Starbucks Global Strategy Essay, Research Paper

De Wit and Meyer (1998) refer to market tendency towards homogeneous variety and tighter international linkages as globalization. The need for global strategy is outlined by the fact that companies are subject to global forces and consumer demands. As a consequence, firms are faced with a challenge of modifying their existent strategies to gain and sustain their competitive advantage in a rapidly changing environment. A well-designed global strategy can help a firm to gain a competitive advantage, that as identified by Sumantra Ghoshal of INSEAD can arise from Efficiency, Strategy, Risk, Learning and Reputation (Appendix1). Therefore, to create a successful global strategy, managers first must understand the nature of global industries and the dynamics of global competition.

I would like to proceed with my analyses of the global market place, with examination the young but already well recognized brand world wide – Starbucks. In my research I will explore on changes in the product, operations, and strategies at Starbucks influenced by the changes in the global marketplace. Due to word limitation on the essay, please refer to Appendixes for more detailed information.

Starbucks Corporation

“There is untapped potential to grow our company internationally,” Schultz said.

Headquarters:

Seattle, Washington

www.starbucks.com

Ownership:

Starbucks is publicly traded — shares are widely held

150 million shares have been authorized, of which 59.6% are on the market.

History:

Howard Schultz, 42, is the founder of the Company and has been chairman of the board and chief executive officer since its start in 1987. The Company originated with eleven Seattle stores and less than one hundred employees. Since them the company has grown to a half billion-dollar company serving millions of cups of coffee per week in one thousand stores throughout the country, and in 17 countries internationally. Schultz believes his company will succeed well into the twenty-first century. He states, “One of the things that you can’t measure on a balance sheet or on a financial statement is the soul of Starbucks.”

The Company holds approximately 39 federal trademark registrations in the United States. They have approximately 44 additional applications pending in the U.S. The Company currently owns one patent in the U.S. for its coffee on tap system and has several patent applications pending.

Starbucks prides itself on being a “good citizen” locally and in the various coffee producing countries. They make significant contributions to local charities that focus on children, the environment, the homeless, and AIDS research/support.

Operations structure:

The Company is organized into a number of business units.

 The Company ’s North American retail business sells coffee beverages, whole bean coffees and related hardware and equipment through Company-operated retail stores in the United States and Canada.

 The Company ’s international retail business consists of entities that own and operate retail stores abroad. These two retail segments are managed by different presidents within the Company and are measured and evaluated separately by senior management.

 The Company operates through several other business units, each of which is managed and evaluated

independently. These other business units are organized around the strategic relationships that govern the

distribution of products to the customer. These relationships include retail store licensing agreements,

grocery channel licensing agreements, wholesale accounts, joint ventures and direct-to-consume

marketing channels. Revenues from these segments include both sales to unaffiliated customers and

inter-segment sales, which due to annual report are accounted for on a basis consistent with sales to unaffiliated customers.

Starbucks and its subsidiaries (”Starbucks” or the “Company”) include Starbucks Corporation and its wholly owned subsidiaries:

 The Coffee Connection, Inc. (”The Coffee Connection”),

 Starbucks New Venture Company (”Starbucks New Venture”),

 Starbucks Coffee International, Inc. (”SBI”),

 Starbucks Holding Company.

 (Appendix H)

Product:

Starbucks Corporation and its subsidiaries buy and roast high quality whole coffee beans. To insure high quality of the product, Starbucks built three roasting plants of his own, where highly trained and experienced personnel monitors roasting of beans (Appendix C). Quality standards are so high that entire batch is thrown away after testing if qualifications differ from acceptable standard.

Later beans are sold in primarily company-operated stores along with fresh, rich-brewed coffee, Italian-style espresso beverages, decaffeinated beverages, cold blended beverages, variety of pastries and confections, coffee-related accessories and equipment, and a line of premium teas. Retail sales brake down is roughly 61 % coffee beverages, 15% whole-bean coffees, 16% food items, and 8% coffee-related products and equipment. Product mix varies with the size and location.

