Q1: Why do you think Starbucks has now elected to expand internationally primarily through local joint ventures to whom it licenses its format, as opposed to using a pure licensing strategy?
First of all, the main point of this topic is that local joint venture gives control to Starbucks. In fact, the company can be really sure that licensees are following its success formula. For example, it allowed the company to the liberty to train the foreign working party by transferring some employees from the USA, so they could teach them the way to deal with the customers and to follow the “Starbucks essence” in their behavior. Before, Starbucks did not have this control on the foreign business and this business still was far behind the Starbucks success formula.
Then, Starbucks got some other advantages expanding through local ventures.
* First, it has a better facility into foreign markets.
* Second, Starbucks shared fixed costs of developing this service in new markets. * Finally, this alliance was a way to bring together complementary skills and assets that neither could easily develop on its own. In fact, Starbucks gives away it valuable technological knowhow to the foreign country so that it can follow the Starbucks success formula and the host country can give to Starbucks some advices and cultural knowledge in order to make the customers feel comfortable with the service.
Q2: What are the advantages of a joint-venture entry mode for Starbucks over entering through wholly owned subsidiaries through a pure licensing strategy?
There are several important benefits for a joint-venture entry mode.
The first is the reduction in a financial risk. In fact, a joint venture relationship does offer a moderate reduction in the financial risk Starbucks must incur. As a great example, when Starbucks developed it 50/50 partnership with Japanese based Sazaby, Inc, they cut their financial risk in half.
The second is the protection of the...
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