Starbucks Corporation:

Global Expansion & International Marketing

Katie Clemons, Adriana Gonzalez, Alexander Green, Ryan Larson, Jaret Ruscio
International Marketing
Professor M. Saghafi
October 8, 2012

BEGINNING AND DEVELOPMENT

The first Starbucks opened in Seattle, WA on March 30, 1971. The company was started
by Jerry Baldwin, Zev Siegl, and Gordon Bowker started the company after gaining motivation
from Peets Coffee. Initially, they purchased their coffee beans from Peets, and then went on to
buy directly from the growers. Siegl later sold his share of the company in 1980.
In 1982, Starbucks hired Howard Schultz to run their marketing and retail sales
departments. While on assignment in Milan, Schultz found inspiration from Italian coffeehouses.
He loved the culture and thought that it could succeed in America. He returned home to pitch the
idea to Baldwin. The idea was initially rejected, but was then taken on for a small trial basis. The
trial encouraged Schultz to form his own coffeehouse, Il Giornale. In 1988, Schultz and other Il
Giornale investors purchased Starbucks for $3.7 million. The pitch he made to his investors was
that he would significantly expand the business. Both companies were then consolidated and
renamed Starbucks Corporation. After the sale, Starbucks expanded outside Seattle into
Vancouver and Chicago. In 1988, Starbucks began to offer employees full health benefits.
In the early to mid-1990s, Starbucks began a significant domestic expansion. In 1991,
they entered into the mail-order catalogue business. They also began licensing to expand into
airports. Their first airport licensee was at Sea-Tac International Airport in Seattle. In 1994,
Starbucks began to put drive through windows at their stores, maximizing the convenience needs
of their customers. Next, they debuted the Frappuccino, to great success. They took that success
and turned it into a deal with PepsiCo: PepsiCo would bottle and distribute Starbucks
Frappuccinos across the country. In 1998, Starbucks signed distribution deals that allowed them
to expand into grocery stores nationwide.
In 1992, Starbucks went public with their initial public offering. By this time, they had
165 locations and were fairly well established. They raised $300 million at $17 a share.
Continuing the trend of treating their employees well, they made a two-for-one stock option
available. Investors saw this as an opportunity for unprecedented growth with ambitious
leadership. By this time, Starbucks had reached a point of success domestically that would allow
them to consider international expansion.
WHY EXPAND INTERNATIONALLY?
The first motivation for Starbucks global expansion was the desire to expand their brand.
Schultz sought to become a global brand and bring the Starbucks experience to the world.
There was a substantial market that Starbucks had not yet reached; in those markets, they had
potential to succeed. These included a strong, competitive European market and the SoutheastAsian market, where Starbucks could be first-mover. Being the first mover in any international
market offered huge advantages. Japan had seen its market for coffee grow and the younger
generation started seeing American culture as new and hip.1 Moving into Japan at the time of
entry was a critical part of success.
Another reason Starbucks went global was to expand their corporate social programs.2
Starbucks had initiated and sponsored a number of environmental activities.3 They have
instituted recycling initiatives, initiated a water reducing technology to be used in their stores,
and provided leftover coffee to be composted.4 Starbucks also insists on buying shade-grown
coffee beans, which are more environmentally friendly.5 Another social responsibility is shown
by how Starbucks deals with their growers.6 They are world-renowned for paying their growers
above market price for coffee beans.7 Starbucks takes part in a program in which they purchase
certified fair trade coffee.8 Since their global expansion, Starbucks has begun selling Ethos

