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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.

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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