Question

*Answer the 4th question ONLY* Read the case study Italy Defied Starbucks—Until It Didn’t, i only left the rest because they are related.

“We arrive with humility and respect in the country of coffee,” Howard Schultz, the former longtime CEO of Starbucks, told Corriere della Sera, Italy’s leading daily, last week. He was about to inaugurate, in Milan, the first Italian outpost of the global chain that supersized coffee and now vies with McDonald’s and Coca Cola as a symbol of American gastronomic imperialism. Even, of course, if Italy has one of the world’s most developed coffee cultures, which in fact is what inspired Schultz to convince the founders of the small Starbucks coffee company to open its first coffeehouse in 1984.

Italy is a country where the pumpkin is generally found in the ravioli, not the latte, and so the Milan Starbucks isn’t just any Starbucks branch. It’s a huge “Roastery” in the former Milan outpost

of the Poste, the Italian postal service, and is meant as a full “experience,” Starbucks said in a press release that has already been mocked by Eater. (“Eight Ridiculous Things Starbucks Is Saying About Its New Store in Milan.”) The Roastery, the first in Europe after others in Seattle and Shanghai, will offer coffee and food and also illustrate Starbucks’s roasting process.

Okay. But a question leaps to mind: Does Italy need Starbucks? “Che tristezza,” one Italian friend told me when I asked her about it opening in Milan. “How sad.” I called the Tazza d’Oro, one of Rome’s most historic coffee shops—they’re called bars in Italian—and Laura Birrozzi, a manager, offered some thoughts. “We and Starbucks sell something completely different. We have quality Italian espresso,” she said. I asked her if she’d ever been to a Starbucks, and she said she had on one occasion, on a visit to London. “It wasn’t the coffee I’m used to,” was all she’d say.

At the Milan Roastery, an espresso will cost 1.80 euros “sitting or standing,” Corriere della Sera noted, since in Italian coffee shops, the price changes depending on whether you have table service or gulp your drink down at the bar. A cappuccino will cost as much as 4.50 euros. This has already prompted Italy’s consumer association to file a complaint with Italy’s antitrust authority, saying the prices were far above average for Milan. Online, Italians are already complaining that Starbucks could drive up prices elsewhere in Italy. (Still, from the coverage, it seems the Roastery piqued people’s curiosity; the lines were around the block for the musical-gala opening party.)

The announcement last year about the opening did not go over well. The columnist Aldo Cazzullo wrote in Corriere della Sera then that “as an Italian,” he considered the opening of Starbucks in Italy nothing short of “a humiliation.” Though he conceded that the arrival of the chain might make some Italian coffee shops step up their game: Starbucks “represents a philosophy, as well as a sort of office for people who don’t have an office,” he wrote. “Maybe our bars will also become more hospitable.”

But, he ended on a discordant note: “I wonder how many of the 350 jobs announced in Milan will go to young Italians and how many to young immigrants,” Cazzullo wrote. It’s unclear what kind of immigrants he had in mind, or why hiring immigrants would be an issue. What is clear is that in Italy, coffee seems to connect in unexpected ways to national identity. There were polemics last year after Starbucks sponsored a garden of palm trees in Piazza Duomo, to drum up enthusiasm ahead of its opening this year. This prompted Matteo Salvini, then only the leader of the far-right League party and now Italy’s interior minister and deputy prime minister, to decry what he called the “Africanization” of Italy, and to call for the defense of the “Italianness” of coffee. “All that’s missing are the sand and camels, and the illegal immigrants will feel at home,” he said then.

Schultz has been trying to open Starbucks in Italy for decades, and the fact that Italy has such excellent coffee everywhere—even the coffee at the average highway rest stops in Italy is better than much of what’s served in good restaurants elsewhere in the world— was no doubt a major issue. In 1998, Michael Specter wrote in The New Yorker about Schultz’s efforts to open Starbucks and said a branch of the chain would open in Italy “next year.”

