Starbucks is one of the multinational corporations that have expanded their business activities into the global market to increase the market share.

Critical Issues in Globalization
Institution Affiliation

Starbucks is one of the multinational corporations that have expanded their business activities into the global market to increase the market share. The company was founded in 1971 in Seattle as an American coffee company. Since its inception, Starbucks has significantly widened its operations by opening stores in various countries. Currently, the company is a global retailer and a roster of coffee with approximately 16,000 stores in the United States. The company started as a single store for selling roasted coffee. Howard Schultz, the former CEO of the organization, triggered the owners of the company to structure the organization in a coffee house format (Chen & Mujtaba, 2007). Currently, Starbucks Corporation is presumed to be one of the largest coffee corporations, and it specializes in the production and provision of high-quality coffee (Watson et al, 2018). In the year 2019, Starbucks accounted for 31,256 stores in the global market.
Starbucks has made significant efforts to enter the global markets to establish its presences and create awareness of its existence.Notably; the organization has deployed the use of various international strategies to enter into foreign markets. The urge of the company to enter into the developing and emerging markets is coupled with market research and insights the organization gains thereafter (Boşcor & Tălpău, 2011).Market research is necessary for the company to have an in-depth understanding of the global markets and the nature of its operations. As well, market research has been of benefit to Starbucks organization since through research; the organization comprehends the political and legal environment of the foreign market.Starbucks has entered some of the international markets such as China, New Zealand, Spain and the United Kingdom. Entry into the Chinese market is one of the recent expansions that have been made by Starbucks Company (Watson et al, 2018). The evaluation of the entry modes used by the corporation in entering the particular foreign market is critical for comprehending the factors that an entity considers before selecting an international entry mode.
An entry mode can be defined as the potential of incepting a possibility through structuring management, organization’s products, social skills, technology and other resources to penetrate a global market (Boşcor & Tălpău, 2011).The primary goal of entry modes is to ascertain the policies and resources that would help in channeling global activities (Boşcor & Tălpău, 2011).Various factors are considered by an entity when selecting an entry mode into the foreign market. One of the factors taken into consideration during selection of the entry mode is the transaction costs that an organization would incur for using a given entry mode (Watson, Weaven, Perkins, Sardana, & Palmatier, 2018). Besides, firm-specific aspects such as ownership merits, assets of the firm and skills are crucial in determining the entry mode that should be deployed by an organization. According to Chen and Mujtaba (2007), an organization with high specificity in terms of an asset tends to select the highly controlled entry mode. Moreover, the legal, economic, political and cultural factors are considered when determining the mode of entry to the global market. The potential of the market, the intensity of competition and demand also impact on the style of entry that is chosen by an organization.
Ideally, an organization can choose one entry modes or a combination of two entry modes when making a decision to enter the foreign market. Licensing, joint ventures, exporting, franchising, turnkey projects, and the inception of the whole owned subsidiaries are among the entry modes that can be selected by an organization with the desire to enter the global market (Boşcor & Tălpău, 2011). The licensing entry mode entails two parties that agree with the involved parties anticipating to gain benefits. One of the drawbacks associated with the deployment of licensing entry mode is that the mode offers the organization less control unless the firm incepts a subsidiary.
In regard to the franchising mode of entry, an organization enters the foreign market by remitting royalty fees and obtains the business by agreeing with the franchiser. One of the merits associated with franchising is that the firm is not obliged to pay the development costs and risks linked to entry into global markets. However; the franchisee is required to follow the strict guidelines and regulations. For the joint venture entry mode, two or more organizations form an alliance to maximize their competitive advantages in the market and attain a good position (Myers & Eroglu, 1995). In the joint venture, both parties hold the same percentage of shares in the investment. The two parties that form a joint venture should include a foreign entity and a local entity. One of the benefits associated with the deployment as a joint venture as an entry mode is that the involved parties share both costs and attained benefits (Huo & Ouyang, 2018). The implementation of a joint venture as a mode of entry into the international market provides the chance to the interested parties to deal with economic and political issues in the most effective way.
