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Starbucks’ International Strategy: A Comprehensive Analysis

  • January 25, 2024

Table of Contents

Unveiling the success of starbucks’ international strategy, starbucks’ adaptability to diverse cultures, multi-domestic strategy: balancing local responsiveness and global integration, factors contributing to starbucks’ international success, starbucks’ expansion phases and emerging markets, lessons learned and future outlook, faqs about starbucks’ international strategy.

In the heart of Seattle, Washington, a small coffee shop named Starbucks opened its doors in 1971, offering a haven for coffee enthusiasts seeking an exceptional cup of joe. Little did they know that this humble beginning would transform into a global phenomenon, with over 32,000 stores spanning over 80 countries , serving billions of customers annually (Schultz, 2019). Starbucks’ remarkable international expansion stands as a testament to its astute strategy , unwavering commitment to quality, and ability to adapt to diverse cultures worldwide.

Starbucks' International Strategy - Seattle

Starbucks’ international strategy, dubbed the “multi-domestic approach,” strikes a delicate balance between global standardization and local responsiveness . This strategy recognizes the importance of maintaining a consistent brand identity across all locations while simultaneously tailoring offerings to meet local preferences. Starbucks has successfully navigated this delicate balance by delegating decision-making to local franchisees, adapting menu items, and customizing marketing campaigns (Keegan, 2019).

A prime example of Starbucks’ adaptability is evident in its Japanese stores, where it offers matcha-infused beverages and traditional Japanese décor to resonate with local tastes and customs (Nishiyama, 2023). In China, Starbucks has embraced the concept of “social drinking,” creating a welcoming atmosphere that encourages customers to linger and socialize (Sang, 2018). This cultural sensitivity has been instrumental in Starbucks’ success in these markets , demonstrating its ability to connect with customers on a deeper level.

Key factors contributing to Starbucks’ international success include its premium positioning, strong brand identity, and customer-centric approach. The company has consistently maintained its premium brand image , charging slightly higher prices than its competitors, while simultaneously offering a unique and differentiated customer experience (Berman, 2018). Starbucks’ strong brand identity is evident in its sleek store designs, recognizable logos, and loyal customer base.

Starbucks’ commitment to customer satisfaction has been a driving force behind its success. The company has consistently invested in training its baristas to deliver exceptional customer service , ensuring a consistent and welcoming experience across all locations (Nishiyama, 2023). Additionally, Starbucks has embraced social responsibility initiatives, such as fair trade practices and sustainable sourcing, further strengthening its brand reputation and attracting socially conscious consumers.

Starbucks’ international expansion journey has unfolded in distinct phases, with its initial focus on North America followed by a foray into Europe and Asia. The company has faced challenges and opportunities along the way, particularly in emerging markets such as China and India, where it has partnered with local companies to gain a foothold and adapt to local regulations (Schultz, 2019).

Starbucks’ global strategy reflects its understanding of the intricate interplay between local customs and global trends. By balancing local responsiveness with global integration, Starbucks has successfully captured the hearts and palates of coffee enthusiasts worldwide . As the company continues to expand into new markets , it will undoubtedly face new challenges and opportunities. However, with its proven track record of adaptability, cultural sensitivity, and strategic decision-making, Starbucks is well-positioned to continue its remarkable global journey.

In its relentless pursuit of global domination, Starbucks has mastered the art of cultural sensitivity, seamlessly blending its core brand identity with local customs and preferences to create a truly inviting and authentic experience for its patrons worldwide. This deep cultural understanding has been instrumental in Starbucks’ remarkable success in expanding into diverse markets, from the traditional tea-drinking culture of Japan to the vibrant coffee scene of Italy.

Harnessing Regional Flavors and Traditions

One of Starbucks’ most effective strategies for adapting to local cultures is its incorporation of regional ingredients, flavors, and design elements into its international stores. In Japan, for instance, Starbucks has introduced matcha-infused beverages, a nod to the country’s deep-rooted tea culture. Similarly, in France, the company has introduced Vienesse coffee, as well as foie gras and brioche sandwiches.

Beyond beverages and pastries, Starbucks has also embraced local design elements to create a sense of place in its international locations . In China, Starbucks stores often feature traditional Chinese décor, such as red lanterns and bamboo accents, while in Korea, stores may feature Korean-style seating arrangements and traditional artwork .

Starbucks' International Strategy - China

Understanding Local Customs and Traditions

Beyond menu items and décor, Starbucks’ cultural sensitivity extends to understanding and respecting local customs and traditions . In China, where social gatherings are a significant part of the culture, Starbucks has created a welcoming atmosphere that encourages customers to linger and socialize. In Japan, where politeness and respect are paramount, Starbucks staff is trained to greet customers with a bow and maintain a respectful demeanor.

Balancing Global Standardization with Local Responsiveness

Starbucks’ ability to balance global standardization with local responsiveness is a key factor behind its success in diverse markets. The company maintains a core set of brand standards , ensuring consistency in quality and customer experience across all locations . However, it also delegates decision-making to local franchisees, allowing them to tailor offerings to meet local preferences. This approach allows Starbucks to leverage its global brand while adapting to the unique nuances of each market.

In India, for instance, Starbucks has adapted its menu to incorporate chai , a traditional Indian tea, as well as local bakery items. In the United Arab Emirates, the company has partnered with a local coffee roaster to source premium Arabica beans, catering to the region’s preference for strong coffee. By striking this delicate balance, Starbucks has successfully navigated the cultural landscape of each market , winning over new customers and solidifying its position as a global coffee leader.

Starbucks’ international expansion strategy is characterized by its ability to strike a delicate balance between global standardization and local responsiveness, a concept known as the multi-domestic strategy. This approach allows Starbucks to maintain its core brand identity and operational standards while simultaneously adapting its offerings and marketing strategies to meet the unique preferences and customs of each market.

Delegation of Decision-Making

At the heart of Starbucks’ multi-domestic strategy lies the delegation of decision-making power to local franchisees . This localization approach empowers local partners to understand and respond to the specific needs of their respective markets. By giving franchisees the autonomy to adapt menu items, design elements, and marketing campaigns, Starbucks ensures that its presence in each market feels authentic and resonates with local tastes.

Examples of Local Adaptation

In India, where tea is a deeply ingrained cultural beverage, Starbucks has introduced chai-infused drinks and partnered with local tea suppliers to offer authentic Indian tea experiences. In Japan, the company has incorporated matcha-flavored beverages and traditional Japanese décor to cater to the country’s tea-drinking culture . These examples demonstrate Starbucks’ ability to seamlessly integrate local flavors and customs into its global brand identity .

Customizing Marketing Campaigns

Starbucks’ marketing efforts are equally tailored to local markets. In China, where social gatherings are commonplace, Starbucks has launched campaigns that promote its stores as a gathering place for friends and families. In Japan, where politeness and respect are highly valued, Starbucks has emphasized its commitment to providing a welcoming and customer-centric experience .

Balancing Standardization with Responsiveness

The multi-domestic strategy presents a delicate balancing act , requiring Starbucks to maintain a consistent brand identity while adapting to local preferences. The company achieves this balance by setting clear global standards for quality, service, and customer experience , while simultaneously delegating decision-making on non-essential aspects to local franchisees.

Starbucks’ remarkable international expansion is not merely a matter of luck or coincidence. The company’s success can be attributed to a combination of strategic decisions, cultural sensitivity, and a commitment to providing an exceptional customer experience .

Premium Positioning and Strong Brand Identity

Starbucks has successfully positioned itself as a premium coffee brand , charging slightly higher prices than its competitors. This premium positioning has allowed the company to maintain a consistent and differentiated customer experience across all international locations. Starbucks’ strong brand identity, characterized by its iconic logo, sleek store designs, and consistent quality, has further solidified its position as a global leader in the coffee industry (Berman, 2018).

Consistent Quality and Brand Standards

Despite operating in diverse markets, Starbucks has maintained a high level of consistency in terms of product quality and brand standards . The company’s global quality assurance program ensures that its coffee beans are sourced sustainably and roasted to a consistent standard. Additionally, Starbucks’ training programs for baristas help maintain consistent customer service and beverage quality across all locations (Keegan, 2019).

Effective Marketing Strategies and Social Responsibility Initiatives

Starbucks has effectively leveraged marketing campaigns to connect with customers and enhance its brand image. The company’s “Share a Cup of Happiness” campaign, for instance, tapped into the emotional appeal of coffee as a social and cultural beverage. Starbucks has also demonstrated a commitment to social responsibility, supporting initiatives such as fair trade practices and environmental sustainability . These efforts have further bolstered the company’s reputation and attracted socially conscious consumers (Nishiyama, 2023).

