Strategic Management Case Solution : Planet Starbucks
Q1.How is the company creating value for its shareholders by pursuing an international expansion strategy?
By expanding internationally, Starbucks is creating value for its shareholders in three ways.
The first way is by increasing the cost efficiency of its operations. This is because in some countries it may be cheaper to carry out the operations due to difference in the economic level of the countries. Therefore, by trying out new countries, some of which are cheaper to carry out its operations, the company is creating value for its shareholders through cost effective operations.
Secondly, it is doing so by gaining new customers. Through submitting into international markets, the company has involved new customers and this subsidizes to more sources of proceeds, even for shareholders.
Thirdly, the company is following global customers and this has earned it an international recognition. Every shareholder would want to be related with an internationally recognized company.
Q2. Using the global strategy framework outlined in this chapter, would you classify Starbucks as a localization, international, global standardization, or transnational enterprise?. Do you think it has the right strategic posture?
Using the global strategy framework outlined in this chapter, would you classify Starbucks as an international enterprise. We know that an international business has many options for doing business, it includes,
1. Giving license to produce goods in the host country.
2. Starting a joint venture with a company.
3. Opening a branch for producing & distributing goods in the host country.
4. Providing managerial services to companies in the host country.
5. Exporting goods and services.
From these Starbucks used many of them.
Q3.Why do you think Starbucks has used joint ventures with local companies to enter many foreign market?
I believe Starbucks has used joint ventures with local companies to help reduce the risk. Since local companies also had some stake in the company it benefits Starbucks to have a partner who knows that local market and who also has economical interest in seeing the company succeed. This shows that entering into joint ventures in international territories can help facilitate growth and lessen the financial burden if international ventures happen to fail.
Starbucks also considered following points:
§ Starbucks required all managers and employees to attend the same training provided to U.S. Managers.
§ The JV use the same store design and menu.
§ The local companies provided Starbucks with a local connection to the market.
Q4. Why do you think that Starbucks chose Japan as its first foreign market? Why did it pick Britain as its second? Why did the company wait until 2002 to open its first stores on the European mainland?
I think one of the reasons the company selected Japan as its starting point was that Japan was the third-largest coffee-consuming nation in the world on that time. So, Starbucks had a significant opportunity to leverage the equity of its brand, as most of the coffee being consumed in Japan was not of the quality of Starbucks.
The UK speciality coffee market had been growing rapidly, with chains like Coffee Republic and Costas springing up throughout metropolitan areas. Starbucks’ top management was eager to enter into the UK as the springboard to explore the rest of the European market. Thus, Starbucks decided to acquire Seattle Coffee Company, form a wholly-owned subsidiary, and enter the UK market. The company hoped to capitalise on the growing attraction of coffee houses in Britain, where customers pay up to £2 ($3) for a cappuccino or mocha latte.
Starbucks waited until 2002 to open its first store on the European mainland because they did not find a perfect partner to start their business.
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