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Joint Ventures In The ASEAN Countries Add in library

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Questions:

1: Critical evaluation about the reason Starbucks became disenchanted with this strategy.

2: Critical evaluation on the strategic role played by the Human Resources Management of Starbucks during the process of internationalisation.

3: Licensing strategy.
 
4: In some markets such as Britain and Thailand, Starbucks has chosen to enter through wholly owned subsidiary. How different are these countries from Japan.?
 
 

Answers:

1. Critical evaluation about the reason Starbucks became disenchanted with this strategy

The Starbucks Company was established in the year 1971. The main head quarter of the company is in Washington in United States of America. The main founders of the Starbucks Company are Jerry Baldwin, Zev Siegl and Gordon Bowker. But later Howard Schultz has acquired the company and has explored the company in the global market of coffee world. In the year 1971, the management of the company has decided to enlarge their department of selling their products. The management of the Starbucks coffee shop wanted to do their business globally. The administration of the Starbucks organization wants to earn more profit from their business. After deciding to do their business globally, the administration of the Starbucks coffee shop has opened 13,000 retail stores in United States of America. Later, the administration of the Starbucks Coffee Shop has opened over 3,750 retail shops in all over the world mainly in foreign countries (Ahn, 2014). The owner or the Chief Executive Officer of Starbucks Coffee shop, Howard Schultz, went to Italy and observed that one of the Coffee shops in Italy was experiencing high business policy in all over the world and earning huge amounts of margins of profit from the market. From that state of mind, the owner of the Starbucks Company has got the idea of expansion of their business in all over the world. In the year 1995, there are only 700 retail stores of Starbucks in United States of America. But later in the year 1995, the owner of the Starbucks Company has decided to expand their business outside United States of America and then decided to expand their business policy in all over the world in the competitive market of selling roasted coffee and teas in the global market (Cho, 2014). The main objectives of the Starbucks Company is to earn huge amounts of margin of profit from the market by selling roasted coffee in the market and to provide better quality of coffees, various types of pastries, teas and other products from their retail shop and also to provide better services to their customers in the market of selling roasted coffees.

The administration of the Starbucks Coffee Company has targeted Japan first to expand their business in all over the world. The main problem faced by the administration of the organization is to get the license to trade in the market of Japan. The Government of Japan is not allowing the administration of the Starbucks Coffee shop to enter in the market of Japan to sell their products in the market (Cilento, 2013). But the owner of the Starbucks Coffee has decided to explore their business in Japanese market. After facing that problem, the management of the Starbucks Coffee shop has made a strategy to enter in the market of Japan. The administration of the company and the owner of the company have decided to establish a joint venture with the other retail shop in the Japanese market. But the retail shop in Japanese market do not wanted to make a joint ventures with the Starbucks Coffee Shop (Fan and Wolfstetter, 2011). After facing all the problems by the owner of the Starbucks Coffee Shop and the administration of the Starbucks Coffee Shop, they decided to implement a new strategy to make a joint ventures with the local retailer shop of Japanese market. Previously, the management of the Starbucks Company resisted their strategy of franchising with the other retail shop in United States of America (Fan and Wolfstetter, 2012). But in the current scenario, the management of the Starbucks Coffee Shop does not have any choices to resist their strategy of franchising with the other local retail shop in Japan. So they decided to make a joint venture with the other local retail shop in Japan. The management of the Starbuck Company has made a strategy to attract the other local retailers to make joint ventures with the Starbucks Company.

The management of the organization has decided to issue 50 % stake in the ventures to the local retailer shop in Japan. The retail shop who will make a joint ventures with the Starbucks Company, they will receive 50 % stake in the ventures of Starbucks (Kashlak, 2013). The management of the Starbucks has invested around $ 10 million in issuing the ventures with the local retail shop. This makes the management of the Starbucks Company to get disenchanted as the 50 % of the profit margin has to be distributed among the Starbucks Company and the local retail shop. The management statistically observed that the company is not having any profit, if they share their profit margin with the local retail shop of Japan.

