Posted: May 25th, 2022

Cross Sectional Cultural Management Plan

Cultural Management

Starbucks wants to enter South Africa, the “Rainbow Nation,” and learn about doing business in Africa for future expansion across the continent. It has the conditions for success, but critical will be managing a multicultural team of employees in every store. There are 11 major languages in South Africa, highlighting the diversity of the country, and it has also become a magnet for immigrants from other African countries as well. Starbucks needs to implement programs such as employee groups in charge of multicultural initiatives and it should track the demographics of its workforce to ensure that they are diverse. Management teams should also be diverse. The company should have a multicultural management training program as one of its major controls.

Situation Analysis

The corporation to be discussed in this paper is Starbucks, and they wish to enter the South African market. Starbucks operates in dozens of countries worldwide. Its largest markets remain in the West — the U.S., UK and Canada — and Asia, where it has a large presence in many countries. The major growth initiatives right now are in China and India, but Starbucks is seeking large new markets and believes South Africa has strong potential. Another carrot for the company is that it feels that South Africa can be a base of operations and a learning ground for other African countries as well. In other words, Starbucks hopes to learn about the cultural aspects of doing business in Africa from a fairly easy African culture and apply that knowledge to an eventual expansion across the continent. This paper will discuss both the company context and country context of such a strategy.

Corporate & SWOT Analysis

Starbucks changed ownership and began expanding in 1986 and went international almost right away — the company’s 10th store was in Vancouver. Since that time, Starbucks engaged in a period of rapid growth domestically through the 1990s to the mid-2000s before a brief period of contraction. Many foreign markets were entered during this time. There is considerable saturation in many of Starbucks’ major markets, so it is seeking growth opportunities in large and economically powerful emerging market nations.

A SWOT analysis provides an opportunity to examine both the internal and external environments of the company. The basic SWOT for Starbucks globally is:

Strengths

Weaknesses

Opportunities

Threats

Strong brand

Insufficient diversification

BRICS markets

Competition from other coffee companies

Financially sound

Reliant on Schultz

New products/store concepts

Economic weakness

Great operations

Institutional market

Political risk in emerging markets

International competency

The company’s success owes to a few things. It has a lot of strengths, both financially and in terms of its proven ability to translate its operations around the world successfully. Starbucks has learned a lot about doing business in foreign countries. It has excelled at this, for example in Japan and China where it adapted well to the needs of the consumers in these tea-drinking companies (Japan Today, 2013). Overseas markets are one of the company’s major opportunities, if it can counter the threats posed by political risk and competition in particular.

Environment of Country Selected

South Africa is a large country (pop. 50 million) and one of the largest economies in Africa. It has racially mixed demographics with 11 national languages, multiple major African groups and two major white cultural groups as well. The country is known as the “rainbow nation” for this reason (BBC, 2013). The South African economy is resource-based, but it has a relatively strong manufacturing base for Africa. The country’s economic power is concentrated in a handful of major cities, in particular Johannesburg, Cape Town, Durban and Pretoria. These cities are multicultural, urban and have significant opportunity for Starbucks to grow. There are many home-grown coffee chains in South Africa as well as independent shops to provide competition. There is political risk, however, in that the current government is perhaps less effective and definitely less inspirational than previous regimes, and the recent death of Nelson Mandela might destabilize the country as well.

Goals & Objectives

There are two major goals for Starbucks to succeed in South Africa. The first is simple market economics — they want to become the market leader. The second is more complicated. Most African countries are multi-ethnic, and this can pose some challenges. Most foreign retail and fast food companies have very limited presence in Africa. Becoming skilled in the South African market, taking a truly cross-cultural “rainbow” approach will teach Starbucks how to manage marketing, human resources and political risk across the continent. Managing diversity is both a challenge and an opportunity for Starbucks. Not only is South Africa diverse, but its cities have immigrants from all over Africa — Angola, Mozambique, the Congo, Zimbabwe and more. This increases the cultural complexity because there is some tension between newcomers and the existing African peoples, but this is also an opportunity to create knowledge and expertise of those cultures before entering those markets.

Luthans and Doh (2009) note that there is often conflict between local cultures and corporate cultures. Starbucks relies on delivering a highly-consistent experience around the world for its success, and this means that local employees need to adapt to the Starbucks culture. The challenge is therefore for the company to find a way to blend the different African cultures and its own corporate culture into a cohesive culture that it can translate anywhere on the continent.

Strategies and Tactics

Starbucks needs to place significant emphasis on multiculturalism in South Africa. Luthans and Doh (2009) would categorize the company as an international corporation, and the groups at its new South African locations will be multicultural (Afrikaner, Bantu, Xhosa, immigrant, etc.). Building trust is the most important condition for effectiveness in a multinational operation. In addition, Starbucks managers must recognize that all members of the organization should be aware that their success is mutually dependent, but also that there are conflict resolution mechanisms in place that are fair and can be trusted. With such tactics, the company can leverage the power of its multinational workforce.

Controls & Evaluations

There will be strong financial controls, but it is important in South Africa to have colorblind procedures for promotion, hiring and employee evaluation. This is important, because of the historical problems in that country with racially-based policies. Training is a big part of the control program. The company should track its demographics to ensure that the stores are reflective of the community as well. Management should be multicultural as well — this will help the company prepare for future expansion in Africa. There should also be periodic reviews from a panel of employees in charge of multiculturalism at the company. Such panels would provide an opportunity for Starbucks to foster a strong multicultural culture from within the company.

References

BBC. (2013). South Africa profile. British Broadcasting Corporation. Retrieved February 21, 2014 from http://www.bbc.co.uk/news/world-africa-14094760

Japan Today. (2013). Starbucks on track to open 1000th store in Japan. Japan Today. Retrieved February 21, 2014 from http://www.japantoday.com/category/business/view/starbucks-on-track-to-open-1000th-store-in-japan

Luthans, F., Doh, J. (2009). International Management: Culture, Strategy, and Behavior. McGraw-Hill.

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