developed a taste for espresso drinks like caffe latte and caffe mocha; they drink a lot of instant coffee or ready-to-drink coffee in cans, as well as American-style hot coffee. Moreover, the Japanese coffee market may be saturated with many coffee shops and vending machines serving hot coffees.

Coca-Cola alone has more than 800,000 vending machines that sell canned coffee”. Similarly, the Nikkei Weekly pointed out that the Japanese coffee industry in terms of the number of stores was in decline, and thus was not much more optimistic than the Wall Street Journal regarding the prospects of an entry into the market. What is more, before setting up in 1995, a detailed study on the coffee market in Japan insisted that Starbucks change its business model from one that seeks to provide young women, families and young couples a third-place venue to gather and socialize to one that allows smoking and targets the 40-year-old working male.

Nonetheless, Starbucks’ top management and primarily Howard Behar (who had originally formed Starbucks’ International group) rejected everything that had been said in this study. They did not want to change the brand and its values, and to stick with being who Starbucks is, not what the competitive set was doing at the time. “We want to bring in Japan the Starbucks experience we already offer in U. S” (H. Behar, 1995) After defining the business model, Starbucks had to choose by what means it would enter the Japanese market. There are many ways to enter a foreign market, such as licensing, franchising, or direct investment.

The Japanese market is very complicated to enter, because of numerous barriers such as different business customs, distribution system, language and so on. But Starbucks wanted to preserve its brand’s premium values and image. In 1995, they eventually came up with a direct investment scheme, setting up a 50/50 joint-venture with a local partner called Sazaby Inc. This latter was primarily known for its ability to bring unique goods into the Japanese market, and does in addition operate upscale restaurant and retail chains throughout Japan.

It brought to Starbucks the local consumer understanding, and took care of the supply chain within Japan (which is basically a nightmare for westerners). Plus, they also carried out all the administrative stuff for the lending of the stores. Martin Coles, actual president of Starbucks International said in a recent interview about Sazaby Inc. “It’s one thing to be culturally aligned between two organizations, but it takes it to a different level when you have that depth of understanding on the part of the leadership. Sazaby understands how to work in East and West.

They bring us all of the connections—the local consumer understanding—and then helps take what’s the best of Starbucks. Because it is a global brand, and the brand is still created in and managed from Seattle with local execution—it’s a delicate balance. And there is, I think, a tendency to want to recreate everything locally. And this was a partner who’s used to working with licensed brands and truly has an ability to partner for success in the market, as opposed to, ‘Thank you for the idea and we’ll execute it here locally. So, in October 1995, Starbucks Japan Ltd. was created. – Export/ Supply Process (Map)

There are different steps in the Supply Process of Coffee to Japan. We can divide it in 4 parts (including how the original bean arrives in Japanese’s stores) . First step: SOURCING: Mainly, the STARBUCKS’ bean is from 3 different locations: Africa: (Kenya and Ethiopia), Asia/ Pacific (Pacific Islands, Indonesia (with its islands Java & Sumatra) and Latin America (Mexico, Columbia, Guatemala). Usually, the person in charge sourcing and finding the best beans is the Vice President, Dave Olsen. (Check the Map) The 3 colors orange, yellow and pink represent the 3 main areas where the beans are coming from.

[pic] [pic] Second step: ROASTING: Starbucks had three roasting plants. – The company’s smallest plant was built in 1989, and it was located in Carson Valley. Its goal is to supply the company’s mail-order business. – There is One in Kent, closed to the head offices (built in 1993), which measures 305. 000 Sq. . . . Its goal is to supply stores west of Mississippi. – The last plan built is the one located in York (Pennsylvania) (year: 1994). Its goal is to supply stores east of the Mississippi. (According to the website, the cost of its construction is around $11 million.

How looks like the roasting process? According to the firm, the roasting of the coffee beans is a utterly and particular process. . First, they roast the beans in a powerful oven with gas for approximately 15 min. For your information, Starbucks requires zero defects in grade, good even color, and consistent bean size. So, experienced employees will be chosen to execute the smelling and hearing in order to choose the perfect coffee beans. Third Step: EXPORT & Fourth Step RETAIL: After the Roasting process completed, they can export its coffee to targeted countries.

In our case, STARBUCKS will send the beans to Japan, and more precisely to its Local Japanese partner named: Sazaby Inc. (for additional information, check the sub part: How STARBUCKS entered in Japan? ). After having received all the merchandise, Sazaby Inc will be able to dispatch to all the Starbucks coffee shop/stores located in Japan. – 5 Porter’s Forces Bargaining Power of buyers: 3/5 The bargaining power of buyers is average. On one hand, even though coffee is not a very differentiated product, Starbucks has succeed into differentiating its offering with type of beverages no one can find elsewhere.

