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Case Study Analysis: Starbucks Foreign Direct Investment

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Question:

Describe about the Case Study Analysis for Starbucks Foreign Direct Investment?

 

Answer:

Introduction

Starbuck Corporation is the biggest retailer of coffee in many countries across the globe.  There were some of the most important factors for the corporation before entering the foreign market segments. Collaboration with the other retailers of the respective countries helped Starbuck to establish its brand name across various countries. The licensing format was used by the Corporation in the different market segments of Japan (Choudhry, 2010). The key strategy of the corporation was to sell company’s premium roasted coffee as well as the fresh brew coffee beverages’ including a variety of pastries as well as the coffee products. This paper will reflect the foreign direct investment analysis in different market segments, the staffing approach of the organization and the different market entry strategies of Starbuck.

Foreign market analysis of Starbuck within different markets revealed in the case

Starbuck Corporation has become the largest retailer of coffee throughout the world. Collaborative, as well as the corporative strategies, have helped the company in succeeding internationally. The corporation applied to the flexible strategy for entering within the international market, in the year 1995. Licensing, whole ownership, and the joint venture strategies have helped the corporation in successfully establishing its strategies throughout many countries across the world (Burgess, 2009).  Moreover, the company focused on the desired services provided to the respective customers.  The company started exploring the foreign opportunities with having 700 stores in the year 1995.   The first target market for the Starbuck Corporation was Japan and the primary strategy of the company was to sell company’s premium roasted coffee as well as the fresh brew coffee beverages’ including a variety of pastries as well as the coffee accessories.   Moreover, the corporation has resisted the franchising strategy in the North America as the stores were completely owned by the company itself.  The management team of the company decided to expand its business process in different parts of the world by having the franchising strategy and then the company decided to license to its desired format in different parts of Japan. The primary motive was to enhance the growth and the development of the business process within the different parts of the world.  It is expected that the coffee industry will grow continually at a steady rate and the demand for the coffee will also increase throughout the world. It was supposed that if the coffee market of United States declines then another coffee market will emerge (Connors, 2012).  On the other hand, the company realized that the pure licensing system will not provide the complete control to the company for ensuring Japanese Licenses which was closely followed by the successful formula of Starbuck.  Thus, it became very important for the company to execute its desired business process within the international markets. Furthermore, the company established the desired joint venture with a local retailer named Sazaby Inc. the most interesting fact was that each of the company included in the venture held a 50% of the total share. The company was trying to extend its market segments and the business process in the different parts of Japan. Moreover, the company invested $10 million in order to expand its desired business processes and this was the first foreign direct investment from the corporation.  The format of the Starbuck was then licensed to the newly formed venture and the primary responsibility was to growth the presence of Starbuck within the entire market segments of Japan.   The quality of the food products s, as well as the quality of the services, was the primary area for the company to improve.

The main motive of Starbuck Corporation was to capture the entire market segments of Japan through its presence in the competitive market segments. Starbuck Corporation transferred some of its experienced employees to Japan in order to replicate the desired experience of Starbuck within the targeted marketed segments (Hall, 2014). The company was looking for to enhance the desired skills and the knowledge of the Japanese employees in order to increase the overall productivity of the organization. Thus, the foreign direct investment from the corporation was mainly to enhance the brand reputation of the corporation all over the world. Employees from different countries were playing a major role in the development and growth of the entire organization throughout the different countries of the world. The foreign direct investment suggested that the company was trying to establish its barriers in different countries of the world. On the other hand, the licensing agreement from Starbuck revealed the desired fact the training was made compulsory for the Japanese managers, as well as the employees and the training, was similar to   the training that was provided to the e employees the United States. Moreover, Starbuck focused on the employee hiring as well as the training programs, the company believed that the programs will help in increasing the selling of the products and will finally increase the profitability of the organization to a large extent (Hyukjun Choi, 2015). The foreign direct investments were made in different countries and the company was expecting to bring out more positive results from the Japanese market segments, therefore, it considered the employees to be highly skilled in order to increase the profitability of the organization. In the year 2001, Starbuck Corporation introduced the stock plan for all of the Japanese employees and was the first company to do this in Japan. The core competency was the major ability of Starbuck which effectively leverage their desired differentiation strategies for the product.  It was the matter of fact that at the end of 2007 Starbuck had more than 700 stores throughout the different parts of Japan.

