Question

What are the main reasons why Starbucks chooses to retain operational control of its domestic operations? Why does Starbucks rely on licenses for most of its international operations? Does the company risk the dissipation of any of its advantages by relying on licensing?

no case study . Based on google knowledge of Starbucks

Answer 1

Answer: Starbucks is an American company and sources a significant amount of its revenues from the domestic operations. Nearly half of the total company’s outlets are in U.S. It cannot afford to give control of the domestic operations to a licensee as it may pose a threat to the quality of the services it provides. The American market is highly competitive and the customers are extremely sensitive to the factors like quality. Therefore the organization cannot take a risk to dilute its quality of service by losing control over the domestic business which is a backbone of the company.

When it comes to the international operations, the company relies on licensing because of two major reasons. Firstly this saves the company from making heavy investments that are required to scale up its operations at the international level. Secondly this reduces the risk of failure in the foreign countries as the licensees of the company often have experience in operating in their domestic markets and share the risks involved in making investments. There are two major risks that the company faces while licensing internationally. First is the loose control over operations and this can result in poor quality of products and services and subsequently will negatively affect the company’s operations. The second is the infringement in the intellectual property of the company as the partners may copy or leak the trade secrets to the competitors.