Starbucks International Operations2006

Group 4
o Huynh Thi Kim Thoa o Le Thi Anh Hang o Ton Nguyen Thanh Thuy o Nguyen Thuy VY o Huynh Ha Viet o Bui Do Duy

Content
Overview Expansion strategy Problems Conclusion

Overview
Established in 1971 at Seattle, Washington Gerald Baldwin, Gordon Balwker and Ziev Siegl Famous for its quality fresh-roasted coffee beans and stylish atmosphere Over 17,000 stores worldwide Product line include:
 Beverages (coffee, Tazo tea, soda, juices)  Pastries  Whole coffee bean  Coffee-related hardware and equipment  Merchandise (mug, CDs)

STARBUCKS AT A GLANCE

17,018 stores in 50 countries. 2,199 stores opened in 2006 (6 stores a day). 145,000 baristas (waiters). Net revenue $7.8 billion, making an annual profit of $564 million.
Source: Starbucks 2011 Annual Report

Starbucks Timeline
Howard Schultz joins Starbucks 1982
Schultz founded II Giomale offering brewed coffee & espresso 84 beverages w/ Starbucks Starbucks coffee locations beans

1985

1990

676 Starbucks 2,292 locations & Starbucks Starbucks Intl opens in Japan locations 2000 1995

1971
1st Starbucks location in Seattle

1984 Schultz tests new coffee bar concept

1987 II Giomale acquires Starbucks assets

Changes name to Starbucks Corporation

1993 272 Starbucks locations

1998 1,886 Starbucks locations

Joint venture w/ Magic Johnson Launch Starbucks .com

2003 6,604 Starbucks locations

Acquired Seattle s Best Coffee Co.

Starbucks Timeline
Jim Donald hold President and Chief Executive Officer 200
Launches Starbucks Bottled Frappuccino Coffee Drinks in China through International Coffee Partnership with PepsiCo Starbucks helps save lives in Africa through partnership with (RED) 2009

2007

2004
The operating profit of the company during fiscal 2004 was $610 million, an increase of 43.7% over fiscal 2003

2006
Rival Diedrich Coffee announced that it would sell most of its company-owned retail stores to Starbucks

2008  Chairman Howard Schultz resumed his roles as President and Chief Executive Officer

2010

Seattle s Best coffee reinvents business strategy to extend brand s reach

Mission Statements
Company Mission Statements: Establish Starbucks as the premier purveyor of the finest coffee in the world, while maintaining our uncompromising principles while we grow. Environmental Mission Statements: Starbucks is committed to a role of environmental leadership in all facets of our business.

Mission Statements
Six guiding principles: - Provide a great work environment and treat each other with respect and dignity. - Embrace diversity as an essential component in the way we do business. - Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. - Develop enthusiastically satisfied customers all of the time. - Contribute positively to our communities and our environment. - Recognize that profitability is essential to our future success.

Expansion strategies
Partnership first, county second Blanket a region with its new stores
Reduce the customers rush in one store Increase revenues through new stores Reduce its distribution cost and the waiting period for customers in its stores -> increasing the number of customers

Expansion strategies
Six additional criteria
They looked for companies with similar ideas about values and corporate life. They wanted companies that had experience in the multirestaurant business. Potential partners had to have enough financial resources to help saturate a given market so as to counter the possibility of imitations. Starbucks sought partners that had the ability and experience to locate prime real estate for coffee-bar locations with a Knowledge of the retail market. Starbucks looked for partners who had the manpower available to make a full commitment to the project

Six ways to enter a foreign market

Exporting Turnkey Projects Licensing Franchising Joint Ventures Wholly Owned Subsidiaries

Variety of factors
The nature of the particular product or service The conditions for market penetration in the foreign target market.

Two different entry mode strategies

Licensing Joint Ventures

Licensing
Definition For example Advantages Disadvantages
-An arrangement whereby a company (licenser) grants the rights to intan-gible property -Trademarks to another company (licensee) for a specified period of time. -The licenser receives a royalty fee from the licensee. -In the early 1960s, Xerox licensed its patented xerographic know-how to Fuji-Xerox. -It was initially meant for 10 years, but the license was extended several times. -In return, Fuji-Xerox paid Xerox a royalty fee equal to 5% of the net sales revenue that it earned. -Lower cost and risk -No tight control -Risk for losing know-how

Joint Ventures
Definition For example Advantages Disadvantages
-Benefit from local partner -Allow companies to own a -Sony-Ericsson is a joint stake and play a role in the venture by the Japanese management of the foreign consumer electronics -Share cost and risk operation. company -Require more direct -Political considerations investment and training, management assistance, and -Sony Corporation and the tech-nology transfer. Swedish telecommunications -Equity joint ventures are company Ericsson to make contractual arrangements with mobile phones. equal partners. -A joint venture is the only way for a foreign company to -Combine Sony's consumer set up operations. electronics expertise with Ericsson's technological leadership. -Loss control of technology -No tight control of partner -Conflicts and battles

Problems
The risks faced by Starbucks in its international operations: + Country and political risks: - In early 2000s, the tense relationships between US and Middle East Country have created serious problems for Starbucks. - US. declaration of war in early 2003 made matter worse for the company. Starbucks closed its 6 stores in Israel. - Non-governmental organization s actions about input controlling also created problems for Starbucks international operation. - Economic recession in Switzerland, Germany and Japan in the early 2000s

Problems
+ Strategic and operation risks: - Starbucks faced stiff competition, high business development costs, and resistance from customers in international markets. - In Europe Starbucks faced stiff competition fro well-established local players who offered specialty coffee at lower prices. - The tastes not suitable to some markets - High real estate and labor costs are also Starbucks international operating problems.

1.Adapt customer behavior:

French tastes
modified and introduced No smoking

Japanese customer
ordering food to go with their coffee

2.Control operational cost:

If we could train the people and find the real estate, the expansion could happen tomorrow, almost. There is demand

3.Decided to go for new supplier for inputs: Mugs: sourcing mugs form low-cost Japanese vendor rather than importing them form US Starbucks Discoveries - a ready-to-drink coffee product close loss-making stores.

Conclusion

References
1. Helen Deresky - International Management: managing across borders and cultures text and cases, State university of New York-Plattsburgh Pearson 2. Entry Modes of Starbucks http://mdh.diva-portal.org/smash/get/diva2:121498/FULLTEXT01 HELEN JUNG, AP Business Writer, Fair Trade Article, Coffee in a time of conflict: Starbucks' growth risks backlash, http://www.organicconsumers.org/starbucks/041603_starbucks_fair_trade_coffee.cf m, access on Dec 3th, 2010. 4. Thompson & Strickland, Strategic management 11th http://www.mhhe.com/business/management/thompson/11e/case/starbucks-2.html 5. Starbuck International Entry Strategy http://www.collegetermpapers.com/TermPapers/Business/STARBUCKS_INTERNA TIONAL_ENTRY_STRATEGY.shtml 3.

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