Starbucks’ international expansion has unfolded in distinct phases, reflecting the company’s evolving strategy and market opportunities. From its initial focus on North America, Starbucks has steadily expanded its presence across Europe, Asia, and more recently, emerging markets like China and India. Each phase has brought unique challenges and opportunities, requiring the company to adapt its approach and leverage strategic partnerships to succeed in these diverse markets.

Early Expansion in North America: Laying the Foundation

Starbucks’ international journey began in 1996 with its first store in Japan , marking the company’s foray beyond its home market of Seattle, Washington. This initial expansion was followed by a steady growth in North America, with Starbucks establishing a strong foothold in the United States and Canada. During this phase, the company focused on replicating its successful formula of premium coffee, comfortable ambiance, and exceptional customer service .

European Expansion: Adapting to Local Tastes

In 2000, Starbucks entered the European market, targeting major cities like London, Paris, and Milan. However, the company faced challenges adapting its American-centric approach to the European market , where coffee culture is deeply rooted and preferences vary significantly from country to country. To address these challenges, Starbucks adopted a more localized approach, tailoring its menu items and store designs to suit local tastes and preferences. For instance, in Italy, Starbucks introduced espresso-based beverages and partnered with local coffee roasters to source premium Italian beans.

Asian Expansion: Navigating Diverse Markets

Starbucks’ expansion into Asia presented another set of challenges, with the region encompassing diverse cultures, tastes, and market conditions. In China, Starbucks encountered a market where tea is deeply ingrained in the culture . To cater to local preferences, Starbucks introduced chai lattes and adapted its store designs to incorporate Chinese elements . In India, where coffee consumption is relatively low, Starbucks partnered with local tea companies to offer chai-infused beverages and adapt its menu to align with local tastes.

Starbucks' International Strategy - Chai Latte

Emerging Markets: Strategic Partnerships and Cultural Sensitivity

Starbucks’ expansion into emerging markets like China and India has highlighted the importance of cultural sensitivity and strategic partnerships . In China, Starbucks has partnered with local conglomerate Alibaba to leverage its e-commerce platform and expand its reach. In India, the company has partnered with Tata Consumer Products , a leading Indian consumer goods company, to gain access to local distribution networks and consumer insights.

Throughout its international expansion, Starbucks has demonstrated a remarkable ability to balance global standardization with local responsiveness, adapting its approach to suit the unique nuances of each market. The company’s success in emerging markets like China and India is a testament to its commitment to cultural sensitivity and its ability to form strategic partnerships that leverage local expertise and resources.

Starbucks’ remarkable international expansion journey has been marked by a series of strategic decisions, cultural adaptations, and strategic partnerships that have propelled the company to become a global coffee giant . As Starbucks continues to expand its reach, it is crucial to reflect on the lessons learned from its past experiences and identify key factors that will shape its future growth.

Key Takeaways from Starbucks’ International Strategy

Throughout its international expansion, Starbucks has accumulated valuable insights that serve as valuable lessons for other businesses seeking to venture into new markets. These lessons include:

  • Adaptability and Cultural Sensitivity: Starbucks’ success hinges on its ability to adapt its offerings and marketing strategies to align with local customs and preferences. Understanding the nuances of each market is essential for building a strong brand presence and fostering customer loyalty.
  • Balance of Global Standardization and Local Responsiveness: Starbucks has successfully navigated the delicate balance between maintaining global consistency and adapting to local preferences. This requires a multi-domestic strategy that empowers local franchisees to make decisions while adhering to core brand standards.
  • Strategic Partnerships: Starbucks has leveraged strategic partnerships to gain access to local expertise, distribution channels, and consumer insights. These partnerships have been instrumental in the company’s success in emerging markets like China and India.
  • Commitment to Quality and Customer Experience: Starbucks has consistently maintained its focus on providing high-quality products and exceptional customer service across all international locations. This commitment has been a cornerstone of the company’s success in building a loyal customer base.

Future Outlook and Potential for Further Growth

Starbucks is well-positioned for continued international growth , with over 32,000 stores spanning over 80 countries. The company’s strong brand reputation, customer-centric approach, and ability to adapt to local markets are key factors that will drive its future success.

However, Starbucks faces several challenges in its quest for further international expansion. These challenges include:

  • Evolving Consumer Preferences: The coffee industry is constantly evolving, with changing consumer preferences and the emergence of new competitors. Starbucks will need to remain agile and adapt its offerings to stay ahead of the curve.
  • Economic and Political Factors: Economic and political instability in certain markets can pose significant challenges for Starbucks’ operations and growth prospects. The company will need to carefully assess these risks and tailor its expansion strategies accordingly.
  • Competition from Local Coffee Brands: Starbucks faces stiff competition from local coffee brands that possess a deep understanding of their respective markets. The company will need to differentiate itself through its brand image, product quality, and customer service to maintain its competitive edge.

Despite these challenges, Starbucks is poised to remain a dominant player in the global coffee industry . The company’s strong brand, customer focus, and adaptability will continue to drive its growth in new markets. Starbucks is well-positioned to capitalize on emerging trends in the coffee industry, such as the increasing demand for specialty coffee and the growing popularity of mobile ordering and delivery.

Starbucks’ international strategy is a multi-domestic strategy, which means that the company adapts its products, marketing, and operations to local preferences in each market it enters. This approach allows Starbucks to maintain its core brand identity while resonating with customers in diverse cultures.

Several factors contribute to Starbucks’ international success, including: • Cultural Mindfulness : Starbucks carefully considers local customs, tastes, and preferences to tailor its offerings and marketing strategies accordingly. This cultural sensitivity has enabled the company to gain a foothold in markets with varying coffee cultures. • Market Research : Starbucks conducts extensive market research to gain a deep understanding of each market’s unique characteristics, consumer demographics, and competitive landscape. This data-driven approach informs strategic decisions and ensures that Starbucks’ offerings are relevant to local customers. • Local Partnerships : Starbucks forms strategic partnerships with local companies and experts to gain access to market insights, distribution channels, and cultural understanding. These partnerships have been instrumental in Starbucks’ success in emerging markets like China and India. • Strong Brand Integrity : Despite adapting to local preferences, Starbucks maintains a strong and consistent brand identity across all international locations. This consistency reinforces the brand’s reputation for quality, innovation, and customer service.

No, Starbucks is not using a translational strategy. A translational strategy involves imposing a standardized approach across all international markets, regardless of local differences. Starbucks’ multi-domestic strategy, on the other hand, emphasizes adaptability and customization to suit local preferences .

Starbucks employs three strategies for market entry: 1. Wholly-Owned Subsidiaries : Starbucks directly owns and operates its stores in these markets, allowing for complete control over operations and brand consistency. 2. Joint Ventures : Starbucks partners with local companies to jointly own and operate stores, leveraging local expertise and market knowledge. 3. Licensing : Starbucks grants local companies the right to use its brand and operate stores in exchange for royalties and fees . This approach expands Starbucks’ reach without the need for direct investment.

Starbucks’ multi-domestic strategy has been a key driver of its global success by enabling the company to seamlessly integrate into diverse markets while maintaining its core brand identity. The company’s commitment to cultural mindfulness, market research, local partnerships, and strong brand integrity has allowed it to cultivate a loyal customer base worldwide.

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Why starbucks succeeded in china: a lesson for all retailers.

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Co-written with Suresh Dalai, a consultant with Alvarez & Marsal and former operations and merchandising director of Levi Strauss Asia and Ermenegildo Zegna, China

Starbucks has meticulously organized its efforts in China around three key pillars of Chinese ... [+] society. (Photo credit: JOHANNES EISELE/AFP/Getty Images)

Much has been written about Starbucks’ successful strategy in China. The company is opening a store a day and aims to have 5,000 stores in the next few years. My fellow Forbes contributor Helen Wang rightfully attributes the company’s success to its long-term commitment to the market, well-executed collaborations with Chinese partners, superior supply chains, adopting local technologies, and offering local items on its menu.

However, these are just the visible tactics of a much more fundamental strategy. From the beginning, Starbucks has spoken to the essence of Chinese culture, giving it the wisdom to develop the long-term vision, local relationships, and localized product offerings for the market.

All global companies can learn from this: attention to and execution around Chinese culture is the root of a foreign brand’s success in China.

