Waiting for April to come...@ Helsinki-Vantaa airport
In the meanwhile...@ Antwerp
Hazelnut Hot Chocolate..mmm...
If this Starbucks cafe was in Finland, my name would be spelled correctly (Kosti)
To kick off my great plan, I will start by describing why Finland is such an attractive market for Starbucks.
Starbucks serves coffee. As it happens, we Finns like to drink coffee – a lot. There you go! It’s a match made in heaven.
Despite that you’re probably jumping out of excitement at the moment, I’m guessing you need more proof than that so here you go: In 2010 the average Finn consumed 10 kg of coffee (1) ( ; that is, 4-5 cups per day. (That means, one Latte to kickstart the morning, a Macchiato for lunch, a Frappucino for dessert and a nice espresso after dinner. Can you already see the dollar signs blinking in front of your eyes?)
Finns were also listed as the top coffee drinking nation in Bloomber Businessweek in 2010: The top 50 coffee countries. (2)
One could say that we Finns are world champions in coffee drinking.
In comparison, according to Harvard School of Public Health, Americans drink 3.1 cups of coffee per day on average.(3)
There are, Starbucks stores in US. In Finland, the number is 0. Now look again at the coffee consumption statistics. Are you getting my point?
Okay, let’s get serious for a while.
Besides Finns’ coffee addiction, there are many other factors that make Finland such a great place for doing business. We may be a small country in terms of population (5.3 million) but we are a rather affluent country: in 2010 our GPD per capita was $ 44,489 which is slightly lower than in US but higher than in UK for example. Our GDP has been rising steadily with other advanced economies excluding a couple of hiccups such as the depression in the beginning of the 90’s and the financial crisis.
According to World Economic Forum’s 2011-2012 Global competitiveness report Finland is the 4th most competitive country in the world, beating the US by one rank. What makes Finland so competitive and more importantly, why is Finland a great place for a company like Starbucks?
First of all, Finland has a stable macroeconomic environment. Sure the financial crisis has left its marks in government debt and budget balance but the country credit rating is still high (92,5/100). Businesses also appreciate the reliable legal and political institutions and highly protected property rights.
Secondly, importing to Finland is child’s play. Being an EU country, Finland has low barriers to trade. As a port city, Helsinki is an attractive location for Starbucks when considering the importing of coffee. Besides ports, the quality of railroads and overall infrastructure is high in Finland. Customs procedures are highly efficient which saves time and money.
Finland is known for its educated workforce and the quality of primary education in Finland is considered best in the world. What about potential customers? Finns are sophisticated buyers that are used to good service and being attended to by businesses which is good news for a coffee shop that wants to offer an experience for its customers with higher than average prices (yes, I’m talking about Starbucks). Consumers particularly in Helsinki are trend wise and the city itself is becoming more international. New international brands are welcomed with open arms and Starbucks is likely to be no exception.
However, with qualified workforce comes restrictive labor conditions and high wages. Hiring and firing practices are more regulated than in the US and wages are set as a result of a centralized bargaining process, not freely by individual companies. Tax rates are also high, however, the total tax rate is still lower than in the US (44,6% < 46,8%). (4)
Sources:
1. http://www.kahvi.net/index.php?k=110973
2. http://www.businessweek.com/magazine/content/10_19/b4177074227389.htm
3. http://www.hsph.harvard.edu/multimedia/flash/2010/coffee/facts.html
4. http://reports.weforum.org/global-competitiveness-2011-2012/ “
I like very much the style that you have taken in this blog, you write in an entertaining way for the reader and make it very easy for the reader to keep interested in what you are saying. In addition, it is extremely good (and quite necessary) that you also incorporate factual and theoretical information in blog as well to which you base your opinions.
VastaaPoistaOne thing that I might suggest you could add to your blog is maybe a little more information about how much Finns actually consume coffee in coffee shops. It is very true that Finns are eager coffee drinkers (myself included ;D) but much of the coffee consumption happens at home or in the office. What about coffee consumption in coffee shops? :) Based on my intuition and experience there would be probably much demand for Starbucks in the Helsinki region but what about else where in Finland?
Looking forward to reading your next post :)
I can just agree about the style of the blog - it is a very nice summary on the sources you have been analyzing. What I wonder about is how you might get insights on how Starbucks might find the way to the heart of Finnish consumers? Can we look inside of the behavioral differences?
