Starbucks Case Memo

Christopher Anderson

3/25/2013

IB MGT 356

MEMO

Resuming Internationalization at Starbucks

Was Starbucks Too Aggressive?

To answer this question simply, no, Starbucks was not too aggressive in its approach to internationalization. The argument here can be made in either direction, but I believe that Starbucks was not too aggressive.

First of all, one must look at what Starbucks has done in their campaign of internationalization. In 1996 Starbucks only existed in the United States and Canada, but by the end of 2009, it had reached about 17,000 stores in 56 countries; a span of 13 years that brought an unprecedented amount of growth. In this time, the world demand for coffee and coffee consumption were rather steady yet showed signs of increasing. As a young company facing a saturated market, they did what any company would do; expand abroad.

When choosing to expand operations into foreign countries, it can be advantageous to be the first mover and Starbucks certainly did this. They were intelligent about their approach as well, by maintaining as much of the core product offering as possible to keep the integrity of the business, while adapting to local cultures as necessary to appeal to as many people as possible. They were able to save money by using licensed partners and joint ventures in some countries, and using wholly owned subsidiaries in others. (Ivey 5) This allowed them to conform to the business environment of the host country while establishing a strong presence.

Unfortunately, Starbucks was profoundly affected by rising costs of coffee beans between 2000 and 2010, increasing domestic competition, and a global financial crisis all of which hurt Starbucks profitability. This led Starbucks to scale back the size of their operations domestically and abroad which led to less expansion and more focus on improving customer service and product quality.

Overall, I believe that Starbucks was not too aggressive, they were...