Read more: Meet The Woman Behind Starbucks' Rapid Growth In China

As previously covered in this column what Starbucks understood when they entered the market was that it was not about the coffee initially. It was about reviving a "tea house culture" that had existed for thousands of years. Starbucks' global success was based on being the "third place" between home and work and brought that ethos to China -- but with a modern, Western, upscale sensibility.

Since those early days Starbucks has meticulously organized its efforts in China around three key pillars of Chinese society.

From the beginning of Chinese civilization, family has been the key source of security, education and spirit for the Chinese people. The society’s Confucian values entwine children and parents in a bond of shared responsibility that stretches throughout all stages of life. Parents should strongly engage in their children’s lives -- their upbringing, education and career -- and in return, children should respect and care for their parents as they age.

Starbucks fully understood this and made engaging parents a cornerstone of its people operations. Since 2012, Starbucks has hosted an annual “Partner Family Forum,” where its employees (whom the company calls “partners”) and their parents can learn together about the company and its future in China. “Partners” talk about their professional experiences in the company and Starbucks leadership -- even CEO Howard Schultz -- speak to the parents.

Starbucks CEO Howard Schultz at the Starbucks Annual Shareholders Meeting on March 23, 2016 in ... [+] Seattle, Washington. (Photo by Stephen Brashear/Getty Images)

The success of the program cannot be underestimated. In an interview with BCG , Schulz said about the first Forums held in 2012:

“Think about an annual meeting of shareholders; we had an  annual meeting of parents  in Beijing and Shanghai, and we had about 90% participation. We did not know who or how many would come. In most cases, there were whole families. There were parents, grandparents, aunts, and uncles. It was unbelievable . . . it was a breakthrough for the company and a milestone for local relevancy and sensitivity.”

Read more: Five Things Starbucks Did To Get China Right

The company has continued to build on this. This year, it announced the launch of the “Starbucks China Parent Care Program” which currently provides health insurance for elder parents of 10,000 employees and will likely extend to more employees. The initiative obviously encourages staff retention by giving rare financial support to employee’s families. Much more importantly, it says to Chinese “partners” that it respects their parents in a way that truly touches the Chinese heart.

Chinese highly value their community, traditionally labeled as their “inside circles.” Be it their homes, schools or companies, they turn to these circles for loyalty, information and approval of their choices.

A Starbucks store in the Luohu district of Shenzhen, China, on Monday, Aug. 4, 2014. (Photographer: ... [+] Brent Lewin/Bloomberg)

With this in mind, Starbucks designed its retail spaces to facilitate these “circles” coming together. Unlike in the United States, where Starbucks chairs are often the quiet haunts of solitary laptop users, China’s Starbucks are laid out to welcome crowds, noise and lounging. In many cases, the spaces are up to 40% bigger than in the U.S., and have been placed in very visible and easily-accessible locations in office buildings (either on highly-trafficked first floors or mezzanine areas). The sitting areas are open format and usually have no walls -- the chairs seem to flow out into adjacent spaces, such as lobbies or walkways. As Quartz's Gwynn Guilford put it:  In China, Starbucks doesn’t sell coffee to make its millions -- it rents couches .

Read more: Starbucks Wants To Crack Asia's Tea Market

The result? Walk into any Starbucks in an office building at 3PM and you will see a buzzing throng of people exchanging office news, admiring and getting information about the latest fashions from their colleagues, and talking with their friends about the next travel destination. It feels like you've walked into a modern-day version of the town square.

Consequently, Starbucks customers not only enjoy the coffee (in all its Chinese variations), they feel fulfilled going to a Starbucks with their friends or families.

Chinese place a premium on gaining and upholding reputation and status, especially for their family and community. Consequently, they want to be associated with brands and products that portray prosperity, success and upward mobility.

Starbucks has positioned itself as the premium coffee brand in China. It charges 20% higher prices in China compared to other parts of the world. It chooses very high-end locations for its outlets including luxury malls and iconic office towers. And since foreign brands, particularly in food and beverage, are viewed as premium, Starbucks often labels its products with the country from which its products are imported.

Read more: Is This The Recipe For Starbucks' Continued Success In China?

Starbucks, and how it enables Chinese to observe their culture, is a powerful example for any global brand on how to operate in the country. By aiming to embed itself in China’s centuries-old culture, Starbucks inevitably plays the long game, leading to a deep commitment to the market. It has to develop relationships with families and communities, which inevitably make it more attractive to and successful in local partnerships. Finally, it has to be part of China’s family rituals and desire for status by providing an environment that consumers and employees are proud of.

Put together, these efforts have made Starbucks less a foreign brand transplanted to China and more a seed from a Western tree that has been carefully planted and patiently nurtured within.

Michael Zakkour

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Starbucks FDI Case Study

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StartupTalky

Starbucks Case Study - How Starbucks Conquered The Coffee Industry?

Devashish Shrivastava

Devashish Shrivastava

Starbucks Corporation is an American coffee chain that was established in 1971 in Seattle, Washington. By mid-2019, the organization had a presence in over 30,000 areas around the world. Starbucks has been depicted as the fundamental delegate of "second wave espresso," a reflectively-named development that advanced high-quality espresso and specially simmered coffee. Starbucks now uses robotized coffee machines for proficiency and well-being.

Starbucks serves hot and cold beverages, entire bean espresso, micro-ground moment espresso known as VIA, coffee, caffe latte, full-and free leaf teas such as Teavana tea products, Evolution Fresh squeezes, Frappuccino refreshments, La Boulange baked goods, and bites (for example, chips and wafers); some offerings such as the Pumpkin Spice Latte are explicit to the territory of the store. Numerous Starbucks outlets sell pre-bundled nourishment items, sweltering and cold sandwiches, and drinkware such as cups and tumblers. Furthermore, there are Select "Starbucks Evenings" areas that offer brew, wine, and appetizers.

Starbucks first ended up productive in Seattle in the mid-1980s. Despite an underlying financial downturn with its venture into the Midwest and British Columbia in the late 1980s, the organization experienced rejuvenated success with its entrance into California in the mid-1990s. Starbucks opened an average of two new stores every day between 1987 and 2007. On December 1, 2016, Howard Schultz reported he would leave his position as the CEO and would be supplanted by Kevin Johnson. Johnson accepted the role of the CEO of Starbucks on April 3, 2017, and Howard Schultz resigned to end up as the 'Chairman Emeritus', effective from June 26, 2018. Kevin Johnson is currently serving as the CEO and President of Starbucks.

Starbucks - Company Highlights

Startup Name Starbucks
Headquarters Seattle, Washington, United States
Sector Food and Beverage, Hospitality
Founders Gordon Bowker, Jerry Baldwin, Zev Siegl
Founded 1971
Valuation $148.83B (January 2022)
Revenue $29.02B (FY21)
Total Funding $900 million
Parent Organization Joint Venture Company of Tata Consumer Products and Starbucks Corporation
Website starbucks.com

Startup Story Of Starbucks Corporation History Of Starbucks Corporation Starbucks - Name and Logo Starbucks Expansion Journey Starbucks Corporation in India Business Strategy Of Starbucks In India Products Of Starbucks Corporation Business Growth Of Starbucks Corporation Over The Years Future Plans Of Starbucks Corporation

Startup Story Of Starbucks Corporation

Starbucks Corporation

If you are wondering how did Starbucks start? Then, the story of Starbucks started back in 1971, when the company was a roaster and retailer of whole bean and ground coffee, tea and spices with a single store in Seattle’s Pike Place Market.

Zev Siegel stated that at that time he knew the coffee industry inside and out, he was well-versed, especially with the gourmet end of the industry. Besides, he was also known as the most educated coffee guy in the country at that time. So, the three college friends - Zev Siegel, Jerry Baldwin and Gordon, started out with their coffee bean shop and roastery at Seattle’s famous Pike Place Market in 1971. Eventually, they found a mentor in Alfred Peet, who was the founder of Peet’s Coffee and the man responsible for bringing custom coffee roasting to the U.S. and started with the coffee business in full swing. Starbucks initially began by selling coffee beans that were roasted by Peet's, a gourmet coffee company in Berkeley, California, and later on, started roasting on their own.

History Of Starbucks Corporation

starbucks fdi case study

The first Starbucks store was initiated in 1971 in Washington by 3 individuals who met while they were studying at the University of San Francisco: English educator Hun Baldwin, history educator Zev Siegl, and author Gordon Bowker. The trio was encouraged to sell top-notch espresso beans and hardware after businessman Alfred Peet showed them his style of simmering beans.