Plus, the “coziness” of the shops makes it a place like no other. On the other hand, a coffee from Starbucks is more expensive than in other place which means that the switching costs are important and they can impact the purchase decision of the consumers. Even though Japanese people value quality, they also became price conscious with the crisis. The purchasing decision is high, In fact consumers have the power to choose between low cost or high quality which will force vendors to choose a strong strategy. According to Starbucks, the typical customer buys small quantities of their products.

Products purchased at Starbucks are highly differentiated and unique. There is an enormous selection of coffees at a Starbucks’ coffee shop. At Starbucks. com, it is possible to buy a large number of products, from coffees, ice cream and Frapuccino Bargaining power of suppliers: 1. 5/5 The bargaining power of the suppliers is pretty low due to the size of Starbucks. It is an honor to be chosen as a coffee supplier for Starbucks. Moreover, a lot of suppliers are very small and Starbucks accounts for a large percentage in their sales. Consequently, Starbucks is able to dictate the prices on the market.

Finally, Starbucks has engaged a vertical integration, which means that the company has taken a stake in its suppliers Nevertheless the fluctuation in prices of coffee beans can be a threat. For example, Arabica Coffee Prices soared of 77% in 2010. Threat of substitute products: 4/5 The substitutes for coffee are tea, juice and soft drinks. Starbucks is actually selling most of them: coffee but also tea, hot chocolate, smoothies, etc… Even if you don’t like coffee you can still go to Starbucks. Concerning the food, Starbucks sells pastry and sandwiches. Those products can be found easily everywhere else.

But the company sells food you can only find at Starbucks and makes it like no one else does. This means that a customer would probably go to Starbucks on purpose just so he can find his favorite cake. We can also note the places that offer people comfortable atmosphere to hang out such as tea houses, bars or side-walk cafes and definitely the vending machine which are located at every corners. Threat of new entrants: 3/5 It is average, due to low barriers entry. It does not cost too much to set up a coffee shop in Japan. Plus, government accepts 100 % ownership in Japan for foreigners.

However the real estate investment remains important (in urban areas) and can be a barrier for new comers. Last but not least, the coffee shop market in Japan is close to saturation. Thus, most of the “good” spots are already occupied by Starbucks’ stores or it competitors. Intensity of the competition: 4/5 The coffee shop market is highly competitive today. Actually, there are major actors such as Starbucks, Doutor or Tully’s and thousands of individual cafes. The Market Coffee is a large industry size. Thus, Starbucks compete with many industries of varying sizes and different exposures to specialty coffee.

Starbucks is obviously the leading retailer and brand of specialty coffee in the world and but might be lost some share because of local competitors such as Doutor . In addition to these smaller scale specialty coffee companies, Starbucks must now compete against two of the largest companies in the fast food industry who have recently entered the specialty coffee segment ( Mc donalds and Tullies Coffee). Average: 3. 1/5 Starbucks have a very strong position and a wide product range but the industry is moderately attractive due to a strong competition. – Brand Pyramid

Definitely, we put STARBUCKS at the top of the pyramid, in Consumer Brand Resonance. The STARBUCKS footprint is important in the world and in the Japan. For some customers, the firm is a small part of their daily life. It’s common to see employee taking a STARBUCKS coffee before to get their job. Thus, the behavioral loyalty from STARBUCKS consumers is STRONG due to the frequency and the repetitive purchases. But it’s also to choose STARBUCKS when you are looking for a place to take a coffee, and to share moments with friends/ family. People feel comfortable in their stores, and they come to enjoy more than a coffee.

So obviously, there is a high attitudinal attachment form its customers. It can happen to see in Japan some brand’s fans wearing tee shirts with the STARBUCKS’ logo. They love the brand, thus they are proud to show their loyalty. – SWOT Strength – The Starbucks model: vision, goal (“become an enduring, great company with the most recognized and respected brand in the world”) – Starbucks stores tend to be located in high-traffic locations such as malls, busy street corners, and even grocery stores. (urbanization rate 67%) – Respected employer that values its employees: motivated employees and good work environment.

They believe that happy employees are the key to competitiveness and growth. – Leveraging the Brand: Multiple Channels of Distribution. Besides its stand-alone stores, Starbucks has set up cafes and carts in hospitals, banks, office buildings, supermarkets and shopping centers. Other distribution agreements have included office coffee suppliers, hotels, and airlines. – Strategic Japanese Partnership: Suntory – Strong Financial Foundation. Very profitable company: $1. 7 billion net revenues (check date) – Starbucks is the market leader in the coffee Market. – Customer service is excellent.

