Starbucks growth - three out of four ain’t bad!

I think the song goes something like that….Starbucks has been very popular in this blog lately with a number of posts across different topics. It seems to be all good news at the moment as they pursue a number of different strategies for achieving growth. And I used this video clip to get my students to identify three out of the four main ways of growing a business.

I started by getting them to recall the four basic forms of growth and put them on to the board - internal growth, horizontal integration, vertical integration, and diversification. I then told them that the video clip I would show them mentions three of them – they needed to match up each type of growth with the reference in the video and see what the odd one out was.

The youtube clip (from Bloomberg) is here. While the lines between the different types of growth can sometime be blurred, they didn’t seem to have any problems:

- internal growth was opening up of 200 drive-thru stores
- horizontal integration was purchasing of juice seller (could also argue diversification)
- diversification was the plan to sell wine and beer at selected stores.

That left vertical integration as the odd one out and I questioned them as to what a good example of vertical integration would be. That was easy - getting involved in coffee bean farming. I then asked them whether this was likely and the consensus was that this was very unlikely as it would not give any meaningful benefits to Starbucks. I love proving them wrong and showed them the video from Jim’s post on Starbucks vertical integration in China And that makes it 4/4!

And the Starbucks juggernaut continues with more gold dust for Business Students - as the same class were doing some other work I saw the announcement that Starbucks has confirmed that it will enter the Indian market with a 50 / 50 joint venture with Tata - this was probably 10 minutes after we had discussed joint ventures in class! The link to the article can be found here.