Starbucks sees its success sustainability in constant development of its products to bring new experiences and ideas to loyal customers of their cozy “coffee-empire,” (Appendix B). High quality of a product that will appeal to coffee lovers around the world is Stabucks’s main consideration.

Marketing and Product Design:

A branding strategy must work well with marketing strategy.

Starbucks sells a lifestyle, to customers and employees alike (Appendix E). It has learned from the experience of Pepsi and others to link its brand to new trends. Therefore Starbucks’ success could be attributed to objective to meet their customers needs and innovate new product offerings.

Selecting a marketing strategy based on a product mix is a key to Starbucks success. Coffee is the second most traded commodity in the world. As a result, Starbucks is forced to adopt a high product differentiation strategy. Product differentiation defined by branding a product and marketing it effectively to target audience. This strategy differentiates company from the competition, making its product unique, targeting quality, service, and price conscious customer.

Starbucks’ distinct branding strategy involves creating a coffeehouse as a place inspiring customers to socialize. As they managed to set up design teams to constantly innovate and create better product and store designs (Appendix D). However, expansion is also beginning to conflict with brand image. The danger with an extensive product mix is a weaker brand image. Strong competition is always a threat to the company’s target market and thus even with a branding strategy, coffee is an easy substitute if other companies get serious with their own promotion. Starbucks cannot exclude from others their ability to walk into any store, study its layout, atmosphere, and product range, and copy the coffee bar concept. Thus the highest value-added element of the Starbucks formula is not excludable. It is also hard to charge a premium for coffee if customers can pay less for the same amount of caffeine and comfort just down the street. Similarly, to compete on costs Starbucks needs a flexible workforce with low wages and every danger of staff being poorly motivated, it is hard for such firms to cultivate customer-friendliness. As a result, Starbucks’ has long emphasized human-resource policies (Appendix E). So in order to distinguish themselves from other coffee makers, Starbucks must continue to transmit a strong corporate identity with their customers. After all, customers that come to their retail stores are the primary source of Stabucks’s revenue.

Starbucks is brand name sensitive, and is seeking to develop partnerships with companies who share their same commitment to quality. Kraft is a partner to Starbucks marketing strategy. Kraft handles distribution, marketing, advertising, and promotion for Starbucks. They distribute products to the grocery, warehouse, and other outlets.

Starbucks retail stores are usually located in high-traffic locations and high visibility areas. To reduce risk of failure and economic fluctuations properties for the stores are leased. Brand name recognition of Starbucks therefore comes from people being frequently exposed to it. As a result, Starbucks carefully selects their market and store locations.

Competition:

Industry ranking as of April 1, 1999, particularly having coffee products:

Company Name

STARBUCKS CORP:

FARMER BROS CO:

CHOCK FULL O NUTS CORP:

GREEN MTN COFFEE INC:

COFFEE PEOPLE INC:

BROTHERS GOURMET COFFEES INC Market Capital($000)

$5,335,000

$395,000

$64,000

$21,000

$21,000

$2,000

The companies above mainly roast, pack and distribute coffee. Their core material: green coffee beans. Farmer Brothers sells to hotels, restaurants, and fast food outlets. Chock Full O Nuts is the fourth largest in this industry. It presents instant and specialty coffees such as LaTouraine and Cain’s. Green Mountain’s profile mentioned the two distribution channels it is focused on – wholesale and direct mail. Like Starbucks, Green Mountain considers growth with brand recognition and availability of its products. With 246 franchises so far, Coffee People is the second largest distributor of specialty coffee. Coffee People recently ventured with Gloria Jean’s Inc. None of the latter five companies is able to match the market capital achieved by Starbucks.

