International Business Strategy: Starbucks Corporation

1. International Business Strategy: Starbucks Corporation

2. “We’re not in the coffee business serving people. We’re in the people business serving coffee." Howard Behar, President of Starbucks International

3. STARBUCKS Expansion intoSão Paulo, Brazil

4. Introduction and Company Overview • Starbucks Products and Ventures • Why Expand into Brazil? • Starbucks’ Expansion Philosophy • Mode of Entry • Finances • Conclusion

5. Introduction and Company Overview • Starbucks Products and Ventures • Why Expand into Brazil? • Starbucks’ Expansion Philosophy • Mode of Entry • Finances • Conclusion

6. Introduction • Starbucks strives to become the most recognized and respected coffee retailer in the world • Expansion of international operations is key to furthering Starbucks’ position in the coffee industry

7. Company Overview • Starbucks History: • Founded 1971 in Seattle, WA • Named after first mate in Moby Dick • Early on roasted and sold coffee beans • 1980s began selling coffee by the cup

8. Company Overview • Starbucks History: • 1987 - Howard Schultz bought Starbucks • Schultz introduced the “Starbucks Experience” • 1992 - 165 locations nationwide • 1996 - International expansion began

9. Company Overview • Starbucks Today: • $6.4 billion in revenue • Serving over 35 million patrons • More than 7,500 shops in the US • Operating 3,000 plus shops in 36 foreign • countries

10. Introduction and Company Overview • Starbucks Products and Ventures • Why Expand into Brazil? • Starbucks’ Expansion Philosophy • Mode of Entry • Finances • Conclusion

11. Starbucks Products • STARBUCKS stores offer regular and decaffeinated coffee beverages, teas, pastries, muffins, and other breakfast foods

12. Starbucks Ventures EthosTM Water Starbucks DuettoTM Visa Starbucks Frappuccino® Starbucks ice cream

13. Introduction and Company Overview • Starbucks Products and Ventures • Why Expand into Brazil? • Starbucks’ Expansion Philosophy • Mode of Entry • Finances • Conclusion

14. Why Expand into Brazil? • Strong coffee culture • Favorable political climate • Large Economy • Other American corporations’ success

15. Strong Coffee Culture • Coffee has been harvested since the early 1700’s • “Café Mana” – Morning Coffee • Largest producer of coffee beans; twice as much as the 2nd runner up - Vietnam • Soon to be the 2nd largest consumer – behind the U.S.

16. Favorable Political Climate • Democratically elected President • Strong diplomatic ties with the U.S. • Current president’s focuses on economic expansion and encourages foreign investment

17. Large Economy • Largest economy in South America • GDP approximately 620 billion and growing • 5th most populated country in the world • Over 186 million people

18. American Corporate Success in Brazil • Coca Cola – 1940’s • McDonald’s – 1960’s • Most American Corporations outside U.S.

19. Introduction and Company Overview • Starbucks Products and Ventures • Why Expand into Brazil? • Starbucks’ Expansion Philosophy • Mode of Entry • Finances • Conclusion

20. Starbucks’ Expansion Strategy • Wheel and Hub expansion method • São Paulo will be the hub • Spoke out into the rest of Brazil and beyond

21. Introduction and Company Overview • Starbucks Products and Ventures • Why Expand into Brazil? • Starbucks’ Expansion Philosophy • Mode of Entry • Finances • Conclusion

22. Mode of Entry • Foreign Direct Investments • Licenses • Joint Ventures

23. Mode of Entry Joint Venturing with

24. Mode of Entry • World’s second largest retailer • 7,000 stores internationally • Creator of hypermarket • 99 hypermarkets in Brazil

25. Mode of Entry • Carrefour has: • Strong brand name recognition • Readily available resources • Massive distribution network

26. Mode of Entry • Targeted Hypermarket locations in São Paulo 1. Downtown district 2. Main business district 3. Cultural District 4. Shopping District • Focus on working professionals

27. Introduction and Company Overview • Starbucks Products and Ventures • Why Expand into Brazil? • Starbucks’ Expansion Philosophy • Mode of Entry • Finances • Conclusion

28. Finances • Carrefour 50% <> Starbucks 50% • $350,000 loans • Retrofit coffee shop in hypermarket • Equipment and beginning inventories • $100,000 infusion to sustain early operations

29. Finances • Critical Assumptions: • Sustain growth of 20% per year - 1st five years • Brazilian inflation hovers around 6-7% • Capital obtained at 10% for 7 years • Equipment life at least 5 years

30. Finances Coffee Shop Setup

31. Finances Break-Even Analysis Break-even Point = $18,200

32. Finances

33. Finances • Project Losses in Years 1 and 2 • Break-even in Year 3 • Profit Margin Projections • 14% in Year 4 • 22% by Year 5

34. Introduction and Company Overview • Starbucks Products and Ventures • Why Expand into Brazil? • Starbucks’ Expansion Philosophy • Mode of Entry • Finances • Conclusion

35. Conclusion • Most respected coffee retailer in the world • International expansion is key to success • Brazil is the next market to enter • Partner with Carrefour • Projected strong profitability by Year 5

36. Questions?