Starbucks started to decide on expansion by about the mid 1990 's, when the market became saturated. Market saturation is when a company or firm has covered an area so thoroughly with its presence, that it can no longer experience growth. Because of the market saturation, there were declining sales throughout stores. The company 's original marketing strategy was to blanket a region with new stores. The idea behind this was to reduce a customer 's wait in lines, while also reducing the company 's distribution costs. Revenues from stores were actually beginning to decline because stores were in such close proximity to one another. Although Starbucks was still ahead of their competitors, they were unable to stir up new business due to the overwhelming number of U.S. locations.
The organization knew that in order to maintain growth and still be able to boost revenues, they would need to expand over seas. In 1995, Starbucks formed Starbucks Coffee International in order to monitor the company 's international expansion operations (Starbucks International Operations 4). Starbucks began its expansion through a joint venture in Japan with Sazaby 's Inc., a leading Japanese teashop and interior-goods retailer.
Starbucks expansion strategy was split three ways; joint ventures, licensing agreements, and company-owned subsidiaries. The method that companies choose depends on many factors including the type of product or service, or the conditions for market infiltration (Daft 209). In many countries, a joint venture was the only way to enter the market, which is why most of their over seas stores are run by joint ventures.
Joint ventures allow companies to own a stake and still play a role in the management of the foreign operation. These require more direct investment and training, management assistance and technology transfer (209). Joint ventures can be equity or non-equity partnerships. Equity joint ventures are
Cited: Daft, Richard L. Organization Theory and Design. International. Thomson-Southwestern, 2004. Jung, Helen. "For Starbucks, Going Global Comes with Headaches, Threats, Protests, Boycotts- Not Everyone Likes American Corporate Icons." Article. Associated Press. May 2003. "Planet Starbucks: Caffienating the World." The American Graduate School of International Management. 2003. "Starbucks International Operations." Center for Management Research. 2003.