Starbucks Note to Instructors This combined note on Starbucks incorporates the video Starbucks: Building Grower Relationships with

the case Starbucks Corporation: Competing in a Global Market The intention is to allow students to e!plore the issues that are "ound in both "ormats in a combined e!ercise #t should be noted that additional issues are developed in the video and in the case$ and that both are worthwhile stand%alone e!ercises as well This note is directl& related to the case on Starbucks in Chapter '$ to the material on "air trade in Chapter ($ the discussion on strategic alliances and market entr& in Chapter )*$ the material on ethics in Chapter *$ the material on globali+ation in Chapter )$ and the discussion o" international strateg& in Chapter ), Summary Starbucks started as a single shop in Seattle in )-') Toda&$ the compan& has over ($... stores in more than /. countries 0nnual revenues e!ceed 1/ / billion Much o" Starbucks2 success can be attributed to 3oward Schult+$ the compan&2s "ormer C45 Schult+ envisioned a chain o" ca"es modeled a"ter the co""ee bars that are "ound across #tal& where people go to en6o& "ine co""ee and time with "riends Schult+ pursued his vision aggressivel& and "ocused on establishing a Starbucks presence in ever& neighborhood in 0merica 0 ke& element in Starbucks2 strateg& o" providing "ine co""ee to its customers is ensuring access to 7ualit& co""ee Starbucks sells onl& hard bean co""ee$ which is also known as arabica co""ee$ and bu&s about ) 8 percent o" the specialt& co""ee in the world 3ard bean co""ee is grown in '. tropical nations #n recent &ears$ the price o" co""ee has tumbled to 6ust 1. 8. per pound as the suppl& has e!ceeded demand Growers o" hard bean co""ee need to make at least 1. 9. to be pro"itable The challenge "or Starbucks was to develop a s&stem in which it would have access to hard bean co""ee$ in an environment where growers were struggling to survive Starbucks met this challenge b& developing relationships with suppliers whereb& the compan& agreed to pa& higher prices$ as much as 1) ,. a pound$ i" suppliers committed to the compan& Starbucks sees the situation as one o" mutual dependenc&:the suppliers need the compan& and the compan& needs the suppliers ;ith that philosoph& in mind$ the compan& built partnerships with man& small growers$ showed them how to grow the best 7ualit& co""ee$ and paid them more than an&one else The compan& sees these partnerships as a win%win situation The compan& ensures its suppl&$ while the grower is guaranteed a pro"it$ and the opportunit& to reinvest in its business$ with the potential "or more success the "ollowing &ear Starbucks began its international e!pansion in )--($ opening its "irst non%<orth 0merican store in Tok&o =or most o" its "oreign locations$ Starbucks has chosen to 6oin "orces with local partners The compan& relies on the partners2 knowledge o" the local market$ but ensures a consistent Starbucks e!perience b& training baristas in the > S $

and maintaining an identical co""ee menu in all o" its locations ;hile the compan& immediatel& saw success in its international e!pansion$ it also became a "avorite target o" anti%globali+ation critics ;hen the ;orld Trade 5rgani+ation held its meeting in Seattle in )---$ protesters destro&ed a local Starbucks store ?rotesters accuse multinationals o" human rights and environmental abuses Starbucks has attempted to silence the critics b& being a model citi+en Throughout the compan&2s growth$ Schult+ has maintained a stead"ast commitment to the compan&2s mission o" establishing Starbucks as the premier purve&or o" the "inest co""ee in the world while maintaining uncompromising principles as we grow The compan& sees its e""orts with its growers as e!amples o" its e!emplar& behavior #n addition to pa&ing its growers above the market rate and providing assistance with "arming$ the compan& also has provided various other t&pes o" support such as schools and health clinics to the communities where growers are located Starbucks has also made a commitment to environmental protection noting that the compan& has a vested interest in preserving a good co""ee growing environment #" the environment is damaged$ its source o" co""ee will also be threatened Starbucks2 pro% environmental stance has also led it to a partnership with Conservation #nternational Discussion Questions ) 3ow has Starbucks2 mission helped the compan& develop its business model@ Consider &our response both "rom the raw materials side o" the business$ and its international e!pansion strateg& , Starbucks has built its business b& partnering with others Re"lect on the compan&2s e""orts with its growers$ and wh& it was so important "or Starbucks to develop relationships with individual growers 3ow have its alliances with "irms helped the compan& establish its "oreign presence@ / 3ow would anti%globali+ation critics view the relationships Starbucks has built with its growers@ #n &our opinion$ are the suppliers hostage to Starbucks$ or have the growers bene"ited "rom the compan&2s actions@ * ;al%Mart is another ke& target "or critics o" globali+ation The compan& has been accused o" driving other "irms out o" business$ and pushing suppliers to provide their products at ra+or%thin margins Ao &ou see an& element o" ;al%Mart in Starbucks2 business model:either in terms o" its relationship with its suppliers or its growth strateg&@ ;h& or wh& not@ 8 Starbucks has made a concerted e""ort to give back to the communit&$ especiall& in the developing countries where its growers are located #n &our opinion$ with these actions help the compan& be seen in a better light b& protesters o" globali+ation@ To see the compan&2s current e!pansion plans and revenues$ visit Bwww starbucks comC #n particular$ students might want to e!plore Bhttp:DDwww starbucks comDaboutusDde"ault asp@
cookieE8=testF)C "or more in"ormation about the compan&2s corporate philosoph&$ and Bhttp:DDwww starbucks comDaboutusDcsrannualreport aspC "or details on the compan&2s social

responsibilit& Bhttp:DDwww starbucks comDaboutusD"armstories aspC provides some additional in"ormation about the compan&2s "armers$ and is also worth a visit