Internationalisation of Starbucks

1051 Words Nov 27th, 2007 5 Pages
No less than 25 years ago, Harold Schultz joined a small American chain of coffee shops in Seattle as the director of retail and operations (Starbucks). Since then, Schultz 's vision has transformed Starbucks into a transnational giant on a scale similar to the international growth experienced by McDonalds. By the end of 2006 the firm had a total 12,400 stores across 37 different countries (Starbucks 2006). In this essay I will explore the academic literature on international business and apply it to the case of Starbucks. I will conclude with a summary of the motivating economic factors that led to the expansion of Starbucks into foreign markets.
The application of the academic literature to the Starbucks case does invariably lead to a
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Such an approach to strategic management is based on the very same premise that Hymer raises.
Hymer postulates that there are two explanations for ‘international operations ' (joint ventures, licensing, tacit collusion and FDI)
1. Specific advantages that a firm can exploit in foreign markets (particularly important when all avenues of domestic investment have been exhausted)
2. Removal of conflicts between firms that are in possession of specific advantages by either colluding and sharing the market with existing rivals or gaining direct control of all operations in the market (Ietto-Gillies 2005)
To return to the case study, Starbucks began expanding into foreign markets in 1995 when it licensed its shop format in Japan in return for royalties (Hill).
Hymer also discusses a third minor reason for engaging in international operations; that of diversification. This is the principle that by having operations in multiple markets there will be less variability of earnings as poor performance in one market may be offset by strong performance in another market. Although it is difficult to establish whether this is an explicit determinant of Starbucks ' internationalisation, it does benefit from the spread of risk across multiple markets. For example, during the slow growth of the US market or the problems in the Japanese economy (its biggest market).
An alternative approach
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