– High brand equity + High brand awareness. Starbucks is a benchmark in Japan among its competitors. – Company is expanding with speedy pace; – Starbucks making their business more environmental friendly. ‘ – Strong online communication policy (social media) Weaknesses High prices: Pricing are higher as compared to the competitors. – Still Lack of internal focus (Too much focus on Expansion)CEO working on it – High operating cost – The business profits are highly dependent on coffee product. – Numbers of closed stores in different countries during year 2008-2009. (In Japan notably) impact on the brand image – Starbucks have less control over stores in Japan and also less revenues. (partnership? joint venture .. 40/40) Opportunity – High Urbanization rate – Average, high purchasing power rate.

The Japanese government has been liberalizing, as its basic policy, the importation of goods into Japan in recent years – The Japanese consumers are probably one of the most discerning consumers in the world. Having a high expectancy toward products and services, they are willing to pay more if they think the product/service worth it. – Japanese are fans of Western Brands as fancy

Japanese are environmental friendly – Entry barrier in the international market. (against new competitors) – Consumer Trends towards more healthy (Recent survey on the benefit of the caffeine (Polyphenol) (World Trend). – – Threats – Financial crisis. Current recession may impact the sales. – Deflation in Japan. Japanese still waiting the price is decline. – Japan depends heavily on the world market especially about coffee – High price of the real estate. – Competitors are trying to minimize the differentiation by imitating. – its growing ubiquity has not gone unnoticed by anti-globalization activists.

Protest against the company. – Japanese Coffee shop market is really competitive, market nearly saturated. – Language Barrier: most Japanese businessmen speak little English; speaking Japanese is often a key asset in order to avoid misunderstandings. + The law is only written in Japanese. – Japanese law controls the import of goods that can negatively affect Japanese industry, economy, health, hygiene or public safety and moral. – Starbucks is exposed to rises in the cost of coffee and dairy products. – Competition + Mapping There are basically two types of competitors; direct and indirect. We shall

begin with the direct ones (self-service coffee shops and cafe) and will continue with indirect competitors (instant coffee or coffee consumed elsewhere than in coffee shops) 1) Direct competitors : • Doutor Gourmet Coffee shop – Excelsior Cafe: Doutor Coffee Co. , Ltd. is a Japanese company founded by Toriba Hiromichi in 1962 that specializes in coffee roasting and coffee shop franchising. It is the pioneer in self-service coffee shops in Japan. It opened its first store in 1980 and has been continually growing to become the leader on this market today with more than 2900 stores in Japan (compared to 935 for Starbucks Japan).

The arrival of Starbucks in 1995 forced, in a way Doutor to create a new brand, namely Excelsior Cafe which kind of copied the Starbucks formula. • Marketing-mix rundown: o Product: Basically, the range of choice in beverages is quite similar to Starbucks’ products lineup. There are hot and ice beverages (coffee based or not). Regarding the food lineup, Doutor and Excelsior Cafe offer a wide choice of cakes, hotdogs and other salty stuff. Whereas, Starbucks offers only sweets products. This competitor (as Starbucks) is also implementing seasonal foods and beverages.

Aside from that, Doutor/Excelsior Cafe sell packs of fresh coffee (beans) and accessories (mug, machines). o Price: The pricing policy is in average 10% lower than Starbucks’. o Promotion: Doutor and Excelsior Cafe have been operating for many years, especially Doutor and 99% of Japanese know these brands. As a result they don’t really use promotion, except for announcing new seasonal/limited products through their websites or TV spots. It’s mainly a story of word of mouth. Doutor and Excelsior have also a member card that can brings discount after several purchases.

As it is said above, Doutor and Excelsior Cafe have more than 2900 stores in Japan. Those are located in major conurbations (Tokyo, Osaka, Kyoto, Kobe and so on). In these huge cities, you basically find a Doutor coffee shop under every single train station. Thus, they benefit from really good locations, with a lot of circulation. In terms of interior, Doutor has a stylish yet casual atmosphere while Excelsior Cafe has an Italian bar layout with smoking and non smoking area. Both offer free wireless Internet connection. Others information: Doutor Coffee shop has not really precise target.

