International Business Strategy: Starbucks Corporation

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International Business Strategy Starbucks
Corporation
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Were not in the coffee business serving people.
Were in the people business serving coffee."
Howard Behar, President of Starbucks
International
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STARBUCKS Expansion intoSão Paulo, Brazil
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• Introduction and Company Overview
• Starbucks Products and Ventures
• Why Expand into Brazil?
• Starbucks Expansion Philosophy
• Mode of Entry
• Finances
• Conclusion

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• Introduction and Company Overview
• Starbucks Products and Ventures
• Why Expand into Brazil?
• Starbucks Expansion Philosophy
• Mode of Entry
• Finances
• Conclusion

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Introduction

• Starbucks strives to become the most recognized
  and respected coffee retailer in the world
• Expansion of international operations is key to
  furthering Starbucks position in the coffee
  industry

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Company Overview

• Starbucks History
• Founded 1971 in Seattle, WA
• Named after first mate in Moby Dick
• Early on roasted and sold coffee beans
• 1980s began selling coffee by the cup

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Company Overview

• Starbucks History
• 1987 - Howard Schultz bought Starbucks
• Schultz introduced the Starbucks Experience
• 1992 - 165 locations nationwide
• 1996 - International expansion began

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Company Overview

• Starbucks Today
• 6.4 billion in revenue
• Serving over 35 million patrons
• More than 7,500 shops in the US
• Operating 3,000 plus shops in 36 foreign
• countries

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• Introduction and Company Overview
• Starbucks Products and Ventures
• Why Expand into Brazil?
• Starbucks Expansion Philosophy
• Mode of Entry
• Finances
• Conclusion

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Starbucks Products

• STARBUCKS stores offer regular and decaffeinated
  coffee beverages, teas, pastries, muffins, and
  other breakfast foods

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Starbucks Ventures
Starbucks DuettoTM Visa
EthosTM Water
Starbucks Frappuccino
Starbucks ice cream
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• Introduction and Company Overview
• Starbucks Products and Ventures
• Why Expand into Brazil?
• Starbucks Expansion Philosophy
• Mode of Entry
• Finances
• Conclusion

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Why Expand into Brazil?

• Strong coffee culture
• Favorable political climate
• Large Economy
• Other American corporations success

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Strong Coffee Culture

• Coffee has been harvested since the early 1700s
• Café Mana Morning Coffee
• Largest producer of coffee beans twice as much
  as the 2nd runner up - Vietnam
• Soon to be the 2nd largest consumer behind
  the U.S.

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Favorable Political Climate

• Democratically elected President
• Strong diplomatic ties with the U.S.
• Current presidents focuses on economic
  expansion and encourages foreign investment

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Large Economy

• Largest economy in South America
• GDP approximately 620 billion and growing
• 5th most populated country in the world
• Over 186 million people

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American Corporate Success in Brazil

• Coca Cola 1940s
• McDonalds 1960s
• Most American Corporations outside U.S.

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• Introduction and Company Overview
• Starbucks Products and Ventures
• Why Expand into Brazil?
• Starbucks Expansion Philosophy
• Mode of Entry
• Finances
• Conclusion

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Starbucks Expansion Strategy

• Wheel and Hub expansion method
• São Paulo will be the hub
• Spoke out into the rest of Brazil and beyond

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• Introduction and Company Overview
• Starbucks Products and Ventures
• Why Expand into Brazil?
• Starbucks Expansion Philosophy
• Mode of Entry
• Finances
• Conclusion

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Mode of Entry

• Foreign Direct Investments
• Licenses
• Joint Ventures

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Mode of Entry
Joint Venturing with
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Mode of Entry

• Worlds second largest retailer
• 7,000 stores internationally
• Creator of hypermarket
• 99 hypermarkets in Brazil

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Mode of Entry

• Carrefour has
• Strong brand name recognition
• Readily available resources
• Massive distribution network

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Mode of Entry

• Targeted Hypermarket locations in São
  Paulo 1. Downtown district 2. Main business
  district 3. Cultural District 4. Shopping
  District
• Focus on working professionals

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• Introduction and Company Overview
• Starbucks Products and Ventures
• Why Expand into Brazil?
• Starbucks Expansion Philosophy
• Mode of Entry
• Finances
• Conclusion

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Finances

• Carrefour 50 ltgt Starbucks 50
• 350,000 loans
• Retrofit coffee shop in hypermarket
• Equipment and beginning inventories
• 100,000 infusion to sustain early operations

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Finances

• Critical Assumptions
• Sustain growth of 20 per year - 1st five years
• Brazilian inflation hovers around 6-7
• Capital obtained at 10 for 7 years
• Equipment life at least 5 years

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Finances
Coffee Shop Setup
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Finances
Break-Even Analysis
Break-even Point 18,200
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Finances
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Finances

• Project Losses in Years 1 and 2
• Break-even in Year 3
• Profit Margin Projections
• 14 in Year 4
• 22 by Year 5

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• Introduction and Company Overview
• Starbucks Products and Ventures
• Why Expand into Brazil?
• Starbucks Expansion Philosophy
• Mode of Entry
• Finances
• Conclusion

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Conclusion

• Most respected coffee retailer in the world
• International expansion is key to success
• Brazil is the next market to enter
• Partner with Carrefour
• Projected strong profitability by Year 5

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Questions?