Starbucks Joint Venture in Asia: Risk and Benefit Analysis

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Identification and Evaluation of risks and benefits in joint
venturing to entre in Asian Market- A study of Starbucks
Corporation
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Executive Summary
The project aimed to find the benefits and challenges during expansion in Asian market
through joint venture. The analysis has been done by considering business operation of
Starbucks. Some articles on international market expansion were reviewed to develop
research questions. The study identified the tools suitable for a quantitative research. It
demonstrated that how Starbucks could get benefits in Asian market in terms of profitability
and productivity.
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Table of Contents
Task 2: Research Report............................................................................................................4
Reference List..........................................................................................................................21
Appendix..................................................................................................................................23
Project Logbook.......................................................................................................................24
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Task 2: Research Report
Chapter 1: Introduction
Background of the study
A joint venture business forms, when two or more individuals or business segments agree to
pool resources and capabilities for meeting a target. Two businesses get involved in a new
segment by combining assets and skills (Baldwin and Yan, 2012). The study is proposing
Starbucks to enter into the international market of Asia. The firm may encounter some
challenges while initiating business in the Asian market. The foreign market has some
opportunities for Starbucks. Therefore, the proposed project will understand the preference
and desires of Asian consumers, and recommend Starbucks to fulfil market needs through
various strategies. Starbucks is an American based Coffee Company, which was established
in 1971. It has branches over 30,000 locations as of 2019. The firm represents “second wave
coffee” that distinguishes it from other coffee house chains in terms of customer experience,
quality and popular darkly roasted coffee (Starbucks.com, 2019).
Nature of the problem
Previously, researchers have studied on a joint venture along with its challenges and benefits.
The existing theories are known to the current study. It is easy to identify the variables and
formulate research objectives accordingly.
Aim
The study aims to identify and analyse the risks and benefits gained by Starbucks while
entering in the Asian market through joint venturing. The primary objectives of this study
include the following.
 To understand the overall concept of joint venturing for business expansion in the
Asian market along with its applicability for Starbucks
 To determine the benefits for the expansion by using marketing strategies using
conventional marketing and social media platform
 To improve the global market share as compared to other players in the industry
 To expand the existing product line as per the demands and preferences of Asian
consumers
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 To assess the risks associated with business expansion in the Asian market
Rationale
Starbucks Corporation has maintained its reputation and brand image within the coffee shop
industry. It aims to enter into the Asian market through joint venturing. The proposed market
entry strategy and Asian market can pose risks to Starbucks. The firm tends to face sales
issues in this market, as the consumption of coffee and tea is more as compared to the US.
Starbuck will always have a threat of competitors and new entrants. The price of coffee
offered by Starbuck is high. Consumers from the low-income group may not consume its
beverage falling under high price ranges. Additionally, the coffee house has to focus on the
cultural aspects of consumers. Consumers may not adopt the American culture easily for
which the firm implement a unique market strategy that shall adjust the challenges posed
from culture and diversity. Employees hired for operating the segments in the Asian market
may be incapable or unskilled (Kumar et al., 2012). Starbucks may require arranging training
for employees to utilise available human resources. Therefore, the research is useful for
Starbucks to identify challenges that it may face in the Asian market.
The research joint venturing and its applicability in the Asian market are important for an
academic context. The challenges are benefits involved with joint venturing can be identified
and used in further researches as a literature review. The researcher will able to gather broad
knowledge on the concept of the joint venture.
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Chapter 2: Literature Review
Introduction
The section of literature review has been done in order to meet with the requirements of the
project and gather authentic information about the topic of the research. There are certain
benefits and drawbacks that are associated with the entrance of companies into the
international market. It is imperative to understand these risks and challenges in order to
penetrate a completely new market. This will assist the management of companies to have a
clear idea about the ways in which these challenges can be mitigated and their business will
be conducted in a flawless manner
Benefits of entering into International Market
While entering into the international market, the company has to make sure that they are
gaining benefits from their global expansion. The growth of a certain company into the
international market allows them to make sure that they are being able to develop their
customer base (Wu et al., 2016). This in turn helps them to ensure that they are earning
enough profit in the market so that it helps them to develop their business process in a better
manner. Besides this, it is necessary for the organisation to understand that they are able to
tackle the amount of economic downturn in the market. This helps them to flourish their
business and they are able to meet with the market requirements. During their process of
international expansion, companies have to focus on understanding the needs and demands of
the customers in the market. This assists them to design their services and products in an
authentic manner (Coeurderoy and Murray, 2014).
