Starbucks Case Study
1. Based on the case, “Planet Starbucks” answer the following questions:
(a) How does Starbucks’ strategy of expanding overseas create value for the company’s shareholders?(10points)
The global expansion creates value because Starbucks as a company heavily invests in its own employees, providing stock options and medical benefits to part time employees. By moving on a global market Starbucks is able to establish a worldwide brand and thus more locations. This allows the company to gain more profits because of the increase in locations. And lastly, more profits circle back to more money and payouts to shareholders.
(b) What kinds of strategy has Starbucks pursued to enter newer markets? Do you think it has chosen the right strategic posture? Provide examples from the case study. (10 points)
Starbucks uses mainly joint ventures to gain access to a country or new global market. It then grows its brand in the region through licensing of the Starbucks format. These two strategies to enter new markets seem to be the most logical for how the company operates. Starbucks had a 50/50 joint venture with Sazaby Inc, which turned into the name Starbucks Japan. The advantage of having a joint venture would be that any potential or unforeseen risks or regulations can be shared with their 50/50 partner. It would also include protection of the sustainable competitive advantage, the reduction in financial risk incurred by the company, and the benefit of knowing how well the US product will do in the foreign market through local adaptation techniques. The disadvantage would be that Starbucks must give up some control and may face any of various conflicts due to management, differences in expectations and/or objectives, and cultural differences. They would also have to share their profits with their venture partner. The results from this venture were that the Starbucks brand was effectively transferred to the Japanese market. And through licensing the brand,
(a) How does Starbucks’ strategy of expanding overseas create value for the company’s shareholders?(10points)
The global expansion creates value because Starbucks as a company heavily invests in its own employees, providing stock options and medical benefits to part time employees. By moving on a global market Starbucks is able to establish a worldwide brand and thus more locations. This allows the company to gain more profits because of the increase in locations. And lastly, more profits circle back to more money and payouts to shareholders.
(b) What kinds of strategy has Starbucks pursued to enter newer markets? Do you think it has chosen the right strategic posture? Provide examples from the case study. (10 points)
Starbucks uses mainly joint ventures to gain access to a country or new global market. It then grows its brand in the region through licensing of the Starbucks format. These two strategies to enter new markets seem to be the most logical for how the company operates. Starbucks had a 50/50 joint venture with Sazaby Inc, which turned into the name Starbucks Japan. The advantage of having a joint venture would be that any potential or unforeseen risks or regulations can be shared with their 50/50 partner. It would also include protection of the sustainable competitive advantage, the reduction in financial risk incurred by the company, and the benefit of knowing how well the US product will do in the foreign market through local adaptation techniques. The disadvantage would be that Starbucks must give up some control and may face any of various conflicts due to management, differences in expectations and/or objectives, and cultural differences. They would also have to share their profits with their venture partner. The results from this venture were that the Starbucks brand was effectively transferred to the Japanese market. And through licensing the brand,