Globalization of Starbucks - Case Study Example

The original idea for the Starbucks format is inspired by the way Italian coffee shops were managed. It is to the credit of Howard Schultz, the marketing director of the company who visited Italy in the 1980s. This trip proved to be a turning point for Starbucks as Schultz brought to America the idea of the comfortable, cozy coffee shop that can provide a soothing ambiance to its visitors. Not only would the shop serve coffee, but also sell pastries, cakes, and tea in an environment that provides a memorable experience. This transformation of the Italian coffee experience to the Starbucks of America tells us that ideas can be used across borders to strengthen the foundations of international business. If an Italian idea can appeal so strongly to an American, the same experience can very well indeed touch the lives of millions of coffee consumers in Asia, Africa, or Australia.
Starbucks achieved phenomenal success in the United States of America, with over seven hundred stores all across the country by the year 1995. Being a country that is home to multitudes of multiethnic crowds all over the world, the success of Starbucks in America was an indication that the Starbucks experience was enjoyed by all, regardless of race, gender, or ethnicity. This became the encouragement for Starbucks to venture into the international market. By spreading its operations globally, the company is not only minimizing risk but also maximizing profits, both of which add increased value for the shareholders of the company (Rappaport). Additionally, dealing in the global market adds the value attached to dealing with foreign exchange, which implicitly results in a stronger portfolio for the individual who chooses to invest in a multinational company.

3. Why do you think Starbucks decided to enter the Japanese market via a joint venture with a Japanese company? What lesson can you draw from this?

It was through penetrating the Japanese market that Starbucks set out on its first venture into the international arena. Though confident of its success within America, the company could not be entirely sure of similar success in other parts of the world. To reduce the risks of a prospective failure, Starbucks chose to commit to a joint partnership, in which the local Japanese retailer, Sazaby Inc., would share both the profits and losses of the joint venture. This was a wise and long-sighted step on part of Starbucks, which showed that the prospect of loss should never be underestimated in the world of business. Apart from the financial aspect involved in making such a decision, the social and cultural aspects involved must also be taken into consideration. As an American company setting up business in Japan, Starbucks chose to hire Japanese employees working in its outlets, thus reducing a sense of alienation in the coffee experience Starbucks wished to sell.

4. Is Starbucks a force for globalization? Explain your answer.

Starbucks has indeed proved itself to be one of the pioneers in the world of modern international commerce. Beginning with a humble start in Seattle, the company’s rise to success is inspiring to say the least. The success of Starbucks has taken the route of globalization to reach this stage, and today, the word Starbucks has become symbolically synonymous with a laid-back coffee experience in a uniquely relaxing ambiance. This is indeed one of the many effects of globalization, where a good or service can mean the same thing, regardless of their ethnic or geographic origin. On the other hand, the downside of globalization has also followed Starbucks, often in the form of international competitors, who duplicate the Starbucks coffee experience and offer it to consumers at a lower price. For this, the company has sought copyrights of its intellectual property, protecting it from unauthorized duplication (Hart).

5. When it comes to purchasing coffee beans, Starbucks adheres to a "fair trade" program. What do you think is the difference between fair trade and free trade? How might a fair trade policy benefit Starbucks?