During this time, the organization sold simmered, entire espresso beans. During its first year of activity, Starbucks bought green espresso beans from Peet's, and then started purchasing legitimately from producers.

Starbucks - Name and Logo

starbucks fdi case study

Bowker reviews that Terry Heckler, with whom Bowker claimed a publicizing office, thought words starting with "st" were ground-breaking. The organizers conceptualized a rundown of words starting with "st" and in the long run arrived on "Strabo," a mining town in the Cascade Range. The team then finalized on "Starbuck," the name of the young chief mate in the book "Moby-Dick".

Starbucks has given too many slogans/taglines already among which the most popular one is - " Brewed for those who love coffee".

Starbucks Expansion Journey

Number of Starbucks stores Worldwide

In 1984, the first proprietors of Starbucks, driven by Jerry Baldwin, acquired Peet's. During the 1980s, all-out offers of espresso in the US were falling. However, offers of strength espresso expanded, shaping 10% of the market in 1989; it stood at just 3% in terms of market share in 1983. By 1986, the organization worked six stores in Seattle and had just barely started to sell coffee.

In 1987, the first proprietors sold the Starbucks chain to the previous manager Howard Schultz, who rebranded his II Giornale espresso outlets as Starbucks and immediately extended. Starbucks then launched its outlets outside Seattle at Waterfront Station in Vancouver, British Columbia, and Chicago, Illinois. By 1989, 46 stores existed over the Northwest and Midwest, and every year Starbucks was simmering more than 2,000,000 pounds (907,185 kg) of coffee. At the hour of its first sale of stock (IPO) on the financial exchange in June 1992, Starbucks had 140 outlets with an income of $73.5 million, up from $1.3 million in 1987.

The organization's fairly estimated worth was $271 million at this point. The 12% segment of the organization that was sold raised around $25 million for the organization, which encouraged a multiplying of the number of stores throughout the following two years. By September 1992, Starbucks' offer cost had ascended by 70% to more than multiple times the income per portion of the past year. In July 2013, over 10% of in-store buys were made on the client's cell phones utilizing the Starbucks app.

The organization used the versatile social media stage when it propelled the "Tweet-a-Coffee" campaign in October 2013. People had the option to buy a $5 gift voucher for a companion by entering both "@tweetacoffee" and the companion's handle in a tweet. Research firm Keyhole observed the advancement of the event and a media article from December 2013 detailed that Starbucks had discovered that 27,000 individuals had taken an interest and $180,000 of buys were made to date.

Starbucks Expansion Around The World

As of 2018, Starbucks is positioned 132nd on the Fortune 500 rundown of the biggest United States organizations by revenue. In July 2019, Starbucks announced a "monetary second from last quarter total compensation of $1.37 billion, or $1.12 per share, up from $852.5 million, or 61 pennies for each offer, a year sooner." The organization's fairly estimated worth of $110.2 billion expanded by 41% in the middle of 2019. The income per share in quarter three was recorded at 78 pennies, considerably more than the estimate of 72 cents.

starbucks fdi case study

Starbucks Corporation in India

starbucks fdi case study

In January 2011, Starbucks Corporation and Tata Coffee reported designs to start opening Starbucks outlets in India. Despite a bogus beginning in 2007, in January 2012, Starbucks declared a 50:50 joint endeavour with Tata Global Beverages, called Tata Starbucks Ltd. , which would possess and work outlets marked "Starbucks, A Tata Alliance". Starbucks had endeavoured to enter the Indian market in 2007. However, it didn't provide any explanation behind its withdrawal of it.

It was on October 19, 2012 that Starbucks opened its first store, a 4,500 sq ft store in Elphinstone Building, Horniman Circle, Mumbai. Starbucks opened its first cooking and bundling plant in Coorg, Karnataka in 2013 to supply its Indian outlets. The company extended its reach to Delhi on 24 January 2013 by opening 2 outlets. Tata Global Beverages declared in 2013 that they would have 50 areas before the end of the year, with a venture of ₹4 billion ($58 million). The organization did open its 50th store in India on July 8, 2014.

The third city of India to get a Starbucks outlet was Pune, where the organization opened an outlet at Koregaon Park on 8 September 2013. Starbucks opened a 3,000-square-foot lead store at Koramangala, Bangalore on 22 November 2013, making it the fourth city to have an outlet. Starbucks opened the biggest espresso-forward store in the nation at Vittal Mallya Road, Bangalore on 18 March 2019. The store is estimated at 3,000 sq ft and is Starbucks' 140th outlet in India.

Tata Starbucks opened 25 stores between 2017 and 2018, which went up to 30 during 2018-19. On 21 February 2019, CEO Navin Gurnaney reported that Tata Starbucks would use only compostable and recyclable bundling materials over the entirety of its stores from June 2020.

starbucks fdi case study

Starbucks reported its entrance in Gujarat on 7 August 2019. The organization opened five stores in Surat and Ahmedabad the following day. Starbucks' leader store in the state is situated at Prahlad Nagar, Ahmedabad, and offers more vegan alternatives than other Indian outlets. CEO Navin Gurnaney expressed that the organization would open more than 30 stores in the 2019-20 financial year, of which 11 have already been opened.

starbucks fdi case study

Business Strategy Of Starbucks In India

Starbucks' strategies for business in India seemed rock-solid but the brand wasn't completely immune still. In any case, the world's biggest bistro chain is building its position cautiously via a progression of well-picked steps. Numerous worldwide brands have entered India since the 1990s, being pulled in by its developing and optimistic customer base. Yet, not all have succeeded.

Starbucks isn't the primary contestant in India's composed espresso showcase; so it doesn't have any first-participant advantage. Cafe Coffee Day (CCD) is the market head while Barista Lavazza was the main espresso chain to open for business. Both are valued by the white-collar class. Costa Coffee, Coffee Bean and Tea Leaf (CBTL), and Gloria Jean are valued by the rich group in India.

India is customarily a tea-drinking nation, so espresso chains have concentrated on giving a feel where individuals can unwind and invest energy with one another. This setup implies higher capital expenses. It is different from the US, where the vast majority have a liking for espresso. The Indian buyer base has likewise advanced in the recent decade. What can worldwide brands like Starbucks do to augment their odds of achievement in India? Here are a few thoughts:

Picking a Local Partner

Worldwide brands face the difficult choice of either going solo or tying up with a nearby accomplice. Starbucks' choice to team up with India's TATA Global Beverages demonstrates attention to utilizing different advantages. The TATA Group is one of India's morally determined brands, an observation passed on about Starbucks India too.

Given that India produces espresso beans in just a couple of spots, the other sourcing alternative was bringing in the beans. Be that as it may, this would have raised costs fundamentally.

Tata's espresso plant in Karnataka has been contracted to supply beans to Starbucks' universally, making common cooperative energies. It has contracted to take into account TATA's TAJ SATS, which supplies to TATA's top-notch lodging network – The TAJ. The TATAs are put into the retail part with store brands like Westside, Tanishq, Croma, Star Bazaar, and so forth. Starbucks can use them for information sharing on Indian land, territory points of interest, and handling land administrations. This would enable its very own development to outline. This strategy gives scope for store-in-store deals.

Consistency in Store Arrangements

This keeps up the one-of-a-kind selling purpose of customer experience and allows to pick up economies of scale on CAPEX. Starbucks plans to have a similar store group crosswise over India. However, the size can change depending on financial matters. This is how it works all around. Starbucks wants to provide an agreeable 'café' experience. Having a similar organization gives clients the solace of accepting the equivalent 'Starbucks' vibe any place they go throughout the world.

Keeping the store designs steady means it needs to pick and open new areas stringently, to such an extent that the area can yield a throughput by the venture. Its methodology in-store arrangement is different from CCD, which has picked various configurations to tap the potential interest in any region. CCD has opened a couple of premium outlets dependent on the area's customer profile . It has additionally gone for non-store organizations like takeaway booths and candy machines. Be that as it may, Starbucks may expect that such non-store configurations may weaken its image esteem.

Estimating the Pace of Expansion

India is the place where an inability to screen primary concerns has tossed numerous organizations out of the rigging. So, a top-line just approach doesn't work here. Since Starbucks needs to pick new areas stringently by its equivalent configuration approach, it has decided on a deliberate pace of extension. It is concentrating on the budgetary feasibility of every outlet, as opposed to going for an aggressive development plan which may have brought about rehashed calls for capital.

