Internationalisation of Starbucks

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MASTER OF SCIENCE INTERNATIONAL BUSINESS

UNDERSTANDING INTERNATIONAL BUSINESS - 16/17

3,000 WORD ESSAY

STARBUCKS

RYAN DINGLEY

DIN12450949

MAHFUZUR RAHMAN

20/12/2017

WORDS – 3295

Abstract

This report will analyse the ways in which Starbucks can internationalise their business in different markets. By using relevant international business theory and carefully selected entry modes of specific markets, the reader of this report should gain an in-depth knowledge of the pros and cons when expanding the Starbucks brand globally.

The main findings in this report show that the Uppsala model is highly applicable to the work of Starbucks’ international expansion. The two markets of China and Canada are explored with the use of a PESTLE analysis, which analyses the pros and cons which could affect direct investment. Specific entry modes are chosen for each country, that being a joint-venture for China and the use of franchising for Canada. The reasoning for this is of a greater scale, but the reader must be aware that they are carefully picked in order to reduce the amount of risk involved, whilst allowing for the greatest business opportunities.

Table of Contents

1.0 Introduction        1

2.0 International Business Theory        1

3.0 Market 1        3

3.1 Selection of Market –        3

3.2 Suitability        3

3.2.1 Political and Legal        3

3.2.2 Economic and Financial        4

3.2.3 Social and Cultural        4

3.2.4 Technological and Infrastructure        5

          3.2.5 Environmental…………………………………………………………………………………………………………………6

3.3 Entry Mode        6

3.3.1 Selection        6

3.3.2 Discussion and Application        6

4.0 Market 2        7

4.1 Selection of Market        7

4.2 Suitability        7

4.2.1 Political and Legal        7

4.2.2 Economic and Financial        7

4.2.3 Social and Cultural        8

4.2.4 Technological and Infrastructure        8

          4.2.5 Environmental…………………………………………………………………………………………………………………8

4.3 Entry Mode        9

4.3.1 Selection        9

4.3.2 Discussion and Application        9

5.0 Conclusion        9

References        11

Appendixes        14

1.0 Introduction

In the current integrated world, it is extremely common for companies to enhance their profitability and brand awareness through internationalisation. Internationalisation is the process of increasing the involvement of international operations (Buckley and Ghauri). Starbucks are an American based company who now operate globally to millions of customers via internationalisation. Their high-quality products and leading innovation have helped the brand to increase in size over the last 20 years, with their logo being one of the most recognised worldwide. Many argue that a weakness of Starbucks is that they are highly reliant on their market within the U.S., however Starbucks argue that they use this to their advantage, whilst still having the opportunity to work on globalisation in strong and emerging markets (Forbes, 2016). Although operating on an extensive international scale, Starbucks have had a failure in attempted globalisation over the last 20 years. Between 2001-2003, Starbucks began operations in the middle-eastern country, Israel. Although the reasons behind this failure were never fully disclosed, it is argued that many reasons such as a weak economy, and the Israeli tastes and needs for coffee led to the international coffee brand pulling their efforts from the country in 2003 (Marino, 2003).