There is high amount of competitive advantage that prevails in the global market. The
process of international expansion allows the organisation to know and understand the
strategies that are used by their competitors. This helps them to develop adequate strategies
for overcoming the challenges of their competitors in the market. The amount of revenue
generation in the market is increased. This can be done by meeting with the demands and
expectations of their customers and making sure that they are meeting with their level of
satisfaction (Sleuwaegen and Onkelinx, 2014). The management of the company is able to
manage their cash flow in the right manner and it can be used to enhance their business. The
higher authority of the organisation is able to ensure that they are able to overcome the risks
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in the right manner. As a result, it helps them to enhance their business in the market and they
are able to meet with the objectives of the organisation.
Risks of entering into International Market
The companies have to face certain challenges and risks when they enter into the
international market. It is highly important for the organisation to make sure that they are
conducting a proper analysis of the risks so that it does not harm their business in a negative
manner. One of the greatest risks that the companies face is related to political turmoil in the
market. Due to instable political condition, companies are unable to conduct their business in
the right manner. As a result, they have to keep changing their business functioning and it
becomes difficult for the employees to meet with the requirements of the workplace. It is
inevitable for the organisation to understand that the rates of changes in the currency might
have an impact on their business. As a result, it is necessary for them to stay prepared for the
change in the currency rates (Laufs and Schwens, 2014). During times of inflation, the
company should be able to implement adequate strategies, as it will help them to deal with
inflation.
One of the major challenges that are faced by organisations look to expand internationally is
that they are faced with a great deal of competition in the market. Due to the extensive level
of competition, the organisations are unable to conduct their business. This creates hindrance
for the organisation, as they are unable to meet with the expectations and demands of the
customers. Besides this, the organisations suffer due to the difference in culture of the
employees. The employees find it difficult to communicate with one another and this creates
clash of their opinion. As a result, the overall productivity of the workplace decreases and
they are unable to generate profit in the market (Liesch et al., 2014). Besides this, there are
times, when the employees are unable to make use of technologies in their workplace and the
management has to withstand the worst of their failure.
Ways to overcome the challenges of market expansion
The management of companies should be able to make sure that they are developing adequate
strategies for dealing with the different challenges and issues that they are facing. With the
help of this, the companies will be able to meet with the requirements of the workplace and
they will be able to overcome the challenges easily (Paul et al., 2017). The higher authorities
should ensure that they are providing their employees with adequate training so that they can
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make use of the advanced technologies in the workplace and it will help to enhance the
quality of their products in the market. The managers and leaders should focus on ensuring
that the employees and the different departments are working in collaboration with one
another. This will help them to meet with the organisational requirements. They have to
ensure that they have a clear idea about the changes in political scenario that they will face
during operation. This will allow them to take all necessary measures so that changes can be
tackled in the right manner. It has been noted that the organisation faces an increase in their
operational cost (Tofail et al., 2018). As a result, they should focus on distributing their
finances in the right manner amongst the different departments so that it can be used
according to the organisational requirements.
Literature Gap
During the course of the research, the researcher has made use of different journals and
articles for conducting secondary research. However, there are certain areas that could not be
researched due to lack of time and finance. These areas create the gap in literature and the
gap can be explored for developing the study in the future. It is important for the researcher to
understand the areas that have not been explored, as it will help them to gain a better
understanding of the research topic (Hickerson et al., 2016). Moreover, the gap in literature
allows the researcher to know about the areas that could help in the development of the
project in an authentic manner.
Summary
The research has been done for understanding the positive and negative impacts of entering
into a global market. This allows the learners to understand about the benefits and challenges
that are faced by companies while entering into the international market. Besides this, it
discusses the ways in which these challenges could be overcome.
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Chapter 3: Methodology
Introduction
The research methodology is the collection of methodologies and their significance in
particular research. It provides a background of research techniques, ethics followed during
the research and the limitations.
Research Philosophy
Positivism and interpretivism are common tools used for research philosophy. The research
on business expansion through joint venturing in the Asian market has chosen Positivism
Philosophy. Philosophy allows only factual knowledge that can be obtained through personal
observation. The studies are based on quantifiable research. They are independent of
individual interest. The research structured through positivism philosophy aims to explain
and analyse (Kumar, 2019). The valid source of information improves the study and findings.