This operational process is different from its system in the USA and China where it has fabricated scale by opening stores in pretty much every area – being the main port-of-call for espresso by basically being all over the place. CCD's methodology behind adaptable store organizations was to guarantee there is a CCD bistro at a simple reach. It is intriguing to check its normal store gainfulness given its scale.

Guaranteeing Top-Authority Backing and Responsibility

Top initiative responsibility from the two sides of the organization, Tata and Starbucks, has been plentifully clear. Starbucks took as much time as is needed to enter the market (6 years), recognizing that India was a mind-boggling market and required cautious passage arranging. The two sides have spoken finally about their dedication and shared their future plans to give their business a new direction toward growth.

Altering Contributions to Suit Indian Market and Client Needs

Being adjusted to Indian culture, tastes, and inclinations conveyed at a suitable "esteem" guarantees customer importance, construct, and continued utilization. Starbucks mirrors this comprehension – as observed through a blend of western staples, a wide scope of intriguing Indian tidbits similar to confined refreshments on the idea. Since its experience ( and item as well, however to a lesser degree) is its image guarantee, its test lies in conveying an all-around steady, yet locally significant brand experience.

The stores, or the "third spot" as Starbucks calls them, have been altered likewise. The stores don't pursue the worldwide layout and appear to have been planned with consideration, with neighbourhood contacts consolidated. Stores in various urban communities have been structured unexpectedly, mirroring the neighbourhood culture – for e.g., New Delhi's store has ropes and chat on the dividers and henna designs on the floor, though the Pune store has a rich showcase of collectables and copper.

There appears to be sufficient utilization of shading – something missing in the US. The stores have been intended to convey a particular, premium café experience, predictable, and in a state of harmony with the one conveyed over the rest of the world.

starbucks fdi case study

Making Inventive and Restricted Plan of Action

Starbucks appears to have made a confined plan of action, planned for conveying a universally reliable item and involvement with locally-focused costs. The Tata group conveys a major sourcing advantage (attributable to its quality over the generation chain, developing, broiling, and exchanging espresso), yet it has just gone past that to develop and support associations with nearby espresso cultivators – putting resources into structure economical cultivating rehearses. All of Starbucks' espresso is sourced locally, a first-ever for the organization.

Scaling up using Arrangements and Organizations

The Tata organization is the genuine overthrow in the Starbucks passage story. Having Tata as an accomplice is gigantically profitable, not due to the validity and strength it offers, or because it coordinates the scale and stature of Starbucks as an organization.

It offers numerous advantages catalyzing pretty much every market section achievement variable - for example, The Tata group has involvement in the retail business , a solid reputation in advancing new pursuits, gives a sourcing advantage through Tata espresso, offers access to high traffic areas using its lodgings and other retail outlets, guarantee excellent nourishment and refreshment supply through its F&B business and so forth.

Furthermore, the potential for an effective organization is amazingly high given Starbucks' and Tata's mutual qualities – the two of them have a solid social inner voice and are resolved to "give back" to the general public and network.

Influencing India for Worldwide Items

Not long after it finished its first year, Starbucks reported that it was serving top-quality Indian Arabica espresso as "Indian coffee" in different markets. Another world-class office for cooking and bundling has just been initiated in Coorg, Karnataka; the results of which are to be analyzed in India and abroad.

Overseeing Discernment and Guidelines

This viewpoint is tied in with structure, a solid positive observation and a picture for the business and brand crosswise over key outer partners and crowds – incorporating the administration, corporate accomplices, networks inside the eco-framework, and customers on the loose. Given what Starbucks has figured out how to accomplish in a year and a half since dispatch, it appears to be genuinely evident that its thought combined with the Tata advantage (critical reach and impact) has helped in developing solid connections and a positive picture with key outside partners and voting demographics.

Engage Nearby Association

Starbucks is by all accounts constructing a nation-explicit activity with nearby individuals in charge and overall unmistakable customer interface focuses, giving them the necessary position to coordinate and work. There is overwhelming interest in enlisting the perfect individuals and giving the essential preparation – to install and instil the organization's culture and administration models.

Along these lines, how has Starbucks fared against the McKinsey spread out variables for long-haul India achievement? Its accomplishments against the scorecard look noteworthy. With thorough vigorous passage arranging and brilliant and quick execution, the multi-month-old endeavour appears to have impressive force, making purchaser and network-driven ventures and focused on sustaining its centre business and brand. It appears to be very much set to "win" in India.

Whether Starbucks will collect a huge piece of the overall industry and accomplish its objective of India being among its best 5 markets over the long haul is not yet clear. It's still early days, yet for the organization, this appears to be an incredible beginning and a great globalization model for multinationals looking for an India section.

Products Of Starbucks Corporation

Aside from the typical items offered globally, Starbucks in India has some Indian-style item contributions, for example, Tandoori Paneer Roll, Chocolate Rossomalai Mousse, Malai Chom Tiramisu, Elaichi Mewa Croissant, Chicken Kathi Roll, and Murg Tikka Panini to suit Indian customers. All coffees sold in Indian outlets are produced using Indian broiled espressos by Tata Coffee. Starbucks additionally sells Himalayan packaged mineral water. Free Wi-Fi is accessible at all Starbucks stores.

starbucks fdi case study

In January 2017, Tata Starbucks presented Starbucks' tea image "Teavana". Teavana offers 18 unique assortments of tea in India. One of the assortments called the India Spice Majesty Blend was explicitly created for the Indian market and is just accessible in India. India Spice Majesty Blend is a mix of full leaf Assam dark tea injected with entire cinnamon, cardamom, cloves, pepper, star anise, and ginger. On 15 June 2015, Tata Starbucks reported that it was suspending the utilization of fixings that had not been affirmed by the Food Safety and Standards Authority of India (FSSAI).

The organization didn't indicate what the fixings were or which items they were utilized in. The organization additionally expressed that it was applying for FSSAI endorsement for these ingredients.

starbucks fdi case study

As per the Latte Index positioning of the expense of a tall hot latte at Starbucks in 44 nations, India was the fifth most costly nation to buy the drink dependent on January 2016 costs. The record distributed by US-based buyer research firm ValuePenguin found that a tall hot latte cost $7.99 in India, far higher than the $2.75 it costs in the least expensive nation, the United States, yet much lower than the $12.32 in the most costly nation, Russia .

Tata Starbucks propelled the Starbucks Delivers program in mid-2019. The administration offers home conveyance from Starbucks outlets through an organization with Swiggy. The administration was first propelled in Mumbai, with designs to turn it out to other cities.

In its menu, the Tata Starbucks company has launched ice-creams as their new products. The frozen delights are available even in flavours like java chip and caramel macchiato among others and will come in takeaway tubs and single scoops. The ice-creams are now available in 50-60% of the Starbucks stores.

Business Growth Of Starbucks Corporation Over The Years

Starbucks Revenue Over The Years

Tata Starbucks, a 50:50 joint endeavour between Tata Global Beverages and Starbucks Coffee of the US, has announced a 30%  top-line development in financial 2018-19, driven by new store openings and improved execution. Tata Starbucks, which is hoping to make back the initial investment in the current money, has opened 146 stores to date. Tata Starbucks announced "twofold digit top-line development - 30% for the entire year, driven by new stores and improved store execution," Tata Global Beverages Ltd (TGBL) said in a financial specialists' introduction. Tata Starbuck's income for 2018-19 is required to be approximately INR 450 crores.

TGBL said Tata Starbucks opened 30 outlets in the past financial year, out of which 15 new stores were opened during the last quarter of the money-related year. The organization claimed detailed benefits at the store level; all urban areas were likewise productive, and additionally saw an ascend in nourishment share in general deals.

The Starbucks company has added around 40 stores in FY21 but the company had recorded a 33% Y-O-Y  fall in its revenues during the same fiscal. According to the Sushant Dash, CEO of Tata Starbucks, the recovery that the company has seen after the second wave of COVID-19 was better than what it saw after the first wave of the deadly pandemic. The quarterly growth after Q2 FY22 was 120% more than what it saw during the same period in the previous fiscal. The company has hugely focused on home deliveries ever since the pandemic broke out. It has already addressed concerns associated with the spillage and other challenges pertaining to home delivery, which contributed to over 18% of the total sales that the company witnessed this fiscal, as per the reports in November 2021. Furthermore, the company has also added ice-creams to their menu in flavours like java chip and caramel macchiato. The Sanjeev Kapoor menu is another thing that has been freshly launched by Tata Starbucks. Besides, the company also launched a one-litre freshly brewed beverage and at-home coffee.  

starbucks fdi case study

Future Plans Of Starbucks Corporation

Tata Starbucks Pvt. Ltd. is looking to forcefully grow its impression in the Indian market with its eyes on the quickly spreading "espresso culture" among the twenty to thirty-year-olds and upwardly versatile customers. Tata Starbucks, a JV between US-based Starbucks Coffee Company and Tata Global Beverages Ltd, hopes to set up altogether more number stores this monetary than it did previously.

