Global business environment case study for Starbucks1.docx

Global business environment case study for Starbucks1.docx

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GlobalbusinessenvironmentcasestudyforStarbucks1

UniversityofBirmingham

BirminghamBusinessSchool

THEGLOBALBUSINESSENVIRONMENT

0715821

Titleofessay

GBEGroupAssignmentforStarbuckscase

Lecturer

DrLisaDePropris

StudentIDs

1286094

1249898

1231372

Wordcount

1455

FromaSeattle-basedcoffeeshop,StarbucksCompanyexpandedatitsfastestspeedto17000storesin55countriesbytheendingof2011.Thefirstforeigninvestmenthappenedin1996whenStarbucksestablishedjointventureinJapan.Inthefollowing16years,varietystrategiesareusedinexpandinginternationalmarket:

licensing,jointventure,wholly-ownedsubsidiary.China,asStarbucks'nexttarget,willbetriplesizedthescaleinnextthreeyears.ThisessayanalysesandillustratesStarbucks’expansionactivitiesandstrategicdecision-makingbasedonDunning’sEclectictheory（1980）andFriedman'sninequestions.

Dunning’sEclectictheory（1980）

Dunning’sEclectictheoryisafruitfultheorythathelpsfirmstodetermineFDIactivitiesandchoosethecorrectmodetoenterinternationalmarket,whichstandsforownership,locationandinternalization.

Ownershipadvantagereferstothesuperiorassetsandskillsthatafirmpossesses,whichareinaccessiblebyrivalsinthehostmarket.

Beingtheleadingcoffeeretailerandroasterformorethan40years,Starbuckshasitsmostsignificantinvisibleadvantage--brandandreputation.Thegoodreputationwasbuiltupbyitsexcellentqualitycoffeeandgoodcustomerexperiencethatisbeneficialforcompanylong-termdevelopment.Moreover,Starbuckshasefficientcoffeebeansupplychain,combiningwithquickR&D,distributionchannels,whichhighlyaddvalueinitsvaluechain.Additionally,Starbucksbuildsaperfectsocialimage,withcontributioninmanyareas:

community,ethicalsourcing,environment,wellnessetc,whichattractscustomerswithenvironmentalandsocialawareness.

Locationadvantagesareadvantagesforfirmstoexploititsassetsinforeigncountriesorregionsratherthandomesticplaces.Itusuallyincludesexistenceofrawmaterial,lowwages,specialtaxesortariffs.（Gray.H.P,2003）

Theycanbedividedintotwoaspects:

marketadvantagesandgovernmentsupport.AccordingtothedatafromChinaCoffeeAssociation,theannualgrowthofcoffeeconsumptionisaround15%,whiletheworldcoffeeconsumptionincreasesonlyby2%eachyear.AttractedbytheChina'slowcostandsoardemandofmostpotentialmarket,Starbucksplannedtriplesizedthescaleinnextthreeyears,andthemostnetstoresopenedinChinaatthenumberof58（AnnualReport,2005）.Furthermore,Chinesegovernmentsetupseveralbeneficialregulationstoattractinvestments:

lowtax,largeinvestarea,freeland,financialsupport.

Internalizationadvantagegivesthereasonwhythefirmhaswillingnesstointernalizecross-borderstructure.（Dunning,J.H.,&Lundan,S.M.2008）

Fromtheinitialpurposeofsellingthefinestwholebeancoffeesandcoffeebeverages,Starbuckscontrolscoffeepurchasing,roastingandpackaging,andtheglobaldistributionofcoffeetoensurewhatitsellsiscompliancewiththerigorouscoffeestandards.Moreover,StarbucksoperatesFarmerSupportCenters,whicharestaffedwithagronomistsandsustainabilityexpertstoworkwithcoffeefarmingcommunitiesinordertopromotebestpracticesincoffeeproductiondesignedandimprovebothcoffeequalityandyields.Thisactionnotonlyhelpsensuresustainabilityandfuturesupplyofhigh-qualitygreencoffees,butalsoreinforcestheleadershiproleinthecoffeeindustry.

Friedman9Questions

HowFastIsYourCountryorCompany?

The‘Fast’ofStarbuckswillberecognizedasthreefollowingparts:

1）FastinR&Dnewgenerationofproducts;2）Fastdistributionbusinesstotheworldaswellasfastindestroyinginefficientbusiness;3）Fastinrespondingtocustomers’commentsandideas.

1.Starbucksisalwaysseekingtodevelopmarketshareandunderpinitscustomers’loyalty.ItputsenormousenergyinR&Dandlaunchesnewproductstomeettheexpectationsofcustomers.Forinstance,inthefirsthalfyearof2010,Starbuckslaunchedthreenewproductstosatisfycustomersinaccordancewithspecificseasonalrequirementandhealthyissue.Comparedwithquick-servicerestaurantsandspecialtycoffeeshops,Starbucks’productdevelopmentisfarquickerthancompetitors.（StarbucksPress,2010）

2.Starbuckshadarapidgrowthfrom2000to2008;italmosttripledthenumbersofstoresinternationally.Starbucksexecutedmanagers’strategieswelltoexpandworldwidemassivelyinsuchashortterm.However,problemscamewithover-expanding.In2008,itcloseddown600storesintheUSduetocannibalizingeffectsandstrongcompetitionfromMcDonald’sandDunkin’Donuts.AlthoughitwasadilemmaforStarbucksatthattime,itmadetimelydecisionstoshutinefficientstores.

