International Business

Assignment # 3

Multi-Nationals in Action

Submitted to: Mr Hanif Shahzad Malik

Submitted by: Usman Tariq

Section: A (morning)

Course: BBA 5th

Roll no: 9171007

 Summary

Starbucks Corporation is a multinational coffee chain store started from Seattle Washington,
United states in 1971. Got seceded after getting the idea of bar concept in 1985 with more than
16000 chains across the world, having chain in North America, South America, Europe and Asia
Starbucks is now a global firm. Starbucks use licensing from the process of internationalization
but also get most of the revenue from its home region.

Questions

1. Why does Starbucks rely on licenses for most of its international operations? Does the firm
risk the dissipation of its managerial or technological advantages?

Ans) Starbucks only rely on licenses because they don’t have heavy operational tasks their job is
just to sell coffee and because licensing is also an easy method to go internationally. No, they
don’t have any risks regarding on the managerial and technological advantages because they
only give license not their technology and skills.

Licensing is the first step and easiest of the internationalization process stepping into the
international market and Starbucks is only selling coffee in the global market.

For example: Toyota has a risk of managerial and technological advantages so that’s why
wherever it operates by itself and don’t give license but that type of case doesn’t applies on
Starbucks.

2. Can you argue that Starbucks is a global company regardless of the strong dominance of its
home region in terms of sales and locations?

Ans) Starbucks is a global company because it do licensing and has stores all over the world
Like in Europe,Asia, north and SouthAmerica. But it is operational in its home region where it is
generating most of its revenue from home region.

Licensing is the basic step of getting internationally and Starbucks is providing licenses to
companies and individuals all across the world.

For example: MacDonald’s, KFC like companies are global companies and they also provide
licenses.

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3. What accounts for discrepancy between percentage of foreign locations and percentage of
foreign net revenues?

Ans) There is discrepancy between percentage of foreign locations and percent of foreign net
revenues because except their home region they are only doing licensing and have proper
operations in home region which gives them 79.9% of revenues from home region and 99% of
total operation income.

This happens because Starbucks have more domestic stores than internationally and also they
have done only licensing which divides profits so there is more ratio of profit from home region.

4. What are some of the reasons why Starbucks chooses to retain operational control of its
domestic operations?

Ans) Because 99 percent of their total operation income and 79.9% of the total revenue comes
from home country also they gave full control on their business in domestic market so they can
perform all their strategies and operations on their best.

Every company wants to make more profit and value creation and Starbucks avail this
opportunity in their domestic market as it gives Starbucks an advantage of same cultural values
and they know more about the market values and standards of their market.

For example: Every company in this world make most of its profit for its domestic market as it is
much easier to grow because they have same standards according to market.