Starbucks’ International Operations Case Study
1. Analyze entry strategies adopted by Starbucks.
Starbucks adopted three different entry strategies: licencing, joint ventures and wholly owned subsidiaries. Looking at the list of the countries in which the company is present and modes of entry to each of them, we can notice that a company hardly ever decides to open their own subsidiary. It is understandable, as this mode of entry is connected with highest risk and costs. Starbucks was able to use this strategy in Canada because of some similarities to the American market. Taking into account small geographical distance between the countries, similar history and culture as well as customers’ values and lifestyles, and the same language, Starbucks could have decided that the risk is relatively low or that they can manage it easier, as they understand the environment better. The benefit was that the company retained full control over the business.
One of the first regions where Starbucks decided to expand its business was Asia Pacific rim. To enter this market the company used two strategies: joint venture and licensing. These strategies are not as risky as direct investment, because less capital is required and risk is shared between business partners, so they were more suitable for countries with large cultural distance from the USA and very different consumer behaviour. Customers are also more likely to perceive a company as ‘an insider’ and accept the new brand (Starbucks wasn’t very well known in some of the countries). However, the success of expanding into foreign markets, in this case, depends on ability to find the right local partners. Starbucks chose them very carefully and later profited from their experience, knowledge of the market and already established distribution framework. Thanks to suggestions made by local partners, Starbucks was able to succesfully incorporate local differences into a global strategy. Joint ventures allowed the company to grow without spending too much money and taking
Starbucks adopted three different entry strategies: licencing, joint ventures and wholly owned subsidiaries. Looking at the list of the countries in which the company is present and modes of entry to each of them, we can notice that a company hardly ever decides to open their own subsidiary. It is understandable, as this mode of entry is connected with highest risk and costs. Starbucks was able to use this strategy in Canada because of some similarities to the American market. Taking into account small geographical distance between the countries, similar history and culture as well as customers’ values and lifestyles, and the same language, Starbucks could have decided that the risk is relatively low or that they can manage it easier, as they understand the environment better. The benefit was that the company retained full control over the business.
One of the first regions where Starbucks decided to expand its business was Asia Pacific rim. To enter this market the company used two strategies: joint venture and licensing. These strategies are not as risky as direct investment, because less capital is required and risk is shared between business partners, so they were more suitable for countries with large cultural distance from the USA and very different consumer behaviour. Customers are also more likely to perceive a company as ‘an insider’ and accept the new brand (Starbucks wasn’t very well known in some of the countries). However, the success of expanding into foreign markets, in this case, depends on ability to find the right local partners. Starbucks chose them very carefully and later profited from their experience, knowledge of the market and already established distribution framework. Thanks to suggestions made by local partners, Starbucks was able to succesfully incorporate local differences into a global strategy. Joint ventures allowed the company to grow without spending too much money and taking