The corporation embarked an aggressive plan of foreign investment after Japan.  In the year 1998, the corporation purchased a British coffee chain which was named as Seattle Coffee and the chain had nearly 60 retail stores which cost for $84 million. The desired fact behind the starting of the chain was that there was an American couple who started the chain in order to establish a coffee chain like this of Starbuck. As the time was passing, Starbuck Corporation was on the way of establishing more number of the stores across different countries in order to increase the efficiency of the entire organization (Këllezi, 2013). In the year 1990, there were several stores from Starbuck Corporation which were opened in different countries such as China, Singapore, Taiwan,  New Zealand, Thailand, Malaysia and South Korea. The company used the same format as it uses the format in the United States as this was the most successful plan which helped in establishing the desired business process of the company throughout the country.  The company used different techniques in order to increase the productivity as well as the profitability of the entire organization. Moreover, the foreign direct investment with the other companies throughout the different countries proved to be a success for Starbuck and this increased the overall reputation of the entire organization (Kenneth Shaw, 2015).  In Thailand, the corporation used different techniques in order to establish its market segments. The most promising factors were the desired collaboration with the local partners of the different countries.

 

Suitability of diverse market entry strategies by Starbucks within different foreign markets

Starbuck Corporation is one of the well known and largest coffeehouse chains in Seattle within the United States. The competitive strategy of the company helped to achieve its desired goals.  The company focused on the differentiation strategy in order to gain desired advantage over its respective competitors. The strategy of the company was to sell the desired roasted premium coffee of the corporation to the respective customers throughout the world.  There were three of the most important factors that helped the company to establish its market segments throughout the globe. Moreover, the company was engaged in providing the top quality of the customer services to the respective customers. The past researchers have critically evaluated the desired fact that the customer’s service is one of the most important factors that plays the most important role in retaining the old customers as well, as attract new customers towards the organization.   On the other hand, the collaboration with the local partners of the different countries such as Japan, China and many more helped in establishing the business processes of Starbuck.    Throughout, Asia the common strategy of Starbuck was to license the desired format of Starbuck that was already in the United States. The licensing of the desired format of Starbuck from the local retailers of the different countries was a major step in establishing its business processes in those market segments (Latest composites market survey continues positive trend, 2015). The returning of the licensing fees and the royalties of the concerned stores revenues were most important for Starbuck.  Moreover, the company considered the training to the respective employees to be most important as the training would help in enhancing the overall performance of the organization (Zheleznov and Zheng, 2014). It was supposed that the proper means of training will; help in delivering the best services to the customers and it will bring out the desired success for the organization. Furthermore, the customer’s services for any organization are very important as it helps in satisfying the respective customers and this evaluates the desired growth of the concerned organization.  One of the best strategies used by Starbuck is the differentiation in the pricing strategies of the desired products served to the different customers.  The mixing of the coffee and the innovations in the desired products of Starbuck provided the desired platform to gain a competitive advantage over its competitors within the confined market segments. However, the company was disenchanted with some other types of the licensing agreements with the different partners. It is very important for any organization to understand the desired needs of the customers as it will help in serving the desired services and products as per the needs of the customers (Lin and Pazgal, 2015). The satisfaction level of the customers helps in enhancing the overall profitability of the organization. Many times the corporation turned the licensing into joint-venture and it also owned some of the subsidiaries. 

