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.
Case Presentation 4.1 Group 4 Matthew Cruz, Brooke Feery,Jacob Hostetler, Daniela Nicula, Manh Duc Tran
Who is Starbucks?Starbucks is the premier roaster, marketer andretailer of specialty coffee in the world,operating in 60 countries with 18,066 Totalstores
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
The Starbucks Portfolio• Tazo® Tea (USA)• Coffee Concepts (Hong Kong)• Evolution Fresh, Inc. (USA)• Olympic Casualty Insurance Co. (USA)• Seattle Coffee Company (USA)• Seattles Best Coffee LLC (USA)• Coffee Equipment Company (USA)• La Boulange Bakery Brand (USA)
Total Revenue (by Region) NAFTA 1% 10% Europe/Middle 5% East/Africa9% Asia/Pacific Channel 75% Development Other
Case Study Questions1. 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?
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
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 highStarbucks’ approach to bridging the Four Distancesclassifies it as an International Projector.
Degree of MultinationalityLicensing – The bulk of Starbucks’ foreign retaillocations are licensee-operated (53% in Europe and80% in Asia)Export – Starbucks exports its “ChannelDevelopment” products from North AmericaLocal Packaging / Assembly – Starbucks operatestwo major facilities outside of North America forroasting and distribution (Netherlands and theUnited Kingdom)FDI – Starbucks owns and operates a minority of itsforeign locations (47% in Europe and 20% in Asia)
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
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
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
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 AsiaThe mix of weak CSAs and strong FSAs placesStarbucks in the 4th Quadrant of the FSA-CSAMatrix
The Double Diamond Primary Diamond US Market Secondary DiamondsCoffee Growing Regions
Foreign Direct Investment Market-Seeking FDIStarbucks primarily engages in FDI fordistribution and retail centers, the majority oftheir foreign-located assets are of this type Efficiency-Seeking FDIStarbucks owns several roasting and packagingfacilities in the host triad regions to facilitateproduct distribution
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
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." CSCMPs 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, Theres 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.