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Published byAugustus Hadcock Modified over 10 years ago
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International Business Strategy: Starbucks Corporation
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“We’re not in the coffee business serving people.
We’re in the people business serving coffee." Howard Behar, President of Starbucks International
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STARBUCKS Expansion into São Paulo, Brazil
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Introduction and Company Overview
Starbucks Products and Ventures Why Expand into Brazil? Starbucks’ Expansion Philosophy Mode of Entry Finances Conclusion
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Introduction and Company Overview
Starbucks Products and Ventures Why Expand into Brazil? Starbucks’ Expansion Philosophy Mode of Entry Finances Conclusion
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Introduction Starbucks strives to become the most recognized and respected coffee retailer in the world Expansion of international operations is key to furthering Starbucks’ position in the coffee industry
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Company Overview Starbucks History: Founded 1971 in Seattle, WA
Named after first mate in Moby Dick Early on roasted and sold coffee beans 1980s began selling coffee by the cup
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Company Overview Starbucks History:
Howard Schultz bought Starbucks Schultz introduced the “Starbucks Experience” locations nationwide International expansion began
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Company Overview Starbucks Today: $6.4 billion in revenue
Serving over 35 million patrons More than 7,500 shops in the US Operating 3,000 plus shops in 36 foreign countries
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Introduction and Company Overview
Starbucks Products and Ventures Why Expand into Brazil? Starbucks’ Expansion Philosophy Mode of Entry Finances Conclusion
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Starbucks Products STARBUCKS stores offer regular and decaffeinated coffee beverages, teas, pastries, muffins, and other breakfast foods
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Starbucks Ventures EthosTM Water Starbucks DuettoTM Visa
Starbucks Frappuccino® Starbucks ice cream
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Introduction and Company Overview
Starbucks Products and Ventures Why Expand into Brazil? Starbucks’ Expansion Philosophy Mode of Entry Finances Conclusion
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Why Expand into Brazil? Strong coffee culture
Favorable political climate Large Economy Other American corporations’ success
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Strong Coffee Culture Coffee has been harvested since the early 1700’s
“Café Mana” – Morning Coffee Largest producer of coffee beans; twice as much as the 2nd runner up - Vietnam Soon to be the 2nd largest consumer – behind the U.S.
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Favorable Political Climate
Democratically elected President Strong diplomatic ties with the U.S. Current president’s focuses on economic expansion and encourages foreign investment
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Large Economy Largest economy in South America
GDP approximately 620 billion and growing 5th most populated country in the world Over 186 million people
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American Corporate Success in Brazil
Coca Cola – 1940’s McDonald’s – 1960’s Most American Corporations outside U.S.
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Introduction and Company Overview
Starbucks Products and Ventures Why Expand into Brazil? Starbucks’ Expansion Philosophy Mode of Entry Finances Conclusion
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Starbucks’ Expansion Strategy
Wheel and Hub expansion method São Paulo will be the hub Spoke out into the rest of Brazil and beyond
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Introduction and Company Overview
Starbucks Products and Ventures Why Expand into Brazil? Starbucks’ Expansion Philosophy Mode of Entry Finances Conclusion
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Mode of Entry Foreign Direct Investments Licenses Joint Ventures
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Mode of Entry Joint Venturing with
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Mode of Entry World’s second largest retailer
7,000 stores internationally Creator of hypermarket 99 hypermarkets in Brazil
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Mode of Entry Carrefour has: Strong brand name recognition
Readily available resources Massive distribution network
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Mode of Entry Targeted Hypermarket locations in São Paulo Downtown district 2. Main business district 3. Cultural District 4. Shopping District Focus on working professionals
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Introduction and Company Overview
Starbucks Products and Ventures Why Expand into Brazil? Starbucks’ Expansion Philosophy Mode of Entry Finances Conclusion
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Finances Carrefour 50% <> Starbucks 50% $350,000 loans
Retrofit coffee shop in hypermarket Equipment and beginning inventories $100,000 infusion to sustain early operations
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Finances Critical Assumptions:
Sustain growth of 20% per year - 1st five years Brazilian inflation hovers around 6-7% Capital obtained at 10% for 7 years Equipment life at least 5 years
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Finances Coffee Shop Setup DESCRIPTION COST Notes
Building retrofit labor $89,000 Approx 40 man-weeks labor Materials $91,000 Includes walls, bathrooms, plumbing, and counter construction Furniture and displays $58,000 Tables, chairs, couches, displays cabinets, etc. Equipment $76,000 Coffee/espresso makers, utensils, pastry warmers, ovens, etc Setup inventory $36,000 Coffees, filters, supplies, pastries, etc Operating capital $100,000 50% investor, 50% Starbucks TOTAL $450,000
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Finances Break-Even Analysis Break-even Point = $18,200
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Finances FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 REVENUE
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 REVENUE Beverage Sales $ 184,900 $ 235,193 $ 299,165 $ 380,538 $ 484,045 Foodservice and other $ ,094 $ ,112 $ ,950 $ ,832 $ ,043 TOTAL SALES $ 195,994 $ 249,304 $ 317,115 $ 403,370 $ 513,087 Cost of Goods Sold $ ,960 $ ,381 $ ,093 $ ,718 $ ,049 Gross Margin $ 165,034 $ 209,923 $ 267,022 $ 339,652 $ 432,038 Operating Expenses $ 254,160 $ 242,384 $ 253,021 $ 264,509 $ 276,386 Income before Taxes $ (89,126) $ (32,461) $ ,001 $ ,143 $ 155,652 Income Taxes (38%) $ $ ,320 $ ,554 $ ,148 Net Earnings $ 8,681 $ ,589 $ 96,504
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Finances Project Losses in Years 1 and 2 Break-even in Year 3
Profit Margin Projections 14% in Year 4 22% by Year 5
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Introduction and Company Overview
Starbucks Products and Ventures Why Expand into Brazil? Starbucks’ Expansion Philosophy Mode of Entry Finances Conclusion
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Conclusion Most respected coffee retailer in the world
International expansion is key to success Brazil is the next market to enter Partner with Carrefour Projected strong profitability by Year 5
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Questions?
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