Coffee and Starbucks
“Starbucks FDI”
Case Study
1. Initially Starbucks expanded internationally by licensing its format to foreign operators. It soon became disenchanted with this strategy. Why?
Because this strategy did not give Starbucks the control needed to ensure that the licensees closely followed Starbucks’ successful formula.
Note: “Starbucks successful formula” refers to its basic strategy, which was:
To sell the company’s own premium roasted coffee, along with freshly brewed espresso-style beverages, a variety of pastries, coffee accessories, teas, and other products, in a tastefully designed coffeehouse setting also providing superior customer service.
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 to a pure licensing strategy?
I am sure it is one of the most important Starbucks’ strategies: to license its format to foreign operators and also establishing local joint ventures with them. This fact (as I said before) gives Starbucks the control to be sure that licensees are following its success formula; “licensed to the venture” means that both joint owners have the responsibility for growing the business (Starbucks) presence where it has established.
For example: at the beginning Starbucks decided to enter to Japan by licensing its format to foreign operators, but later it become a bad decision because Starbucks did not have the authority to control this new business was still following Starbucks successful formula. It is when Starbucks improved this situation adding to the license a joint venture, so both companies which participated as joint owners had the commitment and responsibility to work together in order to get the best result=sales.
So it is clear Starbucks’ strategies had been innovated, in the way that it doesn’t want to affront directly a new business in other countries, Starbucks has been operating in foreign markets by
Case Study
1. Initially Starbucks expanded internationally by licensing its format to foreign operators. It soon became disenchanted with this strategy. Why?
Because this strategy did not give Starbucks the control needed to ensure that the licensees closely followed Starbucks’ successful formula.
Note: “Starbucks successful formula” refers to its basic strategy, which was:
To sell the company’s own premium roasted coffee, along with freshly brewed espresso-style beverages, a variety of pastries, coffee accessories, teas, and other products, in a tastefully designed coffeehouse setting also providing superior customer service.
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 to a pure licensing strategy?
I am sure it is one of the most important Starbucks’ strategies: to license its format to foreign operators and also establishing local joint ventures with them. This fact (as I said before) gives Starbucks the control to be sure that licensees are following its success formula; “licensed to the venture” means that both joint owners have the responsibility for growing the business (Starbucks) presence where it has established.
For example: at the beginning Starbucks decided to enter to Japan by licensing its format to foreign operators, but later it become a bad decision because Starbucks did not have the authority to control this new business was still following Starbucks successful formula. It is when Starbucks improved this situation adding to the license a joint venture, so both companies which participated as joint owners had the commitment and responsibility to work together in order to get the best result=sales.
So it is clear Starbucks’ strategies had been innovated, in the way that it doesn’t want to affront directly a new business in other countries, Starbucks has been operating in foreign markets by