Maria Risholm, Salomon Sacal, Kamel Ait El Hadj, Geraldo Carvalho & Yanee ZhangMaria Risholm, Salomon Sacal, Kamel Ait El Hadj, Geraldo Carvalho & Yanee Zhang

Starbucks

Mission: to inspire and nurture the human spirit – one person, one cup

and one neighborhood at a time

Who? Seattle 1971 1984 coffehouse conseptIPO in 1992Market Capitalization: US $18.6Bn

Where?More than 50 countries and 16,700 stores

Source: www.starbucks.com, http://finance.yahoo.com/

Starbucks’ Success Formula Motivated employees = superior customer

service

Focus on recruiting & developingAttractive compensation policies

○ Stock options○ Medical benefits

Internationalization Licensing Lack of control

Strategy AlternativesLocal Joint-Venture (licensed format)Acquisition (Wholly owned)Greenfield investment (Wholly owned)

Local joint venture = Preferred Strategy

Local Joint-Venture Advantages

Control

A facility entry into foreign market

Shared fixed costs &  associate risks

Local partner’s knowledgeCompetitive conditions, Culture, Political system, etc.

Approaches and Acquisitions in Countries such as : (EMEA)

•Japan – “ スターバックス (transliteration: sutābakkusu), and the abbreviation スタバ is also used as slang”

•Thailand – ” สตาร์�บั�คส� pronounced [satāːbākʰ]”

•Europe

- Joint Ventures and Parameters

Source: http://news.starbucks.com/article_display.cfm?article_id=378

“International operating margin improved to 7.7%, from 1.4% in Q2 FY09”

Starbucks in China:Objective:Develop the largest overseas market in China

Current Situation:

700 coffee stores in Greater China(PRChina, HK, Macau,

Taiwan) , including over 360 in mainland China (2009)

10% of Starbucks’ US$ 6.4 global sales (2005)

A growth of 30% in Beijing recent years and in Shanghai,

less than 2 years, net profit reached 4 million dollars

Licensing and Joint Venture

Ownership Structure:

Shanghai Uni-President Starbucks Coffee Ltd

Licensing: Unable to regulate the cash flow

Joint Venture: Lack of controlling stakes results in the weak

management control

The three individual companies work independently within their own regions. Unable to help to achieve Starbucks' national expansion plans.

Problems:

Solutions:

Whole ownership: Changzhou, Chengdu, Chongqing, Dalian, Dongguan, Foshan, Hangzhou, Kunshan, Nanjing, Ningbo, Qingdao, Shaoxin, Shenyang, Shenzhen, Suzhou, Tianjin, Wuxi, Wuhan and Xi’an.

Starbucks Greater China Support Center in Shanghai (2005)

Other advice for the expansion:

Develop new products

Tea drinks

Social responsibilities:

Starbucks China Education Project (US$5 million)

China Soong Ching Ling Foundation

China Women Development Foundation

Chengdu Education Foundation

2008 Sichuan Earthquake relief ($100,000)

Theoretical patterns

Internalization/market imperfections theory

Licensing system is flawed: (1) limited or no control over the licensee and (2) Starbucks’ specific culture cannot be licensed

Greenfield investments

Dunning’s Eclectic paradigm

Source: International Business, Charles W.L. Hill, McGraw-Hill 7th ed.

Conclusion

No strategy fits all models

Main factors to take into consideration when selecting a course of action: (1) immaterial elements (2) level of control