Coffee and Starbucks
STARBUCKS INTERNATIONAL OPERATIONS - CASE STUDY 1 -
1. Analyst felt that MNCs can mitigate some of the risks in international markets by deciding on a suitable mode of entry into these markets. Analyze the entry strategies adopted by Starbucks for its international expansion.
ANSWER: Starbucks noticed that different socio-economic-cultural environments require different entry mode strategy. Combining 2-3 or more of the known internationalizing strategies is useful because the risk is divided and minimized without affecting negatively the results. When the present company or any other decides to enter an overseas market, there are a variety of options open to it. These options vary with cost, risk and the degree of control which can be exercised over them. Starbucks chose the most complex forms of entry strategies so that it could have as much control as possible and retrieve all the gains. Joint ventures can be defined as "an enterprise in which two or more investors share ownership and control over property rights and operation". Joint ventures are a more extensive form of participation than either exporting or licensing. Joint ventures give the following advantages: - Sharing of risk and ability to combine the local in-depth knowledge with a foreign partner with know-how in technology or process - Joint financial strength - May be only means of entry and - May be the source of supply for a third country. They also have disadvantages: - Partners do not have full control of management - May be impossible to recover capital if need be - Disagreement on third party markets to serve - Partners may have different views on expected benefits - Cultural clashes and - How and when to terminate the relationship. Such alliances are favorable when the partners’ size, market
1. Analyst felt that MNCs can mitigate some of the risks in international markets by deciding on a suitable mode of entry into these markets. Analyze the entry strategies adopted by Starbucks for its international expansion.
ANSWER: Starbucks noticed that different socio-economic-cultural environments require different entry mode strategy. Combining 2-3 or more of the known internationalizing strategies is useful because the risk is divided and minimized without affecting negatively the results. When the present company or any other decides to enter an overseas market, there are a variety of options open to it. These options vary with cost, risk and the degree of control which can be exercised over them. Starbucks chose the most complex forms of entry strategies so that it could have as much control as possible and retrieve all the gains. Joint ventures can be defined as "an enterprise in which two or more investors share ownership and control over property rights and operation". Joint ventures are a more extensive form of participation than either exporting or licensing. Joint ventures give the following advantages: - Sharing of risk and ability to combine the local in-depth knowledge with a foreign partner with know-how in technology or process - Joint financial strength - May be only means of entry and - May be the source of supply for a third country. They also have disadvantages: - Partners do not have full control of management - May be impossible to recover capital if need be - Disagreement on third party markets to serve - Partners may have different views on expected benefits - Cultural clashes and - How and when to terminate the relationship. Such alliances are favorable when the partners’ size, market