2: Critical evaluation on the strategic role played by the Human Resources Management of Starbucks during the process of internationalisation

Human Resource Planning aims to ensure availability of talented resources whenever there is a need. People are the valuable assets for any company and the firm’s need to keep them motivated by providing them ample opportunity to grow with the organization and also rewarding them adequately for their efforts (Ball, 2013).  A motivated workforce will not only take pride in working for the company, but they will also go an extra mile to reach the organizational goal effectively. Competition makes it all the more important to have skilled staff as they are the face of the company since customer meet them while availing the service. Maintaining skilled and dedicated workforce become all the more important for a company like Starbucks, as they not only sell coffee but they sell the ‘Starbucks Experience’ to their consumers, which can be fulfilled only when the staff has the ability to deliver that experience to people (Cavusgil, Ghauri and Akcal, 2013). Starbucks have identified the importance of proving a great service coupled with a quality coffee to its consumer. They also know that their employees are a vital part of their growth plan; and they cannot go ahead without them. Also Starbucks wanted to provide the same experience to their consumers across the globe (Hill, 2013). Therefore, Starbucks put great attention on recruiting employees and they provide them with extensive training so that they are able to live up to the expectations for delivering the Starbucks Experience to the customers. To keep them motivated, Starbucks have followed ESOP (Employees Stock Option Program) compensation policy and provided them with good medical benefits. This incorporated the sense of ownership among employees and made their accounts tax free (Likhi and Sushil, 2013). Starbucks have always treated their employees as their partners and ensured to have a satisfied workforce across the globe. Starbucks have always maintained a work culture which is not only welcoming and genuine but it also keep their employees engaged and always try to improve their knowledge by providing them with training as and when need arises and they have always been considerate towards  its employees need (Martínez-López, 2014). It is because of this strategy, that they were able to boast their dedicated staff during the process of internationalization.

Since they knew that their people are competent enough to provide the expected “Starbucks Experience”, they decided to send their skilled employees to Japan so that they will be able to provide same experience to their consumers in Japan too. The ultimate aim of Starbucks is to provide the best coffee house experience and best coffee to its consumers, wherever they operating. So to maintain this, they trained the Japanese staff in the same manner they trained their staff in US (Nolan, 2008). Also they provided to the employees stock option plan to their Japanese staff too as they have always believed in diversity and never discriminated among its employees. These enabled Starbucks to have a dedicated workforce in Japan also, who worked enthusiastically towards the fulfillment of the ultimate goals of the Starbucks.  This strategy has helped Starbucks in many ways, such as, it helped them to create trust and confidence in the Japanese people for them and it also helped them to retain best talent and attract fresh talent on a regular basis. This has helped to grow their network of dedicated workforce and since they treat their employees as partners, Starbucks was able to create a positive image for themselves among consumers also (Noorderhaven, Sorge and Koen, 2015). They enjoy the warm and welcoming gestures by the staff in every store which enhances perceived the value for Starbucks coffee manifold among consumers. This strategy helped Starbuck to grow rapidly in Japan and they are still growing. The employees of Starbucks, not only in Japan, but across the globe are more than happy by being associated with them and take pride in being a Starbucks employee. Thus it can be concluded that Starbucks have identified the necessity of adopting flexible and progressive HR policies to be able to meet its objective in an effective and efficient manner which also give them as edge over its competitors. Thus we can say that the staffing approach adopted by Starbucks in Japan was at par with the overall corporate strategy of the company.

 