For the whole owned subsidiaries, the organization claims 100 per cent ownership in the global market. An entity can establish itself as an entire owned subsidiary either through acquisition or a Greenfield venture. An organization enters a foreign market as a Greenfield venture by establishing a new store in the international market. Concerning acquisition, a form enters an overseas market by acquiring an organization in the particular global market. One of the merits associated with the embracement of whole owned subsidiaries as entry modes into the foreign market is that the firm has more control since it has 100 per cent ownership (Huo & Ouyang, 2018). The company which enters a market as a whole owned subsidiary has the potential of structuring its strategic plan and manages the subsidiaries according to its know-how. Even though a firm gains all the profits by using the mentioned mode of entry, it is still clear that the firm bears all the losses and risks associated with the operations.
Notably, in entering into foreign markets, Starbucks organization considers the costs linked to the type of entry mode and strategies for expanding its operations. In the selection of its international strategy, Starbucks Company considers the demands of customers in each market, culture and requirements the market. As noted earlier, Starbucks conducts intensive research before its entrance into the foreign exchange. Before the selection of the international partners, they evaluate the commitment and value of the local partners to create awareness on the existence of Starbucks organization (Rask, 2014).Besides, Starbucks Corporation considers the human resources of the entity, financial performance and the involvement of the top stakeholders of the organization. Furthermore, the company evaluates the corporate culture of its partners to depict whether there is culture alignment. The organization also considers the experience of the partner in good and beverage operations, experience in dealing with premium and licensed brands, knowledge of the partner concerning real estate aspects and the potential of the partner to leverage the structure level of the company.
The entry into the China market by the Starbucks organization involved the use of three entry modes. The joint venture, licensing agreement, and whole owned subsidiaries are the three entry modes that the Starbucks used in entering the Chinese market. One of the aspects that triggered the Starbucks to enter the Chinese market as a joint venture is that the company focused on the concept of growth strategy. As well, Starbucks was in demand of a local partner to help it in establishing its presence in the Chinese market. Through the selection of a local partner, Starbucks organization got to understand the local regulations that are applicable in the Chinese market. The partnerships with a local partner provide the chance with Starbucks Company to have a good negotiation and collaboration with local authorities (Rask, 2014). Through partnering with a local partner in China, Starbucks has gained the chance of obtaining the needed requirements and sanctions for engaging in business activities in the foreign market. Since local partners are well informed of the Chinese market, they provide an opportunity for Starbucks to comprehend the localization strategies that they should embrace to satisfy the demands of the customers. As well, the joint venture is an effective entry mode for Starbucks organization since it is an alternative for Starbucks to reduce its operating expenses and decrease its risks in the foreign market.
Regarding the deployment of a joint venture as an entry mode for Starbucks into China market, it is clear that Starbucks has embraced a unique strategy which is likely to drive the sales of Starbucks products in the Chinese market. In 2017, the Starbucks organization acquired the East China joint venture. The company declared its agreement to acquire fifty per cent of its shares from the East China joint venture. The decision underscores the company’s bet that China will emerge as one of the best sale drivers for Starbucks’ products. According to Starbucks Corporation, its full acquisition of the joint venture will provide a chance to the organization to demonstrate full commitment into the Chinese market (Rask, 2014). As well, the commitment and full acquisition demonstrate Starbuck’s confidence in the local governance and leadership team in Chinese. As well, East China is a strategic location for Starbucks organization since it contains several stores that depict the presence of Starbucks in the region. Full acquisition of the venture has provided the chance for Starbucks Company to fully leverage its business activities to offer elevated coffee and enhance career training for its employees in China. According to Starbucks, its joint venture with East China has provided a chance for the organization to intensify its growth following the operational excellence and remarkable leadership.
Since its identification of the Chinese market, Starbucks Corporation has embarked on the formation of joint ventures with the primary aim of expanding its operations. The success of the organization in the Chinese market is attributed to its entry mode strategies and partnering strategies. A close evaluation of China’s future depicts that the culture of the northern part of the country is different from the culture exhibited by individuals who inhabit the eastern region. To address the ascertained complexity, Starbucks entered into a joint venture with three partners in China (Shtal Tetiana, Kozub Viktoriia & Nakhmetov Arzu ,2018).