So why the delay? For one thing, Italians don’t drink coffee the way Starbucks serves coffee. In Italy, coffee—espresso—is drunk generally standing up, at a coffee bar. Cappuccino or caffè latte is drunk in the morning or sometimes in the late afternoon if you haven’t had a proper lunch, and never after meals, because who can digest milk after a meal? Italians are very attuned to proper digestion.

Also, Italy has a market economy with some protectionist elements. In her interview with Schultz for Corriere, the journalist Daniela Polizzi noted that the context had changed in the past 20 years, from one of adjusting to globalization to one in which trade barriers have become an issue. Starbucks now has 30,000 stores in 77 countries, including 3,400 stores in China, with 45,000 employees, Schultz answered. Italy hasn’t given up quite so much ground, but the chain has now established a beachhead there.

Some saw the arrival of Starbucks as a window into the challenges to the Italian economy. “The lack of Starbucks indicates a double anomaly: On the one hand, the biggest coffee chain in the world wasn’t present in Italy, and on the other, the biggest coffee chain in the world isn’t Italian,” the journalist Luciano Capone wrote in Il Foglio, an intellectual daily, this week, citing the economist Luigi Zingales. It seemed a sign of how Italy’s economy is based on smaller businesses with more modest ambitions. More than 90 percent of Italian companies have fewer than 15 employees.

Then there’s the flip side. “Operating in Italy, in competition with Italian coffee bars, it’s probable that Starbucks will soon learn to make excellent espressos and cappuccinos,” Capone continued. “But will the Italian system manage to learn from Starbucks how to create a global chain? It would be a small step for us, but a great step for mankind: Finally the rest of the world would discover that coffee and pizza aren’t the kind on offer at Starbucks and Pizza Hut.”

So if the wheel is coming full circle, does Olive Garden have any plans to open in Italy? I asked its spokeswoman, Meagan Mills. “We do not have any plans,” she wrote back. “Thanks for thinking of us, though!”

Questions to answer

1. What are the main marketing environment factors affecting Starbucks business in the Italian market? Why are these factors affecting the Italian market?
2. Explain the impact of these factors on Starbucks’ marketing. Give a specific example for each factor.
3. Based on your analysis of the two previous questions, discuss the promotion strategies of Starbucks in the Italian market. What modifications to the company’s product components might be necessary?
4. For the promotion strategies that you have outlined in the previous question (Q3), suggest two specific recommendations for these promotion strategies. Give a specific example of how Starbucks should implement these two recommendations in the Italian market.

Answer 1

We know from the case here that Italians love coffee and they feel that Italy has the best coffee available. But it is also mentioned that there is a price difference in Starbucks's cappuccino and Italy's espresso. It is a tough market for Starbucks and the strategy to follow for promotion should include vigorous "advertising" and "sales promotion".

Advertising: Since Starbucks is setting up Roastery, it should highlight it prominently. The advertisement should be in form of hoardings at the busiest of place, at shopping complexes and near restaurants and hotels. The advertisement should focus media like televesion and radio.

It should be a mix of informative and persuasive advertisement to inform the people about what is coming their way in terms of their favourite drink and should aim to create liking for it.

It has to be a continuous advertising plan and should keep on playing so that it reaches to every corner of the country to create a caving to try out a new offering.

It should offer lucrative offers to get people to have a franchise of Starbucks.

Sales Promotion: While advertising is an ongoing process for a new launch in a completely new market and that to a competitive one, it would be wise to have trained sales staffs who knows about coffee and varieties of coffee. He/she must know the difference so that he/she can convince people. If the customer finds the sales staff as an amateur who doesn't even know the difference between Italian's love for their coffee and the one that Starbucks will offer then the hard work will not be fruitful rather customers will feel that the company cannot even train the people it keeps then how can they give a better coffee.

It can use some events to promote like some prizes or a get together or a short event where people can be entertained and be informed about the company. It can also offer some sort of gifts or free trials.