Starbucks Case Study
London School of Commerce
MODULE: International Business (IB)
Name: Malaika Sarah Kikenya
ID: L0320SISI0212
PROGRAMME: BABS4
PERIOD: Feb.2013-May 2013
LECTURER: David Mwaura
Due Date: 18th of April 2013
Table of Contents Questions Q. 1 – Starbucks’ foreign direct Investment 2-4 q. 2 – Strategic role of hrm 4-7 q. 3 – Local joint venture preferred over pure licensing 7-9 q. 4 – Starbucks enters with wholly owned subsidairy 9-11 references 12
Starbucks’ Foreign Direct Investment
1. Initially Starbucks expanded internationally by licensing its format to foreign operators. It soon became disenchanted with this strategy. Why?
Licensing has a number of good qualities and bad qualities, which cannot always be avoided. It is always a bit risky to enter a foreign market with a licensing agreement as it is not possible to gain full control and it is important for a company to maintain the routines and quality consumers are already used to.
As Starbucks was going fast towards success, the need of international domination began to bite. Starting out with the Asian market is not common for coffee branches and for Starbucks to enter this new market, which had completely different lifestyle from the American. It was risky so with a licensing agreement and creating a 50/50 joint venture with a local business (Sazaby Inc.) Starbucks had secured themselves in a low risk and expense agreement, which led to greater profit opportunities. Collaborating with a Japanese company will give Starbucks a security in terms of sales and acknowledgment as they are entering a new market they need fast recognition. The licensing agreement causes a few disadvantages for a company who’s entering a new foreign market:
1. Lack of control – As mentioned Starbucks do not have fully control of the operation in the Japanese stores. In a situation where expansion to a new country with limited control in licensing agreements and often
MODULE: International Business (IB)
Name: Malaika Sarah Kikenya
ID: L0320SISI0212
PROGRAMME: BABS4
PERIOD: Feb.2013-May 2013
LECTURER: David Mwaura
Due Date: 18th of April 2013
Table of Contents Questions Q. 1 – Starbucks’ foreign direct Investment 2-4 q. 2 – Strategic role of hrm 4-7 q. 3 – Local joint venture preferred over pure licensing 7-9 q. 4 – Starbucks enters with wholly owned subsidairy 9-11 references 12
Starbucks’ Foreign Direct Investment
1. Initially Starbucks expanded internationally by licensing its format to foreign operators. It soon became disenchanted with this strategy. Why?
Licensing has a number of good qualities and bad qualities, which cannot always be avoided. It is always a bit risky to enter a foreign market with a licensing agreement as it is not possible to gain full control and it is important for a company to maintain the routines and quality consumers are already used to.
As Starbucks was going fast towards success, the need of international domination began to bite. Starting out with the Asian market is not common for coffee branches and for Starbucks to enter this new market, which had completely different lifestyle from the American. It was risky so with a licensing agreement and creating a 50/50 joint venture with a local business (Sazaby Inc.) Starbucks had secured themselves in a low risk and expense agreement, which led to greater profit opportunities. Collaborating with a Japanese company will give Starbucks a security in terms of sales and acknowledgment as they are entering a new market they need fast recognition. The licensing agreement causes a few disadvantages for a company who’s entering a new foreign market:
1. Lack of control – As mentioned Starbucks do not have fully control of the operation in the Japanese stores. In a situation where expansion to a new country with limited control in licensing agreements and often
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