COMPANY PROFILE

The current mission statement of Starbucks is “to inspire and nurture the human spirit by one
person, one cup and one neighbourhood at a time”.

The first Starbucks store was opened in Seattle on March 30th 1971 by three partners and the
name of the store originated from the novel Moby Dick. In 1987 the first stores Starbucks was
opened outside of Seattle, in Vancouver and Chicago and in the subsequent years stores followed
the expansion of Starbucks much more extensive across North America.

Starbucks sells a variety of products which include high-quality whole bean coffees along with
fresh rich-coffees, Italian-style espresso beverages and cold blended beverages, a collection of
complementary food items and also a selection of premium teas and beverage-related accessories
and equipment.

There are conflicting reports on the overall market segment that Starbucks possesses, although
according to Mintel a global consumer research firm Starbucks had a 73% market share of U.S.
coffeehouse sales in 2005, and this is significant because the majority of its revenue comes from
their home market which is $2.1 Billion compared to an overseas share of just $640 Million.

Amongst Starbucks’ many achievements is its spot of being #1 best coffee in the fast food and
quick refreshment categories and one of the “world’s most ethical companies”. Its performance
as a multinational firm has increased over time and as such led to expansion in global operations.
The recession was a major factor that impacted the company’s position because prior to that,
Starbucks was known for having a café around every street corner. Starbucks prior to the
recession in 2007, their share price traded at $38.41 and a mere two years later the price had
fallen to a measly $9.91, “profits Starbuck down for the last three months of the year from an
astronomical $158.5 million to $5.4 million”.

The turnaround for Starbucks started with the restructuring of management where the former
chief executive Howard Schultz took back the role and set the company’s focus on core markets
and utilizing technological breakthrough to introduce Starbucks coffee in an instant form.
Starbucks back to its roots by focusing on customer service that was neglected during rapid
expansion. All these decisions helped contribute to the sales flourishing and “profits rising” to
high levels once again.

The first location outside of north America was in Japan in 1996 which was followed by an
impressive $83 million acquisition of the UK based “Seattle coffee company” of which there St
60 outlets at the time, all of which Starbucks then re-branded under the Starbucks name. The
global expansion continued into the Latin American, Asian and European markets which resulted
in Starbucks presently being the largest coffee company in the world with over 16,500 stores in
over 50 countries.

An examination of Starbucks’ internal and external environment should provide a good basis for
understanding the company’s turnaround, the foundation of its present successes and what the
future might hold it.

Import and export OF Starbucks

The creation of a single, global logistics system was important for Starbucks because of its far-
flung supply chain. The company generally brings coffee beans from Latin America, Africa, and
Asia to the United States and Europe in ocean containers. From the port of entry, the "green"
(unroasted) beans are trucked to six storage sites, either at a roasting plant or nearby. After the
beans are roasted and packaged, the finished product is trucked to regional distribution centers,
which range from 200,000 to 300,000 square feet in size. Starbucks runs five regional
distribution centers (DCs) in the United States; two are company-owned and the other three are
operated by third-party logistics companies (3PLs). It also has two distribution centers in Europe
and two in Asia, all of which are managed by 3PLs. Coffee, however, is only one of many
products held at these warehouses. They also handle other items required by Starbucks' retail
outlets—everything from furniture to cappuccino mix.

Depending on the location, the stores are supplied by either the large, regional DCs or by smaller
warehouses called central distribution centers (CDCs). Starbucks uses 33 such CDCs in the
United States, seven in the Asia/Pacific region, five in Canada, and three in Europe; currently, all
but one are operated by third-party logistics companies. The CDCs carry dairy products, baked
goods, and paper items like cups and napkins. They combine the coffee with these other items to
make frequent deliveries via dedicated truck fleets to Starbucks' own retail stores and to retail
outlets that sell Starbucks-branded products.

Because delivery costs and execution are intertwined. One of their first steps was to build a
global map of Starbucks' transportation expenditures—no easy task, because it involved
gathering all supply chain costs by region and by customer. An analysis of those expenditures
allowed Starbucks to winnow its transportation carriers, retaining only those that provided the
best service.

The logistics team also met with its 3PLs and reviewed productivity and contract rates. To aid
the review process, the team created weekly scorecards for measuring those vendors. There are
very clear service metrics, clear cost metrics, and clear productivity metrics, and those were
agreed with our partners.

Although Starbucks has a raft of metrics for evaluating supply chain performance, it focuses on
four high-level categories to create consistency and balance across the global supply chain team:
safety in operations, service measured by on-time delivery and order fill rates, total end-to-end
supply chain costs, and enterprise savings. This last refers to cost savings that come from areas
outside logistics, such as procurement, marketing, or research and development.

