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DISCUSSION QUESTIONS
9-1. What are the advantages and disadvantages or using licensing as a market entry tool? Give
examples of companies from different countries that use licensing as a global marketing strategy.
Licensing:
Advantages:
Disadvantages:
A limited form of participation; licensor generally has no control on marketing
9-2. The president of XYZ Manufacturing Company of Buffalo, New York, comes to you with a
license offer from a company in Osaka. In return for sharing the company's patents and
know-how, the Japanese company will pay a license fee of 5 percent of the ex-factory price
of all products sold based on the U.S. Company’s license. The president wants your advice.
What would you tell him?
Assuming XYZ is a small manufacturer with limited international experience, and if the
picture for both market and sales (market share) potential are promising, licensing can be
Overall, as Root (1994, 119) notes, “managers can rationally choose licensing as a
Incremental revenues (excluding royalty revenues) for life of agreement:
Incremental costs for life of agreement:
Training licensee’s employees
Ongoing Costs
York: Lexington Books), 1994.
9-3. What is foreign direct investment (FDI)? What forms can FDI take?
Joint Ventures:
Advantages:
Disadvantages:
Direct Investment/Acquisition/Ownership:
Advantages:
Disadvantages:
Problems may arise from efforts to integrate acquisitions into parent company.
modes.
9-4. What are keiretsu? How does this form of industrial structure affect companies that
compete with Japan or that are trying to enter the Japanese market?
In its most general sense, the word keiretsu refers to connections between different
companies. Japanese Keiretsu consists of a group of large companies with ties to a
CASES
Case 9-1: Starbucks Takes Coffee Culture Around the World
Overview: From modest beginnings 40 years ago in Seattle’s Pike Street Market, Starbucks
Corporation has become a global marketing phenomenon. Today, Starbucks is the world’s
leading specialty coffee retailer, with 2012 sales of $13.3 billion. Starbucks founder and
chairman Howard Schultz and his management team have used a variety of market entry
approaches—including direct ownership as well as licensing and franchising—to create an
empire of more than 18,000 coffee cafés in 62 countries. In addition, Schultz has licensed the
Starbucks brand name to marketers of non-coffee products such as ice cream. However, coffee
remains Starbucks core business; to reach the ambitious goal of 40,000 shops worldwide,
Starbucks is expanding aggressively in key countries. Starbucks has also been successful in other
European countries, including the United Kingdom and Ireland. Greater China—including the
mainland, Hong Kong, and Taiwan—represents another strategic growth market for Starbucks.
9-5. In the United States, nearly two-thirds of Starbucks outlets are company owned; the
remaining one-third are operated by licensees. Outside the United States, the proportions are
reversed: about two-thirds are run by licensees or partnerships in which Starbucks has equity
stakes. What is the explanation for the two different market expansion strategies?
Starbucks’ relentless pursuit of new market opportunities illustrates the fact that most
firms face a broad range of strategy alternatives for Starbucks and other companies
well mandate an adaptation strategy. Formulating a market entry strategy means that
9-6. In response to the economic downturn, Starbucks launched a new line of instant coffee
called VIA Ready Brew. The company also developed a breakfast value meal that costs less than
$4. Do you agree with these decisions?
Student answer will tend to vary, but good students will cite key marketing mix criteria
such as positioning, target markets, pricing, promotion and the “Starbuck’s experience” in
9-7. Should Starbucks enter the Italian coffeehouse market? Why or why not?
Student answers will vary but one option is that Starbucks should enter the Italian market
9-8. In the long run, which company is more likely to win the global “coffee wars,” Starbucks or
McDonald’s?
It is pure conjecture on everyone’s part in trying to answer this question, although, the
9-9. Assess the prospects for the new Starbucks Reserve Roastery and Tasting Room initiative.
Personally, I think that the new Reserve Roastery will hurt the brand. It will hurt
their relationship with their loyal customers who may already struggle paying $ 5+ per
Case 9-2: Jaguar's Passage to India
Overview: In 2008, Tata Motors paid the Ford Motor Company $2.3 billion for U.K.-based
automakers Land Rover and Jaguar. Jaguar’s new owners face challenges of their own. Some
have criticized the acquisition on the grounds that the brands are not compatible with the low-
cost cars, trucks, and commercial vehicles that have long been Tata’s mainstays.
9-10. Do you think Jaguar and Land Rover will prosper under the ownership of Tata Motors?
Tata Motors must leverage its distribution system to allow it to use both the Jaguar
and Land Rover networks around the world to even attempt at prosperity.
9-11. What do you think are the biggest challenges facing the Jaguar Land Rover in the next few
years?
World-wide macro - economic forces will play a role in the success of Land Rover—
most importantly can the world's economies recover fast enough in the developing
9-12. Tata Motors recently introduced the Nano, the world’s least expensive car. The Nano fits
Tata's strategic goal of building a low-cost car for the Indian market. Can Tata succeed in
targeting both the very low end of the auto market as well as the high end?
Yes, as long as Tata Motors understands the concepts of international marketing and
producing products for niche markets and not try to “become everything to everyone”.
