Q3(a): What are the advantages of

a joint-venture entry mode for

Starbucks over entering through
wholly owned subsidiaries?
Answer:
• Starbucks can benefit from local partner’s knowledge of the
host country’s competitive conditions, culture, language,
political and business systems.
• Starbucks can share potentially high development costs and
risks with local partner.
• Joint-ventures face low risk of being subject to
nationalization or other forms of adverse government
interference.
Q3 (b): On occasion, Starbucks has chosen a
wholly owned subsidiary to control its foreign
expansion (e.g., in Britain & Thailand). Why?

• Gain tighter control over expansion strategies

• Reduce risk of losing core competencies
• Maintain tight control over operations in different countries –
necessary for engaging in global strategic coordination

• Firm has a 100% share in the profits

Q4: Which theory of FDI best explains the
international expansion strategy adopted by
Starbucks?
Answer:
• Internalization Theory – when one or more of the following
conditions holds, FDI is preferable to licensing and exporting

1. When a firm has valuable know-how that cannot be adequately protected by

a licensing contract

2. When the firm needs tight control over a foreign entity to maximize its
market share and earnings in that country

3. When a firm’s skills and know-how are not amenable to licensing