Introduction:
In 1995 with 700 stores across the United States, Starbucks began exploring foreign opportunities. Its first target market was Japan. Although Starbucks had resisted a franchising strategy in North America where its stores are company owned, Starbucks initially decided to license its format in Japan. However, the company also realized that a pure licensing agreement would not provide the control it needed to insure that Japanese licenses closely followed Starbucks' successful formula. So, the company established a joint venture with a local retailer, Sazaby, Inc. Each company held a 50% stake in the venture, Starbucks Coffee of Japan. Starbucks initially invested $10 million in this venture. The Starbucks format was then licensed to the venue, which was charged with taking over responsibility for growing Starbucks' presence in Japan. Skeptics doubted that Starbucks would be able to replicate it's North American success overseas, but by the end of 2007, Starbucks had over 700 stores in Japan.
In 1998, Starbucks purchased Seattle Coffee, a British coffee chain with 60 retail stores. In the late 1990s, Starbucks opened stores in Taiwan, China, Singapore, Thailand, New Zealand, South Korea and Malaysia. In Asia, Starbuck's most common strategy was to license its format to a local operator in return for initial licensing fees and royalties on store revenues. However, Starbucks became disenchanted with these straight licensing agreements and converted several into joint-venture arrangements or wholly owned subsidiaries.
Continuing the push into the international scene, Starbucks first licensed their format but eventually purchased the licensee to gain more control. They followed the same strategy in Switzerland, their first foray into continental Europe. Then, they established joint ventures in several other countries. Finally, like many companies and countries, Starbucks viewed the China market as the largest single market opportunity outside of the United States. The latest count showed 350 Starbucks stores in China.
Directions
- Based on this information, please answer the following:
- What entry mode does Starbucks seem to prefer? Why?
- How would Starbucks have approached international expansion if they had been a much smaller company with limited resources?
- Save your document as an rtf file then submit your responses using the Assignment link above.
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