NAME : ZOHAIB

Student ID:

Module leader:

EXECUTIVE SUMMARY

Global market is immensely accumulative now a days, with the vigorouseffects of globalization which effecting firms of all breeds to expandthe business across the borders. This report is generally bases on theanswers to the provided case study of Starbucks growth story and itsinternational expansion plans. Starbucks being the producers of one offinest coffee and premium drink beverages manages its major marketswithin USA and abroad. The report will accumulate Starbucks potentialstrategic options with substantial vision of the management to expandbusiness internationally while understanding the escalating aspects ofethical and cultural values which Starbucks owns as an influentialorganization.

Table of Contents

EXECUTIVE SUMMARY....................................................2BRIEF INTRODUCTION...................................................3

COMPANY OVERVIEW.....................................................3STARBUCKS STRATEGIC OPTIONS..........................................4

STARBUCKS INTERNATIONAL EXPANSION PRINCIPLES AND CONCEPTS............5STARBUCKS VALUE CREATION.............................................5

STARBUCKS INTERNATIONAL EXPANSION AND PROBLEMS.......................6FOREIGN DIRECT INVESTMENT............................................6

ETHICAL AND CULTURAL VALUES IN STARBUCKS.............................7INTERNATIONAL TRADE THEORY IN STARBUCKS..............................7

STARBUCKS AND THE EXTERNAL ENVIRONMENT...............................8CONCLUSION AND RECOMMENDATION........................................8

REFERENCES...........................................................9

BRIEF INTRODUCTION

This report is ultimately based on critical analysis and evaluation ofthe case study provided for one the leading coffee and beveragescompany. With the expanding international business and continuedglobalization policy of Starbucks, this report will help to comprehendthe various International market strategies and options, ethical andcultural values and anticipated problems with the ongoinginternational expansions of Starbucks company.

COMPANY OVERVIEWStarbucks corporation is an American global coffee chain of companyfounded in Seattle in 1971. With the inclusion of current Chairman andCEO of Starbuck Howard Schultz, the company originate a new directiontowards the constant growth and business expansions within the localand global markets. Besides from selling premium coffee, Starbucks hasstretched its product line by including various warm and coldbeverages, pastries and various merchandise accessories to attract theconsumers with mix blend of cultures across the globe which was provento be ultimate success for the corporation. Starbucks core competencecan be defined as a high quality coffee and products at accessiblelocations and affordable prices with the starvation of continuesinternational expansion. According to the recent report publishedover Starbucks website, the firm currently connects with millions ofcustomers in 61 countries via approximately 18,000 stores located invarious busy locations. (www.starbucks.com)

STARBUCKS STRATEGIC OPTIONS

In modern aggressive business atmosphere, it’s not just drivable toknow the operations of the business but to be accustomed with theupright market and realistic knowhow of the business is vital forcompiling a depth analysis from competitor to customers and acompetitive yet well depicted strategic options that manipulates everyaspect of the firm.

Compiling the answer for the first question of the case study, it isexplicable that with the entrance of Howard Schultz to the Starbucksthe company took new directions and wide range of strategic optionswere vulnerable for the firm while developing the existing markets.After visiting and evaluating the Italian coffee stores in Milan,Schultz idea to blend the two cultures within the Starbucks was amaster stroke to grasp the local market with rather dicey strategicchoice considering the competitive nature of the firms businessmanagement. This particular strategy of cultural relativism fromSchultz later on facilitated Starbucks to deploy a competitive jointventures within the prevailing markets as a practice to expand thebusiness across the borders. Various short joint ventures to grasp thesustainable competitive advantage and conveying the brand name intothe beverage and coffee industry gave Starbucks with wide market tocapture. By understanding the specified requirements of dailyconsumers made Starbucks strategic choices more viable to competewithin the industry with effective practice of competent productionsystem, customized team work and resilient customer bonding.

