Starbucks Online Coffeehouse
Name
Institution
As the economy continues to be tight, while E-commerce is advancing, most business globalization of customer base as a remedy to meet primary financial obligations. Being one of such organization, Starbucks online Coffee shop is anticipating the full implementation of already undergoing global connectivity. The process of globalizing a business comes with several challenges. Some of these challenges include high capital costs in setting up business structures, technological barriers, and hiring new staff. Being the world’s largest coffeehouse chain, Starbucks Corporation, has done well in terms of internationalization. However, there is still a potential market at the international level that Starbucks may tap and achieve more. There is a need to expand the service line of the corporation to enhance the global reach of Starbucks. The presentation will substantiate the expansion of services, the use of technology, techniques to reach the worldwide market, and the return on investment.
With over 20,000 branches worldwide, Starbucks seems to be at the optimal level in the international market. However, this is not exactly the case since some continents like Africa are under little exploitation. Opening coffee houses in new countries may prove expensive and risky. Besides, the choice of entry mode is a critical decision (S. Sotillo, 2008). To internationalize the business further at lower costs, I propose expanding the service line to incorporate online coffeehouses. The main target is interested customers who are unable to access Starbucks coffeehouses mainly due to the absence of the coffeehouses in their locations. Through this service, people who are unable to access Starbuck coffeehouses physically can order products online and have the products sent to them. The products sent to online customers are not the end product similar to products in the physical coffeehouse because of its nature. Online customers will receive ingredients and recipes from Starbucks, and this will give customers a Starbucks experience from wherever they are. The main aim is to create more customer occasions. The Forbes magazine notes in 2016, increasing customer occasions increases the profitability of Starbucks.
Technology plays a vital role in making this service possible. Technological platforms will form the basis of this service. The online coffeehouses will be accessible to customers through the corporation’s website. A mobile application will also be in use to avail of the online coffeehouses to customers. Payments for this service will also happen on online payment platforms. All orders, information exchange, and transactions will occur online; thus, the service is technologically receptive.
The service will also feature shipping services as the form of delivery of the products. Customers will make orders online, which will include the customers’ location or where they would like to receive them. Delivery of the products will then be through air or sea services. The shipping services are capable of reaching the international market at relatively lower costs than having physical coffeehouses set up in the respective countries. The choice of shipping service will depend on customer needs and the urgency of delivery. The price will also vary between the two forms of shipping, and the decision will be on the customer.
The expansion of the service line by establishing online coffeehouses requires a capital injection of $2,000,000 over three years. The amount this service asks for will facilitate the establishment and initial running of the online coffeehouses. Firstly, the amount will cover the costs to set up the technology. Since the website is already in existence, only upgrading will be done to include the new service. The main expense in setting up technology will be during the mobile application upgrade to avail the online coffee house to customers. The total cost of technology will be approximately $600,000. The other expense will be on advertising. The price will cover all forms of adverts- videos and print media. A great advertisement is essential to create awareness all over. The advertising cost is $200,000. The balance, which totals to $1,200,000, will handle operating costs. Initial costs like shipping services will be expensive at the start, and having a source to finance the expenses is essential. According to my financial projections, in the first year, the new service will generate $80,000. In the second year, customers will order more products and consequently increase the number of products. The bulk under shipping will rise, and as this increases, the cost of shipping will reduce, thereby doubling the profits to $160,000. The third-year will also see numbers increase and profit tripling to $480,000. Total gain during the three years adds up to $720,000. Therefore the rate of return of this investment is around 36%.
The expansion of Starbucks’ service line through online coffeehouses is key to attaining higher global reach. By embracing technology and the use of shipping services, interested customers who cannot access the coffeehouses can acquire ingredients and recipes from Starbucks and feel the Starbucks experience from wherever they are in the world. The investment requires $2,000,000 for three years. The rate of return of this investment is approximately 36% indicating that the investment is viable.
References
Santamaria Sotillo (2008). “Entry Modes of Starbucks.” Akademin för hållbar samhälls- och teknikutveckling. Page 1. Retrieved from http://urn.kb.se/resolve?urn=urn:nbn:se:mdh:diva-857
Trefis Team (2016). “Let’s Look at Starbucks’ Growth Strategy.” Forbes Magazine, Retrieved from https://www.forbes.com/sites/greatspeculations/2016/09/19/lets-look-at-starbucks-growth-strategy/#455819d33d71