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    Starbucks' Foreign Direct Investment

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    Abdelrahman Ehab
    Starbucks began as a single store in Seattle in the 1980s and focused on providing a welcoming third place experience beyond just coffee. [SENTENCE 1] In 1995, Starbucks expanded to Japan through a joint venture with a local retailer to license the Starbucks format and train employees, growing to over 1,000 stores by 2018. [SENTENCE 2] In the late 1990s, Starbucks opened stores in other global markets like Taiwan, China, and the UK through joint ventures and acquisitions, with China becoming its fastest-growing market second only to the US. [SENTENCE 3]

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    Starbucks' Foreign Direct Investment

    Uploaded by

    Abdelrahman Ehab
    146 views2 pages
    Starbucks began as a single store in Seattle in the 1980s and focused on providing a welcoming third place experience beyond just coffee. [SENTENCE 1] In 1995, Starbucks expanded to Japan through a joint venture with a local retailer to license the Starbucks format and train employees, growing to over 1,000 stores by 2018. [SENTENCE 2] In the late 1990s, Starbucks opened stores in other global markets like Taiwan, China, and the UK through joint ventures and acquisitions, with China becoming its fastest-growing market second only to the US. [SENTENCE 3]

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    Starbucks’ Foreign Direct Investment

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    Starbucks began as a single store in Seattle in the 1980s and focused on providing a welcoming third place experience beyond just coffee. [SENTENCE 1] In 1995, Starbucks expanded to Japan through a joint venture with a local retailer to license the Starbucks format and train employees, growing to over 1,000 stores by 2018. [SENTENCE 2] In the late 1990s, Starbucks opened stores in other global markets like Taiwan, China, and the UK through joint ventures and acquisitions, with China becoming its fastest-growing market second only to the US. [SENTENCE 3]

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    146 views2 pages

    Starbucks' Foreign Direct Investment

    Uploaded by

    Abdelrahman Ehab
    Starbucks began as a single store in Seattle in the 1980s and focused on providing a welcoming third place experience beyond just coffee. [SENTENCE 1] In 1995, Starbucks expanded to Japan through a joint venture with a local retailer to license the Starbucks format and train employees, growing to over 1,000 stores by 2018. [SENTENCE 2] In the late 1990s, Starbucks opened stores in other global markets like Taiwan, China, and the UK through joint ventures and acquisitions, with China becoming its fastest-growing market second only to the US. [SENTENCE 3]

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    Case 10: Starbucks’ Foreign Direct Investment

    Summary
    Starbucks, a global coffee roaster and retailer, began in the 1980s as a single store in Seattle's
    Pike Place Market selling premium-roasted coffee. The company focused on selling a "third
    place experience" (a warm and welcoming environment where customers can gather and connect)
    rather than just coffee, leading to success in the United States.
    In 1995, Starbucks expanded its presence to Japan, establishing a joint venture with local
    retailer Sazaby Inc. The Starbucks format was licensed to the venture, and employees were
    required to attend training classes similar to those given to U.S. employees. By the end of
    2018, Starbucks had 1,286 stores and a profitable business in Japan. In 2015, Starbucks
    acquired Starbucks Coffee in Japan, making the stores wholly owned.
    In 1998, Starbucks purchased Seattle Coffee for $84 million, establishing a Starbucks-like
    chain in Britain. By 2018, Starbucks had almost 1,000 stores in the United Kingdom.
    In the late 1990s, Starbucks opened stores in Taiwan, China, Singapore, Thailand, New
    Zealand, South Korea, and Malaysia. China has become Starbucks' fastest-growing market,
    second only to the United States in terms of store count and revenues. Starbucks entered
    China through a joint venture with a local company but bought out its East China venture
    partner in 2018 to gain control over growth. The company aims to have 6,000 wholly owned
    stores by 2022, increasing from 3,500 at the end of fiscal 2018.
    Discussion Questions

    QUESTION 1: What drove Starbucks to start expanding internationally? Is this strategy in


    the best interests of the company’s shareholders?
     Starbucks expanded globally to benefit from US success, take advantage of growing
    global coffee consumption, diversify revenue sources, and lessen its reliance on the US
    market while solidifying its position as a market leader.
     Starbucks' foreign development strategy entails risks including cultural differences and
    regulatory obstacles despite offering growth and market share. Successful expansion
    benefits shareholders, but there are no guarantees, and the success is dependent on good
    management and market sensitivity.

    QUESTION 2: Why do you think Starbucks decided to enter the Japanese market via a joint
    venture with a Japanese company? What lessons can be drawn from this?
     Through a partnership with local business Sazaby Inc., Starbucks entered the Japanese
    market. By utilizing their understanding of the regional market, customer preferences, and
    business procedures, they were able to adapt to the distinct coffee culture of Japan.
     This strategy places a focus on comprehending local market dynamics, collaborating with
    established players, and tailoring business tactics to target consumer preferences to reduce
    risks and gain traction.
    QUESTION 3: What drove Starbucks to shift from a joint venture strategy in China to run the
    operation through a wholly owned subsidiary? What are the benefits here? What are the
    potential risks and costs? Do you think this was the correct decision?
     To have more control, direct supervision, and effective execution of expansion plans,
    Starbucks changed its joint venture in China into a wholly owned subsidiary, bringing
    brand and operational standards into line.
     To ensure consistency, apply global strategy, increase profitability, and have complete
    control over the customer experience and brand image in China, Starbucks operates
    through a wholly-owned subsidiary.
     Starbucks becomes a completely owned subsidiary and takes over management of all
    operations in China. This requires ongoing monitoring and adjustment to market shifts,
    economic downturns, and shifting consumer tastes.
     As a Chinese subsidiary, Starbucks must deal with difficulties including cultural and legal
    intricacies and handle local regulations on its own, necessitating strong connections with
    government officials.
     Assuming full financial and operational accountability for its Chinese locations,
    Starbucks invested in acquiring a joint venture partner's portion and paid for labor,
    training, marketing, and maintenance costs.
     Shifting to a wholly owned subsidiary provides Starbucks with greater control, potential
    financial benefits, and brand protection.

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