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8/13/2019 Guideline Starbucks
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Starbucks FDI Case:
20 substantive points; 5 points given free.
QUESTION 1: Initially Starbucks expanded internationally by licensing its format to foreign operators.
It soon became disenchanted with this strategy. Why? (5 points)
ANSWER 1: ward 5 points if the student mentions all of the following!
"With licensing# Starbucks had limited control of their expansion rate.
"$ey to Starbuck%s strategy is &uick expansion to build consumer habits while Starbuck%s is trendy.
"'heir licensees did not hae the capability to expand as rapidly as Starbucks wanted.
ward points if the student mentions all of the aboe except *expansion rate+
ward , points if the student mentions all of the aboe except *expansion rate+ and *building consumer
habits while Starbuck%s is still trendy!
ward - points if the student only mentions *lack of control oer the licensee+ as the main issue
QUESTION 2:Why do you think Starbucks has now elected to expand internationally primarily through
local oint entures# to whom it licenses its format# as opposed to a pure licensing strategy? (, points)
ANSWER 2: ward , points if the student mentions both!
"Starbucks has a larger measure of control
" and still can access local knowledge through the /0 partner.
ward 1 point if the student mentions only one or the other
QUESTION 3:(a) What are the adantages of a oint enture entry mode for Starbucks oer entering
through wholly owned subsidiaries? (- points) (b) 2n occasion though# Starbucks has chosen a wholly
owned subsidiary to control its foreign expansion (e.g. in 3ritain and 'hailand). Why? ( points)
ANSWER 3(a):ward - points if the student mentions both of the following!
" /0 gies Starbucks access to local knowledge and local markets#
" Starbucks can still exercise a large measure of control# een though it may not be to the same degree as
a wholly owned subsidiary
ward 1 point if the student mentions only one or the other of the aboe.
ANSWER 3(b): ward points if the student mentions both of the following!
Starbucks pursued wholly owned subsidiaries!
" Where control is a critical issue or /0 partners are not aailable
" or appropriate operations are up for sale# Starbucks pursued wholly owned subsidiaries.
8/13/2019 Guideline Starbucks
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(In 3ritain# Starbucks purchased an operation# for example. In 'hailand# they purchased a /0 operation
that could not produce on expansion.)
ward - points if the student mentions only one of the aboe
QUESTION 4! Which theory of 4I best explains the international expansion strategy adopted byStarbucks? (6 points)
ANSWER 4: ward 6 points if the student mentions all of the following!
"7orrect theory! 8arket imperfections theory (internali9ation) best explains Starbucks approach.
":xplain why this theory is correct! Starbucks wants to maintain product &uality and brand identity (the
Starbucks experience) across a wide range of cultures# taste preferences# work habits and ways of doing
business.
ward points if the student identifies the correct theory and mentions only *product &uality+ or *brand
identity+# but not both
ward - points if the student only correctly identifies the theory but does not offer to explain why he;she
chose that theory
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