+

StarbucksMorgan Phillips

Faraz ChowdhuryMohammad Farooq

Mikaela OdellNeal Deters

+Introduction

Chicago International Consulting Group

Objective Starbucks in

Sweden

+

Macro Economical FactorsMorgan Phillips

+Demographic Environment Language: Swedish Population 9,103,788 Median Age:

Total: 42.2 yrs Male: 41 yrs Female: 43.3 yrs

Population growth rate: 0.1685

Major City Population: Stockholm: 1.279

million people

+Ease of Doing Business

Sweden (14)

+Economical Structural Environment

Mixed System of High-Tech Capitalism and Extensive Welfare Benefits

Privately owned firms account for a vast majority of industrial output

GDP (purchasing power parity): 386.6 billion (2011)GDP (Official exchange rate): 538.2 billion (2011)GDP (real growth rate): 4% (2011)

Labor Force: 5.018 million (2011)Unemployment rate 7.5% (2011)Public Debt: 37.5% of GDP (2011)

• Inflation Rate: 3% (2011)

• Imports: $179.6 billion (2011)

• CPI: 314.81 (Sept 2012)

• Index 1980=100

• National Accounts GDP: 1.3% (2nd quarter 2012

compared to 2nd quarter 2011)

+

Sweden’s Financials 2012

+

Internet and Energy

Technological Factors

+Internet

Sweden is one of the world’s leading information and communication technologies (ICT) nations

Sweden is the birthplace of wireless technologies such as GSM, WCDMA, LTE and Bluetooth

Huawei, Intel, Motorola, Oracle, Symantec and ZTE are among the foreign companies conducting research and development in Sweden.

Networks manufactured by Ericsson, one of Sweden’s biggest companies, handle almost half of the world’s mobile traffic, while in recent years many smaller Swedish startups have broken through on the world ICT stage

89% of Swedes have internet access at home.

+Energy Ever since the oil crisis in the early 1970s, Sweden has invested

heavily in the search for alternative energy sources In 1970, oil accounted for over 75 percent of Swedish energy

supply; by 2009, the figure was just 32 percent, chiefly due to the declining use of residential heating oil

In 2003, green electricity certificates were introduced in Sweden to encourage the use of renewable energy. To be certified green, the electricity has to come from wind power, wave power, solar energy, geothermal energy, biofuels or small hydroelectric plants

In 2005, Sweden introduced a special program designed to boost energy efficiency in industry. Under this program, the 180 or so power-intensive industries taking part are granted tax relief in exchange for drawing up energy plans and taking steps to reduce energy use. To date, the program has resulted in energy savings of about 1.4 TWh per year at a value of about SEK 500 million

+Political Environment

Built Upon Decentralization

All public power in Sweden comes from the people. This is the first sentence in the Swedish constitution. The people are represented by the parliament

Swedish parliament, Riksdagen, since 1970, has a unicameral system. The foremost representative for Riksdagen is The Speaker (Talmannen)

Sweden has a written Constitution (Grundlag) since the middle of the 14th century, but it is not one single constitution. Instead it is now four constitutions. They are called Regeringsformen ( form of government), Successionsordningen (order of succession), Tryckfrihetsförordningen (press law) and Yttrandefrihetsgrundlagen (constitution for freedom of speech)

The present king, King Carl XVI Gustaf was born in 1946, the son of Prince Gustav Adolf and Princess Sibylla. He became king after his grandfather's, King Gustav VI Adolf, death in 1973. In 1976 the king married Silvia Sommerlath and they have three children: crown princess Victoria, prince Carl Philip and princess Madeleine

Form of government: Constitutional monarchy, parliamentary democracy Parliament: The Riksdag, with 349 members in one chamberSweden has been a member of the EU since 1995

+

National and Business

Culture

+National Culture

Efficiency is combined with a laid-back attitude, and old traditions blended with openness for new technologies.

This sense of heritage is mixed with open-mindedness for other cultures, due to the facts that one-fifth of the population has roots in other countries, that Swedes travel a great deal, and that they speak other languages.

Almost one-fifth of Sweden’s 9.5 million inhabitants have roots in other countries. As a result — and despite the challenge of segregation — the growing number of immigrants makes Sweden an open, international and multicultural society.

Many traditions carry a religious significance, such as Christmas, Easter, Pentecost and Fat Tuesday, but there is often little reference to the Bible on these occasions. Generally, it’s more important to watch Donald Duck at Christmas, dress up as witches at Easter, get married at Pentecost and eat cream buns on Fat Tuesday, rather than question why you’re doing it.