Starbucks management identifies competitors in restaurants, shops, street carts and supermarkets. Where own machines are being set up to serve espresso, cappuccino, Latt?, and other coffee drinks to their customers. They are also faced with other mail order suppliers and wholesalers.

Product Supply: Coffee Prices, Availability, and General Risk Conditions

Global supply literature suggests that even though global supply chain allows for cost reduction, it is much more complex than domestic one, and calls for tight controls. Since coffee prices are unstable due to weather, export regulations, economic, and political conditions in the growing countries of Colombia, Sumatra, Yemen, Antigua, Indonesia, Guatemala, New Guinea, Costa Rica, Sulawesi, Papua New Guinea, Kenya, Ethiopia, Java; it is not surprising that Starbucks is concerned with the supply and prices of this commodity.

Starbucks enters into fixed-price purchase commitments and/or purchased futures contracts to secure the company from danger of price fluctuations and supply shortages. As of October 1, 2000, the Company had approximately $84 million in fixed-price purchase commitments which, together with existing inventory, is expected to provide an adequate supply of green coffee for the majority of fiscal 2001.

Vice president for coffee, travels regularly to coffee-producing countries to built relationships with growers and exporters, and find products that would meet Starbucks’ standards of quality and flavour. The Company believes that based on relationships established with its suppliers in the past, the risk of non-delivery on such purchase commitments is remote. Speciality items and coffee accessories however are purchased from local sources and manufacturers.

Starbucks partnerships and joint ventures with suppliers described bellow are another way for the company to retain supplier sustainability and involvement. Therefore according de Wit and Meyer (1998) co-operative strategy benefits Starbucks in reducing risk of failure (Pepsi) and non-delivery, cutting costs, preserving quality, creating innovation (Frappuccino bottled), abandoning associated wastes (referenced in “Joint ventures, Partnerships” paragraphs bellow). To ensure that partners share in Starbucks success, eligible partners are provided with stock option grants under the Bean Stock Plan for the 10th consecutive year.

The ability to find optimal store locations with lower rents, costs of operations and qualifying personnel also contributes to their future. Starbucks management believes they have good relations with their employees and the risk of non-delivery of coffee is low.

Visionary leadership, internal and external cooperation, learning, process management, continuous improvement, customer satisfaction, and employee fulfillment are attributes to almost smooth operations in Starbucks supply chain.

Joint Ventures:

There are five common objectives in a joint venture: market entry, risk/reward sharing, technology sharing and joint product development, and conforming to government regulations. Other benefits include political connections and distribution channel access that may depend on relationships.

 PepsiCo and Starbucks entered into a joint venture in 1994. Efforts were combined towards creation of new cold coffee drinks in bottles and/or cans and their mass distribution through Pepsi channels. Joint venture with multinational giant Pepsi was to open great international exposure for Starbucks, and shift business into more mainstream markets. While first product, Mazagran, resulted in failure. Bottled version of Frappuccino tested in 1996, succeeded. Leading to the partnership investment into three bottling facilities to make Frappuccino in September 1996.

 In October 1995 Starbucks partnered with Dreyer’s Grand Ice Cream to supply coffee extract for a new line of coffee ice cream made and distributed by Dreyer’s under the Starbucks brand.

 The new line, featuring six flavors: Dark Roast Espresso Swirl, JavaChip, Vanilla and others, they appeared in supermarket in April 1996, and became top-seller by July.

 In 1997, two new low-fat flavors were added and were well accepted in the marketplace. Additional new ice cream products were planned for 1998.

 In 1995, Starbucks worked with Seattle’s Redhook Ale Brewery to create Double Black Stout, a stout beer with a shot of Starbucks coffee extract in it.

 In October 1995, SBI signed an agreement with SAZABY Inc., a Japanese retailer and restaurateur, to form a joint venture, which will primarily develop Starbucks retails stores in Japan.

 In August 1996, SBI signed an agreement with Bonvests Holdings Limited to open retail stores in Singapore.

