Starbuck

1
Starbucks FDI
Maria Risholm, Salomon Sacal, Kamel Ait El Hadj,
Geraldo Carvalho Yanee Zhang
2
Starbucks

• Mission
• to inspire and nurture the human spirit one
  person, one cup and one neighborhood at a time
• Who?
• Seattle 1971
• 1984 coffehouse consept
• IPO in 1992
• Market Capitalization US 18.6Bn
• Where?
• More than 50 countries and 16,700 stores

Source www.starbucks.com, http//finance.yahoo.co
m/
3
Starbucks Success Formula

• Motivated employees superior customer service
• Focus on recruiting developing
• Attractive compensation policies
• Stock options
• Medical benefits

4
Internationalization

• Licensing ? Lack of control
• Strategy Alternatives
• Local Joint-Venture (licensed format)
• Acquisition (Wholly owned)
• Greenfield investment (Wholly owned)
• Local joint venture Preferred Strategy

5

• Local Joint-Venture Advantages

• Control
• A facility entry into foreign market
• Shared fixed costs  associate risks
• Local partners knowledge
• Competitive conditions, Culture, Political
  system, etc.

6

• Approaches and Acquisitions in Countries such as
  (EMEA)
• Japan ??????? (transliteration sutabakkusu),
  and the abbreviation ??? is also used as slang
• Thailand ?????????? pronounced sata?bak?
• Europe
• - Joint Ventures and Parameters

International operating margin improved to
7.7, from 1.4 in Q2 FY09
Source http//news.starbucks.com/article_display.
cfm?article_id378
7
Starbucks in China

• Objective
• Develop the largest overseas market in China

• Current Situation
• 700 coffee stores in Greater China(PRChina, HK,
  Macau, Taiwan) , including over 360 in mainland
  China (2009)
• 10 of Starbucks US 6.4 global sales (2005)
• A growth of 30 in Beijing recent years and in
  Shanghai, less than 2 years, net profit reached 4
  million dollars

8
Ownership Structure

• Licensing and Joint Venture

Beijing Meida Coffee Co Ltd
Shanghai Uni-President Starbucks Coffee Ltd
Maxim's Caterers Ltd
9
Problems

• Licensing
• Unable to regulate the cash flow
• Joint Venture
• Lack of controlling stakes results in the weak
  management control
• The three individual companies work independently
  within their own regions. Unable to help to
  achieve Starbucks' national expansion plans.

10
Solutions

• Whole ownership Changzhou, Chengdu, Chongqing,
  Dalian, Dongguan, Foshan, Hangzhou, Kunshan,
  Nanjing, Ningbo, Qingdao, Shaoxin, Shenyang,
  Shenzhen, Suzhou, Tianjin, Wuxi, Wuhan and Xian.
  
• Starbucks Greater China Support Center in
  Shanghai (2005)

11
Other advice for the expansion

• Develop new products
• Tea drinks
• Social responsibilities
• Starbucks China Education Project (US5 million)
• China Soong Ching Ling Foundation
• China Women Development Foundation
• Chengdu Education Foundation
• 2008 Sichuan Earthquake relief (100,000)

12
Theoretical patterns

• Internalization/market imperfections theory
• Licensing system is flawed (1) limited or no
  control over the licensee and (2) Starbucks
  specific culture cannot be licensed
• Greenfield investments
• Dunnings Eclectic paradigm

Source International Business, Charles W.L.
Hill, McGraw-Hill 7th ed.
13
Conclusion

• No strategy fits all models
• Main factors to take into consideration when
  selecting a course of action (1) immaterial
  elements (2) level of control