In undertaking all of those steps to reduce operating costs and improve execution, Starbucks was
laying the foundation for future supply chain capabilities.

Starbucks' International Expansion AND FDI

Since Starbucks established its subsidiaries, "Starbucks Coffee international" in 1995, it has
applied to flexible entry strategies; licensing and joint venture and whole ownership. While it is
operating its US stores directly, Starbucks is largely running its cafés outside US through joint
venture and licensing with local retailers. In fiscal year of 2009, it has opened 3,439 licensed
cafés on earth representing 62 percents of entire stores. The main target of international business
is Asia and Starbucks has operated 2,062 cafés. Besides, Starbucks is managing some overseas
stores directly by acquiring local coffee retailers. In UK, Canada and some Asian market such as
Thailand and Singapore, Starbucks owns 2,068 wholly-owned cafés which account for 38
percents of entire overseas stores

Why Starbucks prefers direct investment to franchising and licensing?

When Starbucks expanded its business outbound, "Coffee culture" has not existed in various
countries including Asian nations. Therefore, it was imperative for Starbucks to spread coffee
culture and Starbucks has implemented a marketing strategy called "Cult-duct" Hence, Starbucks
thought that it was more appropriate for Starbucks to have taken advantage of direct investments;
joint venture and wholly-owned companies rather than licensing and franchising so as not only to
offer tangible products; coffee and cookies but also to deliver a fine coffee culture represented by
urban and elegant image. Through this strategy, Starbucks effectively has managed to control its
core competencies such as the high quality coffee, the quarterly employee training concerning
customer service and store management know-how.

Motivation of Joint Venture

As mentioned above, the main target of Starbucks international is Asia and Starbucks has
adapted joint venture as a main method for Asian market, although it has entered with licensing
in several Asian regions including Middle East and Philippines.

Above all, Starbucks could minimize risk of Asian operation by running businesses through joint
venture with local retailers. At the beginning, since Starbucks did not hold both experience and
expertise for Asian market, it is required for Starbucks to share local companies' know-how and
wide domestic networks to stably perform its Asian operation.

Moreover, Starbucks has properly overcome the cultural gap with Asian nations and carried out
the splendid market research. To demonstrate, local companies Starbucks involved in local
staffing and analysis of regional customer's taste and preference whereas Starbucks took
responsibilities for employee training, coffee roasting and quality control.

Besides, Starbucks could release localized products. For example, it is selling Korean traditional
beverages such as 'Sik-hye' and 'Sujungghwa' in Insa-dong café and offering sorts of Chinese
traditional teas like "Oriental Beauty Tea" and "Fancy Black tea" in Taiwan.

Motivation of Direct Operation

Starbucks is also doing its international business with company-owned operation. .

In UK, Canada and Australia, Starbucks did not have to worry about the huge gap of culture
when it entered into these markets because they all belong to English language culture and there
is no remarkable difference of organization culture. Whereas, Starbucks has finally acquired the
entire equity of local manufacturers, Coffee Partners in Thailand and Bonstar in Singapore
respectively, even if it initially entered those markets with the form of joint venture. These
countries legitimately allowed Starbucks the foreign capital to hold 100% equity of a company
and Starbucks could not trust the marketing capabilities of these local retailers'.

A Key Growth Drive: Indian Entry

In 2006, Starbucks decided to initiate its business in India and made a joint venture contract with
the Indian local retailer, RPG Enterprises, its offer was rejected by Indian government due to
issues related to technique transition and strict regulation on 'foreign retail companies’. To
illustrate, Indian government did not allow direct control of foreign companies' in Indian retail
industry, even though foreign companies can possess up to 51% of equity. This is a big obstacle
to Starbucks because strong control of business is the main principle of Starbucks' overseas
operation.

In February 2009, Indian government made a decision to boost foreign investment owing to late
contraction of FDI and then it has finally permitted outer retailers to own its business in case of
holding 51% shares of a joint venture company. As a result, Starbucks reconsidered Indian entry
and has begun a talk with 'Jubiliant Group' about the alliance.

Conclusions

Starbuck is the largest retailer in the field of Coffee and Coffee products. The company has
established its brand name in different countries all across the globe. At first, the company
captured the entire market segments of the United States by providing the high quality of the
coffee and different tastes of the coffee product to respective customers. Then the organization
planned to enter into Japan and different countries and the organization got success with the help
of the licensing strategy with the local retailers. The main motive was to sell premium roasted
coffee as Starbucks as the fresh brew coffee beverages’ including a large number of other
products. There was different staffing approach adopted by the Human Resource department in
order to increase the profitability of the organization.