Case Presentation 4.1

Group 4

Matthew Cruz, Brooke Feery,

Jacob Hostetler, Daniela Nicula, Manh Duc Tran

Who is Starbucks?

Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 60 countries with 18,066 Total stores

Starbucks at a Glance

Forbes Lists• #631 Global 2000• #54 World’s Most Powerful

Brands• #21 Innovative Companies• #740 in Sales• #493 in Profit• #1930 in Assets• #192 in Market Value

Is Starbucks a MNE? YES!

• Industry: Restaurants• Founded: 1985• Country: United States• CEO: Howard Schultz• Website:

www.starbucks.com• Employees: 149,000 • 2012 Sales: $40 billion• Headquarters: Seattle,

Washington

The Starbucks Portfolio

• Tazo® Tea (USA)

• Coffee Concepts (Hong Kong)

• Evolution Fresh, Inc. (USA)

• Olympic Casualty Insurance Co. (USA)

• Seattle Coffee Company (USA)

• Seattle's Best Coffee LLC (USA)

• Coffee Equipment Company (USA)

• La Boulange Bakery Brand (USA)

Total Revenue(by Region)

75%

9%

5%10%

1%NAFTA

Europe/Middle East/Africa

Asia/Pacific

Channel Development

Other

Case Study Questions

1. What are the four dimensions of ‘distance’ in Starbucks’ international expansion?

2. How did Starbucks reduce the ‘distance’ vis-à-vis host countries?

3. Looking only at the four dimensions of distance, should Starbucks invest in Japan or China?

4. If you had been in charge of the international expansion of Starbucks, what would you have changed?

5. In the case of Starbucks, what are the interactions between company-specific features and the four dimensions of distance?

Starbucks and the Four DistancesCultural

• Asian markets prefer tea• Different markets have different coffee

preferences• Starbucks’ influence is perceived as

Americanization

Administrative

• Russian and Chinese trademark issues

• Difficulty in controlling operations abroad

Starbucks and the Four Distances

Geographic• Difficulty in transporting teas and roasted beans

to far-away markets• Rural areas abroad do not have the infrastructure

required

Economic• In some countries, Starbucks coffee costs more

than a meal• Costs of setting up operations in a new country

can be high

Starbucks’ approach to bridging the Four Distances classifies it as an International Projector.

Starbucks’ Performance as a MNE

Degree of Multinationality

Licensing – The bulk of Starbucks’ foreign retail locations are licensee-operated (53% in Europe and 80% in Asia)

Export – Starbucks exports its “Channel Development” products from North America

Local Packaging / Assembly – Starbucks operates two major facilities outside of North America for roasting and distribution (Netherlands and the United Kingdom)

FDI – Starbucks owns and operates a minority of its foreign locations (47% in Europe and 20% in Asia)

International Expansion

• Starbucks plans to add 3,000 new stores to its Americas and U.S. division and to renovate thousands of other stores in the region

• In Asia, Starbucks will have almost 4,000 stores by the end of 2013, including 1,000 in China

• Right now, the largest markets are the United Kingdom, Canada, and Japan

Firm Specific Advantages

Tangible Resources• 18,066 retail locations worldwide as of Sept 30, 2012• 5 roasting plants in US and the Netherlands

– 24 “co-manufacturers” in US, Canada, Europe, Asia, Latin America

– 1 tea processing plant in Portland, OR

• Advanced coffee and beverage making machines• High-quality beans for use and sale in-store• Drinks/formulas, especially seasonal drinks• “Channel development”: Starbucks branded

merchandise

Firm Specific Advantages (cont’d)

Intangible Resources• Roasting techniques, other in-store beverage processes• Method of serving customers, “order fulfillment process”• Brand identity, reputation, readily identifiable• Large, identifiable, overall satisfied customer base• Fair trade contracts with bean farmers• Image as a socially aware and green company

Human Resources• Superior employee relationship – employees called “partners”• Health insurance plans, “bean stock,” etc. offered to employees• Employees enjoy working at the company • Very low turnover (13%)• Training programs for employees

Country Specific Advantages

Home country CSAs• Starbucks exploited a change in the American

coffee consumption palette

Host Country CSAs• The same trend is occurring in China and much of

mainland Asia

The mix of weak CSAs and strong FSAs places Starbucks in the 4th Quadrant of the FSA-CSA Matrix

Product Supply Chain

The Double Diamond

Primary

Diamond

US Market

Secondary

Diamonds

Coffee Growing Regions

Foreign Direct Investment

Market-Seeking FDI

Starbucks primarily engages in FDI for distribution and retail centers, the majority of their foreign-located assets are of this type

Efficiency-Seeking FDI

Starbucks owns several roasting and packaging facilities in the host triad regions to facilitate product distribution

Summary

• FSAs are Primarily Transferrable

• Double Diamond Framework

• FSA-CSA Matrix: Quadrant 4

• FDI Types: Primarily Market-Seeking and Efficiency Seeking

• Home-Region MNE (NAFTA)

• Activity Level: License, Export, Local Packaging, FDI

• International Performance: Stage 2

• MNE Archetype: International Projector

Works Cited

• "100 Best Companies to Work For 2010: Starbucks Coffee." CNNMoney. Cable News Network, n.d. Web. 20 Feb. 2013.

• 2012 Starbucks Annual Report. Rep. N.p.: n.p., n.d. Print.• "Career Center." Starbucks Coffee Company. Starbucks, n.d. Web. 20 Feb.

2013.• "Clover Coffee Machines Catch Starbucks' Fancy." Business & Technology.

Starbucks, 3 Apr. 2008. Web. 24 Feb. 2013.• "From Bean to Cup: How Starbucks Transformed Its Supply

Chain." CSCMP's Supply Chain Quarterly. Starbucks, n.d. Web. 20 Feb. 2013.

• "Partner Networks." Starbucks Coffee Company. Starbucks, n.d. Web. 20 Feb. 2013.

• "Starbucks' Big Expansion Plans: Yes, There's Still Room for It to Grow." DailyFinance.com. Starbucks, 5 Dec. 2012. Web. 20 Feb. 2013.

• "Starbucks." Brand Ranking. SyncForce, n.d. Web. 20 Feb. 2013.• "Starbucks Coffee Company." Starbucks Coffee Company. N.p., n.d. Web.

20 Feb. 2013.