Starbucks Coffee: The Visionary is Back

In the article "Can Howard Schultz Save Starbucks?", Howard Schultz has returned as CEO and is reaffirming the company's ambitious growth plans with a long-term target of 40,000 stores, half of which will be in the US. Starbucks now has 15,000 stores in the US, so international expansion is going to be aggressive.

The article alludes to Russia, Brazil and India being other focuses of international expansion, however I think China will yield the best ROI for the company. If you read two posts ago, I explained the unique opportunity Starbucks enjoys in China, selling brand rather than product. Facing pressure from less expensive competitors domestically and abroad, strategic pricing in China would give the company a competitive edge globally.

I recently read a book that illustrates this point very well. In "Winning the Profit Game", the authors make a point by linking price and brand. A 1% improvement in price yields a 7.1% improvement in profit. We discussed this financial model quite a bit in grad school, but opportunities to use it don't come along very often. Considering that Starbucks' global strategy is to develop a full 20% of its profits in China, maximizing profits there would make a huge difference to the coffee giant's bottom line.