 United Airlines has joined the ranks of Delta and Horizon Airlines in serving coffee on board. Starbucks set up strict quality control on 500-plus United planes with varying equipment, and Starbucks became the coffee supplier to the 20 million passengers flying United each year.

 According to Financial Times (may1st, 2001), Compaq Computer Corp. and Starbucks Coffee Co. announced a five-year, $100 million deal in which Compaq will equip the coffee shop chain to give its customers wireless Internet access while they sip their Caf? Latte.

 Starbucks has also collaborated with Capitol Records Inc., on two Starbucks jazz CDs, available in Starbucks stores.

Joint venture income was $20.3 million for fiscal 2000,compared to $3.2 million for fiscal 1999.

The increase was primarily due to the crossover from losses to profitability of Starbucks Coffee Japan

Limited as a result of an increase in scale, and due to the improved profitability of the North American business.

Licensed Stores and Speciality Sales: Growth of Distribution Channels

The company does not offer franchising opportunities. Though in recent years Starbucks had begun entering into a limited number of licensing agreements for store locations in areas where the company was not able to locate their shops due to limits in capability. There is much value in transferring knowledge and best practices between parts of a global firm. To protect Starbucks quality brand information is carefully shared with licensees through training, at the same time the Company assures tight strategic control.

Therefore, to maintain its mission of making Starbucks into a global brand, the company has taken an aggressive approach into various national/international distribution channels, like: fashion retailers, airports, airlines, hotels, and book stores described below:

 Marriott Host International entered an agreement to operate Starbucks retail stores in local/foreign airport locations.

 Hyatt agreement to distribute products internationally.

 Agreement with ARAMARK Food and Services to put Starbucks stores on university campuses and other locations operated by ARAMARK

As a result of licensing arrangements Starbucks received royalty fees, and supplied coffee for resale. Tight control over quality of operations was established to protect own brand image.

Specialty sales groups provided Starbucks coffee products to restaurants, airlines, hotels, universities, hospitals, business offices, country clubs, and select retailers.

 Horizon Airlines, a regional carrier based in Seattle

 Nordstrom’s received the contract for sale of Starbucks coffee only in Nordstrom stores

 Barnes & Noble

 Selected Wells Fargo Bank locations in California.

 Chapters, a Toronto book retailer with sites throughout Canada.

 Costco warehouse club stores.

 A 1997 agreement with U.S. Office Products gave Starbucks the opportunity to provide its coffee to workers in 1.5 million business offices.

 In 2000 Albertson ’s, Inc., Safeway Inc., Dayton Hudson Corporation (Super Target stores) and Marriott International, Inc, signed licensing agreements.

 Alliance with The New York Time. The Times will use its advertising resources to promote the Starbucks brand, Starbucks will promote The Times.

Mail order sales:

Starbucks mail order catalogs offered coffee, candies and pastries, and select coffee-making equipment and accessories, distributed six times a year. Starbucks targeted direct-response marketing effort to expand retail into new markets and reinforce brand recognition in existing markets

International expansion:

Since Starbucks Coffee’s opening in 1971 in Pike Place Market, the company has grown significantly both within the United States and abroad. The company’s ultimate goal is to establish Starbucks, as the world’s most respected and recognized coffee brand. Starbucks plans to achieve this objective through its continued rapid expansion of retail operations, growth of new products and other operations, as well as the development of new distribution channels. Interbrand Corporation, the world ’s leading brand consultancy, recently ranked Starbucks as one of the top 75 global brands.

Much of its growth abroad can be attributed to Starbucks Coffee International, a wholly owned subsidiary of Seattle-based Starbucks Coffee Co. This part of the company has entered new partnerships with prime international companies that have allowed it to expand and open retail stores in strategic locations.

Foreign currency exchange risk was accounted for when the Company has entered into forward foreign exchange contracts to hedge foreign currency risk in fiscal 2001.

