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Starbucks' International Operations

            
 
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Case Details:

Case Code : BSTR058
Case Length : 12 Pages
Period : 1982 - 2003
Organization : Starbucks' International
Pub Date : 2003
Teaching Note : Available
Countries : USA
Industry : Food and Beverage

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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"Internationally, we are in our infancy."

- Howard Schultz, Chairman & Chief Global Strategist, Starbucks in March 2003. 1

"The expansion strategy internationally is not bulletproof as it is in the U.S."

- Mitchell J. Speiser, Analyst - Lehman Brothers, in June 2003.2

All's Not Well With Starbucks

In March 2003, Fortune came out with its annual list of "Fortune 500 companies." For Howard Schultz (Schultz), Chairman of Starbucks Corp (Starbucks), this list was special as Starbucks featured in the list. It was a dream come true for the Seattle based entrepreneur.

Though the US economy was reeling under recession and many retail majors were reporting losses and applying for bankruptcy, Starbucks announced a 31% increase in its net earnings and a 23% increase in sales for the first quarter of 2003.

Analysts felt that the success of Starbucks showed that a quality product speaks for itself. The fact that Starbucks spent less than 1% of its sales on advertising and marketing strengthened this view.

In addition to being a popular brand among customers, Starbucks was also considered the best place to work due to its employee friendly policies.3

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However, analysts felt that the success of Starbucks was primarily due to its profitable domestic operations. It was reported that although Starbucks had a presence in 37 countries around the world by mid 2006,4 most of Starbucks' international operations were in trouble.

Although the company had managed to gain a foothold in markets like China, it faced several difficulties in countries like Germany and France. Even in Japan, which was Starbucks' biggest market outside Japan, the company had had a difficult time for several years before it managed to stabilize in 2004. Analysts pointed out that Starbucks' international operations were not as well planned as its US operations. They also observed that the volatile international business environment made it difficult for the company to effectively manage its international operations. Many analysts felt that it was important for the company to focus on its international operations. With the US market getting saturated, Starbucks would be forced to look outside the US for revenues and growth.

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1] Cora Daniels, "Mr. Coffee The man behind the $4.75 Frappuccino makes the 500," Fortune, April 14, 2003.

2] Stanley Holmes, Irene M. Kunii, Jack Ewing, Kerry Capell, "For Starbucks, There's No Place Like Home," BusinessWeek, June 9, 2003.

3] Starbucks was the first organization in the US to offer stock options and health care coverage to part-time employees also.

4] "Company Fact Sheet-August 2006," www.starbucks.com (accessed on October 6, 2006).

 

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