3.Starbucksconcentratesonmarketingcommunicationstrategies,whichhelpcustomerstobeabletooutpourtheirsuggestionsandshareexperienceswitheachotherviaallkindsofpossiblechannels.OneofStarbucksmemberhassummarized6reasonstoprovewhyStarbuckshasbeendoingsowellinmarketingcommunication.Starbucksiskeepingdoingitsbesttorespondcustomersasfastaspossible,sothatitmakescustomersfeellikethatStarbucksiswiththemanywhereanytime,likemobilephones.

IsYourCountryorCompanyHarvestingItsKnowledge?

Thecompetitionforthebestinformationhasreplacedthecompetitionforthebestlocationandmanagerforcompaniesnow.InformationnetworksareextremelycrucialtoStarbucks.Procurementteamworkswellingatheringinformationfromsuppliersworldwidetoensurethequalityofcoffeebeans.Starbucksonlypurchasecoffeebeansfromreliablesuppliersandwellmanagetheinventorylevelinordertohandthebestcoffeetocustomers.Moreover,aswementionedabove,themarketingteamhasatremendouswide-rangecommunicationnetworkwithcustomers.Theytakefeedbacksfromcustomersseriouslyviaanypossiblechannel,comparinginformationwithcompetitorsinthemarket,andfinallymakedecisionsofmarketingstrategies.Starbucksdobenefitalotfrommanaginggoodnetworksofinformation.

HowMuchDoesYourCountryorCompanyWeigh?

Starbucksisalightcompanyratherthanaheavyone,becauseitcontrolsintensiveinventorylevelsofcoffeebeansandfoodstuffinordertoguaranteethebestqualityoffertocustomers.

DoesYourCountryorCompanyDaretoBeOpenontheOutside?

Starbucksismorethanhappytoopenontheoutside;theyarepleasedtoreceivecriticismfromcustomerswhowillhelpthemtothinkabouthowtoproducebetterproductsorhowtochangecurrentproductstomeetcustomers'expectations.

DoesYourCountryorCompanyDaretoBeOpenontheInside?

'Inside'generallymeanshowtransparentthebusinessisfrominsideofthecompany.AccordingtotheresearchbyGoodGuide,seebelow:

ENVIRONMENTAL

PERFORMANCE

SOCIALPERFORMANCE

Transparency

7.3

Transparency

6.9

Environmental

Management

6

Management

6.2

Governance

6.7

Governance

6.7

Policies

6

Policies

6

Reporting

7

Reporting

7

SupplyChain

7

SupplyChain

7

ComplianceandControversies

4

LeadingEdgePractices

10

LeadingEdgePractices

8

ComplianceandControversies

3

ResourceUse

6.8

Workers

5.2

GeneralResourceManagement

7

General

4

Materials

6.5

OccupationHealthandSafety

6

Water

7

DiversityandEqualOpportunity

5.2

Energy

6.8

HumanRights

5.5

EnvironmentalImpacts

6.1

GeneralHumanRights

5

Biodiversity

6

FreedomofAssoc.&Collect.Bargaining

4.5

Emissions

6.1

ChildLabor

6

GeneralEmissions

7

ForcedandCompulsoryLabor

6

GreenhouseGases

7.5

IndigenousRights

6

CriteriaandHazardousAirPollutants

6

Community

6.7

WaterPollution

4

PublicPolicy

6

Waste

6

StakeholderEngagement

6

CommunityRelationships

8

Consumers

5.3

ProductandServiceLabeling

7

Starbuckstransparencyisratedrelativelyhigherthanaverageinbothenvironmentalandsocialaspect.

DoesYourCountry'sorCompany'sManagementGetItandCanYouChangeManagementIfTheyDon't?

Thisisabouttheveryinternalinformationthatwedonotknowfromthegeneralchannels.Thus,wehavenocommentsonthisquestion.

IsYourCountryorCompanyWillingtoShootItsWoundedandSuckletheSurvivors?

After2008,theStarbucksseemedtostruggletodealwithitsdecreasingbusinessperformances.'Starbuckshasbeenhurtbyrisingcosts,thecannibalizingeffectsofyearsofover-expansion,andstiffcompetitioninespressodrinksfromMcDonald'sandDunkin'Donuts.'（11/11/2008,NewYorkTimes）Theyhadtodecidetoclosedown600storesintheUSin2008.TheStarbucksCEOHowardSchultssaid:

'Wehadtoadmittoourselvesandtothepeopleofthiscompanythatweownedthemistakesthatweremade.'Starbuckshavethespiritstoencouragethedestructionofestablishedbusiness.AswellastheyalsoaimtoanewmarketforfuturedevelopmentinChina.StarbuckspostedasignificantgrowthinChinaoffiscalfourthquarterin2012.Itsrevenuerose11percentmeanwhiletheprofitincreased24percent.（Strom,S.2012）

HowGoodIsYourCountryorCompanyatMakingFriends?

ThereisnodoubtthatStarbucksisgoodatmakingfriends.TherearethousandsofstoresopenworldwidesellingStarbuckscoffees.Thesestoresaremainlyeitherlicensedorjointventure.Starbuckshasalliancesallovertheworldsupportingitsfastexpandinginternationally.

HowGoodIsYourCountry'sorCompany'sBrand?

Starbuckshasabrandpersonalitythatdeep-rootedincustomers'minds.Starbucksallovertheworldshavethesimilarelegants