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Date Submitted: 05/01/2016 02:13 AM
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Business Internationalization
STARBUCKS’ INTERNATIONAL OPERATIONS1
Internationally, we are in our infancy.
(Howard Schultz, Chairman & Chief Global Strategist – Starbucks, 2003)
The expansion strategy internationally is not bullet-proof as it is in the U.S.
(Mitchell J. Speiser, Analyst – Lehman Brothers, 2003)
ALL’S NOT WELL WITH STARBUCKS
In March 2003, Fortune came out with its annual list of “Fortune 500 companies”. For Howard Schultz
(Schultz), Chairman of Starbucks Corp. (Starbucks), this list was special as Starbucks [was] featured in the list
(position 465). It was a dream that come true for the Seattle-based entrepreneur.
Though the U.S. economy was reeling under recession and many retail majors were reporting losses and
applying for bankruptcy, Starbucks announced a 31% increase in its net earnings and a 23% increase in sales for
the first quarter of 2003. Analyst felt that the success of Starbucks showed that a quality product speaks for
itself and the fact that Starbucks spent less than 1% of its sales on advertising and marketing strengthened this
view. In addition to be a popular brand among customers, Starbucks was also considered the best place to work
due to its employee friendly policies (Starbucks was the first organization in the U.S. to offer stock options and
health coverage to part-time employees also).
However, analysts felt that the success of Starbucks was due to its profitable domestic operations. It was
reported that most of Starbucks’ international operations were running into losses. In May 2003, Starbucks’
Japanese operations reported a loss of $3.9 million (Japan constituted the largest market for the company
outside the U.S.), and the company also performed badly in Europe and the Middle East. Analysts pointed out
that Starbucks international operations were not as well planned as its U.S. operations. They also observed that
the volatile international business environment made it difficult for the company to effectively...