Research Approach
Inductive and deductive are foremost approaches used in the research process. The
philosophy taken for the current study on joint venture is Deductive Approach. The study has
derived the hypothesis relying upon existing concepts. The philosophy ensures that findings
are not drawn based on general circumstances. The preferable situation for adopting a
deductive approach is that when the researcher has less time to vast study. The challenges and
merits of joint venturing in the Asian market can be more. The researcher was able to identify
the major factor by going through existing concepts on joint venturing. The observation
obtained from the application of the deductive approach is much correct and aligned with the
topic (Flick, 2015).
Research Design
Descriptive and exploratory are commonly applied research design tools used in the research
process (Quinlan et al., 2019). The design considered for study on market expansion in the
Asian market is Descriptive. The design aims to investigate research questions to derive a
conclusive solution. With the revelation of new ideas and insights, the researcher can change
the direction of the research through the implementation of the descriptive design. It is easy
to deal with new problems through descriptive design on which no such effective researches
have been done. The study has used a large number of samples to investigate the research
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problem. Thus, the descriptive design supports data collection by gathering data and
presenting them systematically.
Data collection process
Two sorts of data collection techniques including primary and secondary are used in
researches. The primary research method has two sub-categories such as qualitative and
quantitative. Researchers use a structured interview, and survey to conduct qualitative and
quantitative research. The research method used for study on joint venturing is Quantitative
data collection. The study has been performed on a current topic. Secondary research method
cannot provide adequate and relevant findings on the challenges that Starbucks may face in
the Asian market. Experimentation and objective testing support the hypothesis due to the
involvement of statistical analysis (Walliman, 2017). Each step in quantitative data analysis is
standardised that gives reliable and valid data. It is easy to determine the gap among views of
different samples and give a conclusive statement on the research problem.
Sampling technique
Sampling technique is the process of finding a particular sample size for a research method.
Probability and Non-probability are major sampling techniques that researchers use for
primary and secondary research respectively (Rossi et al., 2013). The sample for quantitative
data collection has been chosen by taking the Simple Random Sampling method. The
researcher has an ease in choosing a random number of samples from a large group.
Minimising any biases associated with data is the goal behind the application of simple
random sampling process. The level of accuracy during data representation is more
(McCusker and Gunaydin, 2015). Each sample has equal probability in the sample selection
process.
Sample Size
The sample size considered for doing quantitative research method is 60. The respondents
will be employees of Starbucks. The study has been performed based on small-scale research
for which sixty employees were taken.
Research Ethics
The researcher has informed the purpose of the research to respondents before doing the
survey. The consent form has been signed to initiate the survey. The information was stored
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by adhering to the guidelines of the Data Protection Act 2018. Personal data of respondents
including age, income and name of respondents have been managed with confidentiality.
Research Limitation
The articles and books selected for the literature review are full of repetitive information.
Therefore, the literature review may contain repetitive concepts. The study is not supported
by thematic and qualitative analysis. The survey is limited to a particular geographical region.
Additionally, time given for research and budget allocated for resources is not sufficient to
carry out the entire process.
Timescale
Activities Start Date Duration End Date
Topic selection 4/22/2019 2 4/24/2019
Formulation Aim and objectives 4/24/2019 1 4/25/2019
Creating a project management plan 4/25/2019 6 5/1/2019
Reviewing books and articles 5/1/2019 8 5/9/2019
Methodology 5/9/2019 5 5/14/2019
Quantitative survey 5/14/2019 10 5/24/2019
Data analysis 5/24/2019 7 5/31/2019
Conclusion and Recommendation 5/31/2019 3 6/3/2019
Final correction and Report writing 6/3/2019 5 6/8/2019
Project submission 6/8/2019 1 6/9/2019
Table 1: Timescale
(Source: Created by the learner)
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Topic selection
Formulation Aim and objectives
Creating a project management plan
Reviewing books and articles
Methodology
Quantitative survey
Data analysis
Conclusion and Recommendation
Final correction and Report writing
Project submission
3/26 4/5 4/15 4/25 5/5 5/15 5/25 6/4 6/14
Figure 1: Gantt chart
(Source: Created by the learner)
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