Management 315: International Management, Professor In Hyeock Lee Loyola University Chicago Spring 2013 This case study analyzes Starbuck's overall performance as a multinational enterprise using the company's revenue data, 4 distances, firm specific advantages, country specific advantages, foreign direct investment, and much more.

1. Case Presentation 4.1
Group 4
Matthew Cruz, Brooke Feery,
Jacob Hostetler, Daniela Nicula, Manh Duc Tran

2. Who is Starbucks?
Starbucks is the premier roaster, marketer and
retailer of specialty coffee in the world,
operating in 60 countries with 18,066 Total
stores

3. Starbucks at a Glance
Is Starbucks a MNE? YES!
• Industry: Restaurants Forbes Lists
• Founded: 1985 • #631 Global 2000
• Country: United States • #54 World’s Most Powerful
• CEO: Howard Schultz Brands
• Website: • #21 Innovative Companies
www.starbucks.com • #740 in Sales
• Employees: 149,000 • #493 in Profit
• 2012 Sales: $40 billion • #1930 in Assets
• #192 in Market Value
• Headquarters: Seattle,
Washington

4. The Starbucks Portfolio
• Tazo® Tea (USA)
• Coffee Concepts (Hong Kong)
• Evolution Fresh, Inc. (USA)
• Olympic Casualty Insurance Co. (USA)
• Seattle Coffee Company (USA)
• Seattle's Best Coffee LLC (USA)
• Coffee Equipment Company (USA)
• La Boulange Bakery Brand (USA)

5. Total Revenue
(by Region)
NAFTA
1%
10%
Europe/Middle
5%
East/Africa
9% Asia/Pacific
Channel
75% Development
Other

6. Case Study Questions
1. What are the four dimensions of ‘distance’ in
Starbucks’ international expansion?
2. How did Starbucks reduce the ‘distance’ vis-à-vis host
countries?
3. Looking only at the four dimensions of
distance, should Starbucks invest in Japan or China?
4. If you had been in charge of the international
expansion of Starbucks, what would you have
changed?
5. In the case of Starbucks, what are the interactions
between company-specific features and the four
dimensions of distance?

7. Starbucks and the Four Distances
Cultural
• Asian markets prefer tea
• Different markets have different coffee
preferences
• Starbucks’ influence is perceived as
Americanization
Administrative
• Russian and Chinese
trademark issues
• Difficulty in controlling
operations abroad

8. Starbucks and the Four Distances
Geographic
• Difficulty in transporting teas and roasted beans
to far-away markets
• Rural areas abroad do not have the infrastructure
required
Economic
• In some countries, Starbucks coffee costs more
than a meal
• Costs of setting up operations in a new country
can be high
Starbucks’ approach to bridging the Four Distances
classifies it as an International Projector.

9. Starbucks’ Performance as a MNE

10. Degree of Multinationality
Licensing – The bulk of Starbucks’ foreign retail
locations are licensee-operated (53% in Europe and
80% in Asia)
Export – Starbucks exports its “Channel
Development” products from North America
Local Packaging / Assembly – Starbucks operates
two major facilities outside of North America for
roasting and distribution (Netherlands and the
United Kingdom)
FDI – Starbucks owns and operates a minority of its
foreign locations (47% in Europe and 20% in Asia)

11. International Expansion
• Starbucks plans to add 3,000 new stores to its
Americas and U.S. division and to renovate
thousands of other stores in the region
• In Asia, Starbucks will have almost 4,000
stores by the end of 2013, including 1,000 in
China
• Right now, the largest markets are the United
Kingdom, Canada, and Japan

12. Firm Specific Advantages
Tangible Resources
• 18,066 retail locations worldwide as of Sept 30, 2012
• 5 roasting plants in US and the Netherlands
– 24 “co-manufacturers” in US, Canada, Europe, Asia, Latin
America
– 1 tea processing plant in Portland, OR
• Advanced coffee and beverage making machines
• High-quality beans for use and sale in-store
• Drinks/formulas, especially seasonal drinks
• “Channel development”: Starbucks branded
merchandise

13. Firm Specific Advantages (cont’d)
Intangible Resources
• Roasting techniques, other in-store beverage processes
• Method of serving customers, “order fulfillment process”
• Brand identity, reputation, readily identifiable
• Large, identifiable, overall satisfied customer base
• Fair trade contracts with bean farmers
• Image as a socially aware and green company
Human Resources
• Superior employee relationship – employees called “partners”
• Health insurance plans, “bean stock,” etc. offered to employees
• Employees enjoy working at the company
• Very low turnover (13%)
• Training programs for employees

14. Country Specific Advantages
Home country CSAs
• Starbucks exploited a change in the American
coffee consumption palette
Host Country CSAs
• The same trend is occurring in China and much of
mainland Asia
The mix of weak CSAs and strong FSAs places
Starbucks in the 4th Quadrant of the FSA-CSA
Matrix

15. Product Supply Chain

16. The Double Diamond
Primary
Diamond
US Market
Secondary
Diamonds
Coffee Growing
Regions

17. Foreign Direct Investment
Market-Seeking FDI
Starbucks primarily engages in FDI for
distribution and retail centers, the majority of
their foreign-located assets are of this type
Efficiency-Seeking FDI
Starbucks owns several roasting and packaging
facilities in the host triad regions to facilitate
product distribution

18. Summary
• Home-Region MNE • FSAs are Primarily
(NAFTA) Transferrable
• Activity Level: • Double Diamond
License, Export, Local
Framework
Packaging, FDI
• International • FSA-CSA Matrix:
Performance: Stage 2 Quadrant 4
• MNE Archetype: • FDI Types: Primarily
International Projector Market-Seeking and
Efficiency Seeking

19. Works Cited
• "100 Best Companies to Work For 2010: Starbucks Coffee." CNNMoney.
Cable News Network, n.d. Web. 20 Feb. 2013.
• 2012 Starbucks Annual Report. Rep. N.p.: n.p., n.d. Print.
• "Career Center." Starbucks Coffee Company. Starbucks, n.d. Web. 20 Feb.
2013.
• "Clover Coffee Machines Catch Starbucks' Fancy." Business & Technology.
Starbucks, 3 Apr. 2008. Web. 24 Feb. 2013.
• "From Bean to Cup: How Starbucks Transformed Its Supply
Chain." CSCMP's Supply Chain Quarterly. Starbucks, n.d. Web. 20 Feb.
2013.
• "Partner Networks." Starbucks Coffee Company. Starbucks, n.d. Web. 20
Feb. 2013.
• "Starbucks' Big Expansion Plans: Yes, There's Still Room for It to
Grow." DailyFinance.com. Starbucks, 5 Dec. 2012. Web. 20 Feb. 2013.
• "Starbucks." Brand Ranking. SyncForce, n.d. Web. 20 Feb. 2013.
• "Starbucks Coffee Company." Starbucks Coffee Company. N.p., n.d. Web.
20 Feb. 2013.