Water in their stores.9 Some of the profits from these sales go toward providing children in third
world countries clean water.10 Finally, they have initiated a program called Rebuilding Together
New Orleans.11 This program helped rebuild communities in New Orleans following Hurricane
Katrina.12
A final motivation for Starbucks global push was their investors. Like most Wall Street
movers, when a company shows success, they are expected to continue to succeed and grow.
Starbucks was dominating the domestic coffee market and the most logical place for continued
growth was internationally. The world presented the opportunity to enter large markets that had
not been reached by a company of Starbucks size and capability, and entering the international
market allowed Starbucks the potential to increase its revenue.
At the time of its international expansion, Starbucks had already secured its dominant market
share in the US. Its existing US stores continued to grow rapidly, more then doubling every two
years, with 425 stores in 1994 to 1,006 stores in 1996.13 During this same time, total revenue
increased from $9,885 to $14,415 million.14 With these stable domestic gains, Starbucks not only
had the leverage to expand internationally, but also had the cash flow. This was crucial given
that if it was not successful internationally, Starbucks at least had the domestic market to fall
back on. Moving to an international market required both money and time, and with its stable
but saturated domestic platform, Starbucks next move was to enter into the international market.
HOW TO EXPAND INTERNATIONALLY (METHOD)
Having determined that global expansion was the next frontier for Starbucks, the
company needed to determine how to go about entering these new, global markets. In 1995,
Starbucks Coffee International was created to drive the expansion of the Starbucks experience
around the globe.15 Consisting of 12 experienced multinational and multi-lingual employees, this
subsidiarys primary responsibility was to help research the international markets and to ensure
success in its international expansion.16 Starbucks Coffee International (SCI) is responsible for
all Starbucks business development outside North America, including developing new
businesses, financing and planning stores, managing operations and logistics, merchandising, and
training and developing Starbucks international managers.17
SCI was also responsible for the local partnerships that have proven to be one of the
primary reasons Starbucks has been successful moving overseas.18 Starbucks sought out local
partners to use for much of its overseas expansion. Kathy Linderman, SVP of Operations for SCI
describes the companys approach as focusing on the partnership first, country second.19
Linderman explained:
We rely on the local connection to get everything up and working. The key is finding the
right local partners to negotiate local regulations and other issues. We look for partners
who share our values, culture, and goals about community development. We are
primarily interested in partners who can guide us through the process of starting up in a
foreign location.20
Starbucks ability and willingness to adapt has proved successful in helping Starbucks to enter the
international market and expanding their international brand.21 Prior to venturing into a new
international market, Starbucks had done extensive research for local partners.22 They look for
partners who share the same managing mentality as their corporate office and ones who are
already established so as to help build a connection in the local culture.23

The first Starbucks store outside of North America opened in 1996 in Tokyo, Japan
through a joint venture agreement with Sazaby Inc.24 As Schultz explained, [Our local partner]
SAZABYs understanding of the Japanese consumer and the insight they have about
merchandising and unique products [has been a big help].25 In the Asia Pacific marketplace,
other than China, licensing agreements were widely used in the early stages of expansion.26 From
1996 to 1999, licensing agreements with local partners were established in Singapore, the
Philippines, Thailand, New Zealand, Malaysia and South Korea.27 These agreements provided
Starbucks with the business know-how from a local perspective on how they needed to enter the
markets. Starbucks would eventually acquire 100 percent equity in the operations of Singapore
and Thailand, creating fully owned subsidiaries, and would increase its equity in South Korea
and Malaysia by partially acquiring the operations and creating joint ventures.28 The Australian
market was also entered with a joint-venture agreement in Sydney in 2000, and two years later it
would become a fully owned operation.29
Starbucks entered the greater China market in the late 1990s with a joint venture in
Taipei, Taiwan.30 More joint ventures followed in the early 2000s in Hong Kong, Shanghai and
Shenzhen.31 Starbucks would then acquire majority in Shanghai and Taiwan.32 However, the first
store in Mainland China opened through a licensing agreement in Beijing in 1999, but it would
later on become a joint venture operation as well.33
Just like in China, most of Europes entry strategy consisted of joint ventures, mainly
with two partners that had local expertise in the region: Sigla S.A. and the Marinopoulus
Group.34 Starbucks and Sigla S.A opened joint ventures in Spain and France in 2002 and 2004.35
Starbucks and the Marinopoulos Group established joint ventures in Greece, Switzerland,
Austria, and Cyprus during the same time frame.36 The German market was also entered with a
joint venture in 2002 but it would soon become fully owned and operated by Starbucks (in
2004).37 In the United Kingdom however, Starbucks acquired a chain of coffee shops in 1998:
the acquisition of Seattle Coffee Company provided Starbucks with more than 65 retail stores
and it paved the way for expansion in this region.38
Furthermore, the Middle Eastern market was penetrated with the creation of a large
licensing agreement with the M. H. Alshaya Company W.L.L, one of the leading international
franchise retailers in the region.39 In 1999, Starbucks opened its first stores in Kuwait and
Lebanon, and in 2000 it opened its first stores in the UAE, Qatar, Saudi Arabia, and Bahrain, all
through the licensing agreement with the Alshaya group.40 A few years later the same licensing
agreement opened doors for Starbucks in Oman, Turkey, Jordan, and even Russia.41
HOW TO EXPAND INTERNATIONALLY (MENTALITY)
When attempting to market internationally, companies tend to take on either a global or a
multinational mentality. A global mentality is one that involves a higher level of standardization
across product lines and features heavy integration across countries.42 Global companies are
driven by strong foreign competition and increased homogenization of world markets.43
Alternately, a multinational mentality focuses on marketing to different countries with local
adaptation of products and promotions.44 For multinational companies, production becomes more
localized and technology is relatively more primitive.45
Even when Starbucks first entered Japan, it brought with it a global mentality, aiming to
take its product far beyond the Japanese borders and into other parts of Asia, Europe, and
beyond. Fundamentally, Schultz intended the core Starbucks experience to be played out on a