3: Licensing strategy

There are three approaches adopted by Starbuck to internationalize their business. They are joint venture, licensing and wholly owned subsidiary. Each one of them has its own advantages and disadvantages. It is quite evident from the case study that Starbucks did want to have a fair amount of control on the operation of its international outlet (Paliwoda and Thomas, 2013). Licensing allows a company to use the trademarks, technical knowhow and patents and other rights of another company, in return of fees in the form of royalties. When a company license out their operations to another company, it increases the competition for the firm because the rival firm now knows the valuable secret of the licensing company (in this case, the other company will know about the secret formula and techniques used by Starbucks). Thus any licensing firm should try to diminish this unwanted competition that occurs due to licensing and they should try to reduce the scope of license as much as they can (Sadiq, Soffer and Völzer, 2015). Also licensing do pose a risk of confidentiality issues, because when a company give license to another company to use its brand name, format and production process, there is a high risk of breach of confidentiality. Also licensing reduces the control on operations. It is for these reasons that Starbucks did not go for pure licensing and they limited the scope of competition arising due to licensing. It is clearly mention in the case study, that Starbucks did not wanted to give full control to Japanese for its operation and they wanted them to follow the format of Starbucks strictly. It is for this reason that they defined the strict design and layout parameters that every store needed to follow.  Starbucks wanted to replicate the US format in Japan without any compromise on quality of their coffee as well in the customer service (Sherman, 2005). The aimed at providing superior customer service across the board. Starbucks started to enter into joint ventures because of various reasons. As stated above all the entry modes has its own pros and cons. As already discussed above, the issues that Starbucks was facing due to licensing. When a company enters into a joint venture, it allows a firm to have access to increased resources including the capital. It also allows the firm to access the new markets and the technical knowhow of the partner company, and also help them to learn new technologies. In a international joint venture agreement, the local partner gets the advantage to make efficient use of their existing distribution network and other resources and joint venture also allows the partners to share the risk and costs. Both together, can diversify into new product category using the strengths of both the companies, which will lead to improved productivity and increased profits. Joint ventures also allow both the firm’s to have a fair amount of control over the operations. Therefore, Starbucks started entering into joint ventures as opposed to pure licensing because they wanted to take all the above mentioned advantages. Joint ventures would ensure control of Starbucks over its international operations and they will be able to provide the same Starbucks Experience to all the consumers they serve across the globe. Starbucks have clearly laid out the strategy for its expansion and they are aware that in order to retain its consumers, they need to mesmerize their consumers to make them come again to Starbucks instead of going for some other coffee shop (Veilleux, Haskell and Pons, 2011). It is for all these reasons that Starbucks strategically planned the investment of $ 10 million in a joint venture with a local retailer in Japan and then licensed the Starbucks format to the venture. This way they have the required control over the operation and helped them to increase its market while creating a strong brand presence in Japan. Thus we can say that Starbucks have always made a strategically move to grow the company and its employees.

4: In some markets such as Britain and Thailand, Starbucks has chosen to enter through wholly owned subsidiary. How different are these countries from Japan

After establishing the business of Starbucks Coffee Shop in the Japanese market, the management of the Starbucks Coffee Shop has decided to open their business in Britain and Thailand market. The organization has faced lots of problem in Japanese market to enter in the market of Japan. The management of Starbucks Company has decided not to open their business in the country where problem raised to enter in the market (Pastor and Sandonı́s, 2012). The management of the organization has decided not to go for joint ventures with the local retailing shop of targeted market in the foreign countries. This is because the management of the company has faced lots of problem by making joint venturing with the local retailing shop. The management of the firm has observed that the company is not earning huge amounts of profit from the market. This is because 50 % of the profit margin has to share with the joint ventures company of Starbucks in Japanese market (Starbucks turns coffee grinds and old muffins into laundry detergent, 2013). The administration of the company has decided not to share their profit margin to the other retail shop established in the targeted market of foreign market. That is why, the administration of organization has decided to do their business in Britain and in Thailand. The management of the Starbucks Coffee Shop has entered into the market of Great Britain and in Thailand market to sell their roasted coffees, coffees, teas, different types of pastries and other products.

The administration of the company has decided to enter in the market of Great Britain and Thailand market because the administration of the company does not want to share the profit margins with any other companies (Swierczek and Dhakal, 2014). The owner of the Starbucks Coffee Shop has observed that if the profit margin is shared with the other companies then the administration of the Starbucks Coffee Shop has failed to generate revenues by selling their products like roasted coffees, coffees, teas, different types of pastries and other products in the market. The main difference of Japanese market and the market of Great Britain and Thailand is the Government of Great Britain and the Government of Thailand allows the outsider Company to enter in the market through wholly owned subsidiary (Pastor and Sandonı́s, 2012). So the management of the Starbucks Coffee Shop has decided that they can enter in the market of Great Britain and also in the Thailand market to sell their products like roasted coffees, coffees, teas, different types of pastries and other products in the market and can generate high revenues from the market for the funds of the retail shops established in the Great Britain market and Thailand market.