In Thailand, the company entered the business market with the same strategy to license with its respective local partners within the market segments. Under the desired licensing agreement the different retailers agreed to increase the number of the stores for Starbuck. But the raising funds was difficult for the different Coffee Partners of Starbuck and the corporation was took the matter seriously as this could affect the overall productivity as well as the profitability of the entire organization. Rising of the funds from the Thai banks was very difficult for the different coffee partners and the company also faced difficulty in expanding this finance in the month of July.   Thus, it became very important for the management team to formulate suitable strategies in order to increase the overall profitability and the productivity of the organization. Moreover, the company used the diversification strategy in order to increase the effectiveness of the entire organization (Littlejohns, 2013). It is very important for the different organizations to differentiate their desired products from that of the competitors as this will help in increasing the selling of the products. The company enhanced the mixing of the coffee in order to attract a large number of the customers. In the year 2002, July the Starbuck acquired some coffee partners for near about $12 million.  The primary aim of the Corporation was to have tight control over the expansion strategy which was very important to execute the desired business process in a well-defined manner (Macomber, 2014).  The expansion strategy of the company proved to be most important as it increased the overall efficiency of the organization and it proved to be very important for the significant growth of the organization.  

Suitability of staffing approach utilized by Starbucks in Japan and in relation to their corporate strategy

Staffing approach is considered to be very important for any of the organization as it helps in establishing the barriers of the desired organization within the competitive market segments. The company used different types of approach for the respective in order to increase the selling of the desired coffee and the coffee products (The latest product news and technologies for the aesthetic and anti-ageing market, 2011). As the company introduced the licensing format within the desired market segments of Japan, therefore, it was very important for the management team of the Starbuck Corporation to provide suitable training to the respective employees. The company arranged proper means of training for the respective employees in order to enhance the satisfaction of the respective customers (Mlinko, 2010). Skills, as well as the desired knowledge of the employees, are considered to be of great importance as this helps in providing reliable customer services to the respective customers of the organization. Moreover, the hiring, as well as the training programs to the respective employees in Japan, was considered to be more important s this may increase the brand reputation of the entire organization. On the other hand, compensation was important for the respective employees, as this would provide motivation to the respective employees of the organization (Moghadasian and Eskin, 2012).  It was very important for the organization to arrange training programs as per the strict guidelines provided by the training department and the training should be as per the format as well as the layout of the licensing agreements (Nahai, 2014). It is important for the management team of any organization to make the employees understand regarding the customer handling and the desired business processes of the entire organization.  The employees were considered to be most important for the organization as they can evaluate the desired growth of the entire organization (Newcomer, Wholey, and Hatry, 2015). As the licensing format was quite different therefore the training for the respective employees of the organization was considered to be of great importance. The expansion strategy of the company was different to capture the entire market segments of the different countries and, therefore, it was very important for the employees to understand the expansion strategy as they may help in expanding the barriers of the organization.  It is very important for the employees to handle the customers in difficult situations; therefore, the training program arranged by the organization helped the employees to assist the customers with the better quality of the customer services (Sauvant, McAllister, and Maschek, 2010).   The employee’s needs to adapt as per the desired market segments and the training helped them to understand the desired requirements of the customers as the quality of the coffee and the different coffee products increase the satisfaction of the customers.  Motivation is considered to be most important for the employees s it helps to enhance the overall performances of the employees.

The corporation is aimed at providing the coffees as well as the different coffee products which will give a different taste to the different customers of the organization. The company has critically developed a distinctive training as well as the development program that will help the employees to bring out the desired success of the organization (Skeete, 2009).  The Human Resource department of the company completely ensures that the organization follows the rules and regulations of the corporation in recruiting and selecting the eligible candidates for the desired post. As per the corporate strategy, it is very important for the human Resource department of Starbuck to verify the desired skills as well as the knowledge of the employees regarding their selection within the corporation. The satisfaction of the customers helps in expanding the desired business process of the organization over the entire market segments (Starbuck, 2007). There were several problems encountered within the organization such as the high turnover of the employees, therefore, it becomes the core responsibility of the Human Resource department formulates better strategies in order to solve these problems.  There is a vast difference between the cultures of the United States and the Japanese culture, therefore, the employees were provided suitable and desired to train to enhance the capability while assisting as well as handling the customers in difficult situations (Starbucks Coffee Company, 2016).  The effective strategies were different as per the different requirements of the two market segments. Thus, the training programs were also developed on the basis of different requirements of the customers as per the changing trends in the market segments (Change of approach to safe staffing ratios triggers debate, 2015). The primary motive of the organization was to provide full assistance to the customers as the satisfactory services and the quality of the services plays the most important role in increasing the overall efficiency of the entire organization (Stephan, 2006).   In order to increase the overall effectiveness and efficiency of the organization, it was very important for the employees to understand the desired requirements and taste of the different customers throughout the market segments (The latest product news and technologies for the aesthetic and anti-ageing market, 2011). Moreover, the management team of the organization ensured that the sufficient funds were acquired in order to fulfill the demands and the needs of the respective employees of the organization.

