Starbucks Corporation

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Starbucks Corporation
By Oybek Salimov

Outline
Introduction…………………………………………………………………………………3 1. Background of the company…………………………………………………………..4 2. Starbucks’s expansion.………………………………………………………………..4 3. Risks associated with expansion………………………………………………………6 4. Capital structure of the company………………………………………...……………7 Conclusion…………………………………………………………………………………… 9 Reference ……………………………………………………………………………………10 Appendix …………………………………………………………………………………… 11

Introduction

Globalization greatly influenced businesses to expand worldwide. Cross boarder communications let people all around the world to exchange demand on services and products. Besides, countries opened boards to foreign investments. New type of business International and/or Multinational Corporations emerged to serve in a worldwide scope. The following report is just an introduction to these complicated phenomena – Multinationals – by illustrating Starbucks Company.

Background of the company
One of the most best known brand and dominant retailer and roaster of whole coffee bean and ground coffee tea, and spices - Starbucks Company began its tremendous success since in 1971 soon after it had been established by three academics Jerry Baldwin, Zev Siegel, and Gordon Bowker in Seattle’s Pike Place Market, USA. The tree scholars chose the brand name in honor of Starbuck in Herman Melville’s Moby Dick and the logo – a twin-tailed siren from Greek mythology which encourages seas and evokes the feelings of the ancient coffee trades through the sea. (Starbucks’ home page) World leader premier roaster and retailer of specialty coffee Starbucks Corporation was formed in1985. Stocks of the company are traded on trades on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “SBUX.” (Starbucks Corporation Fiscal 2009 Annual Report)

Why Starbucks Company became Multinational Company and how it engaged its international business? The theory of comparative advantage, the imperfect markets theory and the product cycle theories are common theories that encourage firms to expand businesses internationally. One of the classical theories that motivate companies to go international markets is the theory of comparative advantage. It suggests that firms expand to other countries due to that country’s market opportunities to increase production efficiency. For example, availability of cheaper labor allows Apple Inc products assembled in China but designed in California, the USA. The Next theory, the imperfect markets theory, suggests that main reason firms penetrate internationally is immobility of production factors. Countries don’t allow their recourses such as labor, land and other production materials being transferred to other countries or it’s costly to transfer those resources. Finally, the production cycle theory explains why firms become Multinational companies. The theory implies that when established firm in home country wants to retain its advantage over other competitors by producing products for foreign markets and at the same time minimizing transportation cost (Madura .J, 2008).

Howard Schultz said:

“Internationally, we are in our infancy”.
(Howard Schultz, Chairman & Chief Global Strategist – Starbucks, 2003) There are three strategic imperatives that Starbucks became Multinational stated Lauren Roby Liberty University student on his senior Thesis (2011). First motivation to push international business was to gain access to large markets. Howard Schulz the former CEO of the company motivated and launched Starbucks’ first international store in Vancouver, British Columbia. Besides, the success in home country was the company’s aggressive expansion said analysts. However, in mid-1990s, market for Starbucks in USA started saturating that the company should penetrate internationally to keep up its boost revenues and growth rates. The company began its international movement right after forming wholly owned subsidiary,...
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