Starbucks expanded internationally by licensingits format to foreign operators. It soon becamedisenchanted with this strategy.Why? Because this strategy did not give Starbucks the control needed to ensurethat the licensees closely followed Starbucks’ successful formula.
Note: “Starbucks successful formula” refers to its basic strategy, which was: To sell the company’s own premium roasted coffee,along with freshly brewed espresso-style beverages,a variety of pastries, coffee accessories, teas, andother products, in a tastefully designed coffeehousesetting […] also providing superior customer service. 2.Why do you think Starbucks has now elected to expandinternationally primarily through local joint ventures towhom it licenses its format, as opposed to a purelicensing strategy? I am sure it is one of the most important Starbucks’ strategies: to license itsformat to foreign operators and also establishing local joint ventures withthem. This fact (as I said before) gives Starbucks the control to be sure thatC.
Rivera licensees are following its success formula; “licensed to the venture” meansthat both joint owners have the responsibility for growing the business(Starbucks) presence where it has established.For example: at the beginning Starbucks decided to enter to Japanby licensing its format to foreign operators, but later it become abad decision because Starbucks did not have the authority tocontrol this new business was still following Starbucks successfulformula. It is when Starbucks improved this situation adding to thelicense a joint venture, so both companies which participated as joint owners had the commitment and responsibility to worktogether in order to get the best result=sales.So it is clear Starbucks’ strategies had been innovated, in the way that itdoesn’t want to affront directly a new business in other countries, Starbuckshas been operating in foreign markets by sharing the costs of beinginternational, working on the advantages the foreign joint owner mayprovide, and also preparing the foreign working party by some trainingsgiven by American experts (American employees).Example: In Japan, Starbucks decided to train the foreign working partyby transferring some employees from the USA, so they could teachthem the way to deal with customers and to follow the “Starbucksessence” in their behavior. Talking about strategic alliances, Starbucks got some important advantagesfor expanding internationally through local joint ventures (to whom itlicenses its format):A facility entry into foreign markets-Starbucks shared fixed costs (and associate risks) of developing thisservice into new markets.
-This alliance was a way to bring together complementary skills andassets that neither company could easily develop on its own (Starbucksprovided to the joint venture the “success formula” = expertise =management know-how; however, the other joint owner provided theexperience in that specific country, the national identity to facilitate theC. Rivera entry of the business and to make the costumers feel comfortable with theservice (because it is established in their country and identified with theirfeelings and customer demands). 3. What are the advantages of a joint-venture entry mode forStarbucks over entering through wholly owned subsidiaries? -The risks associated with learning to do business in a new culture are less if the firm acquires an established host-country enterprise.-Starbucks benefits from a local partner’s knowledge of the host country’scompetitive conditions, culture, language and political systems.A joint venture makes a good combination: it provides not onlymanagement know-how, but also marketing expertise and the necessarylocal knowledge for competing in the foreign country.
-Although Starbucks is a very rich enterprise, it is always important to saveexpenses, so the best strategy for Starbucks is to create a joint venturewhere the other joint owner has the responsibility to share costs, risks andwork together in the “fight” against the competition. On occasion, Starbucks has chosen a wholly owned subsidiaryto control its foreign expansion (e.g., in Britain and Thailand).Why? Because Starbucks felt those specific joint ventures would not be able toachieve the company’s aggressive growth targets.Starbucks has been always interested to create joint venturearrangement where both join owners are able to invest in the venture,so when Starbucks noticed Thailand and Britain did not relied withenough resources for opening at least 20 Starbucks coffee stores inthose countries (respectively) within five years: it decided to acquired
