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Starbucks Foreign Direct Investment

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by

Hang Xiao

on 24 February 2014

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Transcript of Starbucks Foreign Direct Investment

Starbucks Foreign Direct Investment
Starbucks in United States
Starbucks in Japan
1996 First store in Japan
Starbucks in Britain
1998 Purchased Seattle Coffee (British coffee chain
with 60 retail stores) for $84M

Starbucks in Asia
"Asia invasion" :
Taiwan, China, Singapore, Thailand, South Korea, and Malaysia
1971 First store in Seattle's Pike Place Market
1995 Almost 700 stores across the United States
Rapid growth
1982 Howard Schultz joins Starbucks
1984 Howard convinces the founders of Starbucks to test the
coffeehouse concept
Success formula
- Specialty premium coffee
- The third place between home and work
- Employee motivation
- Marketing strategy
- Community involvement
- Tight control

2001 Introduced a stock option plan for employees
2010 Rapidly expanded and reached 877 stores
Q1: How and why did Starbucks' initial foray into foreign markets differ from its domestic operation?
Most common strategy:
licensing success format

Joint venture
Wholly owned subsidiaries
Q2: Why did Starbucks change its expansion strategy in Asia?
Starbucks in Europe
- First entry point: Switzerland
- Joint venture with Bon Appetit Group
Q3: Starbucks' next target market is mainland Europe, including France and Italy. What challenges do you anticipate Starbucks will face in these markets? How should Starbucks approach the markets?
Takeaways
Hang Xiao
Fei Zheng
Shi Chen

Thank You !

Questions & Comments ?
“We aren't in the coffee business, serving people.
We are in the people business, serving coffee.” --- Howard Schultz, CEO
FDI is preferred when your competitive advantage is not just based on the products
Think about if you have what it takes to go global......
Coffee culture differences
-Customer preference
Wholly Owned Subsidiary (e.g. Thailand)
very safe and profitable/lack of JV partners

100% profit
eliminate competitions
protect itself from losing valuable know-how


-Coffee drinking habits
-build the Starbucks experience
to appeal a variety of
European tastes
-many fine coffee brands
-customer brand loyalty
Might fail to make profit in Europe
-high costs
Joint venture

lower the risk of government interference
put many of the new stores
in airports, railway stations
or shopping mall
-high competition
1) Gain benefits from local partner's knowledge of their culture, language, political systems, and business systems
2) Have an access to larger funds and are allowed to share high costs
3) Share risks with co-venturer in case they encounter any problems or end up in deep troubles
Comparing to Licensing:
greater control
full control
1995 Established a joint venture with Sazaby Inc. and licensed format to the venture
How differ?
- Established a joint venture and licensed its format to the venture
And Why?
Challenges
Approaches
-increase sitting space
-upscale stores
Full transcript