Analysis of Starbucks' International Financial Management: LCBB6002

This report provides an in-depth analysis of Starbucks' international financial management. It begins with an overview of the company and its global presence. The report then delves into Starbucks' dividend distribution policy, explaining its stable dividend approach and providing historical data on dividend payments. It examines the application of the efficient market hypothesis (EMH) in the context of Starbucks' stock performance, discussing the limitations of the EMH in explaining the company's financial behavior, particularly in the face of global challenges. Furthermore, the report explores various methods of project appraisal, including economic and financial analysis, and market analysis, which are crucial for Starbucks' decision-making processes. The conclusion summarizes the key findings, emphasizing the importance of international financial management for businesses like Starbucks, ensuring fund supply, and optimizing resource utilization to maximize returns. The report references various academic sources to support its analysis.

LCBB6002
International
Financial
Management

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Company overview......................................................................................................................1
Dividend distribution policy........................................................................................................2
Efficient market hypothesis.........................................................................................................5
Methods of project appraisal.......................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The term International financial management is also referred as the international finance, it
is the management of finance in the environment of international business which is related to
Trading and making money through the exchange of foreign currencies. The International
financial management is concerned with r the proper management of international business and
its financial functions as well. The main aim of IFM is to make sure that the funds are supplied
uninterruptedly and there is no such barrier in the field of fund supply and its management it has
also related with the best and optimum utilisation of resources and funds from where the best
possible results can be generated. It is also used for increasing the wealth and also for the
maximisation of profit (Angrick, 2018). The International financial management is considered as
an important term so as to make sure that there is adequate amount of fund and the availability is
also proper and accurate. This report will be done in the organizational context of Starbucks
which is one of the most dominant beverage chain company in the world and will discuss about
its dividend distribution policy, application of efficient market hypothesis along with methods of
appraising projects.
MAIN BODY
Company overview
Starbucks is a well-known reputed Coffee chain, founded in 1971, which is spread
worldwide and has its stores all over the world. The Company Starbucks is an American
corporation and multinational chain of coffee-houses and other fresh roaster y services which is
quite high in demand (Batra and Verma, 2018). The brand has its own value and it also focuses
on the Differentiation policy and gain the various advantages of profits and competitive
advantage as well. The Company's Headquarters are situated in Seattle, Washington and has
around 33833 stores operating globally in 80 countries. Coffee is the most preferred thing which
is demanded by the customers from different segments of market. Starbucks has created its own
value by delivering the best of its quality to its customers along with the various different
varieties such as, Latte, Cappuccino, Espresso, the brand has built a great trust over the period
time. The company has various offerings such as mugs, attractive packaging, tumblers, scoops
and coffee presses which makes it quite different from its rivals and other competitors in the
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market. It offers the fresh quality of Coffee drinks which is not available to be sold on stores but
only in the Outlets of Starbucks.
Dividend distribution policy
The term dividend distribution policy is referred as the policy which generates the various
principles so as to get the ascertain amounts that can be distributed among the equity
shareholders which were divided by the company by also enabling the company strike balance
between pay outs and retained earnings so as to meet the future needs of the Company. The
dividend is distributed on the Pro – Rata basis where each investor earns the Dividend which
depends upon the number of shares that are held by him\her. The dividend is referred to the
Profit which is paid to the common stockholders of the company or an organisation from the
share of its accumulated profit. The distribution of Dividend must be according to the
recommendations of the members of Board and it should also be decided at the annual general
meeting of shareholders (Cunha, Reis and Teixeira, 2021). The Company Starbucks is using the
Stable dividend policy for the distribution of dividends. The Stable dividend policy is the easiest
and the most commonly used dividend policy, the goal of using this policy is to make the steady
and predictable dividend each year so that the problems related to the distribution of dividend
can be reduced. The Starbucks distributes the accurate and adequate amount of dividend whether
the earnings are up or down. By promoting the stable dividend policy, The Starbucks is
contributing excellently in the long term growth, with providing the dividend of $0.49 per share
of outstanding stock.
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Figure 110 year profitability data of Starbucks
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Figure 2 10 year dividend history of Starbucks
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Figure 3 Starbucks dividend growth rate
Efficient market hypothesis
The global business markets are very turbulent and any company such as Starbucks which is
known to diversify its international operations must be vary of the fact that it can suffer from