STARBUCKS INTERNATIONAL EXPANSION PRINCIPLES AND CONCEPTS

When a firm wants to extend its business to overseas markets, thefirst step is to analyze and evaluate the long-run profit potentialof a nation to approach the precise overseas market. The strategicapproach for a domestic firm seeking international expansion reliescomprehensively upon balancing benefits, cost and risk to pursue thebusiness rather conveniently and yet attractively into the targetedinternational markets (Charles W.L. Hill 2008).

Answering the second question of the case study it is comprehensiblethat Starbucks mainstream expansion plan as suggested by HowardSchultz was to mix up the two culture to make the company perfectchoice for its consumers across the globe by recalling the brand namewithin the same breath as Macdonald’s and Burger King. With theSchultz’s idea of preferable expansion, the management took rapidsteps to grasp the overseas markets by following expansion schemes.

Strategy of licensing through reputable and capable localcompanies.Joint venture partner in the stores outside the USA.New subsidiary’s to orchestrate overseas expansion.Store in Japan, Third largest coffee-consuming nation of thattime.UK bases Seattle coffee company acquisition to enter the Europeanmarket.Using internet technology to sell Starbucks coffee online.Large adverting through word of mouth.Selling of various merchandise at Starbucks stores.

With these defining principles, Starbucks management seek to grasp thewide range of emerging markets on the globe to deploy a feasibleexpansion plan via various entry strategies with increasedproductivity of their renown brand and extended level of customerservices. However, the second stint of Howard Schultz as Chairman ofthe firm rather fast tracked the international expansion program withhis interest and influence to glorify the company with resilienceservices to the customers across the stores and promoting his basicprinciple of blending the two cultures for the coffee devotees withinthe overseas regions.

STARBUCKS VALUE CREATIONThe way to increase the profitability of a firm is to create morevalue. The amount of value of a firm creates is measured by thedifference between its cost of production and the value that consumersperceive in its products (Charles W.L. Hill 2008).

With the robust changes across the globe and most of the businesseswere having an impact of globalization during the second stint ofChairman Schultz, whom lately focused to exploit the global emergingmarkets with the strong believe that Starbucks can produce half of therevenue from abroad. Starbucks swiftly started to unlock the non-exploited markets of China and Asia Pacific, EMEA ,Europe, MiddleEast, Russia and Africa with existing brands and high customer bondingupon the strengths that were already available to the company ratherthan starting from the scratch in a totally new area which proven tobe fruitful for the organization and difficult for the competitors todevelop the same complex resources. This astounding approach by

Starbucks created an intimidating value for its shareholders parallelto its strategies for international expansions.

STARBUCKS INTERNATIONAL EXPANSION AND PROBLEMS Starbucks has maintained its renowned brand name within the stiff andcompetitive industry over the time. With the current vastinternational expansion plan, Starbucks may face the “cannibalizing”sales between branches if deployed over the short distance from eachother specially in Asian market where the consumption of tea andcoffee are outnumbered with numerous small stores in different townscomparing to USA. Moreover, Starbucks will always have the threat ofnew entrants and local competitors considering its high brand imageand rather excessive pricing for the middle class people especiallyconsidering the expansion plan in under developing countries.

However, the existing entrepreneurship and cultural ideologies asdeveloped primarily under Howard Schultz Starbucks can certainly seekforward towards the future development considering the followingcomprehensible factors.

Blend of cultural mix across the globeStrong customer bonding and satisfaction Formidable ties with the Starbucks employeesMassive community developments within the acquired regions.Substantial efforts to ensure the diversified and noteworthycooperate responsibility.

FOREIGN DIRECT INVESTMENT Foreign Direct Investment is the long-term investment by a company inthe product, technology, management skills, brands and physical assetsof a subsidiary in another country. Such investment is then used togenerate sales in that country, quite possibly replacing exports fromthe home country (Lynch. R, Corporate strategy 2006).

Starbucks being a well-known coffee industry giants in the market nowgradually adapting the globalization measures by directly investing

into targeted critical overseas markets. For instance, the firstforeign direct investment of Starbucks was in the markets of Japanwith initial investment of around $10 million way back in 1995. Takingthe leaf forward in modernized globalization era, Starbucks can adherethe Foreign direct investment policy especially in Asia and MiddleEast region considering the following aspects for these zones (CharlesW.L. Hill 2008).