Conclusions

Starbuck is the largest retailer in the field of Coffee and Coffee products. The company has established its brand name in different countries all across the globe. At first, the company captured the entire market segments of the United States by providing the high quality of the coffee and different tastes of the coffee product to respective customers. Then the organization planned to enter into Japan and different countries and the organization got success with the help of the licensing strategy with the local retailers.  The main motive was to sell premium roasted coffee as well as the fresh brew coffee beverages’ including a large number of other products. There was different staffing approach adopted by the Human Resource department in order to increase the profitability of the organization.  

 

References

Burgess, G. (2009). Trading and investing in the forex market using chart techniques. Chichester, U.K.: Wiley.

Change of approach to safe staffing ratios triggers debate. (2015). Mental Health Practice, 18(10), pp.6-6.

Choudhry, M. (2010). Capital market instruments. Basingstoke: Palgrave Macmillan.

Connors, T. (2012). The volunteer management handbook. Hoboken, N.J.: John Wiley.

Hall, M. (2014). Disingenuous: The Latest Legal Challenges to Insurance Market Reforms. Hastings Center Report, 44(5), pp.6-7.

Hyukjun Choi, (2015). An Entry Strategies on Chinese Online Market of Korean SME's.the business studies, 16(3), pp.221-243.

Këllezi, J. (2013). Strategies of Entry Modes: The Case of Greek Banks Entering the Albanian Market. AJIS.

Kenneth Shaw, (2015). Foreign Market Entry Strategies. China-USA Business Review, 14(8).

The latest composites market survey continues the positive trend. (2015). Reinforced Plastics, 59(5), p.217.

Lin, Y. and Pazgal, A. (2015). Hide Supremacy or Admit Inferiority—Market Entry Strategies in Response to Consumer Informational Needs. Customer Needs and Solutions.

Littlejohns, P. (2013). Time for an evidence-based approach to staffing. BMJ, 346(may15 1), pp.f3002-f3002.

Macomber, D. (2014). 92 Pacific Boulevard. Harlequin MIRA.

Mlinko, A. (2010). Shoulder season. Minneapolis: Coffee House Press.

Moghadasian, M., and Eskin, N. (2012). Functional foods and cardiovascular disease. Boca Raton, FL: Taylor & Francis.

Nahai, M. (2014). The Art of Aesthetic Surgery. Hoboken: Taylor and Francis.

Newcomer, K., Wholey, J., and Hatry, H. (2015). Handbook of practical program evaluation, 4th ed. San Francisco, Calif.: Jossey-Bass.

Sauvant, K., McAllister, G. and Maschek, W. (2010). Foreign direct investments from emerging markets. New York: Palgrave Macmillan.

Sauvant, K., McAllister, G. and Maschek, W. (2010). Foreign direct investments from emerging markets. New York: Palgrave Macmillan.

Skeete, H. (2009). The future of the financial exchanges. Burlington, MA: MondoVisione/Elsevier.

Starbuck, W. (2007). Testing case-descriptive models. Syst. Res., 6(3), pp.191-199.

Starbucks Coffee Company, (2016). Starbucks: The Best Coffee Makers and Cold Brew Coffee. [online] Available at: https://www.starbucks.com/ [Accessed 8 Feb. 2016].

Stephan, J. (2006). Technology transfer via foreign direct investment in Central and Eastern Europe. New York: Palgrave Macmillan.

The latest product news and technologies for the aesthetic and anti-ageing market. (2011). Prime, 1(2), pp.80-81.

The latest product news and technologies for the aesthetic and anti-ageing market. (2011). Prime, 1(3), pp.80-81.

Zheleznov, A. and Zheng, J. (2014). Critical Impact of Latest Quality Issues and China Dairy Market Economic Overview: Comparative Analysis. Asian Social Science, 11(1).

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