Starbucks Corporation is an international coffee and coffeehouse chain based in Seattle, Washington Starbucks was founded in Pike Place Market in Seattle, Washington (March 30, 1971 (1971-03-30)) by Jerry Baldwin, Gordon Bowker and Zev Siegl Starbucks has more than 17,000 stores in over the world ( following the information in 2010) including over 11,000 in the United States, over 1,000 in Canada, and over 700 in the United Kingdom Follow the the information of BusinessWeek. com. in 2010. The Brand Value of Starbucks is 3339 million U. S Dollar. Rank 97 in over the world http://www. nterbrand. com/en/best-global-brands/best-global-brands-2008/best-global-brands-2010. aspx Employees 137,000 (2010) Website Starbucks. com Currently Starbucks is present in more than 55 countries But until 2011, Starbucks still have not come to VN. Our group think that Starbucks should come to VN through franchising method Why choose Viet Nam 1/ A suitable model of development: In recent years, Vietnam has favorable conditions for business activity * GDP growth averaging over 8% * The economic situation is stable * The purchasing power is rated highly in the world
VietNam became officially the 150th member of WTO. It opens up a lot of opportunities for not only VN’s entrepreneurs but also other countries’ ones 2/ Policies from VN government VN government encourage investments VN Laws allowed foreign enterprise operate comfortably in VN which it didn’t occur in the past 3/ Others Vietnam population is 82 million, among whom 2/3 are young people In Viet Nam, people spend 70% their income for consuming, especially in food ( Follow the data from The General Statistics Office) Why choose franchising What is franchising? > Starbucks chooses Franchising as its international entry strategy. A franchise is a business arrangement where the developer/owner (the franchiser) of a business concept grants others (the franchisees) the licensed right to own and operate a businesses based on the franchiser’s business concept, using its trademark. For complete franchising model, the franchisor share and transfer of at least four types of “products” include: * Systems ( Strategies, model, management process, marketing support … ) * Trade or business secrets * Right to operate under the Starbucks brand * Products and services
Franchising in Viet Nam With Vietnam’s entry into the WTO, it is expected that franchising activity in the country will increase markedly over the next few years. There are presently a handful of major franchises operating in the country, including Kentucky Fried Chicken, Lotteria, Jollibee, Pho 24, Gloria Jean’s Coffees, Buntamita and Cartridge World. In the past, Vietnamese law did not provide a clear basis for franchising arrangements, groundwork for franchising to develop in Vietnam. Reasons which Starbucks should choose franchisng
In fact, with the economy situation in VN, franchising brings a lot of advantages to both franchisor and franchisees Franchisor * Franchising reduces the risk of investment into a new market for Starbucks. * Starbucks don’t need to have a huge capital. Capital is always one of the biggest problems of any company. But with franchising system, the franchisors don’t need to worry about it because franchisees have to use the capital of them to expand business, not franchiser. * Franchising help Starbucks access the new market quickly and make rapid expansion over broad area.
In Vietnam market, especially coffee market, you have to find the way to develop and grow continuously to compete with others. No development means that going back. It’s lucky that franchising system can help you expand, develop your business quickly. * Promote the brand promotion strongly. With the expansion quickly of franchising system, it also helps Starbucks to advertise Starbucks’s image widely when hundreds of Starbucks’s stores appear everywhere. Beside that, the advertising cost will be shared for all stores, so Starbucks don’t have to spend much money o launch their huge advertising campaigns * Maximize income. In franchising system, franchisor can earn a lot of money from franchisees; from copyright cost, the cost for the right to operate under Starbucks’s brand, the profit of franchisees to raw materials which franchisees have to buy directly from Starbucks * Most importantly, franchisees are motivated operators to do a good job. Franchisees have to use the capital of them to operate business. So, it will be a great motivation for them to work well Franchisees * Franchising primary benefit is risk minimization.
