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Starbuck´s FDI

Starbuck´s FDI. Maria Risholm , Salomon Sacal , Kamel Ait El Hadj , Geraldo Carvalho & Yanee Zhang. 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

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Starbuck´s FDI

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  1. Starbuck´s FDI MariaRisholm, SalomonSacal, KamelAit El Hadj, Geraldo Carvalho & YaneeZhang

  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.com/

  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. Control • A facility entry into foreign market • Sharedfixedcosts &  associaterisks • Local partner’s knowledge • Competitive conditions, Culture, Political system, etc. Local Joint-Venture Advantages

  6. Approaches and Acquisitions in Countries such as : (EMEA) Japan – “スターバックス (transliteration: sutābakkusu), and the abbreviation スタバ is also used as slang” Thailand – ” สตาร์บัคส์ pronounced [satāːbākʰ]” 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_id=378

  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 Xi’an. • 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 (US$5 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 Dunning’s 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

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