1.

Initially Starbucks expanded internationally by li

censingi t s f o r m a t t o f o r e i g n o p e r a t o r
s . I t s o o n b e c a m e disenchanted with this
strategy. Why?
Because this strategy did not give Starbucks the control needed to
ensurethat the licensees closely followed Starbucks’ successful formula.Note:
“Starbucks successful formula” refers to its basic strategy, which was: To sell
the company’s own premium roasted coffee,along with freshly brewed
espresso-style beverages,a v a r i e t y o f p a s t r i e s , c o f f e e a c c e s s o r i e s ,
t e a s , a n d other products, in a tastefully designed coffeehousesetting
[…] also providing superior customer service.

2.Why do you think Starbucks has now elected to

e x p a n d internationally primarily through local
joint ventures tow h o m i t l i c e n s e s i t s f o r m a
t , a s o p p o s e d t o a p u r e licensing strategy?
I am sure it is one of the most important Starbucks’ strategies: to license
itsformat to foreign operators and also establishing local joint ventures
withthem. This fact (as I said before) gives Starbucks the control to be sure that
licensees are following its success formula; “licensed to the venture”
meanst h a t b o t h j o i n t o w n e r s h a v e t h e r e s p o n s i b i l i t y f o r g r o w i n g
t h e b u s i n e s s (Starbucks) presence where it has established.For example:
at the beginning Starbucks decided to enter to Japanby licensing its
format to foreign operators, but later it become
ab a d d e c i s i o n b e c a u s e S t a r b u c k s d i d n o t h a v e t h e a u t h o
r i t y t o control this new business was still following Starbucks
successfulformula. It is when Starbucks improved this situation adding
to thel i c e n s e a j o i n t v e n t u r e , s o b o t h c o m p a n i e s w h i c h
participated
as j o i n t o w n e r s h a d t h e c o m m i t m e n t a n d r e s p o n s i b i l i t y t
o w o r k together in order to get the best result=sales.
So it is clear Starbucks’ strategies had been innovated, in the
w a y t h a t i t doesn’t want to affront directly a new business in other countries,
Starbucksh a s b e e n o p e r a t i n g i n f o r e i g n m a r k e t s b y s h
a r i n g t h e c o s t s o f b e i n g international, working on the
a d v a n t a g e s t h e f o r e i g n j o i n t o w n e r m a y provide, and also p
r e p a r i n g t h e f o r e i g n w o r k i n g p a r t y b y s o m e t r a i n i n g s given by
American experts (American employees).Example: In Japan, Starbucks decided
to train the foreign working partyb y t r a n s f e r r i n g s o m e e m p l o y e e s f r o m
the USA, so they could teachthem the way to deal with
c u s t o m e r s a n d t o f o l l o w t h e “ S t a r b u c k s essence” in their behavior.
Talking about strategic alliances, Starbucks got some important
advantagesf o r e x p a n d i n g i n t e r n a t i o n a l l y t h r o u g h l o c a l j o i n t
v e n t u r e s ( t o w h o m i t licenses its format):-A facility entry into foreign
markets-Starbucks shared fixed costs (and associate risks) of
developing thisservice into new markets.-This alliance was a way to bring
together complementary skills
anda s s e t s t h a t n e i t h e r c o m p a n y c o u l d e a s i l y d e v e l o p o n i t s o w
n (Starbucksp r o v i d e d t o t h e j o i n t v e n t u r e t h e “ s u c c e s
s f o r m u l a ” = e x p e r t i s e = management know-
h o w ; h o w e v e r , t h e o t h e r j o i n t o w n e r p r o v i d e d t h e experien
ce in that specific country, the national identity to facilitate th
e entry of the business and to make the costumers feel comfortable
with theservice (because it is established in their country and
identified with theirfeelings and customer demands).

entry of the business and to make the costumers feel comfortable with
theservice (because it is established in their country and identified
with theirfeelings and customer demands).
3. What are the advantages of a joint-venture entry
mode forStarbucks over entering through wholly owned
subsidiaries?
-The risks associated with learning to do business in a new culture are less
if the firm acquires an established host-country enterprise.-Starbucks benefits
from a local partner’s knowledge of the host country’scompetitive
conditions, culture, language and political systems.-
A joint venture makes a good combination:
i t p r o v i d e s n o t o n l y management know-
h o w , b u t a l s o m a r k e t i n g e x p e r t i s e a n d t h e n e c e s s a r y local
knowledge for competing in the foreign country.-Although Starbucks is a
very rich enterprise, it is always important to savee x p e n s e s , s o t h e
b e s t s t r a t e g y f o r S t a r b u c k s i s t o c r e a t e a j o i n t v e n t u r e where
the other joint owner has the responsibility to share costs, risks
andwork together in the “fight” against the competition.

On occasion, Starbucks has chosen a wholly owned

subsidiaryto control its foreign expansion (e.g.,
in Britain and Thailand).Why?
Because Starbucks felt those specific joint ventures would not
b e a b l e t o achieve the company’s aggressive growth
targets.S t a r b u c k s h a s b e e n a l w a y s i n t e r e s t e d t o c r e a t
e j o i n t v e n t u r e arrangement where both join owners are able to invest in
the venture,s o w h e n S t a r b u c k s n o t i c e d T h a i l a n d a n d B r i t a i n d i d
n o t r e l i e d w i t h enough resources for opening at least 20 Starbucks
coffee stores inthose countries (respectively) within five years: it decided
to acquired
bot h v e n t u r e s , w h i c h g o a l w a s t o g a i n r i g h t e r c o n t r o
l o v e r t h e expansion strategy (in Britain and Thailand).

C. Rivera
both ventures, which goal was to gain righter contr
o l o v e r t h e expansion strategy (in Britain and Thailand).
3.Which theory of FDI best explains the
i n t e r n a t i o n a l expansion strategy adopted by Starbucks?
HORIZONTAL FOREIGN DIRECT INVESTMENT
1
It is known that one of the most important advantages Horizontal FDI
givesto the enterprise that practices it, is the fact that the enterprise
finds
morep r o f i t a b l e t o h a v e a n o t h e r o p e r a t o r t o p r o d u c e a b r o
a d t h a n t o p a y t h e commerce barriers […] it is not really the case
of Starbucks, because theadvantage of its FDI is not to save money of
payments in commerce
barriers( e x p o r t i n g w o u l d n o t b e u s e f u l b e c a u s e t h i s e n t e r p
r i s e d o e s n o t s e l l a product directly, its main direction is to
s e l l t h e s e r v i c e ) , i t i s t o h a v e a n important presence in as many
countries as possible, obviously to earn muchmore money and to create one of
the best value brand.