global scale. While Starbucks early market expansion abroad may have suggested elements of
multinational operations, the mentality with which executive management approached
Starbucks international marketing and decision to expand into foreign markets illustrates a
global mentality.
The creation of Starbucks Coffee International also exhibits Starbucks global perspective
and through SCI, Starbucks has developed an international process for determining where to
expand.46 First, the company looks for extremely visible sites in well-trafficked areas and focus
on three major factors: demographics, branding potential, and financials.47 The company then
categorizes sites on a scale from A to D, with A sites being deemed signature sites that are
qualitatively superior to all other sites within the trade area and C or D sites often failing
to satisfy the criteria to develop into Starbucks locations.48 The international Market Business
Unit then sends in the site submittal package with quantitative and qualitative measures, such
as how the site meets Starbucks established criteria and the partners agreed-upon criteria.49
After this package is reviewed by several functional units, including operations, finance, and real
estate, within the International Group, Starbucks moves into the design phase, undertaken in
Seattle using information provided by the partner.50 Next, Starbucks negotiates the lease with the
landlord and initiates the construction the phase when the appropriate permits are obtained.51
Lastly, the store is given over to operations, the conclusion of a process that typically lasts
between 13 and 16 weeks from beginning to end.52
Along with this global mentality, Starbucks was required to cultivate an understanding of
what was needed in entering its first markets beyond North America. For instance, one critical
issue in entering the market in Tokyo was the difficulty acquiring real estate to establish its retail
store presence. Starbucks was required to have an understanding of the citys real estate market
and the ability to comprehend the cultural norms that would enable the company to negotiate
with property owners in key locations throughout Tokyo. Entering Japan, Starbucks had to pay
steep deposits to property owners, even despite the early 1990s decline of commercial rent
values prior to Starbucks 1996 penetration of the Japanese market.53 In Tokyo, Starbucks was
often asked by a property owner to help pay back deposit money to the business vacating the
retail space [they were] trying to rent.54 The Tokyo market also featured heated competition for
the prime retail space as many firms competed for a relatively limited collection of attractive
properties.55 Another situation that arose for Starbucks was the need to understand how certain
formal institutions differ in other parts of the world. In Japan, the term Caf Latt was a
registered trademark for a cold espresso drink sold by Moringa Milk Industry Company.56 Where
there was strong brand consciousness, Starbucks had to be vigilant in protecting its products in
order to avoid having to change its brand, and was required to comprehend the system of
Japanese intellectual property laws and the way in which the country operated its commercial
law. Given these hurdles, Starbucks success in Japan and beyond was never guaranteed.
HOW TO COMPETE INTERNATIONALLY
At the time that Starbucks began expanding into Europe, one of its biggest competitive
challenges was the plethora of Cafs, or local coffee shops that had been around since the
1600s. Because Europe is composed of many different countries with varying cultures and
histories, Starbucks was similarly facing unique competitive environments for each of these
regions. To start, the UK, along with other countries that lacked strong coffee drinking histories,
was heavily dependent on instant coffee. In the 1990s, instant coffee accounted for 90% of all
coffee consumption in the UK and Nestl was dominating the market with a 57.9% share in

