Starbucks,why they succeed in FDI

With the rapid growth of vehement business competition, companies have to consider more strategies to create the firm value on the premise of the risks minimisation. Foreign Direct Investment could be seen as a useful tool to strengthen the companies' competitive power. They could gain more reputation through expanding their business. The benefits such as gaining certain market share and know how, more cash inflow through FDI could be brought through this activity. However, sometimes problems such as the conflicted corporate structure and limited access to local markets will be the obstacles for them to face.

I would say the FDI strategy of Starbucks is brilliant. Actually it is because their know how is hard to transfer and their products, which are mainly coffee, are hard to meet the local customer's requirements. So in this case, their core competitive power will not be lost in FDI activity. They employ the local staff being another advantage for their strategy. This is because many FDI will fail at last because they can not localise their products, which then cannot win the local markets. Hence, the high cost of such investment eventually will damage the value of their shareholders. But the hardest problem for them is to gain the license. This challenge for them is easier than other companies like McDonald's, who may conflict with local religion.

The main purpose that Starbucks decide to expand their business across the world is to win the market on the premise of ensuring quality. They are not like Sony, who focus on the diversification and lead to the strategic failure in the end. But the other challenges for them are tax management, currency fluctuation management. Such macro environment will inevitably impact on the shareholder value. Without proper management, their wealth will just fade away by the effect of currency and tax. That is also what most companies' are worried about. I think if Starbucks want to create more value for their shareholders, they can employ the total quality management, that is suitable for their company.

At last, I want to say foreign direct investment is the way to expand business and discover more opportunities. But the when deciding their strategies, managers must be fully aware if the merits are over drawbacks or disadvantages are over benefits. The only principle is to maximise the shareholder wealth. Starbucks is the typical example of success.