Starbucks is hopeful about solid business development in India throughout the following year as it means to leave red in monetary numbers after 2020. "Our proceeded with development in topline and reasonable methodology towards extension will enable us to accomplish make back the initial investment by March 2020," Navin Gurnaney, CEO, Tata Starbucks disclosed to Business Line in the wake of declaring five new stores in Gujarat - three in Ahmedabad and two in Surat. Gurney likewise included, "First time in quite a while, we are opening five stores in any state in one go.

Gujarat is a significant market for us. In the wake of opening these five stores on Thursday, the all outnumber of hides away goes up to 157 in India." Starbucks entered India with its first store opened at Mumbai in 2012. Of the 157, the organization has opened all out 11 stores so far in this financial, as against complete 30 stores opened during 2018-19. It takes into account 270,000 clients each week in India. The organization had announced a turnover of INR 442 crores for the monetary 2018-19.

"Espresso business in India is developing significantly. The espresso culture is being initiated by recent college grads, upwardly versatile, and individuals who travel and get brand. Two years back, we set up 25 stores (in a year). During the last financial 2018-19, we included 30 stores.

This year we will beat that number considerably and by end of March 2020, we will have included a lot a greater number of stores than we included in the past," Gurney said. With per store venture prerequisites being evaluated at INR 1.7-2 crores, the complete CAPEX plan by the organization works out in overabundance of INR 50 crores during current monetary on the off chance that it opens more number of stores than a year ago. Be that as it may, Gurnaney ceased from giving venture figures for 2019-20.

The organization is likewise open to different open doors for development including inorganic development through acquisitions. Be that as it may, when tested about any probability of a venture plan in the espresso chain Cafe Coffe Day (CCD), Gurnaney denied estimating any discussions for securing. "We are very hopeful about India. We will be attentively forceful (to extend). (At present) we are not in discussions with anyone for obtaining.

In any case, we are hoping to develop constantly," he included. With an end goal to upgrade the client experience, Starbucks is presenting new nourishment things, taking into account all client needs including breakfast and lunch. The income share from nourishment things is right now around 25%, even as it keeps on developing with new things to meet the client's needs.

Who founded Starbucks?

Starbucks was started by Hun Baldwin, Zev Siegl, and Gordon Bowker in 1971.

Where was the first Starbucks started?

Starbucks was started in Pike Place Market, Seattle, Washington, United States.

When was Starbucks started in India?

Starbucks was launched in India in 2012.

What is the revenue of Starbucks?

Starbucks revenue was recorded $29.02 billion in 2021.

How many Starbucks stores are there worldwide?

There are 33,830 Starbucks stores in the world as of 2021.

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Starbucks Corporation Foreign Direct Investment in Japan Essay (Article)

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Introduction

Starbucks foreign direct investment, works cited.

Starbucks Corporation is a leading coffee company in North America. The company‘s history dates back to 1971 when it started as a tiny sole coffee house with Gordon Bowker, Jerry Baldwin, and Zev Siegl as the pioneers. Within the first twenty five years of its operation, the company had only managed to expand internationally.

During this period, Starbucks opened several outlets for example in Chicago and also started producing other products for example Frappuccino beverages and Starbucks Ice Cream. It was not until the year 1996 that the company began oversees expansion with Japan being the first country where they set up their operations, followed by Hawaii and Singapore in the same year. In this paper, the foreign direct investment as a method of expansion adopted by Starbucks is going to be tackled.

Starbucks prepares products like coffee and supplies it to user across the globe. According to Aswathappa (p. g 100), the company has made huge investments all over the world.

The company started as a single store in Seattle over 30 years ago but today, Starbucks is a global roaster and retailer of coffee. The company currently operates in about 40 countries outside US having 13,000 stores in total. According to Aswathappa, “the investments made by starbucks in 40 countries outside US are typically of Foreign Direct Investment (FDI)” (Aswathappa pg. 100).

When Starbucks began its ventures abroad, the strategy used was licensing the format of the company to foreign operators. With time, they were disappointed because they lacked the full control over such a company and hence were not able to achieve their intended aim of producing the best quality coffee and its products and customer satisfaction.

Starbucks therefore adopted another method of venturing into international market: The foreign direct investment. Using this method, two patterns are involved. New operations investment method involves the setting up of business that was non existent in the foreign country. The other method is the fusing or purchasing of an already existing company in the country.

Starbucks has used both methods to expand internationally but has majorly used the second method. Joint venture with another company abroad gives it several advantages over the first method: the new operations investment method. This is because the second method is relatively cheap as there is no much cost involved in the setting up of factories but they use the already existing equipment of the company they are merging with.

The other advantage is that Starbucks shares responsibilities with the foreign company. The benefit from such a venture is mutual. Starbucks benefits from the foreign company’s familiarity with the local culture, language and other important factors like the political situation of the host country (Aswathappa p.g 101). On the other hand, the company benefits from Starbuck’s expertise and other important skills needed in the success of the business that both parties would not come up with on their own.

Starbucks has also ventured into oversees market through purchase of foreign companies. This also solves the problems of cultural disparity that could be a factor if they set up new operations in the country. Other problems like the high cost of purchasing and setting up of equipment are reduced.

Japan is an example of a country where foreign direct investment has worked for Starbucks. When Starbucks started its operations in Japan using the licensing method, they were disillusioned because they did not have the control they wanted over the company.

They later corrected this by having a joint venture whereby both companies had equal and shared responsibilities. Starbucks also offered to train the people working in the company by sending some of their employees there. The training would include customer service and other core values held by Starbucks.

Aswathappa, Kalupally. International Business 4E, chapter 4 . India: Tata McGraw-Hill Education, 2010. Web.

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Home » Management Case Studies » Case Study: Starbucks Resilient Turnaround Under Howard Schultz in 2008

Case Study: Starbucks Resilient Turnaround Under Howard Schultz in 2008

Founded in 1971 in Seattle, Starbucks had grown to become a respected global brand , present in 50 states in the US and 43 countries. However, its premium pricing was a considerable disadvantage during the economic slowdown. By March 2008, Starbucks had to close 600 underperforming stores, and its profit had plummeted by 28% compared to the same period in 2007. The following year saw another 300 store closures and 6,700 employees laid off. On January 8, 2008, Howard D. Schultz returned as CEO, taking over from Jim Donald. Schultz, who had been with Starbucks since 1982 and previously served as CEO from 1987 to 2000, found that rapid expansion had diverted the company’s focus from creating inviting cafes and developing new products .

Case Study Starbucks Turnaround Under Howard Schultz

Also, the company was insufficiently equipped within the framework of the newly emerged digital world . Stores were deprived of the opportunity to express their passion for high-quality coffee and service all over the world. In particular, the online space was not presented as a part of the company’s arsenal. In this regard, plenty of localized outlets, as well as coffee farmers, could not take part in the online discussion that arose after the memo written by Schultz about the company’s weaknesses was posted on the Internet. The above fact illustrated the need to join the global online community to remain successful.

Another factor faced by Starbucks was an overexposure that was seemingly the right course to pursue. However, there was a risk that the company might lose its uniqueness and become just another one of the usual coffee retailers. Although the company’s revenue growth was conspicuous, it became difficult to establish appropriate relationships with new partners and stores, as well as to manage the latter.

During the crisis, Starbucks also faced competition from McDonald’s and other fast-food giants. Customers did not understand why they should buy more expensive coffee. Consequently, Starbucks’ assets fell significantly, as both Dunkin’ Donuts and McDonald’s offered cheaper alternatives. As per the discussed article, the majority of factors were detected in 2007.

In 2008, Schultz noted that the company offered plenty of food. He did not like that the coffee stores sold a lot of food, as the smell of sandwiches interrupted the coffee aroma. The entrepreneur realized that coffee was what made Starbucks different from the fast-food chains, and thought about how to improve the technology of preparation. At the same time, too many products created a loss of value and confusion in customers. Also, financial metrics sounded alarm bells: The growth in the number of comp-store sales increased by only five percent, and the stock price decreased in 2008.

