Global Market Entry Strategies

Presented by Siddharth Raj Gurung, MBA 2010.

Company Background :
 Starbucks is an international coffee and
coffeehouse chain, based in Seattle, Washington.

 Sells packaged, premium specialty coffees.

 Starbucks has evolved into a firm known for its

coffeehouses, where people can purchase
beverages and food items as well as packaged
whole bean and ground coffee

 Founded by Howard Schultz, in 1987.

Cont.
 sacrifice long-term integrity and values for short-term profit.

 from the beginning, Schultz has professed a strict growth policy .

 owns all of its North American Starbucks stores outright.

 Starbucks goes into a geographic market and tries to completely

dominate it before setting its sights on further expansion

 Starbucks has grown from 17 coffee shops in 1987 to 5,688

outlets in 28 countries by the end of fiscal 2002
 employed over 60,000 individuals

 including approximately 50,000 in retail stores at the end of 2002.

Global Presence.
 Structure of Starbucks
 Starbucks Corporation is organized into two
business units that correspond to the company's
operating segments:

• North American

• Starbucks Coffee International

Reasons for foraying into international
markets.
 Market saturation in North America.

 Schultz, the founder of Starbucks, professed and believed in

a strict growth policy, according to him market share and
name recognition were critical to the company’s success, so
after having expanded extensively in North America
Starbucks decided to foray into foreign markets.

 the company’s net revenues increased at a compounded

annual growth rate of 20%, to $3.3 billion in fiscal 2002. Net
earnings had grown at an annual compounded growth rate
of 30% to $218 million in fiscal 2002, which is the highest
reported net earnings figure in the company's history. So in
order to duplicate these figures the company expand.
Contd.
 Attractive Asia Pacific region markets due to
growing consumerism and eagerness among
youths.
Starbucks’ International Expansion
Strategy.
Basic strategy was to identify a large city to serve
as a "hub" for each selected targeted region, then
it would be followed opening 20 or more stores in
the first two years. Once stores blanketed the hub,
then additional stores were opened in smaller,
surrounding areas in that region. All vice
presidents of the new zones, Starbucks recruited,
came with extensive operating and marketing
experience in chain-store retailing.
Contd.
 Expansion through Joint venture – helped Starbucks
to take the advantage of the knowledge of its local
partners, as in the case Sazaby Inc. of Japan with whom
the company entered into a joint venture in Japan, it was
through Sazaby Inc.’s knowledge that Starbucks were
able to introduce popular products like ‘Green Tea
Frappucino’

 Partnership – laid great stress on right partner with

similar values as to those of Starbucks.
Cont.
 Expansion through Licensing .

 
 Expansion through Foreign Direct Investment:
Although only the units in North America were wholly
owned, Starbucks entered the Canadian market through
wholly-owned subsidiary, Starbucks Coffee Canada.

 Expansion through Acquisitions:

After the success in Japanese market in 1996, Starbucks
acquired Seattle Coffee Company in the United Kingdom,
a chain with more than 38 retail locations, in 1998 .
Cont.
 Success of No Smoking Policy.

 Starbucks’ ambience.
Risks associated with international expansion:

 Anti-globalization activists.

 Community push-back.
E.g. Primrose Hill, in London.

 Less Profit

 Less Control Power.

Risk emerging out of Strategy deployed:

• structure of new operations overseas

• competitor in the new market

• diligence of potential partners,

• trademarks to protect brands,

• sales and distribution

Cont.

• Warehousing
• accounting issues
• import taxes.
• intellectual property.
• existing multilateral treaties.
• registration policies and statutory protection
• Environmental issues
• and should the labors be hired form the native
country or should they be brought in from
somewhere else?