numerous losses owing to rapid changes which cannot be predicted with the most advanced
technologies. Over the course of the last few decades, there have been various theories and
models which have been endorsed and invented by market researchers and economic experts
with the efficient market hypothesis being one of the most popular ones. According to the
efficient market hypothesis (EMH), the markets around the word are self-sufficient and perfect
as it is and any correction which needs to be made is done through the market forces without the
need of any direct or indirect intervention from businesses and the state. This theory argues that
for both investors and the business, studying and predicting the pattern at which the stock prices
are fluctuated in the market on a daily basis is impossible as the only thing which affects the
prices on a consistent basis is access to new information which the investors and other firms are
not privy of most of the time (Funke, 2022).
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In context of Starbucks and its international endeavours, the EMH theory does not hold true
on a universal degree as the stock has displayed tendencies which occur beyond the theory’s
established rules which become clear upon closer inspection. For instance, the stock price of the
firm has been consistently increasing owing to high demands in the US despite getting into
workforce and labour related issues owing to COVID-19 and when it comes to the firm’s global
operations, the stock price is still high despite getting hit in China with major losses and negative
demand (Starbucks beats profit estimates despite hit to China business, 2022). This pattern of the
stock prices rising and investors earning big despite external environment posing challenges
states that the EMH theory has its fair share of loopholes and in order to be financially robust,
companies must work on a stellar market brand image which Starbucks takes advantage off to
keep its stocks prices high despite facing operational challenges in tough markets like China.
Methods of project appraisal
Project appraisal is a systematics process to review and allowing the project at any
different stage of execution. It is also known as assessment of a project and it is made for both
projects proposed and execute, it is the structures which helps to assessing the credibility of a
project. Project proposal analyses the cost and benefits of the project in different aspects to
proposed the project with as target to adjust the validity. Along with it involves calculating the
feasibility of the project, before committing the resources to it. It means and analysing or
researching the technical organisation, financial activities and economic of a project. There are
some methods of project appraisal are listed below:
Economic Analysis- Starbucks needs to analyse the economic before appraisal the project,
because without the are not able to handle this project properly. Under the economic analyses,
the project aspects include some requirements for knowing the level of capacity utilization,
anticipated sales and expenses, probable profits and so on. Starbucks need to be calculated, that
how much sales would be necessary require to achieve the target profit, along with, it helps to
find the demand of the products by estimating the sales volume.
Financial Analysis- Finance analysis is very important for the Starbucks company, because
financial helps to facilitated the company to bring together like labour, machines of another, raw
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material. Financial analysis is the process to evaluating the company projects, budgets and so on.
They help the Starbucks to determine their performance, which is beneficial for executing the
project, without this, they face difficulty to handle the project.
Market analysis- Before project appraisal Starbucks need to analyse the current market, they
need to studies the assessment of a market within the specific industry. Market analysing helps
the company to identifies the strength and weaknesses of the company, so that they are able to
make effective project which helps the company, to find more opportunities. Along with
Starbucks, need to doing a proper research of market to find the current position of the company,
because these things support the company in project appraisal (Maxfield, 2019).
CONCLUSION
In this report it discusses the topic regarding international financial management, it is very
important for any business or company. The main aim of international financial management are
ensuring the uninterrupted supply of funds which is related top business activities of the
company and its optimum utilization, Because it gives the highest possible returns for the
company. In this report it discusses that company need to doing the project appraisal, to achieve
the target of the company effectively and efficiently. But before appraisal the project company
need to analyse the economic, market, financial and so on condition.
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REFERENCES
Books and Journals:
Angrick, S., 2018. Structural conditions for currency internationalization: international finance
and the survival constraint. Review of international political economy, 25(5), pp.699-
725.
Batra, R. and Verma, S., 2018. Non-financial criteria in project appraisal methodologies:
empirical evidence from Indian companies. International Journal of Accounting and
Finance, 8(1), pp.80-102.
Cunha, J., Reis, V. and Teixeira, P., 2021. Development of an agent-based model for railway
infrastructure project appraisal. Transportation, pp.1-33.
Funke, J.J., 2022. Producing investment space: the International Finance Corporation and the
geofinancial power network. Cambridge Journal of Economics.
Maxfield, S., 2019. Governing capital: International finance and Mexican politics. Cornell
University Press.
Online referencing
Starbucks beats profit estimates despite hit to China business, 2022 [online] available through <
https://economictimes.indiatimes.com/markets/stocks/earnings/starbucks-beats-profit-
estimates-despite-hit-to-china-business/articleshow/93311478.cms>
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