Starting a new business is risky. Most studies show that over 90 percent fail within three years. The primary reason that the failure rate is so high is because the owners have to do many things. They have to have a plan to introduce their new products or service, beside that they have to do operating plan, marketing plan … to achieve their goal. All of them contain many risks. And the retailer often don’t have a lot of experiences when they start a new business, they have to spend a lot of time to learn characteristic elements of each industry.
Franchising reduces risk for these things. When you join a franchising system, franchisee will be trained, taught from experiences to successful secrets which franchisor has to spend a lot of time to know. * Another benefits of franchising is the franchisee don’t have to go through beginning step when you have to do a lot of things, and spend a lot of money to survive, to build an image in consumer mind. * The next benefit, the well known brand names of franchisers are another reason of franchising to franchisees. Nowadays, there’re a lot of same products in different brands in market.
Therefore, building a famous brand which everyone know and trust is a key to survive and success with any business. With franchising system, franchisee is allowed to succeed a brand which have a stable position in market, it is really a big advantage for retailer * Maximize manpower: the franchisee only have to focus on business operations. The rest like strategies, marketing process… will be built and transferred to franchisee by franchisor * Easy to borrow money from banks: Because franchise system was proven to be the safest business system.
Therefore, it is easier for franchisees to ask money from banks Objectives Short-term: Assert brand of Starbucks coffee in HCM city area. Try to lead Starbucks to become a familiar brand in customer mind Long-term: Create a unique coffee culture of Starbucks in VN. Lead Starbuck brand become a standard for coffee in Vietnam Target market and location Target market Based on our franchising strategy, our objectives in long term and short term, Starbucks will target consumers between the age of 18-50, with a specific concentration on officers and businessman. Demographic Age: 18-50
Gender: Male and Female Income: Average to high income Occupation: Businessman, officers, students, intelligentsia Psychographic: Life Style: For those who have deep experience about coffee People who want to choose for themselves some products that have brand name that show their levels. For people who value quality and service above money People who want to enjoy Starbucks coffee’s culture Location Follow our objectives in short term and long term. Starbucks’s stores have to occur densely in Ho Chi Minh City, especially in: Main streets and main districts where have high living
Plazas and buildings Big universities, especially international universities through Starbucks’s stalls (Most of them serve take-away coffee only) Analyze Environment in VietNam Social and Cultural Environment General View On the basis of study and observation of the rapid development of Vietnamese societal life in recent decades, this text tries to suggest a global view on the cultural environment in Vietnam – the country which is still poor, but which nonetheless has got rather high indexes of life expectancy and education. Cultural environment in Vietnam nowadays is fine, fair, and healthy.
However, the cultural environment in Vietnam is now unprecedentedly rich, complicated, and fraught with plenty of implicit problems. Vietnam has three main advantages: Firstly, a suitable model of development; secondly, political and social stability; and thirdly, a nationwide strong will for progress, with 82 million inhabitants, among whom 2/3 are young people. 3. Business Environment in Vietnam a. Macro Environment in Vietnam Economic Factors Ho Chi Minh City’s per capita income has doubled the figure of the whole country; a recent survey by the HCMC Institute for Development Studies has showed.
The first-ever survey on the income and living standards of HCMC households was conducted in 12 districts, with 720 questionnaires released. The survey revealed Ho Chi Minh City’s per capita income has increased over the past years to US$2,500, compared to the whole country’s $1,200. However, the average income of the rich is seven times higher than that of the poor in Ho Chi Minh City, according to the survey. HCMC is now home to 80,000 poor households, a Wednesday conference co-hosted by the HCMC Institute for Development Studies and the United Nations Development Program (UNDP) was told.
A poor household is defined as having the per capita income of VND12 million ($650). Only 24. 3 percent of Ho Chi Minh City residents feel “satisfied” with their income, according to the survey. Ho Chi Minh City dwellers spend half of their income on food, and 20 percent of their income on education, the survey says. There an average 4. 6 members in a household in HCMC; the number of people of working age makes up around 70 percent of the total population, the survey says. Vietnam defines a person of working age as aged between 18 and 60 for males and 18 to 55 for females.
