Analyzing LVMH
INBS 349-02
November 11, 2013
Case Studies (2)
Starbucks
1. In the United States, about two-thirds of Starbucks outlets are company owned; the remaining one-third are operated by licensees. Outside the United States, the proportions are reversed: about two-thirds are run by licensees or partnerships in which Starbucks has equity stakes. What is the explanation for the two different market expansion strategies? When conducting business abroad, multi-national companies can use different market expansion strategies. The strategy of licensing is a contractual agreement where company A (the licensor) makes a legally protected asset available to company B (the licensee) in exchange for some form of compensation. Companies typically license assets such as brand names, company names, patents, trade secret, or product formulation. These agreements typically generate a substantial amount of revenue. It also allows companies to leverage their brands. Another advantage to licensing agreements is that typically the product will be produced and marketed on a local or regional basis, allowing companies to find a way around government imposed tariffs, quotas, and other barriers. In certain situations, licensees are free to adapt the licensed goods to the preferences of local consumers. However, there are also some risks associated –licensing agreements offer limited market control. Also, after gaining knowledge from the licensor, licensee may develop the know –how to produce their own version of the licensed product.
2. In response to the economic downturn, Starbucks recently launched a new line of instant coffee called VIA Ready Brew. The company also developed a breakfast value meal that costs less than $4. Do you agree with the decisions? In this economic downturn, it is wise that companies increase their product lines to appeal to different markets that originally intended. Although the original concept of Starbucks was marketed to the upper middle class
November 11, 2013
Case Studies (2)
Starbucks
1. In the United States, about two-thirds of Starbucks outlets are company owned; the remaining one-third are operated by licensees. Outside the United States, the proportions are reversed: about two-thirds are run by licensees or partnerships in which Starbucks has equity stakes. What is the explanation for the two different market expansion strategies? When conducting business abroad, multi-national companies can use different market expansion strategies. The strategy of licensing is a contractual agreement where company A (the licensor) makes a legally protected asset available to company B (the licensee) in exchange for some form of compensation. Companies typically license assets such as brand names, company names, patents, trade secret, or product formulation. These agreements typically generate a substantial amount of revenue. It also allows companies to leverage their brands. Another advantage to licensing agreements is that typically the product will be produced and marketed on a local or regional basis, allowing companies to find a way around government imposed tariffs, quotas, and other barriers. In certain situations, licensees are free to adapt the licensed goods to the preferences of local consumers. However, there are also some risks associated –licensing agreements offer limited market control. Also, after gaining knowledge from the licensor, licensee may develop the know –how to produce their own version of the licensed product.
2. In response to the economic downturn, Starbucks recently launched a new line of instant coffee called VIA Ready Brew. The company also developed a breakfast value meal that costs less than $4. Do you agree with the decisions? In this economic downturn, it is wise that companies increase their product lines to appeal to different markets that originally intended. Although the original concept of Starbucks was marketed to the upper middle class