Starbucks Goes Middle East

1 Introduction

Starbucks goes Middle East

Since there has been a worldwide trend for coffeehouses in recent times, this assignment will focus on Starbucks and examine its approach to enter international markets. The main focus will be on the market entering strategy in Middle East. For this reason Turkey will be examined in the ways of how the international human resources management principles of Starbucks are influenced by entering this market.

2 Company Image

Starbucks is one of the best-known and fastest growing companies in the world. Originally the roots of the Starbucks Corporation are in Seattle, Washington USA. After being 30 years on the market it expanded up to 9,000 Starbucks outlets worldwide. The positive commitment to every community is helping to bridge cultural gaps and deflect anti-Americans sentiment. Within every nation Starbucks tries to attract partners who are engaged in serving community and protecting environment.

Starbucks is organized into two business units that correspond to the company's operating segments: North American and International. In 1995, Starbucks Coffee International, a wholly owned subsidiary of Starbucks Coffee Company, was set up to build Starbucks' businesses outside North America, including opening company - owned, licensed, and joint-venture-based retail stores worldwide.

Starbucks buys; roasts and sells whole bean specialty coffees and coffee drinks through an international chain of retail outlets. From its beginnings as a seller of packaged, premium specialty coffees, Starbucks has evolved into a firm known for its coffeehouses, where people can purchase beverages and food items as well as packaged whole bean and ground coffee. Starbucks is credited with changing the way Americans-and people around the world -view and consume coffee, and its success has attracted global attention.

It is the first coffeehouse which overcame the stereotype image and managed to obtain sociability as a second name. Attracting customers with their Starbucks-Experience, they canvass with excellent coffee, interesting people, extraordinary music and a distinctive atmosphere.

Giving the six principles of their mission top priority, Starbucks has achieved to maintain these standards throughout the years and also ensured an incredible growth within the US and on a global base (T1:"Starbucks mission statement").

Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.

The following six guiding principles will help us measure the appropriateness of our decisions:

Provide a great work environment and treat each other with respect and dignity.

Embrace diversity as an essential component in the way we do business.

Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee.

Develop enthusiastically satisfied customers all of the time.

Contribute positively to our communities and our environment.

Recognize that profitability is essential to our future success.

Source: Online on 29-04-06http://www.starbucks.com/aboutus/environment.asp

3 Internationalisation and market-entry strategies

As already mentioned Starbucks belongs to the fastest growing companies worldwide. They are almost doubling the stores opened each year (T2).

Table 2- Online on 29-04-06 http://depts.washington.edu/bacisb/gbc/2003%20Presentations/Taiwan.pdf

By using a number of various market-entry strategies based on partnerships, Starbucks expands all over the world. After establishing a stable business in North America, they also opened stores overseas. While doing so, they intended to run either "own coffeehouses directly or through a local subsidiary or [...] enter into a business agreement with a company or a group of individuals" , in other words joint ventures or licenses.

3.1 Joint Venture

Within a joint venture a new identity is created in which both partners take active roles in formulating strategy and making decisions. If the decision making process is decentralized the managers is given a sufficient autonomy to run the joint venture successfully. Moreover joint ventures can be classified into "Specialised joint ventures", whereas each partner brings a specific competency and "Shared value-added joint ventures", in which both partners have got the same function. Joint ventures are particularly common in high-technology industries such as the USA.

3.2 License

The second form of the new market method is licensing, which is less risky compared to a joint venture. Considering the fact of risk, licensing would be more appropriate for entering the market in Middle East. Instead of creating a new company and contributing to it with their specific competence, they basically sell their ideas and product-lines. Therefore, licensing does not require much investment capital, since the foreign entrant makes little or no resource commitment. The benefits for the licensor are the licensee's local knowledge and distribution channels, which would otherwise be difficult and time consuming to be developed and maintained. Over the years Starbucks has founded a number of licenses (T3).

Table 3- International Business, Stuart Wall and Bronwen Rees, page 314

"[A]s [their] coffee becomes more widely available, the inherent contradictions between increasing sales and preserving brand integrity have intensified." Starbucks decides on the right strategic partner through an extensive screening process. First of all, the quality of the partner has to be assed, in terms of goodwill, reputation