Economical laborCurrency flexibilityCoffee and tea affectionate nationsEconomically robust marketsAiming China to be the largest market outside USA.

ETHICAL AND CULTURAL VALUES IN STARBUCKSThe accepted principles of right or wrong governing the conduct ofbusinesspeople. It’s very vital for any association to understand theprincipal values of ethical behavior in order to avoid a risk free andyet profitable business. Within the international business settings,the most conjoint ethical issues involve employment practices, humanrights, environmental regulations, corruption and the moralobligations of multinational corporations (Charles W.L. Hill 2007).

Starbucks chairperson Howard Schultz with his influential abilitiesstrongly emphasize to increase the awareness of business ethics withinthe society. The supreme vision of Schultz was the long-termprofitability without minding the short term losses by up righting thecore ethical and cultural values in organization. Despite thechallenging management circumstances, Starbucks employment policystayed a landmark to follow for other firms by keeping the employeerights with the highest priority by adhering the simple policy of“Give and Take” (Odies C. Ferrell, F. John 2011).

Considering resilient and effective ethical values, Starbucksstretched its support to promote the Ethiopian coffee keeping thecultural values on check regardless the dispute but with clearintentions to organize the business with all viable ethical andcultural aspects.

INTERNATIONAL TRADE THEORY IN STARBUCKS International business which are generally free from governmentimposed barriers, such as quotas or duties, that obstruct the freeflow of goods and services between countries. With the profoundbusiness activities abroad, Starbucks adhere the fair and free tradepolicy however the emerging markets for Starbucks does hold the tradelimitations to some extent (Charles W.L. Hill 2008).

Considering the vastly spread business, Starbucks limitations of international trade theory can be enlightened with implications of trade theory.

Location implications: The foremost policy to implicate with the business activities for Starbucks is the suitable location to run the business efficiently with defined trade theory to counter the imminentlimitations within the prescribe regions.

First-mover implications: Starbucks since already had their vibrantstores in 61 countries, further expansions will certainly give them anedge to pursue a risk free trading with mostly countries borderingeach other and adore the free flow of product trade to some scope.

Policy implications: With the influential management of Starbucks,policies requires to be precise confer the governmental support inorder to vibrantly run the limit free trading of products andservices among the already existing markets which may edge thebusiness activities in new emerging markets.

STARBUCKS AND THE EXTERNAL ENVIRONMENTThe marketing plans, strategies and decisions are not determined one-sidedly by any business, not even by vendors in operation sincedecades with immense experience and influential management, ratherthey are strongly influenced by the powerful external environment(Griffin, R & Ebert R.J, 2006).

Starbucks foundation and social support to over numerous societieshighlights the extensive volume of fair trading policy Starbucks owns.Starbucks relief programs, and various funding for the communitiesultimately gives the company an edge to clutch fluctuating marketswhich provides an irrepressible benefits of fair trade for both theconsumers and for the company. With the established vision ofStarbucks to get benefited for the long-term by fair trade to thrivein the open market.

CONCLUSION AND RECOMMENDATION

By concluding and answering the case study questions from StarbucksGrow story, it is fathomable fact that Starbucks as a successfulorganization can be an influential mark to follow for the other firms.Exclusively the standout believe and dedication of the top managementto put in their vital trust and support to employees of all levels,culture and race. The flamboyant working environment and socialfoundations are the benchmark of the company which can be positivelyimitative by the uprising organizations in order establish the corecompetence of the company from scratch.

REFERENCES

Lynch Richard (2006), Corporate Strategy, 4th Edition, Publisher, Prentic Hall

Charles, W.L.Hill (2008), Global Business Today, 5th Edition, Publisher, Macgraw-hill/Irwin.

Griffin. Ricky W & Ebert. Ronald J (2002), Business, 6th Edition, International Edition, Publisher, Prentic Hall.

Odies C Ferrell. J Fraedrich. L Ferrell (2006), Business Ethics, 9th edition, Publisher, Cengage Learning

STARBUCKS, starbucks.com [Accessed December 2013]