1994.57 Nestl was already in 100 countries in 1991 and was continuing to grow during the same
time that Starbucks was expanding internationally (as evidenced by its 40% increase in sales
during that period), with its major markets in the U.S., France, Germany, Brazil, UK, Italy and
Japan.58 Starbucks also eliminated what would have been its major coffee shop competition in
the UK by purchasing Seattle Coffee Company, thus acquiring its 38 Starbucks-like store
locations and using them to help enter the market.
Compared to the historically non-coffee drinking UK, historically coffee-drinking
countries presented different challenges to Starbucks. In Italy for example, the epicenter of
European coffee culture, there were 200,000 local bars able to serve cheaper coffee and most of
which already served food.59 Unlike Starbucks, these local bars had advantages of a strong, local
heritage and didnt have to deal with the anti-American sentiment and pushback that Starbucks
would experience being perceived as an overpriced imitation of the real thing.60 Despite the
presence of long-standing coffee shops in some places like Vienna for example, these shops were
seen as old, so this posed an opportunity for Starbucks to position itself as hip and modern and
target the younger demographic.
As Starbucks began its first international conquest in Japan, it was facing a very different
competitive landscape. The traditional coffee culture in Japan at this time revolved around the
kissaten, or formal coffee houses with sit-down service and expensive coffee.61 Even though the
popularity of the kissaten was fading as the Japanese were becoming more westernized and
demanding convenience and higher quality coffee, a large, less-formal Japanese-owned specialty
coffee chain, Doutor Coffee Company, was already seen as the McDonalds of coffee houses in
Japan.62 In 1996, Doutor had 600 locations and was selling coffee for at least half the price of a
kissaten, the equivalent of $1.67 compared to $3.70-$5.56 U.S. dollars.63 However, the coffee
chain was not known for the milk-based products that Starbucks would push and the shops were
overcrowded with limited to no seating. In addition to Doutor leading the market, consumers
were also frequently purchasing cheap coffee (equivalent to $1 U.S. dollar) conveniently through
Japanese vending machines, and canned iced coffee and instant coffee was very popular as
well.64 Even in China, where coffee sales grew 90% from 1998-2003, Starbucks was facing an
inhospitable environment as the resistance to foreign brands was strong, not to mention that
instant coffee was widely accepted and Nestl eventually accounted for 46% of retail coffee sales
by 2002.65
In the mid-late 1990s, Singapore was a prime target for Starbucks and other competing
coffee chains due to its increased Westernization, growth potential, and culture of indulging in
food and luxury goods.66 However, there was no clear competitor when Starbucks entered the
picture. During this time period of Starbucks expansion, threats developed from gourmet coffee
outlets like the well known Coffee Connection and Coffee Club. Moreover, smaller companies
like Burkes Caf and Spinelli, who had the advantage of years of coffee industry experience in
Asia, were planning to strategically position themselves next to new Starbucks locations in order
to benefit from the overflow of traffic.67 Then, there was Suntec Dome Holdings, who was seen
as more of a restaurant chain than a coffee chain, but were less expensive and had strong brand
awareness already in Singapore, as well as sufficient investment support for the necessary capital
to be able to compete with Starbucks and its Southeast Asia expansion plans.68 Suntec Dome
Holdings was also planning to expand to Malaysia, Indonesia, Thailand, Hong Kong and China
in the near future.
Because Starbucks essentially drove the market and was the first truly global third
place and specialty coffee shop chain, its rapid international expansion also spurred its own

