Question

Thirty years ago, Starbucks was a single store in Seattle’s Pike Place Market selling premium roasted coffee. Today it is a global roaster and retailer of coffee with some 13,000 stores, more than 3,750 of which are to be found in 38 foreign countries. The strategy of its owner was to sell to the company’s own premium roasted coffee and freshly brewed espresso-style coffee beverages, along with a variety of pastries, coffee accessories, teas and other products, in a tastefully designed coffeehouse setting.

In 1995, with 700 stores the United States, Starbucks began exploring foreign opportunities. Its first target market was Japan. Although Starbucks had resisted a franchising strategy in North America, where its stores are company owned, Starbucks initially decided to license its format in Japan. However, the company also realized that a pure licensing agreement would not give it the control needed to ensure that the Japanese licenses’ closely followed Starbucks’ successful formula.

So the company established a joint venture with a local retailer, Sazaby Inc. Each company held a 50% stake in the venture, Starbucks Coffee of Japan. Starbucks initially invested $10 million in this venture, its first foreign direct investment. The Starbucks format was then licensed to the venture, which was charged with taking over responsibility for growing Starbucks’ presence in Japan.

After Japan, the company embarked on an aggressive foreign investment program. In 1998, it purchased Seattle Coffee, a British coffee chain with 60 retail stores, for $84 million. In Asia, Starbucks’ most common strategy was to license its format to a local operator in return for initial licensing fees and royalties on store revenues.

In 2006, Starbucks announced that it believed there was the potential for up to 15, 000 stores outside of the United States, with major opportunities in China, which the company now views as the largest single market opportunity outside of the United States. Currently the company only has 350 stores in China.

1. What could be the main reason that triggered Starbucks to pursue FDI in Britain? .

2. Starbucks decided to pursue international investment through licensing, what would be the cause of that? .

3. Assess the reasons why Starbucks chose to embark on a foreign market expansion strategy outside of the USA.

4. In your opinion what type of international business activity should have Starbucks used? Explain your answer.

Answer 1

Answer 1 :

The main explanation that The Coffee Bean picked diversifying is to grow its business into the external market rapidly. Since it started growing far later than its rivals, it strived to take quicker passage mode than FDI. By doing its global activity with diversifying, The Coffee Bean could enter in excess of 20 nations including India without enormous difficulty. In the in the mean time, Starbucks has attempted to enter India advertise by administrative and political intercession as we talked about above.

Second, as notice above, while Starbucks needed to furnish clients with only espresso as well as espresso culture at its remote market section, The Coffee Bean has progressively centered around the nature of espresso. As its procedure is to serve classy espresso to the same number of clients as it can, it is basic to spur franchisee to serve more individuals. Diversifying can give high inspiration to franchisees as they simply need to pay fixed eminence. It implies that more clients they serve clients, the more benefit they can anticipate.

The last explanation is cost sparing. On the off chance that it had entered the abroad market as FDI, it would have brought into the world more cost, for example, lease and working expense. By diversifying, additional expense could be avoidable.

Answer 2 :

Worldwide development is basic to effective organizations; Starbucks is no special case. While Starbucks was effective in its household advertise, the pioneers of the organization realized they would need to misuse globalization and extend the organization to outside business sectors to completely use the potential that the organization had. In 2003, Starbucks immediately ventured into remote markets and started to advance into the overall organization we know today.Countries started encountering the "Starbucks Effect," which is the persistent development of new contenders with better plans of action that power organizations than reevaluate the feasibility of what they've constantly done. More or less - if your organization can't stay aware of the proficiency of the Americans, it won't succeed.

As globalization has assisted with setting up Starbucks as a worldwide organization, the organization has run into issues. These issues emerged both inside, inside the organization's global plan of action, and remotely, as abroad rivalry. Opponent cafés began replicating Starbucks' strategic approaches, name, and even its organization logo. Starbucks needed to use licensed innovation laws to scatter client disarray among itself and contenders; more on protected innovation insurance is canvassed in the procedure area of the paper.

Answer 3:

Starbucks International has gone past the ordinary way of thinking of Starbucks, to make a re-birth of their product offering in outside nations. Ordinarily in the United States, Starbucks claims its whole line of coffeehouse stores inside and out with no establishment ventures or associations. In any case, their global tasks are a remarkable inverse. Starbucks International has embraced a technique of associations to make its line of global bistro stores. These joint endeavors make an expanded simplicity of passage into the remote market.

Starbucks International decide to be associated with organizations for the advantages these connections offered over their average entirely… show progressively content…

Potential accomplices needed to have enough money related assets to help soak a given market in order to counter the chance of impersonations. Starbucks looked for accomplices that had the capacity and experience to find prime land for bistro areas with an information on the retail showcase. At long last, Starbucks searched for accomplices who had the labor accessible to make a full duty to the task. It was this determination standard which helped Starbucks in executing the advantages of organizations to their global activity extension. When taking a gander at Starbucks universal section procedure, three primary potential advantages emerge from the improvement of the organization. These advantages had and can possibly be differing in their level of handiness subordinate upon the section system Starbucks picks, for this situation Joint Venture (association). The three primary potential advantages of a joint endeavor passage technique are: insurance of the reasonable upper hand, decrease in the money related hazard caused by the firm (Starbucks), and the advantage of knowing how well the US item will do in the remote market through neighborhood adjustment. We will inspect every one of these all the more completely from the perspective of Starbucks going into the Japanese outside market. In an organization where espresso is a lifestyle, Starbucks needed to completely send the innovativeness of its originator to build up a reasonable upper hand and be an engaged.

Answer 4 :

Starbucks - Modes of international business. Modes of International Business.
License
Joint Venture
FDI (Foreign Direct Investment) Franchisee Contract
Marketing
Turnkey Projects
Barter
Merger
Take Over
Exports Contract
Manufacturing.