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Starbucks is an American coffee company that operates in many countries around the world including America, China, Canada, Mexico, the United Kingdom, the Philippines, Germany, and Thailand. Coffee is a commodity that has high volume of global trading. However, its market is highly fragmented hence need for extensive exposure.
The United Arab Emirates (UAE) is one of the markets of Starbuck’s coffee and coffee products. UAE’s fragmented coffee market has forced the company to consolidate distribution processes to cut distribution costs (Mangold, 2010).
The process involves participation of farmers, millers, exporters, brokers, roasters, and producers. Each of these groups has a role to play depending on its position in the distribution channel. Starbucks purchases, roasts, and sells coffee and coffee products. It sells products primarily through its retail stores. To boost distribution efforts, the company collaborates with other stakeholders that include suppliers, business partners, and specialty operators (Mangold, 2010).
In the UAE, Starbucks requires great market exposure because of stiff competition from other coffee shops (Mangold, 2010). In addition, the UAE is located in the desert, which makes it difficult for coffee companies to market and distribute coffee products. The climate of the UAE is mainly hot for most part of the year. Therefore, Starbucks needs to conduct extensive marketing and advertisement in order to endear its products to customers.
Another reason for extensive market exposure is the company’s country of origin (Mangold, 2010). Many UAE countries are populated by Muslims. Muslims are conservative and firmly hold on to traditional values and beliefs. Starbucks needs a lot of market exposure in order to enhance its goodwill role in the UAE. Western countries are usually considered bad influence because of their culture that erodes ideals, beliefs, and cultural values of the Muslim countries.
Starbucks’s distribution strategy involves a mixture of various distribution channels (Upadhyay, 2011). This implies that the company applies multiple channels that involve different participants at different market levels. First, the company uses a direct retail system to sell its products in stores under its management. Starbucks purchases, processes, and sells coffee in its stores without involvement of business partners. Second, Starbucks sells products in supermarkets and shopping malls across the UAE (Upadhyay, 2011).
It supplies products to supermarkets and shopping centers depending on demand. Proceeds from sale of products are divided between involved partners according to their business agreement. Third, Starbucks sells its products through airlines, hotels, restaurants, and suppliers of office coffee (Upadhyay, 2011). One of the benefits of adopting a multiple distribution channel is that Starbucks serves a wide market in the UAE.
However, the multiple channel distribution strategy is risky because of potential channel conflicts that might arise from using multiple channels concurrently. Starbucks also distributes its products via mail and on the internet (Upadhyay, 2011). The company produces a mail order catalog and sells products on its websites. Customers can place orders through the website. However, online purchase is not common in the UAE because of its conservative culture that does not fully embrace technology especially the internet.
The main objective of Starbuck’s distribution strategy is to grow Starbuck’s brand beyond the company’s retail environment. The main distribution strategy is to provide products and services to customers professionally and on time. As such, the company adopts distribution channels that deliver products to customers in places of work, during travel, and in restaurants and shopping centres (Upadhyay, 2011).
It has thus developed business relationships with business partners who have similar business ideals, values, and goals. Business relationships include joint ventures and agreements with coffee companies and retail stores. Starbucks first entered the Middle East market in 1999 through MH Alshaya WLL, a company based in Kuwait (Mangold, 2010). The UAE market is difficult to penetrate necessitating collaborations with established companies and businesses located in the region.
Marketing involves several functions that facilitate purchase of goods and services. These functions include selling, buying, transportation, storage, advertising, standardization and grading, financing, and risk taking. Starbucks is concerned with standardization and branding, transportation, coffee purchase from producers, and storage.
After processing coffee, Starbucks standardizes and grades products before distributing them to retailers and wholesalers (Mangold, 2010). In addition, it stores them in storage facilities specially made to maintain quality of products. It is the responsibility of Starbucks to advertise products in order to attract customers. Wholesalers and retailers are not involved in advertisement of products.
Afterwards, the company transports finished products to retailers and wholesalers who sell them to consumers (Mangold, 2010). Starbucks conducts market research to evaluate and determine viability of providing services in certain regions. It obtains market information by conducting SWOT analysis of the location it intends to introduce its products.
In conclusion, Starbucks adopts a multiple channel strategy in the UAE. The strategy involves collaboration with distributors, wholesalers, and retailers. In addition, the company sells its products in its retail stores located in different regions of the UAE. A multiple distribution channel enables the company serve many customers distributed in various regions.
References
Mangold, C. (2010). Starbucks: Success Strategy and Expansion Problems. New York: GRIN Verlag.
Upadhyay, R. (2011). Distribution Strategy of Starbucks. Retrieved from http://www.managementparadise.com/forums/principles-management-p-o-m/216453-distribution-strategy-starbucks.html
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