increased competition as companies either saw increasing demand and seized opportunities or
were forced on the defensive. According to industry experts, Starbucks arrival in the UK
stimulated market forcing national competitors to expand more rapidly to compete for prime
retail sites.69 In 2000, there was real estate available to accommodate 1,500 coffee bars in the
UK and less than half were being used.70 With convenience and strategic store location being so
central to Starbucks business model, Starbucks needed to acquire these sites before other large
coffee or retail chains beat them to it. Additionally, many stores and companies were taking to
Starbucks success and becoming imitators after the expansion began. For instance, many
copycat chains had sprung up in Rio de Janeiro, some imitating Starbucks to the last detail, and
the UK became overcrowded with specialty coffee market chains like Caf Nero, Coffee
Republic and Costa Coffee.71 Not to mention, the price points were lower at these rival chains.
According to BusinessWeek 2003, A Starbucks tall latte sells for $2.93, while the same drink
goes for $2.12 at the rival Caf Nero.72
HOW TO SUCCEED INTERNATIONALLY
In order to succeed internationally, Starbucks has needed to adapt to unique markets
while preserving a commitment to its core competencies, namely high quality, efficiency, and
good customer service. Further, the company has needed to understand how to tap into markets
where the product that they bring may be fundamentally opposed. Not unlike other large
American retail companies, Starbucks has experienced growing pains in bringing Americanstyle coffee sales to international marketplaces particularly in volatile political or economic
situations. As an example, because of anti-war protesters in Lebanon in the early 2000s,
Starbucks has to close its retail stores in Israel in the face of possible terrorist attacks.73 In
France, there was an initial lack of acceptance with Starbucks entering as a big U.S. coffee house
chain with standardized packaging and distribution.74 However, Starbucks has been able to target
younger consumers who have since joined American tourists in Paris to embrace such
favourites as Starbucks caramel coffee.75 In China, Starbucks has managed to penetrate a
market where consumers traditionally prefer tea by positioning itself as a status symbol.76
Starbucks succeeds as a coffee house that empower[s] Chinas emerging middle class to
publicly display their new lifestyles and status while keeping Starbucks beverages as affordable
luxuries.77
One strategy that Starbucks has employed in order to help it succeed abroad is the
introduction of its full range of products in phases, selling coffee and other beverages including
tea and juices through retail stores in 25 international countries. 78 In another 11 countries,
including the United Kingdom, Thailand, Canada, and Chile, Starbucks also sells whole bean
coffees, coffee-brewing equipment, and merchandise.79 Moreover, Starbucks employs a selective
introduction of specific products, like its ready-to-drink coffee beverages, to specific countries
like Japan, Taiwan, and Koreato maximize profits.80
Along with its creation of localized partnerships and its use of joint ventures with
companies abroad, Starbucks has also made use of domestic ties to expand outwards. Even with
its domestic market and its local partners secured, Starbucks needed to find help with logistics.
In 1994, Starbucks entered into a joint venture with Pepsi-Co to help with its distribution chains.
Pepsi-Co already had extensive international distribution chains throughout the world. Schultz
saw this as a major paradigm shift with the potential to cause Starbucks business to evolve in
heretofore unimaginable directions.81 With Pepsi-Co, Starbucks entered into the cold coffee
market. Japan at the time had an $8 million dollar4 a year market for ready-to-drink coffee based

