Global business environment case study for Starbucks1.docx
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Global business environment case study for Starbucks1.docx
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GlobalbusinessenvironmentcasestudyforStarbucks1
UniversityofBirmingham
BirminghamBusinessSchool
THEGLOBALBUSINESSENVIRONMENT
0715821
Titleofessay
GBEGroupAssignmentforStarbuckscase
Lecturer
DrLisaDePropris
StudentIDs
1286094
1249898
1231372
Wordcount
1455
FromaSeattle-basedcoffeeshop,StarbucksCompanyexpandedatitsfastestspeedto17000storesin55countriesbytheendingof2011.Thefirstforeigninvestmenthappenedin1996whenStarbucksestablishedjointventureinJapan.Inthefollowing16years,varietystrategiesareusedinexpandinginternationalmarket:
licensing,jointventure,wholly-ownedsubsidiary.China,asStarbucks'nexttarget,willbetriplesizedthescaleinnextthreeyears.ThisessayanalysesandillustratesStarbucks’expansionactivitiesandstrategicdecision-makingbasedonDunning’sEclectictheory(1980)andFriedman'sninequestions.
Dunning’sEclectictheory(1980)
Dunning’sEclectictheoryisafruitfultheorythathelpsfirmstodetermineFDIactivitiesandchoosethecorrectmodetoenterinternationalmarket,whichstandsforownership,locationandinternalization.
Ownershipadvantagereferstothesuperiorassetsandskillsthatafirmpossesses,whichareinaccessiblebyrivalsinthehostmarket.
Beingtheleadingcoffeeretailerandroasterformorethan40years,Starbuckshasitsmostsignificantinvisibleadvantage--brandandreputation.Thegoodreputationwasbuiltupbyitsexcellentqualitycoffeeandgoodcustomerexperiencethatisbeneficialforcompanylong-termdevelopment.Moreover,Starbuckshasefficientcoffeebeansupplychain,combiningwithquickR&D,distributionchannels,whichhighlyaddvalueinitsvaluechain.Additionally,Starbucksbuildsaperfectsocialimage,withcontributioninmanyareas:
community,ethicalsourcing,environment,wellnessetc,whichattractscustomerswithenvironmentalandsocialawareness.
Locationadvantagesareadvantagesforfirmstoexploititsassetsinforeigncountriesorregionsratherthandomesticplaces.Itusuallyincludesexistenceofrawmaterial,lowwages,specialtaxesortariffs.(Gray.H.P,2003)
Theycanbedividedintotwoaspects:
marketadvantagesandgovernmentsupport.AccordingtothedatafromChinaCoffeeAssociation,theannualgrowthofcoffeeconsumptionisaround15%,whiletheworldcoffeeconsumptionincreasesonlyby2%eachyear.AttractedbytheChina'slowcostandsoardemandofmostpotentialmarket,Starbucksplannedtriplesizedthescaleinnextthreeyears,andthemostnetstoresopenedinChinaatthenumberof58(AnnualReport,2005).Furthermore,Chinesegovernmentsetupseveralbeneficialregulationstoattractinvestments:
lowtax,largeinvestarea,freeland,financialsupport.
Internalizationadvantagegivesthereasonwhythefirmhaswillingnesstointernalizecross-borderstructure.(Dunning,J.H.,&Lundan,S.M.2008)
Fromtheinitialpurposeofsellingthefinestwholebeancoffeesandcoffeebeverages,Starbuckscontrolscoffeepurchasing,roastingandpackaging,andtheglobaldistributionofcoffeetoensurewhatitsellsiscompliancewiththerigorouscoffeestandards.Moreover,StarbucksoperatesFarmerSupportCenters,whicharestaffedwithagronomistsandsustainabilityexpertstoworkwithcoffeefarmingcommunitiesinordertopromotebestpracticesincoffeeproductiondesignedandimprovebothcoffeequalityandyields.Thisactionnotonlyhelpsensuresustainabilityandfuturesupplyofhigh-qualitygreencoffees,butalsoreinforcestheleadershiproleinthecoffeeindustry.
Friedman9Questions
HowFastIsYourCountryorCompany?
The‘Fast’ofStarbuckswillberecognizedasthreefollowingparts:
1)FastinR&Dnewgenerationofproducts;2)Fastdistributionbusinesstotheworldaswellasfastindestroyinginefficientbusiness;3)Fastinrespondingtocustomers’commentsandideas.
1.Starbucksisalwaysseekingtodevelopmarketshareandunderpinitscustomers’loyalty.ItputsenormousenergyinR&Dandlaunchesnewproductstomeettheexpectationsofcustomers.Forinstance,inthefirsthalfyearof2010,Starbuckslaunchedthreenewproductstosatisfycustomersinaccordancewithspecificseasonalrequirementandhealthyissue.Comparedwithquick-servicerestaurantsandspecialtycoffeeshops,Starbucks’productdevelopmentisfarquickerthancompetitors.(StarbucksPress,2010)
2.Starbuckshadarapidgrowthfrom2000to2008;italmosttripledthenumbersofstoresinternationally.Starbucksexecutedmanagers’strategieswelltoexpandworldwidemassivelyinsuchashortterm.However,problemscamewithover-expanding.In2008,itcloseddown600storesintheUSduetocannibalizingeffectsandstrongcompetitionfromMcDonald’sandDunkin’Donuts.AlthoughitwasadilemmaforStarbucksatthattime,itmadetimelydecisionstoshutinefficientstores.
