International Business - Starbucks - Essay Example

This has been the key reason, according to the case study, that managers in Starbucks decided to use alternative internationalization strategies that could protect the firm’s interests more effectively. The inappropriateness of licensing, as the core internationalization strategy of Starbucks, can be understood by referring to the characteristics of licensing. Licensing, as a strategy for expanding internationally, can offer a series of advantages. In fact, licensing is considered as one of the most popular internationalization strategies (Czinkota et al. 2009). In the context of licensing ‘a party can uses intellectual property of another party paying compensation in the form of royalty’ (Czinkota et al. 2009, p.244).

The intellectual property the use of which can be allowed to third parties, under compensation, can vary, incorporating ‘patents, trademarks and business skills’ (Czinkota et al. 2009, p.244). In general, licensing has related to the following benefits: there is no need for capital investment, compared to other internationalization agreements (Czinkota et al. 2009). . The licensing agreement is considered as an ideal strategy for testing foreign markets as of their potential to offer high profits (Cherunilam 2010).

After testing a foreign market using the licensing agreement the licensor may decide to proceed to a full-entry in the particular market, in case that prospects for high growth are identified (Cherunilam 2010). In other words, the licensing agreement can be used as a means for checking a market’s prospects in regard to a specific product/ services before proceeding to the further promotion of this product/ service in the particular market (Stonehouse et al. 2007). Managers in Starbucks probably used initially the licensing agreement as a first tool for checking the perspectives of markets worldwide.

It seems that the firm would prefer to avoid investing funds on internationalization agreements in regard to markets the potentials of which were unknown. After testing these markets, the firm’s managers were ready to proceed to the next phase, i.e. to develop internationalization strategies that could offer full control over the firm’s intellectual property. At this point, reference should be made to the following fact: the company had used licensing only in Asia, probably aiming to explore the local markets’ potentials in terms of the firm’s products.

In Canada, the expansion of the firm was arranged differently: the owners of Starbucks bought the stores in Canada so that a full control is secured. Of course, the use, directly, of another internationalization strategy in Canada was feasible, since the firm’s owners could have a better view of the particular market’s prospects, meaning that there was no need for testing the Canadian market in regard to its responses to