The southern hub’s unemployment rate is 4. 5 percent, according to the survey. It also says only around half of HCMC households have been living in the city for less than 25 years; meanwhile, the number of migrants within the past 10 years is increasing. The latest census found Ho Chi Minh City to be Vietnam’s most populous city, with more than 7. 1 million people, of which an estimated 625,000 are rural migrant workers. Coffee Environment in Vietnam Coffee production has been a major source of income for Vietnam since the early 20th century.
First introduced by the French in 1857, the Vietnamese coffee industry developed through the plantation system, becoming a major economic force in the country. After an interruption during and immediately following the Vietnam War, production rose once again after D? i m? i economic reforms, reaching 900,000 tons per year in 2000. In 2009, Reuters reported Vietnamese coffee exports at “an estimated 1. 13 million tonnes” for the previous year, stating that coffee was second only to rice in value of agricultural products exported from Vietnam.
Vietnamese (Buon Ma Thu? t region) style coffee has characteristics that distinguish it from other coffees and brewing methods. The growing regions of the Buon Ma Thu? t have been classified into micro-climates by European scientists contracted by private industry. In these different regions, several varieties of coffee are grown, including Arabica, Robusta, Chari (Excelsa), Catimor, and some indigenous varieties of Arabica such as the Arabica SE. Vietnamese coffee producers blend multiple varieties of beans for different flavor characteristics and balance.
Vietnamese coffee brewing in single-cup filters, with a cup of iced coffee at right. Typically the coffee is prepared in single servings in single-cup filter/brewers known as phin. Generally the coffee is served tableside while it is still brewing. The use of sweetened condensed milk rather than fresh milk was first due to its availability and easier storage in a tropical climate. The condensed milk serves to sweeten the coffee as well. Long practice has led to this being the taste preference in the Vietnamese community. Political and Legal Environment
A foreign franchisor is not required to have a legal presence in Vietnam and is permitted to franchise in Vietnam without establishing a business entity in Vietnam. However, to franchising in Vietnam, Vietnamese primary franchisee must also have been in business under the foreign franchisor for one year prior to sub? franchising in Vietnam. A foreign franchisor registers its activities with the Ministry of Industry and Trade (“MOIT”), while a local franchisor registers with the local Department of Industry a franchise agreement, but this requirement may be waived by the Vietnamese franchisee.
The franchise agreement must be in Vietnamese and may be translated into English. Vietnamese’s Cultural profile * High-context cultures * Respect hierarchy, public relationship; authority, experience; formality, class; age; harmony. * Are demonstrative, friendly, aggressive * Open expression and also discouraged. * Respect honor; sentiment; harmony * Are subtle; considerate. Vietnamese’s culture according to Hofstede’s Dimensions * Power distance: HIGH * Uncertainty avoidance: LOW * Individualism: LOW * Masculinity: LOW * Long-term orientation: HIGH Local Government
VN is a developing country. It’s really is a big opportunity for Starbucks because VN Government are trying and encouraging investment from foreign companies. After VN join WTO. VN Laws in the present are also more convince for foreign enterprises than in the past. We know that bribe is a part of Vietnamese culture. Vietnamese often use bribe to make sure that their business will operate smoothly. It totally differs with western culture, and it is also a problem Starbucks have to note. But we believe that Starbucks can solve this problem easily follow some reasons.
When Starbucks comes to Vietnam, we can create a lot of jobs for employee. In addition, Starbucks is a big corporation in over the world; we operate clearly and follow the laws, and we always have good policies to protect environment, employee or consumer. We’re sure that Starbucks comes to Vietnam will bring many benefit for both our company and local Government. Therefore, we hope that Starbucks can give full support from local government Consumers Follow data in 2010, the index of coffee consuming in Vietnam increased 31 percent ( the highest rate in over the world).