PoistaThank you for your comments Isa and Maria!
PoistaIsa, your question about the coffee consumption in cafés is a really good and relevant one. Unfortunately I was only able to find statistics on coffee consumption in general, not where or by whom the coffee is consumed. I can only share your perception that most coffee is still consumed at home or work. However, I do believe that cafés are becoming more popular places to spend time especially among young people. Nevertheless, I don´t believe that the amount of money spend in cafés is high nor that the people who do like to go to cafés would go there on a daily basis.
I agree with you that Helsinki would be the primary target for Starbucks, but we also identified other cities as possible locations, such as Turku and Tampere which are rather big cities with many students. Of course these suggestions are only based on our own intuition since we haven´t found statistics on coffee consumption in different regions.
Maria, regarding your question, as our final conclusion was to recommend Starbucks to use a standardized strategy, our recommendation didn´t include many alterations to their business model. However, we did recommend them to introduce some localized products so that Finns would feel more at home in Starbucks’ stores, especially since our survey also revealed that Starbucks’ American image was perceived as negative. The products we suggested for Starbucks were rye bread sandwiches and cinnamon buns, which are common in Finland to have with coffee especially.
Wow, we Finns do consume a lot of coffee. And according to your analysis there's many factors that support why Finland is a good country to expand to.
VastaaPoistaI would also be interested to see if you can find data on how much Finns actually consume coffee at coffee shops. How frequently they visit them and what is the average amount of consumption? I have the impression that in Finland we don't have such a strong "café culture", i.e. we don't go and sit in coffee shops that much. However, I do believe that there would be interest in a chain like Starbucks (at least when I think about my network of friends). Maybe a good idea would be to do a consumer survey for Finnish consumers, where you could ask about these things and if there is a interest for Starbucks and why? Maybe that way you could also see who the potential customers for Starbucks could be.
In addition, do you have an outline of your project plan? Would be interested to see how you have planned to move forward.
Thank you for your comment Jenni!
PoistaAs I mentioned above, unfortunately I was unable to find statistics on coffee consumption in cafés, even though it would´ve have been a really interesting and useful piece of information for our project.
And as you already know, we did a small consumer survey, the results of which you can read in our blog
Outline would indeed have been a good idea but we thought that since our blog strategy was a bit different (writing from the viewpoint of “Kosti”), we wouldn´t add project updates such as an outline to make the blog sound more casual and “real”. I hope that you still managed to follow our blog without getting too confused!
Hi,
VastaaPoistaI'm Karoliina and I, too, will be your consultant for this project. Seems like you are at a good start! Have you however considered inserting an outline to make sure that we can follow your line of thought?
During the fall our International Business class "Internationalization of the Firm" read a case study on Starbucks. Just in case none of you were on that course, I will post here the link of the case study which is still available as a pdf in Noppa so you can all access it (I hope): https://noppa.aalto.fi/noppa/kurssi/26e00400/cases
The case study has loads of information on the internationalization of Starbucks over the years. The study also discusses why Starbucks had to close down several of its stores in a number of countries. How do you think Starbucks should tackle some of the issues it has faced before?
From the case study, I remember that the fluctuating price of coffee beans was a significant issue. How big a role do you think this will have on profitability in Finland?
Hi Karoliina and thank you for your comment!
PoistaAs I responded to Jenni´s comment; an outline would have been good for you to follow the blog, but we thought that since our blog strategy was a bit different (writing from the viewpoint of “Kosti”), we wouldn´t add project updates such as an outline to make the blog sound more casual and “real”. I hope that you still managed to follow our blog without getting too confused!
My impression of why Starbucks had to close some stores (in addition to the financial crisis) was that they had too many stores in one area and the brand became too common. How they should deal with this in Finland is that they shouldn´t open many stores in a short time frame and all in all they should try to keep the number of stores in maximum 4-5 in the Helsinki (center) for example. Since Starbucks’ brand will probably attract most of the consumers, it should not become too common by spreading the stores all over like it does in New York e.g., but stay as a more special place not found in every corner.
Regarding the fluctuating coffee beans prices, I don´t believe it would be a lesser or bigger issue for Starbucks in Finland than it is in any other country.