Starbucks targeted international expansion through licensing a reputable and capable local company in selected countries to develop and operate the stores.

 Joint Ventures in stores outside US, SCI to overlook international expansion and build the Starbucks brand name globally via licensees.

 By the end of 2000, Starbucks had more than 3,500 locations worldwide, serving more than 12 million customers per week in 17 countries (annual report, 2001).

 Plan to have 650 locations through out Europe by the end of 2003.

 Please view details of International expansion in Appendix F, (b).

The Future:

Renee Mauborgne, (FT, 11/10/99) in support of Shultz’s vision claims that the Starbucks story is about value innovation. Offering buyers fundamentally new and superior value in traditional businesses through innovative ideas and knowledge.

The Company ’s retail goal is to become the leading retailer and brand of coffee in each of its target markets by selling the finest quality coffee and related products and by providing superior customer service, thereby building a high degree of customer loyalty. Starbucks strategy is directed towards increase of Starbucks’s market share in existing markets and new markets worldwide to support the Starbucks brand through the introduction of new products and the development of new distribution channels.

Starbucks strategic expansion till now was achieved via its joint ventures with Pepsi and Dreyer’s, its move to sell coffee in supermarkets, the possibility of marketing fruit-juice drinks and candy under the Starbucks label, and world wide web presence represented an ongoing drive on Schultz’s part to continually reinvent the way Starbucks did business.

Starbucks’ expansion carries inherent risks. Many brands cannot do both retail and packaged goods. Too many extensions can erode a brand’s identity. Wall Streeters say Starbucks should move onto supermarket shelves under a dual-brand strategy, but Mr. Schultz says that will not happen because the brand might suffer.

In addition to fluctuating coffee prices, management believes that in the future, the Company’s results of operations and earnings could be significantly impacted by other factors such as increased competition within the specialty coffee industry, the Company’s ability to find optimal store locations at favorable lease rates, the increased costs associated with opening and operating retail stores in new markets, the Company’s continued ability to hire, train and retain qualified personnel, and the Company’s ability to obtain adequate capital to finance its planned expansion. Potential financial problems are described in Appendix G.

Conclusion:

In relation to Starbucks’s strategy for world presence, Starbucks’s annual report states: “Going forward, we will pursue only those opportunities that we feel will complement our core operations.”

Therefore, Starbucks’s global sustainability and strategic development lays in ability to successfully reconfigure their value chain in a way that improves value for money and their competitive position. Synergy was achieved through continuous market development, product development and backward integration strategies.

Starbucks continues to expand globally, seeks new ventures within the industry and hopes to remain competitive.

Appendices:

Appendix A:

Sumantra Ghoshal of INSEAD proposed a framework comprising three categories of strategic objectives and three sources of advantage that can be used to achieve them. Assembling these into a matrix results in the following framework:

Strategic Objectives Sources of Competitive Advantage

National Differences Scale Economies Scope Economies

Efficiency in Operations Exploit factor cost differences Scale in each activity Sharing investments and costs

Flexibility Market or policy-induced changes Balancing scale with strategic & operational risks Portfolio diversification

Innovation and Learning Societal differences in management and organization Experience – cost reduction and innovation Shared learning across activities

Appendix B:

Products:

 In 1997, the company introduced its Starbucks Barista home espresso machine.

 Power Frappuccino, packed with protein, carbohydrates, and vitamins—was tested in several markets during 1997

 Fruit-juice beverages in 1997.

 Chai Tea Latt?, a combination of black tea, exotic spices, honey, and milk appeared in stores in 1998.

 Jazz and blues CDs, with Starbucks background music, appeared for sale on customers’ request and proved to be a significant addition to the product line.

 Starbucks selling coffee in supermarkets 1998

 In 1999, Starbucks opened up its new prototype Internet cafй called Circadia, providing 18 Internet connections, laptop rentals, a computer kiosk and a 10-person conference room equipped with a large-screen computer of presentations.

