Starbucks Business Strategy - Assignment Example

International Business Case Study Question Why did Starbuck became disenchanted by licensing its format to foreign operators? Starbucks began its growth over thirty years ago by adopting a number of strategies. To grow the business beyond United States, the company embarked on a journey of venturing into new markets through licensing its format to its global partners. The primary goal of this strategy was to sell the companys business to foreign partners, but still allow the company to have control over international markets. Three key reasons can explain why it was prudent to surrender full license controls to new partnerships in Japan, where expansion started. Firstly, the company wanted to have the Japanese licensing strategy to adhere strictly to the standards in the U.S. This would ensure that the company controls minimum standards to ensure the quality of products (Pereira, Kerr, Kimura, & Lima, 2009). As a result, the company successfully established quality standards. The second reason was to ensure that the company joint venture with Coffee of Japan took off. In reality, the strategy allowed the company to take full responsibility in growth and expansion of the new markets. Establishing a brand within the foreign joints and partnership was successful (Chua & Banerjee, 2013). This is explained by its growth in Japan, China, and Thailand. More specifically, within ten years of venturing into Japanese markets, there were over 700 Starbucks branches in Japan alone. Further, there were 103 stores in Thailand and the dream of expanding its stores to over 15,000 outside U.S was becoming a reality (Rossman, 2009). Due to this enormous success within a decade, the company gradually started losing control in some ways. Firstly, the joint licensure denied the company full control on the rate of expansion. As a result of existing partnership stipulations, Starbucks strategy of quick expansion and building consumer habits was significantly curtailed within joint licensure arrangement. Moreover, freedom to establish trendy Starbucks brands and get away with new marketing strategies failed to take off as expected (Rossman, 2009). The strategy had succeeded in the U.S stores. It was likely to be helpful within these new markets. In essence, their licenses did not give the company an opportunity to expand more rapidly as it was expected. Besides, the existence of international regulations on foreign investments have been messy. High taxation and bureaucratic laws governing operations summed up to become an impediment on top of licensure restrictions. The flexibility and choices of marketing and management strategies that the company would take were limited, and thus the strategy soon became disenchanted (Venkatraman & Nelson, 2008). Question 2: What were strategic roles played by the human resource management of Starbucks during the process of internationalization? As Starbucks expanded its stores to Asia, Europe, and South Africa, human resource strategies became integral in sustaining the process. Among strategic role employed by the company was evident when the first store was established in Japan around 1996 (Argenti, 2004). The human resource played four key roles that facilitated a successful internationalization strategy. First, the company executive devoted a lot of time and resources to employees hiring process. The idea was to ensure that the company taps the best-qualified staff. This was in line with their internationalization strategy whose aim was to set the superior level of customer services. Just like any other business, the cadre of employees was a great determinant in ensuring the success of the company in these new environments. Taking time and investing resources to the process of hiring was an essential aspect that would determine success during internationalization (Gambardella, 2009). Secondly, human resource management embarked on building employees capacity through training. In Japan, the company focused on a different approach from its corporate practice when it transferred some staff from U.S stores to newly founded Japan markets. Certainly, this was a remarkable strategy that depicted the highest commitment to ensuring that internationalization works. As it was the first destination in an ambitious plan, the company ensured that all Japanese based employees underwent similar job training as those in the United States. The purpose of this policy was to ensure that workers get the best training similar to that in U.S in order to meet the set standards of work (Seaford, Culp, & Brooks, 2012). Similarly, HRM strategic plan saw the design and parameters of work adopted by the U.S stores. This remarkable strategy ensured uniformity in operations. It affirmed the commitment of human resource department in providing appropriate knowledge and skills establishment in Japan (Roby, 2011). In reality, building workers capacity was an excellent way of ensuring the quality of work and business success. In addition, there was an aspect of progressive compensation policy within the human resource strategy. In line with the theory of motivation, the HRM system