When it comes to drinking coffee, Swedes rank second in the world (per capita, of course). People usually drink coffee for breakfast, after lunch or during the highly esteemed coffee breaks (Fika), but there are also special coffee parties (kafferep). If you are invited to one, you can expect to find at least seven sorts of home-made buns and cakes, a kind of minimum amount according to Swedish housewives 'standards

Personality Food

+Business Culture

The boss is one of the team, decisions are reached by consensus, the vacations are long, and the coffee breaks are sacred

Business dress is on the casual side — you don’t see many suits on the train during the morning commute — and everyone is strictly on first-name terms, regardless of their place in the company hierarchy

A Swedish manager tends to think of himself as a coach rather than a commander, and he often delegates tasks and authority to his staff.

The power distance in Swedish companies is among the smallest in the world, according to a study of 40 countries in 1984. 'Power distance' can be defined as "the extent to which people in a hierarchical situation feel they can and should control the behavior of others, and the extent to which those others are conditioned by reflexes of obedience". In Swedish companies, the concept of power distance is largely replaced by personal responsibility

Swedish executives are generally more willing to take risks than their colleagues in other countries. An international study showed that Sweden had the lowest "uncertainty avoidance index" by far among the countries compared, while Japan had the highest

Being punctual is not only regarded as a sign of respect but also of efficiency and Swedish businessmen will have little understanding for cultural variation in this case.

Foreign businessmen often find that their Swedish colleagues talk too much business , and too little about themselves or their interests. They might draw the conclusion that their partners are simply limited and ignorant. The Swedish businessman, on the other hand, probably wishes his foreign business partner would cut the small talk and come to the point. In Sweden, a direct approach is seen as a sign of efficiency and a wish not to waste the other person's time.

1/5 board members

are women and 1/3

managers are

women in Sweden. Double

the European Average

Getting emotional in a business setting is considered very inappropriate

+

Micro Analysis & Trends

+Political Environment

Parliamentary political system

Government has a large role in the Swedish

Economy

Own shares in many industries

State own monopoly on alcohol

+Social Systems

Second least religious country in the world

Egalitarianism

Strong welfare system

5 weeks paid vacation a year

Taxes

+Degree of Openness

Exports account for roughly 50% of the GDP

One of the top recipient of foreign direct

Investments.

Early adopters

+Markets in Sweden

Relatively small market, around 9 million Inhabitants

Early adopters

Foreign policy ranked Sweden as one of the top three most globalized countries in the world

Part of EU import tariff system

Several market research companies

Unemployment 7.2 %

From 1980-2012 average unemployment rate 5.68%

Easy for people to get education because it is Free

Unions have great influence over the workplace

Product Market Labor Market

+Business Hierarchies

Low level of hierarchies

“Violates” the corporate chain of command

Managers are more like coaches

Business decisions based on consensus

Direct and open communication style

+ Host-country Global/National Competitive EnvironmentMohammed Farooq

+New Entrants to Market

• No direct corporate competitors entering the market within segment

• Cafes in Sweden, Finland, Norway, & Denmark

• Must look at coffee shops in near-by countries as well

• Could be potential threats within the near future for Starbucks

+Market Threats Now

Emmi Nordic AB Second largest player within the Ready to Drink

(RTD) coffee market. 41% share of volume shares in the market as an

international player.

Lidl Sverige KB Hold a 14% share (3rd in the market) within the

Swedish RTD Coffee market. However, they are a privately controlled player.

Negative Effects of RTD Coffee Threat to forecast growth

+Industry Movement Total Sales Increase of Coffee: 3% in 2011

Although this appears to be a small increase, it shows increase sales during a economic crisis.

On-Trade Sales of RTD Coffee are Marginal Consumers prefer always fresh coffee made on the spot.

Market Shares Increased gradually over 5 years Managed to increase value during the European Debt Crisis

+Starbucks in Sweden

Starbucks History Starbucks was created in 1971. In 1996, the company began their international

expansion.

Starbucks Pros in Entrance Strong competitor within not only the American Markets,

but also the international markets. Sweden’s stability allows for an easier ability for entry..

Starbucks Cons in Entrance Starbucks has shown to have created little growth within

most European markets. Starbucks has yet to turn profits in any of its French retail

outlets, and continues to struggle with growth even in its profiting areas.

Foldger’s and Maxwell House

+ Host Country Industry Analysis

+

“Coffee is worth over $100 billion worldwide,” and over 500 billion cups of coffee are drank every year (Goldschein).

Sweden is one of the highest consumers of coffee at 8 kg per capita (CBI). An average Swedes consumes about three and a half cups of

coffee everyday (CBI).

Even after the world economy had declined, coffee consumption “declined marginally.”

Since prices increased, Swedes began making it at home. They did not stop consuming coffee, and even during this

time, coffee had a “positive growth” (Euromonitor).

In 2011 prices increased 25% per unit due to poor harvesting (Euromonitor).

Customers are loyal to their coffee brands

Swedes typically have two coffee breaks a day Known as Fika

Overview of Industry

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Recently, Swedes have began purchasing coffee makers for home. Increased demand for fresh coffee pods.

