Lavazza: The Challenges of Foreign Market Entry in a Brand-Intensive Industry

Luigi Lavazza SpA (Lavazza) was the largest coffee maker in Italy and the seventh-largest coffee roaster in the world. Despite its success in global markets, Lavazza was finding it difficult to make its mark in the United States. After establishing its North American subsidiary in 1989, Lavazza entered the US market in the 1990s with strategic partnerships with restaurants and hotels to cater to US consumers. But even as a strong global brand with thirty years of experience in the US market, Lavazza continued to struggle. As competition in the global coffee industry intensified, Lavazza could no longer afford to be complacent with its performance in the US markets, and it sought to increase its market share. However, Lavazza faced a key strategic decision: should it try to introduce US consumers to the “Italian way” of drinking espresso coffee, or should it create a new brand identity and a new portfolio of products that were more aligned with the tastes of US consumers?

This case may be used in courses related to international business and strategic management. The case is appropriate and easily adjusted for students at the undergraduate, graduate, or executive levels. The case can be used at the beginning of the course to introduce topics such as internationalization strategy, the challenges encountered in entering different countries, competitive analysis of local markets, and business models that coexist in other countries. By working through the case and assignment questions, students will have the opportunity to do the following:<ul><li>Understand the challenges associated with internationalization strategy in specific markets for companies that have been successful in many other national contexts.</li><li>Analyze the pros and cons of replicating the home-country market strategy in different countries.</li><li>Map the most relevant elements of a local market that a company needs to use as reference points to align its resources and capabilities effectively.</li><li>Understand the characteristics and effectiveness of different internationalization modes (e.g., acquisitions, alliances, subsidiaries, etc.) to access foreign markets.</li></ul>

• internationalization
• strategic partnerships