recognized the importance of building workers motivation to work through reasonable compensation. As a result, Japanese stores became an important case study that was employed successfully in Thailand, China, and other parts. The lesson learned from Japan case was building a high strategy with total regard to the labor force. To meet organizational goals, a business plan should recognize the central role of employees in ensuring success. Question 3: Why will the Starbucks will expand primarily through local joint ventures as opposed to using pure licensing strategy? Currently, Starbucks has now embarked on expansion strategy based on joint ventures rather than pure licensing policy because of some reasons. Firstly, through joint ventures (JV) the company will build its cultural competence across its stores. To succeed in the market, business is obliged to understand cultural dynamics within its area of operations (Hsieh & Chen, 2011). Setting up a business in Europe, Asia or Africa requires cultural competence. This explains the preference of Starbucks JV as opposed to operating on a pure licensing. Through building links with local companies, the company will exploit its financial abilities to expand within existing cultural environment. Additionally, Starbucks has a larger measure of control (Talpau & Boscor, 2011). One of the greatest interest of the company was to establish markets and remain in control. To do so, the company opted to utilize JV to gain local knowledge from its partners while ensuring unlimited expansion. The companys measure of control was larger. It aimed at ensuring it colonizes foreign market without unforeseen restriction. In reality, this was the primary excuse of bolting out of licensing its format to local ventures. Evidently, in 2002, the business was pursuing aggressive expansion international markets using JV approach (Berfield, 2009). The company appears to have learned from its experience in Asia, especially Japan where the company experienced a gradual loss of the control of the business operations. Because of its prospects in the international markets, the firm will continue to explore joint venture as a market entering strategy. Remaining in control while at the same time gaining knowledge from new markets and cultures are crucial goals that the company continue to pursue now and even in future. Question 4: How different are strategies of a wholly owned subsidiary in Britain and Thailand from those employed in Japan? In Britain and Thailand, the company entered into licensing agreement unlike in Japan where it license its format to local operators. Loss of freedom in operations curtailed its rate of growth in Japan. Specifically, in Thailand, it made an agreement with Coffee Partners. The local company was needed to open 20 Starbucks coffee stores within the contract terms. However, Starbucks came to rescue when the local company could not raise the required capital (Koehn, 2001). Evidently, the company was driven by intentions to ensure tight control of the international markets. Thus, it used its economic strength to arm local twist firms. This agreement came at a time the company wanted to utilize opportunity to venture into the European market. Besides wholly owned subsidiary arrangement was the best alternative in ensuring the business understand local knowledge and markets. International marketing requires actual contact with the customers. Operating within JV has over years of internationalization yield fruits in Starbucks strategy (López-Duarte & Vidal-Suárez, 2013). However, in circumstances where joint ventures are non-existent, wholly owned subsidiary stores are better alternative because of two reasons. In a case where the joint venture operation fails to take off, the company can intervene to ensure successful operations. Evidently, Starbucks purchased a common venture with Coffee Partners to ensure the business progress. Thus, the flexibility of intervention made it possible for the company to intervene. Similar strategies proved successful in Britain (Park, 2012). Essentially, where a company needs freedom and space to establish its brand and identity within a given market situate, joint ventures are not the best. However, JV allows access to the market, but they do not guarantee independence for expansion. In the European market, the wholly owned subsidiary was lucky because the U.S based business had substantive knowledge of the company operations within Europe. To the company, the Asian market was perhaps the difficult to enter because of cultural diversity and poor knowledge of business operations. Navigating through challenges establishing stores in Europe was simplified by the firm independent shops. Subsidiary stores were fully assets of the Starbucks; consequently, it was possible to later activities according to existing market forces (Thompson & Arsel, 2004). Expansion with Europe market where the competitive environment is quite high was made possible by appropriate strategy, the wholly owned subsidiary stores. Reference List Argenti, P. A. 2004. Collaborating with Activists: How Starbucks Works With NGOs. 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