beverages.82 This market provided crucial information that Starbucks used when deciding to
enter the Asian market. The fact that Japan did not have a dominant market leader meant that
timing was also crucial.
Starbucks success abroad has enabled the company to become one of the largest in the
world within the decade after its first journey outside of North America. In 2006, 10 years after
having entered the Japanese market, Starbucks revenues had reached around $8 billion, tripling
in the three years prior.83 In 2006 alone, international revenues jumped over 30% and Starbucks
revenues from international operations expanded from 9% to around 20% between 1997 and
2006, respectively.84 Assessing Starbucks first decade abroad, the second half was marked by
serious growth and expansion. Whereas in 2001, the company had 3,200 retail locations in
America and about 400 outlets in 17 other nations, the next five years saw Starbucks grow to
about 12,000 stores, almost 4,000 of which were in 36 countries outside the U.S.85
Starbucks success abroad has been driven by its profitable growth, which includes entry
into markets where Starbucks may take an initial or prolonged loss in order to establish the
opportunity for long-term market presence and sales. For example, while Starbucks
international operations ran losses in Japan until 2004, the largest market for the company
outside of the U.S. has since improved its profitability consistency from quarter to quarter and
maintains a solid presence in the country.86 In sum, Starbucks has experienced an excellent
overall success rate selling its products in international markets.87
CONCLUSION
Japan was chosen as the first location abroad because of its position as the third-largest
coffee importing country in the world, making it an essential part of Starbucks Internationals
expansion plan.88 Japan was the only country in the 20th century to go from an emerging
economy to advanced economy. The original 100 stores in Japan had double the amount of
volume as its counterpart in the U.S. stores.89 Japan has constantly been the best overseas market
barely being behind the U.S. globally and had become the worlds second largest economy.
Starbucks goal in entering Japan was to transport the experience and product embodied
within their brand into a new market where they believed that it could succeed, illustrating a
global mentality. Yuji Tsunoda, president of Starbucks Coffee Japan Limited in 1995, explained,
The Starbucks specialty coffee retail shop is a new lifestyle concept that we believe Japanese
consumers are ready to embrace.90 Starbucks marketing plan included opening 15 additional
outlets in and around Tokyo by the end of 1997 following its initial opening there in August
1996 in Tokyos Ginza shopping district, one of Tokyos trendiest neighborhoods.91
Starbucks needed to have a firm grasp of the market size when initiating their expansion
abroad. In Japan, they needed to be conscious of such pertinent statistics as population growth,
consumer spending, and the number of Japanese coffee drinkers. In Japan, the population growth
rate in 1995 was 0.25% annually, and then dipped slightly to 0.21% in 1996. In the short term,
this resulted in a total population increase of 268,184 people between 1995 (125,287,341 people)
and 1996 (125,555,525 people). Private consumer spending increased from 275,745,000 in
1995 to 282,121,000, representing an expanded capacity for private consumption. The Real
GDP Per Capita growth rate also increased between 1995 and 1996, from 1.7% and 2.5%, and
represented a growth from $21,234,610 to $21,699,660. In terms of Real GDP Per Capita and
Real GDP during this time, Japan ranked ninth and third, respectively, on a global scale.
Regarding coffee consumption, there were around 87 million Japanese coffee drinkers in 1996.92
While the number of consumers who did not drink coffee on a weekly basis decreased from 29%

to 16% from 1980 to 1994, those drinking 21 cups or more weekly increased from 9% to 15%,
showing a escalating demand for coffee in this market through the mid-1990s.93
By the mid-1990s when Starbucks entered Japan, coffee had supplanted green tea as
Japans most popular beverage.94 Coffee consumption had risen about six-fold between 1980 and
1996, while green tea consumption fell 8%.95 The coffee shop became a special role in the
Japanese culture because homes had become too crowded and were often too far from urban and
downtown centers.96 Starbucks has attempted to create a third place between home and work,
and this filled a need amidst the crowds and breakneck pace in Tokyo.97,98 In the opening week
of that first location outside North America, Schultz commented: I don't think we have any
location in North America that has the foot traffic we've seen outside this place, speaking to
both the size of the Japanese market and the demand for Starbucks product in Tokyo.99
According to Schultz, Starbucks chose Japan mainly because the company had its sights set on
Asia and sought to first penetrate the continents largest market for coffee.100 Tokyo, as a fastpaced, bustling metropolis, offered a high demand for coffee, especially the dark roasted, nondecaffeinated type that has remained Starbucks flagship.101 Though some consumers in
Starbucks domestic market had expressed displeasure with a burnt taste to Starbucks dark roast,
the Japanese market was ideal for the companys marquee product: decaffeinated coffee was
virtually unavailable in Tokyo.102 Japanese perceptions about caffeine also differed significantly
from those of many Americans in that the Japanese esteemed the stimulation of blood circulation
and did not associate caffeine with any significant health risks.103 Further, Japanese customs
officials prohibited chemically decaffeinated coffee.104 When reviewing Starbucks entry into the
Japanese market, the Los Angeles Times characterized the new market as a land of $5 cups of
coffee, chronically sleep-starved consumers and intense competition to supply their daily
caffeine fix.105 Moreover, the coffee retailing market in Japan at the time was more
competitive than ever.106
Having spent 25 years establishing itself as a giant in the American beverage industry,
Starbucks was capable of investing the required capital to set-up shop in Japan, one of the
worlds most competitive environments. In 1995, Starbucks projection was that it would invest
anywhere between $5 million and $10 million dollars in its Japanese venture during the 1996
fiscal year and planned to see a loss during 1996 from the operation.107
From a cultural standpoint, Starbucks took a risk with its expansion into Japan. For
instance, the blue-chip consulting firm it hired warned them that the no-smoking policy would
not survive in Japans heavy smoking culture and that no Japanese would ever lose face by
drinking from a cup in the street.108 Furthermore, as mentioned previously, the coffee culture
was kissaten-based and the Japanese had never been exposed to Italian-style coffee drinks.109
However, Starbucks paid more attention to the success of Doutor Coffee Company and the
emerging trend of Japanese consumers gravitating to a casual coffee shop atmosphere with
cheaper and more convenient coffee. The company saw a great opportunity to come in and offer
a middle ground between the historically popular formal kissaten culture and the hustle and
bustle of Doutor by offering a more relaxed atmosphere with ample seating, as well the option to
dine in or take out. Since Japan has been seen as having taste for sophisticated and refined
cuisine, Starbucks felt it would be ready to make the move to fine Italian-style coffee. Moreover,
the company also fits its interior dcor to the local architecture, which helped it in adapting to
Japanese culture.110
In 1996, Japan was a democratic monarchy where the Prime Minister of Japan was the
head of the government. As a democracy, the Japanese political system fostered economic