The Government of Thailand and the Government of Great Britain can allow the outsiders to enter in the market in one condition. The conditions that both the Government has made is whenever an outsider retail shop tries to enter in the market, the management of the retail shop has to expand their retail shop in next five years. The Government of both the countries provides the license to the retail store to do their business but the administration of the retail shop should open at least 20 retail shops in the next five years. But one major problems in Great Britain and in Thailand is to generate funds. This is because the finance department of the banking sector of Thailand and Great Britain does not help the management of the retail stores to raise their funds. But the management of the Starbucks Coffee Shop knows that the company can earn high profit margins from the market and later in the year 2000, the management of the Starbucks Coffee Shop acquired many local coffee shops in the market of Thailand and Great Britain to expand their retail shops in the market of Great Britain and Thailand market. For example – The administration of the Starbucks Coffee Shop has acquired one local coffee retail shops in Thailand for around $ 12 million (Zhang, 2011). And later in the year 2007, the management of the Starbucks Coffee Shop has expanded their stores in the Thailand market and acquired around 103 stores in the market of Thailand.

 

Reference List:

Ahn, D. (2014). Joint ventures in the ASEAN countries. Intereconomics, 15(4), pp.193-198.

Cho, M. (2014). Segmentation of Coffee Shop Customers based on Organic Coffee Choice Motives. Journal of the East Asian Society of Dietary Life, 24(6).

Cilento, M. (2013). Joint ventures in Eastern European countries: A survey of legislation. MOCT-MOST Economic Policy in Transitional Economies, 3(1), pp.151-161.

Fan, C. and Wolfstetter, E. (2011). Research Joint Ventures, Optimal Licensing, and the R&D Subsidy Policy. The B.E. Journal of Theoretical Economics, 8(1).

Fan, C. and Wolfstetter, E. (2012). Research Joint Ventures, Optimal Licensing, and R&D Subsidy Policy. SSRN Journal.

Kashlak, R. (2013). Establishing financial targets for joint ventures in emerging countries. Journal of International Management, 4(3), pp.241-258.

Pastor, M. and Sandonı́s, J. (2012). Research joint ventures vs. cross licensing agreements: an agency approach. International Journal of Industrial Organization, 20(2), pp.215-249.

Pastor, M. and Sandonı́s, J. (2012). Research joint ventures vs. cross licensing agreements: an agency approach. International Journal of Industrial Organization, 20(2), pp.215-249.

Starbucks turns coffee grinds and old muffins into laundry detergent. (2013). Focus on Surfactants, 2013(3), p.3.

Swierczek, F. and Dhakal, G. (2014). Learning and its impact on the performance of manufacturing joint ventures in developing countries. Technovation, 24(1), pp.53-62.

Zhang, X. (2011). Communicating Coffee Culture through the Big Screen: Starbucks in American Movies. Comparative American Studies, 9(1), pp.68-84.

Ball, D. (2013). International business. New York: McGraw-Hill/Irwin.

Cavusgil, S., Ghauri, P. and Akcal, A. (2013). Doing business in emerging markets. London: SAGE Publications Inc.

Hill, C. (2012). International business.

Likhi, D. and Sushil, N. (2013). Building international strategic alliance capability: a case research-based insights. International Journal of Business Performance Management, 14(4), p.341.

Martínez-López, F. (2013). Handbook of strategic e-business management.

Nolan, S. (2008). Realizing efficiencies through HR policies and practices. Strategic HR Review, 7(2).

Noorderhaven, N., Sorge, A. and Koen, C. (2015). Comparative International Management. Hoboken: Taylor and Francis.

Paliwoda, S. and Thomas, M. (2013). International Marketing. Hoboken: Taylor and Francis.

Sadiq, S., Soffer, P. and Völzer, H. (2014.). Business process management.

Sherman, H. (2015). Starbucks: Brewing a New Song. The CASE Journal, 2(1), pp.103-103.

Veilleux, S., Haskell, N. and Pons, F. (2011). Influence of entry modes on communication strategies of international new ventures in foreign markets: a preliminary study. IJBG, 6(2), p.117.

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