“Standard fresh ground coffee” is still the most popular in Sweden and it accounts for a “93% share of total volume sales” (Euromonitor).

Specialty coffees are becoming more and more popular.

Major coffeehouses keep price competitive.

Recently there has been a high demand for strong coffee.

Swedes tend to sit down and drink coffee, as opposed to Americans who like to grab and go Seen as being rude if a guest leaves before drinking coffee

Three major chain coffee houses are Wayne’s Coffee, Bishop Arms and Espresso House. These three players alone accounted for 71% of chained value sales of coffee in

2011(Euromonitor).

These coffee houses also provide a quick bite to eat (cookies, sandwiches, cupcakes). Menus change frequently due to trends and demand

Nature of Industry

+Charts

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It is estimated that there will be approximately a 1% decrease in the growth of coffee sales. Perhaps due to coffee makers at home.

Price of coffee is expected to decrease in the next 5 years. The increase was because the world economy had declined as well as

the poor harvesting in 2011. Coffeehouses keep price competitive

Swedes have always been concerned for their health and they will continue to, but this will not affect coffee sales.

Competitors are expected to come out with new items, but it is not going to have no effect in the near future.

Overall, there is no foreseeable threat to the coffee industry in Sweden in the next few years.

Future of Industry

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Competitors are well established

Will be costly doing research, building stores, marketing, etc.

Customers are loyal to their coffee brand

Three major competitors have plans to expand in the next few years.

Finding “hot spots” or prime locations with most foot traffic that have not been taken yet.

Barriers of Entry

+

Risk AnalysisFaraz Chowdhury

+Risk Analysis

Political Levels of corruption and bureaucracy are low. The quality of the judiciary is high and the legal code is well

developed. Sweden is welcoming to foreign investment, although

regulation inhibits competition in some of sectors.

Politically Sound: Disputes settled within legal framework Broad agreement between parties

Legal system not open to political interference

Excellent relationship with their neighbors

+Potential Risks

Financial Sector is strong despite the EU turmoil. Strong Financial Network and plans to

establish stability

Large Automobile industry struggling due to EU struggle

Increased involvement of international organizations

Strict policies on intellectual property

Here are few restrictions on foreign ownership of companies and property, and the main regulations do not discriminate between domestically- and foreign-owned firms.

+Other Potential Risks

The tax environment Favorable for companies more than that for

individuals: The corporate tax rate was reduced from 28%

to 26.3% in 2009.

High unit labor costs – weakness More skilled workers, less lost time and higher

productivity

Transportation and Logistics is excellent

Sweden is one of the most technologically advanced countries in the world, and consistently ranks among the leading nations in terms of internet and phone communications.

+ Composite Risk Analysis Score

+ Composite Risk Analysis Score

+Regional Real GDP Growth

+Risk Forecast for International Businesses

+Recommendation & Entrance Strategy

+Starbucks “All in One”

Currently only 2 franchised outlets

Will need to provide Strong, gourmet, premium coffee

Private Sit down outlets because swedes like to sit down and drink tea Effective way to get market share is to open outlets Keep up with trends

Heavy Marketing to relate with Swedes and get our message across

+Strategy to Start Starbucks in Sweden

Import coffee from Brazil,

Use Starbucks’ International distribution

Ownership Greenfield No franchising

Labor Half and half

Location and Property Stockholm and Popular

markets based in market analysis

Risk Assessment Adapt Change content Get out

+

National Competiti

ve Advantag

e by Porter

High end Coffee Demand to be met

Export alliances to streamline supply

High labor costs, low business taxes

Conform to host country customs such as less hierarchy and more equality

+

Thank you!

+Sources

CIA Factbookhttps://www.cia.gov/library/publications/the-world-factbook/geos/sw.html10/29/2012Last updated oct 22 2012. ISSN 1553-8133

Sweden.Sehttp://www.sweden.se/eng/Home/Business/Business-culture/10/29/2012

Sweden Information Smorgasbordhttp://www.sverigeturism.se/smorgasbord/index.html10/29/2012Photos: Copyright © Kamerareportage

Invest Swedenhttp://www.investsweden.se/North-America/Advantage-Sweden1/10-reasons/10/29/2012

+Sources

http://www.portal.euromonitor.com.ezproxy1.lib.depaul.edu/Portal/Handlers/accessPDF.ashx?c=77\PDF\&f=S-201640-21369277.pdf&code=h8Djsev35wmlOFst1Kh9UgNS1CQ%3d

https://docs.google.com/file/d/1PMG1OIcbXoQW14EeWlqvgs_8zj-R-G7S3DTBzV0eciLegKaK9aC4Mp8xds6G/edit

http://www.smartplanet.com/blog/smart-takes/starbucks-struggles-to-compete-in-european-market/24904