INTERNATIONAL BUSINESS CASE STUDY

International business case study



International business case study

1)

From the early 2000s, Starbucks faced many problems in its international operations (Refer to Exhibit 2 for risks in international markets). The volatile political environment in the Middle East created serious problems for Starbucks. In July 2002, Arab students gave a call for a boycott of American goods and services, due to the alleged close relationship between the U.S. and Israel. The boycott targeted U.S. companies including Starbucks, Burger King, Coca Cola, and Estee Lauder. Starbucks topped the list of companies to be boycotted due to Schultz's alleged closeness to the Jewish community (In 1998, Schultz was honored with the “Israeli 50th Anniversary Tribute Award” by the Jerusalem Fund of Aish Ha-Torah, a group supporting Israel).

The problem was aggravated when it was reported that, in one of his lectures to students at the University of Washington, Schultz had said, “one of my missions is to sensitize you; you should not be immune to what is happening in the world. I travel a great deal and one of the things that I see is the rise of anti-Semitism in Europe, especially France and England.” His address to Jewish Americans made matters worse. Schultz said, “What is going on in the Middle East is not an isolated part of the world. The rise of anti-Semitism is at an all time high since the 1930s. Palestinians aren't doing their job; they're not stopping terrorism.” These comments from Schultz resulted in angry protests from the Arab countries and pro-Palestinian groups across the Middle East and Europe. Analysts felt that Schultz comments strengthened the feeling that he was acting as an Israeli mouthpiece.

Starbucks distanced itself from Schultz's comments, saying that they represented his personal beliefs and not those of the company. Schultz also denied allegations that he was anti-Palestinian and released a personal statement, saying that “my position has always been pro-peace and for the two nations to co-exist peacefully.” In addition to the previously mentioned incidents, the U.S. declaration of war on Iraq in early 2003 made matters even worse for the company. Due to increasing security threats, Starbucks closed down its six stores in Israel.

Starbucks also faced criticism from non-governmental organizations (NGOs) who urged the company to acquire certified coffee beans, ensuring that those coffee beans were grown and marketed under certain economic and social conditions. Starbucks also faced problems due to economic recession in countries such as Switzerland, Germany, and Japan in the early 2000s, where it experienced declining sales and revenues. Starbucks faced stiff competition, high business development costs, and resistance from customers in international markets. Especially in Europe, it was reported that Starbucks faced stiff competition from wellestablished local players who offered speciality coffee at lower prices when compared to Starbucks.

For example in England, while the Starbucks tall latte coffee was sold at $2.93, the same was available for $2.12 at the local coffee shop. By the 1990s, Starbucks noticed that store traffic in Japan, its largest overseas ...