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Starbucks

Foreign Direct Investment Strategy. Starbucks. Nethra Murali, Nina Wagner & Nikhil Sharma. Presented by :. Presentation Overview. Introduction to Starbucks Case Overview Case Analysis Recent Trends Q & A. Company started in 1971 in Seattle, Washington

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Starbucks

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  1. Foreign Direct Investment Strategy Starbucks Nethra Murali, Nina Wagner & Nikhil Sharma Presented by:

  2. Presentation Overview • Introduction to Starbucks • Case Overview • Case Analysis • Recent Trends • Q & A

  3. Company started in 1971 in Seattle, Washington Grew from 55 stores in 1989 to over 16,680 stores today Products sold include: Beverages Pastries whole coffee beans coffee-related retail items & accessories Introduction to Starbucks Source: 2008, Starbucks Corporation

  4. Case Overview 1) JV with local Sazaby Inc 50/50 stake First foreign market entry: JAPAN 2) Transferred US employees to Japan 3) All Japanese managers & employees attended training classes 4) By 2006 – over 600 stores In Japan

  5. Case Overview Important Events: 1998: Purchased Britain's “Seattle Coffee” 2000: Opened stores throughout Asia-Pacific 2002: Aggressive Expansion in Europe

  6. Case Overview As of 2006: • Saw potential for up to 15,000 stores outside the US • New focus was on China

  7. Greenfield versus Acquisitions Greenfield Strategy: Mostly in developing nations Acquisitions: Quicker to execute. Foreign firms have valuable strategic assets Believe they can increase the efficiency of the acquired firm More prevalent in developed nations • Starbucks uses a combination of both strategies. • Acquisition when first entering a new market • Greenfield once presence is established

  8. Why Foreign Direct Investment Why does Starbucks prefer FDI to licensing? Licensing does not give Starbucks the tight control over manufacturing, marketing, and strategy in the foreign countries that it requires to maximize its profitability. People visit Starbucks for the experience and familiarity – they expect unison across all stores internationally.

  9. Benefits: Resource Transfer Employment Direct Indirect Increased Competition Costs: Adverse effects on Competition Impact of FDI on Host Country

  10. Benefits: Stream of income from foreign earnings MNEs may learn skills from exposure to foreign countries Costs: Employment effects Potential loss of jobs domestically Impact of FDI on Home Country

  11. Global Economic Crisis and Starbucks? …“When it rains, it pours. While it appears that Seattle may weather the Global Financial storm better than some, we are still going to get wet”… Starbucks suffered a 77% drop in its fiscal second quarter net income Since July, 2008 Starbucks has shut 507 stores in US and 64 Shops in other countries Starbucks has announced to close 960 stores globally as part of cost cutting plan Comparable store sales of negative 8% compared to negative 9% in Q1, 2009 Source: Apr 2009, BBC News

  12. Global Economic Crisis and Starbucks? Continued… Shares have been generally rising since March, for two years it has outperformed Dow Jones. Source: FDImagazine.com

  13. The Future for Starbucks Fiscal 2009 Targets Expects to add approx 20 new stores to its global store base in fiscal 2009. Focusing on disciplined global store expansion in key markets Focusing more on customers satisfaction and high quality of coffee

  14. Questions? ~ Nikhil, Nina & Nethra ~

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