Starbuck’s International Operations Starbuck’s International Operations Submitted Submitted by: 4th May 2009 This paper would seek to evaluate and outline the number of concerns which came across as a result of Starbuck’s international operations and the strategy which was formulated by Starbuck’s for the purposes of international expansion. This paper would examine the sort of strategy that was implemented by Star Buck’s for the purposes of global expansion. The Strategy that was used by Starbuck’s for its global operations consisted of a three-pronged one: joint ventures, licensing and lastly, wholly owned subsidiaries.
(Dutta, & Subhadra ” Starbuck’s International Operations” Case 7 page 4 lines 9-10) Though these operations have their own advantages, they also have certain disadvantages such as high transport costs, trade barriers, problems with marketing agencies, lack of control over technology, inability to engage in strategic co-ordination, high costs and risk etc. Hence, all these factors had to be analyzed by Starbuck’s which it did to a certain extent by carrying out a market analysis which consisted of analyzing the market conditions in these countries for its various products.
(Dutta, & Subhadra ” Starbuck’s International Operations” Case 7 page 5) By using a local partner, Starbuck’s was able to make use of local expertise and knowledge to its benefit and its policy of test-marketing by opening fewer stores aided its own corporate strategy. Once, the test marketing was found to be successful only then did Starbuck’s decide to go ahead with opening more stores which shows a keen business sense. Its close adherence to its principles such as the No-Smoking policy allowed Starbuck’s to become a success in Japan. (Dutta, & Subhadra ” Starbuck’s International Operations” Case 7 page 7 lines 5-8) Also, its close association with Sazaby aided Starbuck’s to be aware of the local traditions and customs and introduce products accordingly.
In a established coffee market such as in countries such as Italy and other European nations; penetration seemed a formidable task but the “hip” image of Starbuck’s along with its ambience, No-Smoking policy and the self-service mode all aided Starbuck’s to firmly establish itself in the European region. However, problems began to rise soon after the euphoric rise as a result of the increasingly volatile political economic and political situation in the Middle East where the sales began to sink increasingly due to the negative image of everything “American” and Starbuck’s image of being pro-Jewish.
Even Starbuck’s attempts to downplay any such association, it still faced massive losses and consequently, had to close down a number of stores in the Middle Eastern region. (Dutta, & Subhadra ” Starbuck’s International Operations” Case 7 page 7 ) Besides, the above mentioned issues, a number of other issues had cropped up such as stiff competition, high business developmental costs, and resistance from the clients in international markets who over time had substituted Starbuck’s for cheaper alternatives or due to basic taste issues.
The economic recession in certain European nations and the criticism by Non-Governmental organizations further escalated the worsening situation. Added to these woes was the complexity of its joint ventures etc, lack of proper staff training and high operational costs. (Dutta, & Subhadra” Starbuck’s International Operations” Case 7 page 9) Starbuck’s addressed these issues through a number of strategic maneuvers such as opting for local suppliers to reduce operational costs, decreasing the expansion pace in order to decrease the costs of operation etc.
(Dutta, & Subhadra” Starbuck’s International Operations” Case 7 page 9) However, certain pertinent factors need to be considered by Starbuck’s such as the environmental risk of volatile regions such as the Middle East and the pricing strategy which had made Starbuck’s lose precious international customer force. (Dutta, & Subhadra” Starbuck’s International Operations” Case 7 page 9) Hence, all the above factors outlined a strategy analysis of the company’s global operations and the company’s situation in terms of its international competitiveness.
References Dutta, S & Subhadra K” Starbuck’s International Operations” Case 7 J. Reese, "Starbucks, " Fortune (December 9, 1996) L. Ioannau, "King Bean, " Fortune (May 5, 1998)