In 2000, Tazo ?tea and Hear Music ™

Appendix C:

Roasting Plants:

By 1998, Starbucks had three roasting plants:

 The company’s first plant was built in 1989 to supply the company’s mail-order needs for the next 10 years.

 In 1993, a 305,000-square-foot plant was opened in Kent, Washington, output mainly catered to stores west of the Mississippi.

In 1994, the company began construction of an $11 million roasting facility in York, Pennsylvania, that could be expanded to 1 million square feet to supply stores east of the Mississippi.

Appendix D:

Real Estate, Store Design, Store Planning, and Construction:

Starting in 1991 in-house team of architects and designers were set up to create a store development process to ensure that each store would convey the right image and character, as majority of the sites were rented and differed in shape and size.

Fireplaces, leather chairs, newspapers, couches, and lots of character added a cozy living room like feel to Starbucks. Each store also reflected the personality of the community and the neighborhood. As majority of sites were positioned in busy down town locations, Starbucks emphasized atmosphere of ambience that offered customers an escape from their busy lives into a peaceful place to relax, chat, meet friends or read a news paper.

In 1995 Starbucks decided to reduce average store-opening costs by centralizing the buying process, developing standard, often fixed contracts with suppliers, favoring contractors with good cost-control practices.

Standard minimum amount of equipment needed by each store was outlined by operations, orders were placed in volumes accordingly at 20-30% discounts, and delivered to stores just in time from vendors or Starbucks warehouses.

Store layouts and costs involved were developed electronically. All these measures allowed for cost cutting and reduced store development time from 24 to 18 weeks.

Schultz and Olsen took Starbucks ambiance concept even further, when confronted their project team with a “stores of the future project” in 1995. Their vision of the store was of: “an authentic coffee experience that conveyed the artistry of espresso making, a place to think and imagine, a spot where people could gather and talk over a great cup of coffee, a comforting refuge that provided a sense of community, a third place for people to congregate beyond work or the home, a place that welcomed people and rewarded them for coming, and a layout that could accommodate both fast service and quiet moments.”

Extensive research was undertaken by a team of developers into the history of coffee, from coffee growing to coffee-making techniques. Based on already evolved corporate identity of Starbucks, four new store designs were created, each identified with one of the stages of coffee making. In 1996, Starbucks opened new stores based on one of the four templates: growing, roasting, brewing, and aroma—each distinguish by own color combinations, and lighting scheme.

New structure eased a problem of expansive store customization, as now the company could vary the materials and details to adapt to different store sizes and settings: downtown buildings, college campuses, shopping areas.

Two mini-store formats and movable stations in line with design concept described above were introduced the same year, to cater to office-building lobbies, and other stores.

According to …this project has accomplished: better store designs, lowered store opening costs, and expanded sales as new formats allowed for new positioning strategies.

Appendix E:

HR:

Starbucks’s annual report states, that People are crucial to ensuring that the company delivers the Starbucks Experience every day. Starbucks is attempting to plant its values in the company culture to give employees a sense of meaning to their work even if it is just pouring a cup of coffee. Starbucks’s ongoing commitment to providing a great work environment has also had many positive impacts on partners and customers. To ensure that partners share in Starbucks success, they are provided stock option grants to eligible partners under the Bean Stock Plan for the 10th consecutive year, 401K option is also available.

Starbucks’ has a strong management team, hiring people with extensive experience in managing and expanding retail chains.

 The four key executives during the company’s formative years—Howard Schultz, Dave Olsen, Howard Behar, and Orin Smith—contributed the most to defining and shaping the company’s values, principles, and culture.

 Shultz added people experience growing a retail chain, capable of adding valuable perspectives to the board of directors.

Store personnel is put through intense 24 hour training session before entering the store. Classes include: coffee history, drink preparation, coffee knowledge (four hours), customer service (four hours), and retail skills, plus a four-hour workshop called “Brewing the Perfect Cup.”

