Indicative Assessment Requirements for the Module;
Read the following case study and answer ALL three questions:
Starbucks’ Foreign Direct Investment
Thirty years ago, Starbucks was a single store in Seattle’s Pike Place Market selling premium roasted coffee. Today it is a global roaster and retailer of coffee with some 13,000 stores, more than 3,750 of which are to be found in 38 foreign countries. Starbucks Corporation set out on its current course in 1980s when the company’s director of marketing, Howard Schultz, came back from a trip to Italy enchanted with the Italian coffeehouse experience. Schultz, who later became C.E.O., persuaded the company’s owners to experiment with the coffeehouse format- and the Starbucks experience was born.
The strategy was to sell to the company’s own premium roasted coffee and freshly brewed espresso-style coffee beverages, along with a variety of pastries, coffee accessories, teas and other products, in a tastefully designed coffeehouse setting. The company also focused on providing superior customer service. Reasoning that motivated employees provide the best customer service, Starbucks’ executive’s devoted a lot of attention to employee hiring and training programs and progressive compensation policies that gave even part-time employees stock option grants and medical benefits. The formula led to the spectacular success in the United States, where Starbucks went from obscurity to one of the best known brands in the country in a decade.
In 1995, with 700 stores the United States, Starbucks began exploring foreign opportunities. Its first target market was Japan. Although Starbucks had resisted a franchising strategy in North America, where its stores are company owned, Starbucks initially decided to license its format in Japan. However, the company also realised that a pure licensing agreement would not give it the control needed to ensure that the Japanese licences’ closely followed Starbucks’ successful formula.
So the company established a joint venture with a local retailer, Sazaby Inc. Each company held a 50% stake in the venture, Starbucks Coffee of Japan. Starbucks initially invested $10 million in this venture, its first foreign direct investment. The Starbucks format was then licensed to the venture, which was charged with taking over responsibility for growing Starbucks’ presence in Japan.
To make sure the Japanese operations replicated in the “Starbucks experience” in North America, Starbucks transferred some employees to the Japanese operation. The licensing agreement required all Japanese store managers and employees to the Japanese to attend training classes similar to those given to U.S employees. The agreement also required that stores adhere to the design parameters established in the United States. In 2001, the company introduced a stock option plan for all Japanese employees, making the first company in Japan to do so. Sceptics doubted that Starbucks would be able to replicate its North American success overseas, but by the end of 2007 Starbucks had over 700 stores in Japan and planned to continue opening them at a brisk pace.
After Japan, the company embarked on an aggressive foreign investment program. In 1998, it purchased Seattle Coffee, a British coffee chain with 60 retail stores, for $84 million. An American couple, originally from Seattle, had started Seattle Coffee with the intention of establishing a Starbucks-like chain in Britain. In the late 1990s, Starbucks opened stores in Taiwan, China, Singapore, Thailand, New Zealand, South Korea and Malaysia.
In Asia, Starbucks’ most common strategy was to licence its format to a local operator in return for initial licensing fees and royalties on store revenues. As in Japan, Starbucks insisted on an intensive employee training program and strict specifications regarding the format and layout of the store. However, Starbucks became disenchanted with some of the straight licensing arrangements and converted several into joint-venture arrangements or wholly owned subsidiaries.
In Thailand, for example, Starbucks initially entered into a licensing agreement with Coffee Partners, a local Thai company. Under the terms of the licensing agreement, Coffee Partners was required to open at least 20 Starbucks coffee stores in Thailand within five years. However, Coffee Partners found it difficult to raise funds from Thai banks to finance this expansion. In July 2000, Starbucks acquired Coffee Partners for about $12 million. It goal was to gain tighter control over the expansion strategy in Thailand. By the end of 2007 the company had 103 stores in Thailand.
By 2002, Starbucks was pursuing an aggressive expansion in mainland Europe. As its first entry point, Starbucks chose Switzerland. Drawing on its experience in Asia, the company entered into a joint venture with a Swiss company, Bon Appétit Group, Switzerland’s largest food service company. Bon Appétit was to hold a majority stake in the venture, and Starbucks would licence its format to the Swiss company using a similar agreement to those it had used successfully in Asia. This was followed by a joint venture in other countries. In 2006, Starbucks announced that it believed there was the potential for up to 15, 000 stores outside of the United States, with major opportunities in China, which the company now views as the largest single market opportunity outside of the United States. Currently the company only has 350 stores in China. (Hill, 2011)
Answer all three questions:
1. Using suitable business tools carry out a foreign market analysis and assess the reasons why Starbucks chose to embark on a foreign market expansion strategy outside of the USA.
2. Assess the strategic suitability of the different market entry strategies employed by Starbucks specifically those used in the entry of Starbucks to Japan, Thailand and Britain.
