In the readings for this week, we took a closer look at international
alliances. International alliances are usually formed when a company is looking
to expand into the market of another country. There are many different
approaches a company can take but the most important is finding the right
partner. In order to fully understand the importance of selecting a suitable
partner to form an alliance with I read the article, “Pouring Israel into a
Starbucks Cup” by Arturs Kalnins and Laure Stroock.
The article begins with a history of Starbucks and how it
became dominant in the US. Then it moves on to describe its move in to
international territory. Starbucks enjoyed great success in Middle East
companies due to a collaborative effort with M.H. Alshaya Co. (Kalnins and
Stroock, 2011). After a trip to Israel by Starbucks CEO, Howard Schultz, the
company decided to expand to the country. (Kalnins and Stroock, 2011) The company
then began looking for a possible partner to help with expanding. Starbucks chose
Delek Israel Fuel Corporation, DIFC. (Kalnins and Stroock, 2011) DIFC was known
for its fuel distribution and their gas companies. (Kalnins and Stroock, 2011)
The article takes a closer look at why the alliance failed and what could have
been done to prevent it.
In his article, Gomes-Casseres provides the reader with
seven key issues in alliance management. (Gomes-Casseres, 1993) The second of
these key issues is selecting partners. (Gomes-Casseres, 1993) This issue is concerned with being able to identify
the pros and cons of a possible partnership as well as evaluating whether they
will be worth the risk. This is an area in which Starbucks did not spend enough
time. Starbucks was eager to capitalize on its success in the Middle East with
Alshaya therefore it moved quickly. Starbucks compromised many of its core
ideals because it did not fully plan the partnership and the organization of
the company. (Kalnins and Stroock, 2011) Had Starbucks developed a full,
detailed plan for the partnership they might have been able to succeed in
Israel.
Another way to look at the failed alliance between
Starbucks and DIFC is through the words of Kanter. In Kanter’s article, the
author suggests treating alliances like relationships. Kanter describes five
phases of a relationship for companies in order to reach a full collaborative
advantage. Starbucks and DIFC all but
skipped over the phases. There was a short courtship between the two and they
rushed in to a “marriage.” Throughout their short time together, the companies
rarely agreed on anything. Starbucks was concerned with their employees and
their well-being whereas DIFC would fire staff if the numbers were not met. (Kalnins and Stroock, 2011)
Starbucks lasted two years in Israel with only six stores
opened. (Kalnins and Stroock, 2011) I think Starbucks really rushed in to the
market. They had done very well in other Middle Eastern countries and insisted
on pushing forward. Israel was already heavily populated with coffee shops. The
country drinks more coffee than the US and the UK. (Kalnins and Stroock, 2011)
Starbucks was also very arrogant when they decided to enter Israel. From the
very beginning Starbucks was not welcome in the country. (Kalnins and Stroock,
2011) Starbucks should have looked into
the culture before putting all their efforts and concentration in to the
venture. I think if they ever try again
they might want to take things a little slower. Research the competition, the
proposed partnerships as well as the market for their product. Overall, Starbucks was too eager and excited about
the possibility of moving in to Israel that they overlooked many of the factors
that led to their fall in the country’s market.
References
Gomes-Casseres,
(1993). Managing International Alliances: A Conceptual Framework. Harvard Business School. pp. 1-20.
Kalnins, A. & Stroock, L. (2011). Pouring Israel into a Starbucks cup. Cornell Hospitality Quarterly, 52, (2). p. 135-143.
Kanter,
R. (2010). Collaborative Advantage: The Art of Alliances. Harvard Business
Review. p. 1-16.
Would you say the primary cultural issue was a corporate culture issue or national culture issue (or both)?
ReplyDeleteI think both. Starbucks went in to the alliance thinking they knew exactly how to conduct business no matter where they set up shop. I don't think they truly thought through the entire process. Coffee was already big in Israel. Plus it was cheap enough that people could still enjoy it without it hurting their budget. Starbucks kept their prices high and claimed their coffee was far superior to any other choice. They were also counting solely on their name to generate business. Obviously this did not fair well in Israel. The Israel citizens did not want some American company coming in and telling them that the way they did things was wrong. Plus the company they chose to partner with was pretty obscure. I mean really, they were all about gas. All they really wanted was to be able to sell Starbucks in their locations. They even tried to sell their shares in the alliance many times. It was just a rushed alliance that ended up costing both companies a lot of financial loss.
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