Compare with the average coffee consuming in the world (only 2 percent), we can see that coffee market in Vietnam is a gold mine The living situation in HCM city is very high because most of people have average to high income. So, people in HCM city tend to use products or service with a famous brand name. When consumer choose a product or a service, it’s not simple that it’s good for them or they need it, they choose it sometimes because it show your style, it will tell everyone that who they are, especially in Coffee market. Coffee is not a normal beverage; drinking coffee in Vietnam is a culture.
Every coffee shop in HCM City regularly has a unique from quality, service to style. It will be a real challenge for Starbucks in enter Vietnam market, we have to know how and when we need to change to catch up consumer demands In HCM City, consumers tend to choose famous brands. Many of them are willing to pay a lot of money to make sure that the service or product which they chose is the best It will be a great opportunity for Starbucks Coffee because with a famous brand name which was asserted by high quality products and best services in over the world, Starbucks will have many advantages to compete with others.
Employees * Emphasis on participative management, consensus, and duty * Get group orientation * Have understatement and hesitation in verbal and nonverbal communication * Delayed feedback * Be diligent and work hard Suppliers: In the beginning, Starbucks will use directly imported raw materials from Starbucks in Thailand. However, after a period of time, we will use farm in Vietnam to supply materials for us. Of course, the quality of materials will be tested strictly. Vietnam is of the best country to produce coffee. So, there is no reason we don’t use farms in Vietnam to support for us.
We believe that Vietnam has enough potential to support for not only Starbucks in Vietnam but also others Starbucks in Asia area. 5. Human Resources Management a. Staffing Policy for Top Managers of Starbucks Franchisees Store in Ho Chi Minh City International Human Resources Management (HRM) strategy makes an important role when Starbucks has decided to go international, because it ensures that HRM policies are congruent with the firm’s strategy, structure and control. We decide to establish the staffing policy following Polycentric Staffing approach for the first store in District 1, HCMC.
These Local Manager – Host Country Nationals (HCNs) policy is used for selecting people for the Store Manager position not only now but also in the future for reasons as follows: Firstly, it is familiar for the local managers with local environment. However, Social and economic environment in Vietnam are very different from US and other countries that have Starbucks franchise. Using managers from parent company (PCNs) will not suitable to Vietnam situation because of the unfamiliar with foreign environment and communications problems abroad. It will so hard to local employees to understand their boss.
Besides these, PCNs also requires an expensive cost for training and repatriation programs. Therefore, we will both buy the franchisee and become the owners of Starbucks franchisee in Vietnam. We will select store managers who are Vietnamese to manage the store. However, we have to spend a lot of time finding the qualified people. Furthermore, Vietnam employees usually prefer their own citizens in managerial positions. Secondly, using local managers for our stores will be the best choice because it will decrease the cost due to the low pricing in Vietnam.
Local managers also have the goodwill; this trait will create a friendly business and working atmosphere to local suppliers, employees and customers, especially in coffee service. Besides, they have knowledge of local business subtleties that is very useful for the first time operating. Although there are some advantages of using local managers, we also face with some problems such as lack of understanding firm’s culture, conflicting loyalties of the local manager and difficulty of coordinating activities and goals between the subsidiary and parent company.
To solve these challenges, we will ask Starbucks franchiser in America to support us on recruitment, training and communication to select the best people for our stores not only in present but also in the future. * Recruitment: Applicants with high English level skills and experience in coffee service’ management will be selected. * Training: Potential Vietnamese store managers will be trained in international atmosphere in 2 weeks; they will be practiced in other Starbucks’ franchise stores in China or Singapore.