Thus, the stated factors impacting the decline of Starbucks showed an urgent need for transformation.

The Most Important Aspects of Starbucks Transformation

In his memo, Schultz pinpointed that the company needed to get back to its roots. Since its beginning in the 1970s, Starbucks has positioned itself as the third place, after home and work, where people can pleasurably spend their time. The smell of freshly ground coffee fills the brightly lit stores, where visitors can charge their laptops and phones from conveniently located sockets. In the majority of Starbucks coffee shops in the United States, and several other countries, there is the possibility of wireless Internet access. However, the desire to return to the roots, to some extent, contradicts the stated goal of opening 40,000 coffee stores all over the world.

The first initiative was devoted to the current state of the company in the United States, as the revenues from this part of the business were large. Consequently, Starbucks’ leadership was tasked to slow the quick pace of operations and close all underperforming stores.

Second, to revitalize intimacy with customers, Schultz tried to enhance the Starbucks Experience at the core of the company’s performance . However, the mentioned goal was abstract to some extent. It consisted of baristas’ attentive relationships with customers , seasonal offerings, and an excellent coffee aroma. Schultz emphasized that Starbucks’ competitive advantage was in the fact that it amazingly combined standardization, comprised of process, service, location, and branding, with an individual and attractive design. Coming to any coffee store, a person can see recognizable details and compelling solutions adapted for a definite location, while by contrast, the majority of competitors look too standardized.

Third, the organizational structure should be reorganized. For instance, while walking through New York City’s Chelsea neighborhood, Schultz saw a Clover coffee machine. According to Schultz, this was the best coffee he had tasted in 25 years of working for Starbucks. In 2008, Starbucks bought the manufacturer of that brand of coffee machines and began to set Clover in some of its coffee outlets. Also, IT capabilities, supply chain , and other organizational aspects should be reconsidered and adjusted to current requirements.

Trying to win among the new players in the market, Schultz firmly closed non-core divisions that had turned into a kind of flea market. Also, he revised the menu, removing the notorious sandwich with egg, and returned to Mastrena espresso machines that allowed customers to observe the process of coffee making. Schultz organized machines per serving, making the aroma of coffee stronger. The results were impressive. Customers rushed to Starbucks, and the stock rose. Not only trusting customers but also cautious investors believed that the spirit of transparency and open environment reigned at Starbucks for a long time. Thus, Starbucks confidently solved two key challenges: financial stability and understanding its customers.

The described transformation was crucial for Starbucks to survive in the context of a rapidly changing environment. Otherwise, the company could have lost its position in the U.S. market and turned into a typical coffee shop. Schultz used to say that if the barista was just repeating memorized actions without worrying about the taste of the beverage, it meant that Starbucks had lost the purpose for which it was created 40 years ago—inspiring people. The company’s mission is not to fill stomachs but to fill souls. Here it is, the secret of Starbucks’ success .

Speaking of the generalization of these ideas, it should be stressed that each country has its peculiarities that should be taken into account during the expansion. As an example, one might consider China’s coffee market. It was necessary to save the brand and satisfy the local community, as well. Therefore, the company supported the development of Arabica coffee in the Yunnan Province of China, for example. However, the Chinese needed the kind of place where they could meet with friends and family and have a great time.

Starbucks is “Redefining the Role of a For-Profit Company”

Schultz stated that Starbucks was “redefining the role of a for-profit company”. This statement meant that he wanted to integrate profit stimulus with social consciousness. In other words, the leadership strategy addressed plenty of issues, beginning with the appropriate healthcare services for those employees who worked more than 20 hours per week, up to investment in environmental sustainability.

From the very beginning of his work for Starbucks, Schultz devoted much attention to personnel. There are two things on which he did not scrimp: the quality of coffee, and health insurance for employees. This rule was valid even in times of crisis when the company needed to cut its costs. As in most chain retailers, most of the coffee shop workers are young people, such as students and those who are saving money to continue their education.

As one might note from the above example, Starbucks is seizing a plethora of opportunities in the framework of corporate responsibility . Furthermore, Starbucks pursues a policy of social responsibility in all aspects of its business . This applies to the selection of suppliers of coffee and includes compliance with human rights and labor standards.

For instance, Starbucks supports the Conservation International organization, encouraging sustainable technologies in agriculture and protection of biodiversity through innovative approaches to the production of coffee. The results of the program showed an increase in revenues and the number of coffee plantations located in an area of tropical forests, without damaging biodiversity. Additionally, the coffee chain sells only “fair trade” coffee. This means that the products sold were made without the use of child labor, and comply with social and health standards.

The company has always believed that Starbucks should and can have a positive impact on society. Therefore, the operation of the company keeps a continuing focus on corporate social responsibility :

  • Starbucks works with non-profit organizations to assist them in achieving objectives focused on the improvement of education, health, housing, security, and employment;
  • Starbucks allocates grants for young professionals, attracting thousands of people per year, and considering these investments a significant contribution toward changing the world for the better— the creation of a successful business , as well as social non-profit organizations investing in skills and promoting the improvement of the world’s economy;
  • Starbucks supports social projects aimed at the development of communities that produce coffee, tea, and cocoa. Projects include improvement of access to education and agricultural training, development and preservation of biodiversity, and enhancement of the level of health standards, health care, food, and water.

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Starbucks' Foreign Direct Investment - Case Study Example

Starbucks Foreign Direct Investment

  • Subject: Management
  • Type: Case Study
  • Level: Undergraduate
  • Pages: 2 (500 words)
  • Downloads: 39
  • Author: fbartell

Extract of sample "Starbucks' Foreign Direct Investment"

Starbucks Foreign Direct Investment ID Number & Total Number of Words: 534 Q Initially Starbucks expanded internationally by licensing its format to foreign operators. It soon became disenchanted with this strategy. Why?The first country where Starbucks had first expanded its business internationally was in Japan. Back then, Starbucks expanded its business internationally by allowing its foreign operators to license its business format. It was only on the later part when Starbucks started realizing that the use of “pure licensing agreement” does not guarantee that Starbucks’ foreign operators will comply with the business formula that was initially developed by Starbucks.

To ensure that Starbucks’ foreign operators will be able to imitate and deliver the “Starbucks experience” in a foreign country, the company decided to consider entering into a “joint-venture” agreement with the foreign business partners. By doing so, it was easier on the part of Starbucks to transfer its business culture and practice to Japan. This was done by instructing some American employees to train the newly hired workers in Japan. By teaching the foreign workers on how Starbucks is making their coffee, the company was able to extend the Starbucks atmosphere in a foreign land.Q.2 Why do you think Starbucks has now elected to expand internationally primarily through local joint ventures, to whom it licenses its format, as opposed using to a pure licensing strategy?

Starbucks decided to enter into a joint-venture agreement with its pre-selected foreign business partners. As a common knowledge, Starbucks is new in a foreign country. Therefore, it would be very difficult on the part of Starbucks to gain sufficient knowledge about the business licensing requirements in Japan, its existing labor policies, and the business culture in Japan among others (Morrison et al., 2008, p. 56). By taking advantage of the joint venture agreement, it will be so much easier on the part of Starbucks to learn more about the Japanese market.

Likewise, joint-venture will also help the company remove barriers related to cultural and language differences (Kreitner & Cassidy, 2011, p. 96). Without losing Starbucks’ control over its foreign business partner, the joint-venture agreement will make it easier for Starbucks to establish a strong business relationship with its potential suppliers. Q.3 What are the advantages of a joint-venture entry mode for Starbucks over entering through wholly owned subsidiaries? On occasion, Starbucks has chosen a wholly owned subsidiary to control its foreign expansion (i.e. in Britain and Thailand). Why?Among the advantages of joint-venture agreement includes allowing Starbucks to share the risks of operating its business in a foreign market like the Britain and Thailand (Schermerhorn, 2010, p. 383). In case Starbucks’ target consumers in a foreign land do not patronize Starbucks’ products and services, the company will share its business loss with its foreign business partner.

Starbucks’ decision to choose a wholly-owned subsidiary is to gain full control over its business in a foreign land (Neelankavil & Rai, 2009, p. 138). For the price of $84 million, Starbucks decided to acquire Seattle Coffee in Britain. Since the coffee chain was already successfully establish a total of 60 retail store outlets, Starbucks did not experience any difficulty in trying to introduce the concept of “Starbucks experience” in Britain. After Starbucks entered into a licensing agreement with Coffee Partners (in Thailand), the company encountered some problems with regards to raising funds for its business expansion.

