SynopsisIn 2003, Starbucks was listed on the Fortune 500 list. Despite the ongoing recession, the company managed to post a 31% increase in net revenue for the year. This was reasonable, considering they only spent about 1% of total sales on marketing. This, combined with the fact that they were appreciated by customers and employees, was a sure recipe for success. While their domestic numbers were rosy, international operations were losing ground. The once-lucrative Japanese market was in decline, and European and Middle Eastern ventures were failing to gain momentum. Unfortunately, the US market was experiencing saturation and the only way to grow seemed to be in foreign markets. They gained entry through the use of wholly owned subsidiaries, licensing agreements, or joint ventures. Starbucks didn't escape the common practice of adapting and integrating the business across different geographic regions, but they stuck to their guns when it came to their standard product. line-up and their no-smoking policy. Surprisingly, these conditions were met with wide acceptance. Analysts believed the real challenge would be in the European market, with cafes at every corner to compete with. Once again, the stores did very well, largely due to the newer, cleaner environment they offered compared to the older locations of existing houses. Business went well, but it was not without problems. There was political upheaval in the Middle East, followed by further tensions after then-CEO Howard Schultz commented on growing anti-Semitism in the region. Their integrity was put to the test when some non-governmental organizations (NGOs) accused them of purchasing coffee beans under questionable social and economic conditions. These situations, coupled with tough economic times globally, meant that Starbucks was likely to take a hit somewhere. Eventually, they shut down their operations in Israel altogether. There is speculation that the company was pouring too much capital into its complex system of joint ventures and licensing agreements, and was failing to meet operating costs. They decided to source some of their merchandise and disposable products from less expensive suppliers as an immediate cost-cutting measure. They also decided to reduce the number of new stores and close unprofitable ones. Starbucks had to learn the hard way that external forces go far beyond a company's taste in coffee and that too much growth can have negative effects. Internal Analysis Strengths: · Strong commitment to quality and community · Popular among its employees