3. Critically assess the suitability of the staffing approach that Starbucks utilised in Japan in relation to their corporate strategy.
Guidelines for undertaking the Assessment
1. All assignments must be word processed – in Microsoft Word (or similar) format with size 12 and line spacing 1.5.
2. The maximum word count for the assignment is 3000 words.
Report structure and word count for each question:-
• Title Page
• Table of Contents
• Executive summary-Not more than 200 words (does not count towards the overall word count)
• Question 1
• Question 2
• Question 3
• Appendix-use sparingly
GUIDANCE FOR STUDENTS IN THE COMPLETION OF TASKS
NOTE: The guidance offered below is linked to the five common assessment criteria overleaf and specifically aligned to the “exceptional” outcome category to which we anticipate students aspire.
1. Research-informed Literature
Your work must embed and be informed and supported by relevant and credible scholarly material that is accessible in the learned journals listed on the module schedule. You should refer to at least 10 such sources. Additionally, you should refer to text books, current news items and benchmark your organisation against other organisations to ensure your assignment is current and up-to-date. High-level referencing skills using the Harvard Method must be demonstrated throughout your work and all sources listed alphabetically within your bibliography.
2. Knowledge and Understanding of Subject
Your work must demonstrate the growing extent of your knowledge and understanding of concepts and underlying principles associated with the subject area. This means that within your work, you should provide evidence of your growing mastery in critical awareness of current challenges, new insights and the constant need for innovation within the field. Furthermore, a critical awareness of the ambiguities and limitations of knowledge and even understanding, should be considered and examples of such, illustrated within your work.
To be considered masters worthy, your work must contain evidence of analysis, evaluation and synthesis. This means not just describing “What!” but also justifying: Why? How? When? Who? Where? And at what cost! At all times, you must provide justification of your arguments and judgements. Evidence that you have reflected upon the ideas of others on matters occurring in the real world of business is crucial to you providing a reasoned and informed debate within your work. Your choice of methodologies to gather data and information must be rigorously defended. Furthermore, you should provide evidence that you are able to make sound judgements and convincing arguments in the absence of complete data, since within the real world of work, we rarely have access to, or know all the information! Persuasive conclusions are especially necessary and must be derived from the content of your work – there should be no new information presented within your conclusion. Your work should aspire to resemble work which is of journal publishable quality.
4. Practical Application and Deployment
It is essential that you rationalise how you decided upon certain methods, materials, tools and techniques to inform and complete your work. You must demonstrate what informed your decision(s) to apply certain concepts that enabled you to formulate innovative and creative solutions to the challenges presented to you or that you identified for yourself. Plausible, costed and justifiable recommendations are demanded and where these are absent, your work is undermined. Your work should provide evidence that you are growing in mastery in developing cutting edge processes and techniques within the subject area.
Skills for Professional Practice
Your work must provide evidence of your attributes in the application of professional practice. This includes demonstrating that you are highly capable of individual and collaborative working. Regarding the presentation of your work, you must demonstrate your ability to select and deploy the appropriate media that is “fit for purpose. Additionally, you must exhibit your ability to: communicate with an exceptionally high level of professionalism; work professionally, autonomously and within a team; develop leadership skills; and produce/present work that is coherent, cogent and specifically addresses the challenges set for you or you have set yourself. Importantly, your work should be easily understood by specialists and non-specialists in the field.
MARKING CRITERIA AND STUDENT FEEDBACK
This section details the assessment criteria. The extent to which these are demonstrated by you determines your mark. The marks available for each criterion are shown. Lecturers will use the space provided to comment on the achievement of the task(s), including those areas in which you have performed well and areas that would benefit from development/improvement.
Common Assessment Criteria (applied to all parts of the project) Marks available Marks
1. Research-informed Literature
Extent of research and/or own reading, selection of credible sources, application of appropriate referencing conventions. 25%
A critical review of contemporary academic literature related to the concepts and frameworks of international business under investigation from a range of academic sources;
2. Knowledge and Understanding of Subject
Extent of knowledge and understanding of concepts and underlying principles associated with the discipline. 25%
The level of demonstration on the grasp of these concepts/theories or models and their use in relation to the assignment tasks;
Analysis, evaluation and synthesis; logic, argument and judgement; analytical reflection; organisation of ideas and evidence 20%
Critical analysis, evaluation and synthesis of the relevant concepts/frameworks of international business to the assignment tasks;
4. Practical Application and Deployment
Deployment of methods, materials, tools and techniques; application of concepts; formulation of innovative and creative solutions to solve problems. 20%
Critical application of the relevant tools and frameworks of international business to provide solutions to the assignment tasks;
5. Skills for Professional Practice
Attributes in professional practice: individual and collaborative working; deployment of appropriate media; presentation and organisation. 10%
Presentation and structure of the assignment including referencing of sources as per the Harvard style of referencing;