Maria Risholm, Salomon Sacal, Kamel Ait El Hadj, Geraldo Carvalho & Yanee Zhang

Starbucks  Mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time  Who? Seattle coffehouse consept IPO in 1992 Market Capitalization: US $18.6Bn  Where? More than 50 countries and 16,700 stores Source:

Starbucks’ Success Formula  Motivated employees = superior customer service Focus on recruiting & developing Attractive compensation policies ○ Stock options ○ Medical benefits

Internationalization  Licensing  Lack of control  Strategy Alternatives Local Joint-Venture (licensed format) Acquisition (Wholly owned) Greenfield investment (Wholly owned) Local joint venture = Preferred Strategy

Local Joint-Venture Advantages  Control  A facility entry into foreign market  Shared fixed costs & associate risks  Local partner’s knowledge Competitive conditions, Culture, Political system, etc.

Approaches and Acquisitions in Countries such as : (EMEA) Japan – “ スターバックス (transliteration: sutābakkusu), and the abbreviation スタバ is also used as slang” Thailand – ” สตาร์บัคส์ pronounced [satā ː bāk ʰ ]” Europe - Joint Ventures and Parameters Source: “International operating margin improved to 7.7%, from 1.4% in Q2 FY09 ”

Starbucks in China: Objective: Develop the largest overseas market in China Current Situation: 700 coffee stores in Greater China(PRChina, HK, Macau, Taiwan), including over 360 in mainland China (2009) 10% of Starbucks’ US$ 6.4 global sales (2005) A growth of 30% in Beijing recent years and in Shanghai, less than 2 years, net profit reached 4 million dollars

 Licensing and Joint Venture Ownership Structure: Beijing Meida Coffee Co Ltd Shanghai Uni-President Starbucks Coffee Ltd Maxim's Caterers Ltd

Licensing: Unable to regulate the cash flow Joint Venture: Lack of controlling stakes results in the weak management control The three individual companies work independently within their own regions. Unable to help to achieve Starbucks' national expansion plans. Problems:

Solutions:  Whole ownership: Changzhou, Chengdu, Chongqing, Dalian, Dongguan, Foshan, Hangzhou, Kunshan, Nanjing, Ningbo, Qingdao, Shaoxin, Shenyang, Shenzhen, Suzhou, Tianjin, Wuxi, Wuhan and Xi’an.  Starbucks Greater China Support Center in Shanghai (2005)

Other advice for the expansion: Develop new products Tea drinks Social responsibilities:  Starbucks China Education Project (US$5 million) China Soong Ching Ling Foundation China Women Development Foundation Chengdu Education Foundation  2008 Sichuan Earthquake relief ($100,000)

Theoretical patterns Internalization/market imperfections theory  Licensing system is flawed: (1) limited or no control over the licensee and (2) Starbucks’ specific culture cannot be licensed Greenfield investments Dunning’s Eclectic paradigm Source: International Business, Charles W.L. Hill, McGraw-Hill 7th ed.

Conclusion  No strategy fits all models  Main factors to take into consideration when selecting a course of action: (1) immaterial elements (2) level of control