10

development and allowed for significant economic and commercial freedom. Economic and
military ties with the United States were also strong, particularly in the second half of the 90s,
which facilitated trade.
Furthermore, by the mid-1990s the Japanese legal environment had developed into a
modern hybrid that included elements of continental European systems (civil law from Germany
and France), Anglo-American systems (common law), and traditional Japanese and Chinese
systems.111 Consequently, much of the Japanese law that has had an effect on Starbucks since its
entry is comparable to modern American law, both in practice and in principle. For Starbucks as
a business, this affords comparable systems of property law, contract law, and intellectual
property law, each one vital in the decision to enter the Japanese market.
Japanese property law and contract law formed the basis for establishing retail locations
and allowing Starbucks to create legally enforceable business relationships with suppliers,
employees, and contractors in Japan. Japanese intellectual property law allowed Starbucks to
protect its brand and bring its trade secrets and know-how into the country without losing its
intellectual rights because of Japanese infringement.
Internally, Starbucks needed to assess its capabilities and the likelihood to succeed
abroad. Would the company be able to fund entries into new markets that would require the
company to operate at a loss initially? Was Starbucks product able to be received in new
markets? Did Starbucks have a mentality that would allow it to commit to excellence globally?
Affirmative responses to such questions as these illustrated that Starbucks was ready to look
outwards based on the state of its internal operations.
Externally, Starbucks needed to find a large market that Starbucks could afford to
penetrate, a market where consumers both wanted what Starbucks had to offer and could afford
to invest in its product. Because the Japanese market presented such an appealing and emerging
opportunity to Starbucks, it was intelligent for the company to enter the market when it did in
terms of both brand expansion and market size/characterization. While Japan was certainly
different from the United States, its political, legal, and economic environments created enough
similarity with the American system that Starbucks was able to transition into the Japanese
market.
Starbucks has formulated a recipe for success that continues to be driven by its global
expansion. Starbucks has managed to take the Starbucks experience all around the world by
consistent maintenance of its core competencies and a focus on its vision, ensuring that the
organizational culture is compatible with the kind of people that they want to attract and
retain.112 Quality, both in product and in experience, is imparted to Starbucks consumers
through the companys employees, one of its most valuable resources.113 Additionally,
Starbucks leadership is intently focused on a clear vision, bolstered by its excellent planning and
its dedication to an exceedingly deliberate positioning strategy.114 However, even with its great
track record, Starbucks still has room for growth as it currently reaches only a fraction of coffee
consumption worldwide. This inherently creates an ongoing opportunity for Starbucks as they
look towards the future.

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Endnotes:

1

Q&A with Starbucks Schultz.

Being a Responsible Company.
3
Starbucks. Being a Responsible Company. Accessed October 7, 2012. http://www.starbucks.com/responsibility
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10
Rob Walker, Big Gulp, New York Times Magazine, February 26, 2006, accessed October 7, 2012,
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11
Bohrer, Becky, Starbucks helps beautify New Orleans: More than 10,000 managers, workers, joining in on projects.
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Strickland, A.J. and Thompson Jr., Arthur A., Starbucks Corporation: Case Study.
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