STARBUCKS
CORPORATION

Starbucks Corporation is a Seattle, Washington-based coffee company. It roasts and sells whole bean coffees and coffee drinks through a national chain of retail outlets/restaurants. Originally only a seller of packaged, premium, roasted coffees. The bulk of the company’s revenues now comes from its coffee bars, where people can purchase beverages and pastries in addition to coffee by the pound. Starbucks is credited with changing the way Americans view coffee, and its success has attracted the attention of investors nationwide.
Starbucks has consistently been one of the fastest growing companies in the United States with over 1,000 retail outlets in 1996. Over a five-year period starting in 1991, net revenues increased at a compounded annual growth rate of 61 percent. In fiscal 1996, net revenues increased 50 percent to $696 million from $465 million for the same period the previous year (see Exhibit 10.1). Net earnings rose 61 percent to $42 million from the previous year’s $26 million. Sales for Starbucks have been continuing to grow steadily, and the company is still a darling of investors. with a PE ratio of 58.
To continue to grow at a rapid pace, the firm’s senior executives have been considering international expansion. Specifically, they are interested in Japan and other Asian countries, where Starbucks had little or no presence. Japan, the world’s third largest coffee consumer after the United States and Germany, represented both a challenge and a huge opportunity to the firm. To explore what changes in Starbucks’ strategy were required. And the questions that might arise during expansion, this case looks at the firm’s entry strategy into Japan and the nature of the issues facing the firm during early 1997.
THE COMPANY BACKGROUND
In 1971, three Seattle entrepreneurs – Jerry Baldwin, Zev Siegl, and Gordon Bnwker started selling whole bean coffee la Seattle’s Pike Place Market. They named their store Starbucks, after the first