maanantai 20. helmikuuta 2012

Why has Starbucks not penetrated the Finnish market yet?


The reason why Starbucks hasn’t entered the Finnish market is still a mystery to me. By annual consumption of coffee, as of 2008, Finland is the biggest consumer with 12 kg per person. Norway as the second biggest consumer with 9,9kg doesn’t even give the Finns a good run for their money!
An excellent tool to get a deeper understanding of Starbucks is SWOT analysis. In this case the SWOT-analysis focuses on the export policy towards Finland. In order to get a coherent picture I decided to divide the SWOT into internal (SW) and external analysis (OT). The internal analysis focuses on the internal factors that characterize Starbucks; its purpose is to attain insight in the success-increasing and the value-decreasing factors in the organization. The external analysis, on the other hand, focuses on the factors which can have an influence on the success of Starbucks entering Finland.

Strengths
  • Starbucks has no hierarchical organizational structure or formal organizational chart. The company believes that its employees are one of the most important assets and in Starbucks’ company language an employee is called a partner.
  • Starbucks’ products have an image of high quality. Starbucks itself is worldwide recognized and has a trendy image; it’s considered even popular to visit Starbucks.
  • Starbucks’ strong financial position is a proof that they are capable of entering new markets although they already have enormous number of locations worldwide.
  • The organization has strong ethical values and an ethical mission statement that 'Starbucks is committed to a role of environmental leadership in all facets of our business.'
  • Starbucks’ mission to make its stores a third place for people to go besides work and home comes by offering services like free internet and cozy atmosphere.
  • Starbucks is the only coffee chain with their own logistics chains for guaranteeing freshness an quality of coffee
Weaknesses:
  • Starbucks’ products have relatively high prices.
  • Due to the extension of the product portfolio, the company has got further away from its initial core-concept, and it is sometimes described as the “McDonald’s of coffee”.
  • Starbucks is pretty inflexible with their pricing. For example, they have the same price for their products whether you’re in LA or Beijing.
  • Their business isn’t as well established internationally as for example McDonalds.
  • In general, Starbucks has kept their business plan pretty centralized and they try to keep their branches as untailored as possible in different locations.
Opportunities:
  • Finns are, in general, high educated and internationally-minded.
  • There is pretty high economic level in Finland.
  • Finland has a tremendous coffee culture. Furthermore, Starbucks opportunity is in the coffee shop culture which is still in its infancy
  • Finland offers convenient and efficient distribution possibilities: potential consumers of Starbucks are to be found in the large cities which are almost all located in the South.
  • Starbucks has good opportunities to improve their market share and get more visibility by further expanding their portfolio of products, such as bottled Frappucinos and other specialty goods, in Finnish grocery stores.                                 
Threats:
  • Existing Finnish brands and competitors in the coffee business (even McDonald’s is now offering quality coffee).
  • If Starbucks decides to stay only in the airport they won’t get high visibility locations to attract Finnish customers.
  • Being a major worldwide corporation Starbucks is subject to many critical opinions from different corners of society: criticism against the “evil” corporate character of Starbucks and Starbucks leaving small coffee store-owners no choice but to give in and close their stores.
  • Starbucks may lack knowledge of the Finnish market.

So as you can see Starbucks has some weaknesses as a company and there are some threats when considering entry to the Finnish market. However, these are not insuperable problems and in my next post I will try to convince you how Starbucks can turn these weaknesses and threats into opportunities in the Finnish market.

Sources:
Finnish coffee: preserving a Scandinavian tradition. Retrieved on Feb 3, 2012, http://www.luxner.com/cgi-bin/view_article.cgi?articleID=59Finnish people and lifestyle. Retrieved on Feb 3, 2012:
http://www.squidoo.com/finish-people-and-life-style
Helsinki Times, Finns love affair with coffee continues despite rising prices. Retrieved on Feb 3, 2012: http://www.helsinkitimes.fi/htimes/eat-and-drink/16241-finns-love-affair-with-coffee-continues-despite-rising-prices.htmlShaun Weston, Starbucks premium iced coffee now available in Finland. Retrieved on Feb 3, 2012:
http://www.foodbev.com/news/starbucks-premium-iced-coffee-now-availa
Starbucks, monoculture, and American Imperialism. Retrieved on Feb 3, 2012: http://www.everything2.com/index.pl?node_id=1535254
 Starbucks Website. Business ethichs and compliance. Retrieved on Feb 3, 2012: http://assets.starbucks.com/assets/sobc-english-2011-09-01.pdf
 Starbucks Website. Our Company. Retrieved on Feb 3, 2012:
 Wikipedia, List of countries by coffee consumption per capita. Retrieved on Feb 3, 2012: http://en.wikipedia.org/wiki/List_of_countries_by_coffee_consumption_per_capita

 

4 kommenttia:

  1. Good points! A nice SWOT analysis always provides great insights :) So did you find out why Starbucks hasn't expanded to Finland earlier despite the fact that we are the World's biggest coffee consumers? I remember reading many newspaper articles last spring when Starbucks introduced their coffee drinks in supermarkets stating that the company is not going to open any coffee shops in Finland. A year later a coffee shop has been opened :) Do you know why they suddenly decided to enter the Finnish market?

    VastaaPoista
  2. Thanks, the SWOT analysis is very clear.
    The topic is "Why has Starbucks not penetrated the Finnish market yet?" and I was hoping to actually hear the answer to that question. I know, maybe I was being too optimistic, I guess no one knows the answer to that question (expect Starbucks themselves?) :)

    Do you have any info on Starbucks' "normal" market entry strategies? Is it normal that they first open a store at the airport and then expand from there? Or is Finland just a exception?

    VastaaPoista
  3. A nice and clear SWOT analysis! I was also hoping to see some kind of a conclusion or analysis on why they havent come to Finland yet. Otherwise, the swot was conducted nicely and has many valid points.

    VastaaPoista
  4. Thank you all for your comments! You all have a good point that I should definitely have added a comment/conclusion why I think Starbucks hasn’t actually penetrated the Finnish market. But here are some answers.

    Isa, I think that the fact why Starbucks hasn’t penetrated the Finnish market yet is the fact that Finland is a rather small country (population-wise) and there is also already high existing competition. I also found a blog post arguing that there might be a ”gentleman’s agreement” with Paulig meaning that Starbucks doesn't want to undermine Paulig's current market share and the other way around. The argument was pretty interesting but at the same time the writer was just guessing as he either couldn't understand why Starbucks hasn't penetrated the market yet.

    JenniV, the Finnish market is a rather small one and there is high competition already. Starbucks has penetrated other Nordic countries with the same strategy which is by first opening stores to the airports. This has been very successful for them and that’s why they have decided to use it in the rather unfamiliar Nordic markets.

    Jonna, thanks for your comment!

    VastaaPoista