It has a more casual image than Starbucks and basically everyone go in a Doutor Coffee because they are everywhere. Excelsior Cafe is the Doutor’s better-lit version of Starbucks. Thus, it targets younger people. Last but not least, you can buy alcohol (mainly beers) in these coffee shops which is really a “Japanese thing”. • Tully’s Coffee: Tully’s Coffee is a U. S company based, created in 1992. Tully’s Coffee Japan started in 1999 as a joint partnership with the master license rights being purchased by Tully’s Coffee Japan in 2005. The brand in Japan grew by way of the single-unit franchise method.

Tully’s Coffee Japan is now roasting six types of coffee beans in Japan with the help of UCC Ueshima Coffee. The company thus becomes the first major coffee house affiliated with a non-Japanese company to roast its own beans. It has currently 400 stores in Japan. The marketing mix is basically similar to Starbucks or Doutor. Price are 5-10% lower than Starbucks’. It offers well-designed spaces (housed with soft seating areas to smoking sections), to relaxing or hip funky music playing at the right volume in the background, to a stack of magazines to read, to free Wi-Fi.

The stores are designed with the comfort of the customers in mind. To match the Japanese spirit and its love for the more indigenous beverages, the ever-expanding menu includes seasonal festive drinks and food. Tully’s has also a member card that can bring discount after several purchases. • Caffe VELOCE: It is a Japanese coffee shop set up in 1986. Today, it has 250 stores in Japan. They have a variety of sandwiches and also beverages other than coffee. The atmosphere of Veloce has a bit of an American and European feel and is very spacious.

Interior decoration is simple and modest, not too much decoration. And there are usually large windows which you can sit at and watch the world go by outside. It has free Wifi. And the cost is very cheap, too. Veloce is the cheapest of these reviewed coffee shops and has great quality (15% cheaper than Starbucks). Coffee is fresh but simple here. There are no fancy things like in Starbucks but everything you buy here ought to be fresh. It is as Starbucks a non-smoking place. Veloce is seriously competing with Starbucks in quality. And Veloce is the cheapest of the coffee shops.

The target of Caffe Veloce seems to be (relatively) the salary men and people who just want a good coffee or other beverages with a sandwich, without fancy stuff. • McCafe: McDonald’s Japan launched its McCafe Shop in 2008 which feature a broad lineup of specialty coffee drinks. Additionally, the burger chain recently introduced a better quality brew called Premium Roast at its regular restaurants for just 100 yen per cup. Although McCafe is still targeting kids, families and younger customers, they hope the new stores succeed in reaching out the older generation, primarily through healthier soup and sandwich.

By installing a McCafe next to a McDonald’s, they intend to increase the sales of the hamburger stores. Some McCafes are in the same complex as a McDonald’s. Since McDonald’s has already ~3900 regular McDonald’s stores in Japan, they can increase the number of McCafe very quickly. With good quality low price coffee, McCafe is a real competitor for Starbucks and the other coffee shops. • The mom-and-pop cafe: Estimated at 65,000, these cafe or “Kissaten” have been here since the 50’s. These are independent non-branded coffee shops with a highly targeted customer base.

Typically, the clientele is made up by a rather elderly segment of the population, and due to a sense of exclusivity prices have been and continue to be the most expensive in the market. They are relatively formal sit-in places. Customers are served in a traditional restaurant-style manner and the average stay is around 30 minutes. A cup of coffee usually costs around 600 yen, typically even more. Since the 80’s there has been a staggering decrease of these Cafe. Although the food and the coffee have a better quality, these cafe cannot really compete with group such as Starbucks or Doutor Coffee.

On the at-home fresh coffee market: At first glance, we could think that every coffee (or others beverages) that is not bought/drank in a coffee shop is an indirect competitors for Starbucks. But, actually, Starbucks do sell fresh coffee bags through its stores and website. However, its market share in the at-home fresh coffee is less than 1%. This coffee “sub-market” is quite fragmented. The leader in terms of market share is the Japanese coffee roaster/retailer UCC Ueshima with 15% of market share in volume and 12% in value.

On the Instant coffee market: Since 2010, Starbucks Japan has entered the instant coffee market with its ‘VIA Coffee Essence”. The market is oligopolistic for only 2 companies account for 90% of the market share. The leader, Nestle Japan has 60% market share in volume and it climbs over 69% in value. Its challenger is Ajinomoto General Foods with 31% in volume and 22% in value. At the present, we did not find data concerning the market share Starbucks’ VIA could have gained against these competitors. • On the Ready to Drink (RTD) coffee market:

Starbucks Japan has a licensing agreement for the manufacturing, distribution and marketing of Starbucks-branded coffee RTD beverages in Japan, offering Starbucks Discoveries chilled cup coffees and Starbucks Doubleshot espresso drinks to Japanese consumers in convenience stores. However, its market share is also insignificant.

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