The success of the company can be attributed to aggressive expansion and product innovation.
Although Starbucks was having great success in the United States, they decided to expand into the international market. They formed Starbucks Coffee International, which was a wholly owned subsidiary. Entering into the international market has not been the easiest for the Starbucks Company. In 2003 they reported a loss of $3.9 million in the Japanese market and were also performing badly in the European and Middle East market. Since the domestic market is so saturated, Starbucks needs to look at ways to improve their international market strategy.
Finding of Facts and Recommendations/Justifications
Fact #1: Starbucks expanded into the international markets by using a three-pronged strategy: joint ventures, licensing, and wholly owned subsidiaries.
Recommendation/Justification: There were many good reasons that Starbucks chose these three strategies for international expansion. Starbucks entered into a joint venture with Sazaby Inc. to open stores in the Japanese market. This joint venture allowed Starbucks to own stake and play a role in the management of the foreign operation. One advantage of this was that they were able to learn from this local partner because they had a good knowledge of Japanese coffee drinking habits. From this knowledge Starbucks was able to offer other products such as Green Tea Frappucino to their Japanese customers. Some disadvantages of joint venture are that there is a lack of control over technology, and the inability to realize location and experience economies. Although there were good reasons for using the three pronged strategy, analysts observed that Starbucks was unable to earn enough revenues from their international operations because of complex joint ventures and licensing agreements. Starbucks should consider the option of franchises in their international market. A franchise would shift the financial ri View More »