To gain more control over the business expansion in Thailand, Starbucks decided to acquire Coffee Partners for $12 million. Q.4 Which theory of FDI best explains the international expansion strategy adopted by Starbucks? The FDI theory that best explains the international expansion strategies that were adopted by Starbucks is similar to internalization theory. Aside from analyzing the imperfections of a foreign market (i.e. political barriers, etc.) (Moosa, 2002, p. 33), this theory explains why some companies avoid entering into pure licensing agreement (Rugman, 1996, p. 49). ReferencesKreitner, R.

, & Cassidy, C. (2011). Management. Mason, OH: South-Western Cengage Learning.Moosa, I. (2002). Foreign Direct Investment: Theory, Evidence and Practice. New York, NY: Palgrave.Morrison, S., Cooke, J., et al. (2008). U.S. and Chinese Engagement in Africa: Prospects for Improving U.S.-China. Washington, DC: CSIS.Neelankavil, J., & Rai, A. (2009). Basics of International Business. New York, NY: M.E. Sharpe, Inc.Rugman, A. (1996). The Theory of Multinational Enterprises: The Selected Scientific Papers of Alan M.

Rugman, Volume 1. Glos: Edward Elgar Publishing Company.Schermerhorn, J. (2010). Exploring Management. Danvers, MA: John Wiley & Sons.

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Case Study Analysis: Starbucks Foreign Direct Investment

1. Discuss the relationship between data, information, and knowledge. Support your discussion with at least 3 academically reviewed articles.

2. Why do organization have information deficiency problem? Suggest ways on how to overcome information deficiency problem.

Introduction

Describe about the case study analysis for starbucks foreign direct investment.

Generally, when global corporations explore entering global markets, they employ entrance methods such as licencing, franchising, joint ventures, and mergers and acquisitions. For instance, ‘Pierre Cardin’ expanded their global business by sheer licencing, while Mcdonald’s leveraged its innovative franchising model becoming the world’s biggest store. As a result, a strategic mix of entrance techniques might be considered a key component for giant enterprises seeking to expand into new regions.

While Starbucks began to increase its customer base outside of the U. S., “cafe culture” didn’t even exist in many nations, especially Countries in Asia. As a consequence, Starbucks needed to promote coffee culture, and the company used a marketing technique known as “Cult-duct” to do so. As a result, Starbucks made the decision that capital investment, joint – venture, and entire businesses, rather than leasing and partnerships, would be more suitable for delivering not only physical assets such as coffee and biscuits but also a perfect coffee culture symbolised by a metropolitan and classy picture (Ivankoe 2015). Starbucks has efficiently managed to handle its efficacy is a key, such as high-quality espresso, monthly training of employees in customer support, and shop managerial know, throughout this approach.

The Coffee Bean & Tea Leaf

In regards to foreign business, several of Starbucks’ rivals have picked a different way. “The Coffee Bean & Tea Leaf” is an amazing illustration (hereafter, The Coffee Bean). For overseas operations, The Coffee Bean has revised its franchising strategy. The Coffee Bean operates around 745 cafés in 20 countries as of 2008. It has approx. 279 cafés under direct control and 444 cafés run by franchisee.

When a business enters into a licencing agreement with a license holder, it has access to the licensor’s copyrights, understand exactly, trademark rights, and technologies. Franchises, on the other hand, permit franchisees to seek support from the licensee in aspects of management and operations, operating mechanisms, and marketing (Ivankoe 2015). In other terms, the franchisor may be intimately engaged in the operations of the franchisor.

  • Licensing can be understood as an external business transaction that involves the acquisition of property rights and technological licenses for a price. It is a non-equity technique of international expansion that is frequently adopted by businesses because of the licensor’s very minimal risk and cost. The fundamental issue with licencing, meanwhile, is limited control on licensee’ processes (Ivankoe et al 2016). It’s particularly necessary for Starbucks, because the successful internationalisation of its “Starbucks Formula,” which is focused on delivering quality goods, empowering staff, and providing a great customer experience, is dependent on the proper application of its “Starbucks Formula”. Starbuck’s concern with licencing and its limited control arose from the firm’s global expansion into geographic regions that were diverse from the US both in terms of market development and improvement (Ivankoe et al 2016). As a result, the business continued to explore different globalization approaches, such as strategic partnerships (Japan) or perhaps even expanding through its own branches.
  • The major benefit of strategic partnerships over mere licencing is that Starbuck can retain strong control throughout its new ventures. Starbucks can preserve ultimate control over its operations worldwide while mitigating risk and getting speedy access to markets by close collaboration with its external partner to achieve joint objectives. In addition, strategic alliances are beneficial in areas where no market players are capable of fulfilling the parameters for developing a Starbuck licence. Starbuck may certainly assist partnerships by giving information and sharing resources by establishing strategic partnerships.
  • Starbucks evaluated the massive benefits of Jvs over integrating via an owned subsidiary while deciding on their entry strategy. First, by pooling investment risk and internationalisation costs with the joint venture company, strategic alliances assist in reducing these. Second, strategic alliances provide leverage to the partner’s specific market expertise and market position. As a result of the collaboration with Sazaby Inc., Starbuck now has exposure to the Japanese company’s distribution system. Strategic alliances, on the other hand, bring with them a range of risks.

As a result, it may lead to the loss of management control by the parent company, exploitative behaviour by the local presence, or even confrontation. Strategic alliances are also inappropriate in underdeveloped markets where selecting the ideal partner is challenging. Starbucks decided to penetrate these nations through its own subsidiaries in such situations (Ivankoe et al 2016). If the approach focuses on the acquisitions of a rival company, this entrance mode provided for the greatest command over processes, as well as the reduction of competitors and the earliest entry into the market. Furthermore, the subsidiary company assist to minimize the chance of firm know-how and expertise being disseminated, protecting Starbuck’s specialist knowledge from being propagated.

  • The internationalisation principle could be used to analyze Starbucks’ approach for overseas operations. The requirement for supervision, accessibility to know-how and local supermarket expertise, and the significance of tacit capacities are all factors to be considered when picking the right entrance strategy. The first reason describes why Starbucks decided to pursue certain countries, such as the UK and Vietnam, by acquiring local players and forming branches. Starbucks leveraged joint ventures for its internationalisation plans for the second and third causes, correspondingly.

Strategic alliances were more acceptable than different forms that needed less engagement in terms of funding and risks because of the relevance of implicit characteristics such as employees ’ motivation and the potential to produce distinctive consumer experiences (Amati 2006). Further, the requirement for local supermarket expertise, which may have been obtained and absorbed faster via strategic partnerships instead of through mere licencing, might probably explain the adoption of JV.

Firstly, should Starbucks confine its FDI to India? As already said, it has suffered from red tape. Finally, they are still unable to access the Market in India, although their rivals have done so.

Secondly, was this a wise decision for Hollys Coffee to explore the franchise market while also pursuing a strategy of offering Korean Traditional coffees? Logically, it would not use the FDI mode of entry because it is unknown and unfamiliar with the local environment. Isn’t it, nevertheless, incompatible with 2 ill-advised techniques?

Each mode of entry has its own blend of upsides and downsides. As a consequence, it is vital to select a mode of entry that is adequate with each corporate structure. Although the business will be the same, this could be risky to access every country with much the same mode of entry. The issue that Starbucks had in India, as well as the problems that Hollys Coffee is expected to encounter, demonstrate how perilous it is.

As a consequence, even if a business intends to spread its same business globally, it is suggested that it use multiple entrance tactics based on every country’s rules, cultural, political, financial, and psychosocial factors.

Amati, A. (2006).  Ownership and control of foreign direct investments  (Order No. 3243325). Available from ProQuest One Business. (305305243). Retrieved from https://www.proquest.com/dissertations-theses/ownership-control-foreign-direct-investments/docview/305305243/se-2?accountid=30552

Ivankoe, J. (2015).  Starbucks: In the front row, partner (employee) & digital investments paying off.  (). New York: JPMorgan Chase & Company. Retrieved from ProQuest One Business Retrieved from https://www.proquest.com/reports/starbucks/docview/1730617685/se-2?accountid=30552

Ivankoe, J., Barbarula, M. J., & Alex Mergard, C. (2016).  Starbucks: Relieving, given all the worry. starbucks offers growth at A reasonable price.  (). New York: JPMorgan Chase & Company. Retrieved from ProQuest One Business Retrieved from https://www.proquest.com/reports/starbucks/docview/1837932089/se-2?accountid=30552

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