Training course will include company’s culture, methods of operation and some basic management skills. * Communication and Coordination strategy: At the first time of operating in Vietnam, we will conduct the weekly E-meeting between Vietnamese store managers and International department in US headquarter. Problems in operating and customer services, new strategies or investment issues will be discussed. b. Kinds of Leadership At the first time of operating in Vietnam, kind of leadership in Starbucks stores will follow the Bureaucratic leadership style.
They will work exactly the guideline to follow Starbucks’s international policies and procedures in operation and customer services. We choose this style for reasons as follow * Operation in coffee shops requires staff performing routines tasks: Using Bureaucratic leadership style will appropriate and fortunate to line managers and employees’ working. * Need to create the staff’s understanding of certain standards: In the coffee shop services, standards in operating and customers services are very important. At the first time, we need to create certain standards in Starbucks store.
After 1 year operating, Democratic leadership style will be applied. Staff will be a part of decision making in store. The line mangers have the final say, but they need to gather information from staff before making decisions. With this leadership type, we think the store will operate better for reasons as follows * With democratic leadership style, we can avoid the loss of staff’s interest in their jobs. As the result, productivity will increase. * We also provide opportunities for employees to develop a high sense of personal growth and job satisfaction. Furthermore, Vietnamese employees reach low individualism prevails, so they have a strong belief in group decisions. c. Motivation Systems Motivation is a state of mind. High motivation leads to high morale and greater production. A motivated employee gives his best to the organization. He stays loyal and committed to the organization. In general, we will apply broadly seven strategies for motivation. * Positive reinforcement/high expectations: to reinforce the standards and practices you believe your staff members are capable of achieving. Effective discipline and punishment: rewards and punishments should be parallel to motivate employee in jobs. For example, we set a typical target such as selling 1300 cups of standard coffee each month, if employees get over it; they will get rewards such as bonus 5-10%. In contrast, if under target, they will get punishment such as minus 5% on salary. * Treating people fairly: managers usually make the mistakes that treating people unfairly. This is a motivation for employees. They will not be pleasant to dedicate their jobs any more.
And this makes turnover decrease significantly. That is reason why treating people fairly is one of strategies for motivation. * Satisfying employees needs: We will try to satisfy our employees’ needs from physical to psychological needs at acceptant level according to labor contract. * Setting work related goals: Detail working schedule and store’ goals will be established so that employees can understand clearly and work effectively. * Restructuring jobs: We will change the work content of a job so that the employee derives greater satisfaction from it.
It is accomplished either by adding more tasks of similar nature or by transferring tasks from the next level. * Base rewards on job performance: Reward system will totally base on employee’ performance. They will decide their reward. For typical level, my company will divide 2 groups to motivate. * Employees: major motivation from financial rewards because their basic meaning of word is tied to economic necessity (money for food, housing, and so forth) and they are nearly part-time employees. * Managers: motivated by both financial and non-financial rewards because they are people who need more than income.
Besides, they also need achievement, social contacts, status and prestige, etc. In which, financial rewards include basic salary, year-end bonus, profit sharing and mandatory provident fund etc, while non-financial reward covers corporate medical scheme, travel benefits, leaves (including annual leave, sick leave, examine leave, maternity leave, compassionate leave), rental reimbursement, housing and education subsidence for both staff and immediate family. 6. Communication Problems There are some significant differences in the culture between American and
Vienamese that causes “noises” in communication within the franchise relationship. These are some barriers the managers might have to face. a. Language As Starbucks is a franchisor, so the communication among the top managers, supervisors should be in English. Though we are good in English, it’s still hard to avoid the misunderstanding between us – Vietnamese managers and American ones during the discussion and meetings as well as between the American trainers and Vietnamese employees during the trainings for employees.
We understand that Vietnamese employees can have ability to communicate in English; however, this is the second language so they might sometime get lost in slang, expression in English. b. Context As we know that American is a low-context culture while Vietnamese is a high-context culture. Americans prefer to express the feelings and thoughts explicitly in words whereas Vietnamese people tend to make assumptions meaning based on their knowledge.
