Case Study Starbucks

American InterContinental University

Assignment # 3 – Starbucks Corporation

Strategic Management MGT 680

Dr. Kola Sonaike

Danna Mustakhitova

May 15, 2012

Starbucks Corporation is a dominant multinational coffee house chain based in United States. Starbucks is the largest coffee house company in the worlds with 8505 company-owned and 6506 licensed states over 40 countries, making a total of 15011 states worldwide.

1. What is the central issue in the case?

The Starbucks concept is near saturation in the U.S. market. Some analysts give Starbucks only two years at most before that comes to fruition. Starbucks must expand globally to maintain the returns they've experienced over the last decade. The chain only operates 1200 international outlets, which leaves plenty of white space for expansion. Starbucks expects to grow the number of its stores worldwide, to 10,000 in three years, but there are huge risks in global expansion. One major factor is that unlike its U.S. locations, Starbucks international outlets are operated with local partners who can help identify locations, sift through tax issues, and give Starbucks more local community appeal. The addition of a partner, however, reduces the company's share of the profits to only 20% to 50%. It also makes it harder than in the U.S. to control costs ? a major profit killer overseas has been real estate and labor costs far higher than those in the U.S.

Another potential issue with global expansion is backlash against American companies worldwide. Some see the Starbucks expansion as corporate colonialism, American Idealism, and even an attempt to change foreign cultures. Especially in a time of war, Starbucks remains a symbol of America to many cultures worldwide. Much like McDonalds has experienced in international markets, Starbucks too has been boycotted by antiwar protesters in Lebanon and criticized in New Zealand by advocates for higher coffee...