Case 9-1: Starbucks Takes Coffee Culture Around the World

  1. In the United States, nearly two-thirds of Starbucks outlets are company owned; the remaining one-third are operated by licensees. Outside the United States, the proportions are reversed: about two-thirds are run by licensees or partnerships in which Starbucks has equity stakes. What is the explanation for the two different market expansion strategies?

Starbucks strategy of offering licenses and keeping self-owned outlets is simple. Company has access to several places in United States of America and it can offer its resources to these places. Along with that, the competition at these places are particularly more than other places. The company attempts to keep the outlets to itself at these places in order to perform well through internal working strategies and by keeping full control of its decision making. There are some places in United States of America where either the company is not facing a fierce competition or it doesn’t have the access to the place so it prefers to license the branch to someone else i.e. local businessmen which understands the working conditions better than the company’s employees.

The company offers too much licenses for its foreign outlets because it would be hard for the company to keep its presence in those places through self-owned branches. For example, Starbucks cannot afford to own every Indian and Chinese outlet because of their extended geographical areas. It cannot afford to self-own the outlet in Pakistan because the outlets are limited in number and company cannot afford the fix cost and hassle to operate and take care of such units.

  • Should Starbucks enter the Italian coffeehouse market? Why or why not?  

Italian market has special characteristics that forbids the company to enter into this market. These features include but not limited to the knowledge of the people about Coffee, the affordability for a cup of coffee, difference of exchange rate and company’s existing brand image of an expensive coffee franchise makes it hard to get the desired results. People in Italy are in habit of drinking coffee in peace with their friends, they don’t hassle like American so they need a sitting place too which increases the cost.