Therefore, in the stand of Vietnamese, they expect American people to understand the implicit moods subtle gestures and environmental clues that do not show. This situation can happen easily during the meeting with American managers for discussing matters related to the franchising and contract. Moreover, we can foresee problems for us if we attend in a regional meeting for Asian managers of Starbucks franchisees there with the attendance of the American franchiser.
It’s easy to get the misinterpretation and misunderstanding for American mangers because they are not used to guessing the implication. In the stand of American managers, they would find that Vietnamese are talkative, obvious and redundant those are not very fit with the American style. c. Communication Channels Once again the context also affect to the information flow. In the Vietnamese organization the information spreads rapidly and freely due to the close contact between people so the information flow through tend to be informal.
As the style of American, they control the information and keep it in formal transfer. American people expect to give and receive information quickly and clearly, moving through details and stages in a liner fashion to the conclusion. As the result, we – the Vietnamese managers – have to adapt that style in communication as well as reporting to the American managers. d. Our Solutions To success in the relationship between franchisor and franchisee in this case, both sides have to adjust their own styles and research more about the cultures of each others. For the franchisor, do careful research about Vietnamese people and culture; pay more attention to take care people. For us – the Vietnamese franchisee, we have to sharpen our communication skills in English of us and our employees as well as get to know the American style in working, try to adjust and adopt that style. * Build trust in the relationship. Once there is a trust between franchisor and franchisee, the implicit understanding will be raised, as the result, it’s faster and easier to communicate. * Adopting sophisticated intranets to help meet the communication needs.
An intranet can provide an effective, fast and transparent communication channel for franchisors to communicate direct with franchisees, and for franchisees to communicate direct with the franchisor and each other * Make sure whatever the communication policies and procedures in place, they actually work for all parties involved. All the information transferred must be precise and on time. 7. Uncontrollable Risks for Subway Franchisee in Vietnam a. Price Wars Price wars are unavoidable thing. Competitors will set appropriate price to compete with my coffee shop. Solutions Set reasonable price but will get the profit. * Not usually increase the price. * Not set low price in our promotion because consumers will doubt of the coffee quality. b. New Competitors Competitors that appear in market later are new competitors. They may have many new business strategies in promotion, advertising, price to attract the consumers. Solutions * Use the suitable strategies promotion such as special day or vouchers to reach the potential customers. * Not put the price too higher than other competitors * Release membership card for loyal customers. c. Economy
Economic risk is the likelihood that events, including economic mismanagement, will cause drastic changes in a country’s business environment that would adversely affect profits and other goals of a particular business enterprise. This is possible that an economic downturn will negatively impact an investment. Solutions * Choose the appropriate time to open more branches. * Get knowledge about economy to know how to avoid the related problems. * Have to predict the economic growth to give the right ways of investment. d. Changes in Consumer Tastes Consumer tastes always change.
If we are unable to predict or respond to changes in these trends and tastes in a timely manner, we may lose sales and have to sell excess inventory at reduced prices. This could lower our sales and earnings. Solutions * Have a diverse and attractive menu. * Try to understand the trends of customer base on age, season, gender…in order to have a reasonable menu for many people. References http://www. hcmizones. org. vn/index. php? option=com_content&view=article&id=4615:tieu-th-ca-phe-ti-vit-nam-tng-trng-nhanh-nht-th-gii&catid=89:tin-trong-nuoc&Itemid=115 ——————————————- [ 2 ]. Accel Team, Employee Motivation: Theory and practice, Official website, Retrieved December 22, 2010 from http://www. accel-team. com/motivation/ [ 3 ]. Helen Deresky (2008). International Management (6th Ed. ). In the United States of America (Ed. ), Communication across culture, p. 135. Pearson Prentice Hall [ 4 ]. Helen Deresky (2008). International Management (6th Ed. ). In the United States of America (Ed. ), Communication across culture, p. 139. Pearson Prentice Hall.