In the northern part of China, the Starbucks Company entered into a joint venture with Beijing Mei Da coffee. Starbucks organization has also entered into a joint venture with Beijing Shanghai Uni-President Starbucks Coffee Ltd in China to expand its operations. When the mentioned joint venture is strictly evaluated, it is found out that the venture carries out operation in East China and Shanghai provinces. During the formation of the enterprise, Starbucks entity only owned 5 percent of the shares in the venture. However, in the year 2003; the organization increased its dividend by fifty per cent after boosting its remittances to the enterprise (Simmons, 2007). Another joint venture entered by Starbucks Company in its entry into China market is the Maxim’s Caterers Ltd which is the organization’s joint venture in the southern part of China, Macau and Hong Kong(Sort & Turcan, 2019). In the given joint venture Starbucks entity has assumed one hundred percent of the total equity, a fact that has given the entity fully ownership and control of the venture.
Apart from the deployment of a joint venture as the entry mode into the Chinese market by Starbucks Company, the organization has also embraced the use of license agreement as a mode of entry into the Chinese market. As explained earlier, a licensed agreement mode of entry is used to denote a method of entry whereby two parties enter into an agreement with both parties anticipating to gain benefits. In the embracement of the licensing entry mode, one of the involved parties offers intangible property rights to another party for a particular period of time (Sort & Turcan, 2019). The primary rationale for deploying the licensed agreement mode of entry by the Starbucks organization is that the mode of entry is associated with low developmental risks and costs. Through entering the market by the deployment of license agreements, Starbucks reduced the costs of capital as they were catered by the local partners (Simmons, 2007). Besides, the license agreement mode of entry provided a chance for the company to avoid the incurrence of administrative expenses and establish its presence in the Chinese market.
The use of the licensing agreements to enter the China market by the Starbucks organization can be depicted from the entry made by the company into China in the year 2000. In the year 2000, the Starbucks Company entered into a license agreement with one of the partners in Shanghai in the year 2002. Starbucks organization entered into a license agreement with one of the partners to expand its operations into the Hong Kong market.
A license agreement by Starbucks Company is also demonstrated in the license agreement between Starbucks organization and the Coffee Concepts Thailand which is also a venture with Maxims Caterers Limited and Thai partner to license its business fully in China. The primary rationale of entering in the given business venture is to help in accelerating the operations of the company in China and build a new store as a significant segment in the Chinese market (Simmons, 2007). In the given venture, the venture is accorded exclusive rights to fully perform Starbuck’s operations in Thailand and accelerate improvement or growth of the market in Thailand. Under the newly incepted venture, Starbucks aims to leverage its expertise and understanding of the company’s culture. Hubei, Hainan, Guangdong and Shaanxi are among the mainland markets which are covered by the given venture.
Besides, the embracement of the license agreement entry mode by Starbucks is justified since through the way the company gained the potential of attracting high-quality staff who would deliver a high customer experience. If the company failed to recruit highly qualified staff to perform its operations in the China market, then it would risk its success and would result in the closure of the business (Sort & Turcan, 2019). As such, the entry mode provided the chance for Starbucks Company to curtail capital costs and administrative expenses (Simmons, 2007). As illustrated earlier, a firm considers various factors before the selection of an entry mode. By examining the costs of entering a new market, Starbucks gained the potential of declining costs associated with entry into the foreign exchange.
The embracement of the whole owned subsidiaries as a mode of entry for Starbucks organization is demonstrated in the case of Starbucks Coffee International, Inc, which is a subsidiary owned by the Starbucks organization. The subsidiary is highly committed to providing high-quality products and services for the company (Simmons, 2007). The subsidiary offers services in such a way that it yields economic, social and environmental factors for the communities in which it is located. Through gaining entry as a subsidiary, the organization has attained fu control of its operation in the global market.
In light of the discussion, it is apparent to denote that Starbucks has been successful in embracing its entry modes and strategies into the Chinese market. The utilization of the joint venture, licensing agreement and whole owned subsidiaries as entry modes into the Chinese market has aided Starbucks to establish its presence in the global market. Ideally; the organization has demonstrated an in-depth consideration of essential factors in selecting entry modes a fact that has ultimately contributed to the success of Starbucks in the Chinese market.

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