When stores are open in a new markets, recruiting efforts are undertaken 10 weeks prior to opening, experienced teams of managers and sales were sent to location to assist training on one-to one basis.

Appendix F:

a) The Original Store Expansion Strategy:

In 1992 and 1993 Starbucks developed a three-year geographic expansion strategy that targeted areas with favourable demographic profiles, that could be serviced and supported by the company’s operations infrastructure. A large city was selected to serve as a focal point for each targeted region. Starbucks professional teams were strategically positioned at these focal points to supervise opening of another 20 stores in each city in the first two years. Following focal point success additional stores were opened in smaller surrounding areas. Zone Vice presidents with extensive experience in chain-store retailing were in charge of expansion process locally.

In 1995, new stores generated an average of $700,000 in revenue in their first year, far more than the average of $427,000 in 1990. Success could be assigned partially to growing reputation of the brand, and successful identification of top retailing sites for stores.

b) Details of International Expansion:

 In 1998, SCI had 12 retail stores in Tokyo (Japan is the world’s third-largest importer of coffee);

 7 stores in Hawaii through partnership with The Mac Naughton Group, a unit of Hawaii-based investors. Because Hawaii is an integral part of the Pacific, it fit into Starbucks’ strategy to expand internationally.

 6 stores in Singapore, and 1 in the Philippines.

 Taiwan and Korea Thailand, and New Zealand stores in 1998. The company and its licensees had plans to open as many as 40 stores in the Pacific Rim by the end of September 1998, with 200 Taiwan potential. The possibility of locating stores in Europe and Latin America was being explored.

 257 international locations were opened by the end of 2000, including: 63 locations in UK, also in Lebanon, the United Arab Emirates, Qatar, Hong Kong, Shanghai, and Australia.

 Retail location in Kuwait through an agreement with M.H. Alshaya Co. W.L.L. Kuwait. Kuwait will serve as the gateway into the rest of the Middle East countries to include Saudi Arabia, Oman, Bahrain, United Arab Emirates, Qatar and Lebanon. Kuwait represents Starbucks’ eleventh international market to open retail locations.

 First store in Beijing, China opened in early 1999 with plans to open 500 more stores in Asia by 2003. China represents Starbucks ninth Pacific Rim market to open retail locations.

Appendix G:

Potential Financial problems:

Starbucks annual report states that, in connection with various bank loans entered into by Starbucks Coffee Japan Limited, the Company has guaranteed $25.4 million of the outstanding debt in the event of default by Starbucks Coffee Japan Limited. In the normal course of business, the Company has various legal claims and other contingent matters outstanding. Management believes that any ultimate liability arising from these actions would not have a material adverse effect on the Company ’s results of operations or financial condition as of and for the fiscal year ended October 1,2000. Despite these potential problems, Starbucks remains excited about future growth and continues to be hopeful about the future.

Appendix H:

Operational Structure:

In 1994, Starbucks acquired all of the capital stock of The Coffee Connection, a roaster/retailer of specialty coffee. Starbucks New Venture was created in fiscal 1994 to develop coffee-based beverages in partnership with the Pepsi-Cola Company. In October 1995, SBI was created to pursue development of Starbucks stores internationally, and Starbucks Holding Company was created to enter into a joint venture with Dreyer’s Grand Ice Cream, Inc. to develop and distribute Starbucks premium coffee ice creams.

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http://www.ecommercetimes.com/perl/story/503.html

27. Finance

Title: New dynamics of strategy in the knowledge economy, by W. Chan Kim-Ren?e Mauborgne

The Financial Times, FT Mastering Series ,

Date of Document: 11/10/99

http://www.insead.fr/~mauborgn/FT111099.htm

28. Joint Venture, Globalization

Title: Strategy: Global Strategy

Date of Document: 2001

http://www.quick.mba.com