3.Starbucksconcentratesonmarketingcommunicationstrategies,whichhelpcustomerstobeabletooutpourtheirsuggestionsandshareexperienceswitheachotherviaallkindsofpossiblechannels.OneofStarbucksmemberhassummarized6reasonstoprovewhyStarbuckshasbeendoingsowellinmarketingcommunication.Starbucksiskeepingdoingitsbesttorespondcustomersasfastaspossible,sothatitmakescustomersfeellikethatStarbucksiswiththemanywhereanytime,likemobilephones.
IsYourCountryorCompanyHarvestingItsKnowledge?
Thecompetitionforthebestinformationhasreplacedthecompetitionforthebestlocationandmanagerforcompaniesnow.InformationnetworksareextremelycrucialtoStarbucks.Procurementteamworkswellingatheringinformationfromsuppliersworldwidetoensurethequalityofcoffeebeans.Starbucksonlypurchasecoffeebeansfromreliablesuppliersandwellmanagetheinventorylevelinordertohandthebestcoffeetocustomers.Moreover,aswementionedabove,themarketingteamhasatremendouswide-rangecommunicationnetworkwithcustomers.Theytakefeedbacksfromcustomersseriouslyviaanypossiblechannel,comparinginformationwithcompetitorsinthemarket,andfinallymakedecisionsofmarketingstrategies.Starbucksdobenefitalotfrommanaginggoodnetworksofinformation.
HowMuchDoesYourCountryorCompanyWeigh?
Starbucksisalightcompanyratherthanaheavyone,becauseitcontrolsintensiveinventorylevelsofcoffeebeansandfoodstuffinordertoguaranteethebestqualityoffertocustomers.
DoesYourCountryorCompanyDaretoBeOpenontheOutside?
Starbucksismorethanhappytoopenontheoutside;theyarepleasedtoreceivecriticismfromcustomerswhowillhelpthemtothinkabouthowtoproducebetterproductsorhowtochangecurrentproductstomeetcustomers'expectations.
DoesYourCountryorCompanyDaretoBeOpenontheInside?
'Inside'generallymeanshowtransparentthebusinessisfrominsideofthecompany.AccordingtotheresearchbyGoodGuide,seebelow:
ENVIRONMENTAL
PERFORMANCE
SOCIALPERFORMANCE
Transparency
7.3
Transparency
6.9
Environmental
Management
6
Management
6.2
Governance
6.7
Governance
6.7
Policies
6
Policies
6
Reporting
7
Reporting
7
SupplyChain
7
SupplyChain
7
ComplianceandControversies
4
LeadingEdgePractices
10
LeadingEdgePractices
8
ComplianceandControversies
3
ResourceUse
6.8
Workers
5.2
GeneralResourceManagement
7
General
4
Materials
6.5
OccupationHealthandSafety
6
Water
7
DiversityandEqualOpportunity
5.2
Energy
6.8
HumanRights
5.5
EnvironmentalImpacts
6.1
GeneralHumanRights
5
Biodiversity
6
FreedomofAssoc.&Collect.Bargaining
4.5
Emissions
6.1
ChildLabor
6
GeneralEmissions
7
ForcedandCompulsoryLabor
6
GreenhouseGases
7.5
IndigenousRights
6
CriteriaandHazardousAirPollutants
6
Community
6.7
WaterPollution
4
PublicPolicy
6
Waste
6
StakeholderEngagement
6
CommunityRelationships
8
Consumers
5.3
ProductandServiceLabeling
7
Starbuckstransparencyisratedrelativelyhigherthanaverageinbothenvironmentalandsocialaspect.
DoesYourCountry'sorCompany'sManagementGetItandCanYouChangeManagementIfTheyDon't?
Thisisabouttheveryinternalinformationthatwedonotknowfromthegeneralchannels.Thus,wehavenocommentsonthisquestion.
IsYourCountryorCompanyWillingtoShootItsWoundedandSuckletheSurvivors?
After2008,theStarbucksseemedtostruggletodealwithitsdecreasingbusinessperformances.'Starbuckshasbeenhurtbyrisingcosts,thecannibalizingeffectsofyearsofover-expansion,andstiffcompetitioninespressodrinksfromMcDonald'sandDunkin'Donuts.'(11/11/2008,NewYorkTimes)Theyhadtodecidetoclosedown600storesintheUSin2008.TheStarbucksCEOHowardSchultssaid:
'Wehadtoadmittoourselvesandtothepeopleofthiscompanythatweownedthemistakesthatweremade.'Starbuckshavethespiritstoencouragethedestructionofestablishedbusiness.AswellastheyalsoaimtoanewmarketforfuturedevelopmentinChina.StarbuckspostedasignificantgrowthinChinaoffiscalfourthquarterin2012.Itsrevenuerose11percentmeanwhiletheprofitincreased24percent.(Strom,S.2012)
HowGoodIsYourCountryorCompanyatMakingFriends?
ThereisnodoubtthatStarbucksisgoodatmakingfriends.TherearethousandsofstoresopenworldwidesellingStarbuckscoffees.Thesestoresaremainlyeitherlicensedorjointventure.Starbuckshasalliancesallovertheworldsupportingitsfastexpandinginternationally.
HowGoodIsYourCountry'sorCompany'sBrand?
Starbuckshasabrandpersonalitythatdeep-rootedincustomers'minds.Starbucksallovertheworldshavethesimilarelegants
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