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MKT630 International Marketing Assignment 2 Solution Spring 2014

Topic: Comparative Analysis of different Modes of Entry in International Market

Case: Starbucks

In October 1998, Starbucks opened the first Starbucks retail store in New Zealand at Parnell Road, Auckland, which was operated and owned by Restaurant Brands New Zealand Ltd. Restaurant Brands New Zealand Ltd, which was listed on the New Zealand Stock Exchange in June 1997, was an authorized licensee of Starbucks. Besides that, it was the franchisee for the KFC and Pizza Hut brands in New Zealand with an annual turnover of NZ$216.8 million in 1997 (Business Wire 1998).

Restaurant Brands New Zealand Ltd. shared with Starbucks the enthusiasm of bringing the Starbucks experience to New Zealand. Therefore, Restaurant Brands New Zealand Ltd. tried to operate Starbucks stores while keeping the essence of Starbucks’ coffee culture. In this manner, New Zealand Starbucks stores offered much the same as in other international Starbucks stores: coffee beverages, more than 30 varieties of arabic coffee beans, and local pastries and desserts.

Restaurant Brands New Zealand Ltd. was delighted to help Starbucks enter New Zealand. Jim Collier, CEO of Restaurant Brands, commented: “We are excited about bringing the unique specialty coffee experience of Starbucks to New Zealanders with our first  Starbucks retail location. We hope to open up to 10 retail locations by the end of next year. Our commitment to people, quality coffee, exciting products and excellent customer service will provide New Zealanders with a unique café experience.” (

Starbucks regarded that its partnership with Restaurant Brands New Zealand Ltd. would provide it certain opportunities. This was especially because the competition intensity of the 1990 s in the coffee retail industry was low, as a result of the early stage and un-mature coffee industry in New Zealand. Howard Behar, president of Starbucks Coffee International said “Our successful partnership with Restaurant Brands provides us with a strategic opportunity to further enhance the recognition of Starbucks as the world’s leading purveyor of specialty coffee in the Asia Pacific region” (Business Wire 1998). Starbucks could also gain recognition of its good brand image by forming the licensing agreement with the well-known Restaurant Brands New Zealand Ltd. and entering into the new and un-mature New Zealand coffee market.

After years of having the licensing agreement with Restaurant Brands New Zealand Ltd., the information about Starbucks’ achievement can be found in 2006’s annual report. “Total sales for the year grew 14.4% on a comparative weekly basis to a high of $27.9 million for the year. Same store sales for the year grew by 2.6% and store earnings improved 6.3%” (Salmon 2006). Starbucks was also very successful in the following year as well. Starbucks is now recognized in New Zealand as the foremost international coffee brand. “Starbucks Coffee New Zealand has also been recognized internationally for our local marketing activity” (Salmon 2 006).

In 2001, Starbucks and Restaurant Brands New Zealand Ltd. reached an agreement to open 50 outlets. In 2006, Starbucks obtained the above negotiated number of coffee stores. Starbucks in New Zealand has been a shining star where there were no signs o f its light dimming since its beginnings (Salmon 2006). At the present, Starbucks is  continuously growing with steady store development. Starbucks plans to “double shoot” the original plan, with its current plan calling for 100 stores throughout New Zealan d (Mark 2006). Starbucks New Zealand General Manager Steve Montgomery said “We could possibly double that and hold our own.”

Question:

What analyzed factors were crucial to decide licensing instead of joint venture or wholly-owned -subsidiary for New Zealand? Identify and enlist all discussed external and internal factors in this case study. (10+10 = 20 Marks)

An organization must have the ability to examine and make changes based on internal and external environmental factors that affect its performance. The use of tools to analyze these environmental factors is the key to a successful organization.

There are two types of environmental factors: internal environmental factors and external environmental factors. Internal environmental factors are events that occur within an organization. Generally speaking, internal environmental factors are easier to control than external environmental factors. Some examples of internal environmental factors are as follows:

  • Management changes
  • Employee morale
  • Culture changes
  • Financial changes and/or issues

External environmental factors are events that take place outside of the organization and are harder to predict and control. External environmental factors can be more dangerous for an organization given the fact they are unpredictable, hard to prepare for, and often bewildering. Some examples of external environmental factors are noted below:

  • Changes to the economy
  • Threats from competition
  • Political factors
  • Government regulations
  • The industry itself

 

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