Starbucks Global Expansion Strategy, with a focus on China.

Starbuck’s began their journey in the coffee market with the grand opening of a small cafe, back in 19711. The name for this company is quite unique and there is a clear back story behind this. The original owners were inspired by the story of Moby Dick and its thought to “evoke the romance of the high seas and the seafaring tradition of the early coffee traders.” Since the first Starbucks store, the company was famous for its community development and its active participation within society. Starbucks began to witness great change within their company once their management changed, in 1987 Harvard Shultz was appointed the Chief executive officer. Inspired by the traditional Italian design, Schultz adapted this design and integrated it within the lighting, layout and music choice played in the cafe’s. As a

Starbucks Entry Into China, 4 even at this time, promising investors that Starbucks would open 125 stores in five years.14 During the next five years Starbucks remained a privately held company and expanded its number of stores at a faster pace than planned. With a base of 11 stores in 1987, Starbucks opened 15 new stores in 1988 and 20 in 1989. Seeing that their targets were being met easily, they stepped up their expansion efforts and had 165 stores by 1992. Their expansion was limited to the Pacific Northwest, Chicago and parts of California. They practiced a strategy of market saturation and building up customer loyalty. This loyalty helped their mail order business, which reached many people who have tried Starbucks coffee but did not live near a retail store.15

It’s all about the coffee for Starbucks. Starbuck’s core competence is in its ability to effectively leverage its coffee product to entice customers to be repeat customers. There are several ways that they have achieved this successfully.

This case assignment discusses the history of Starbuck’s accomplishments as they entered the American coffee culture heritage. In 1983, The chairman and CEO Howard Schultz traveled to Italy and had a dream to carry the Italy coffeehouse ritual back to the United States. Schultz was focused on creating an environment meeting company that makes good coffee but also be a social experiment. Starbucks today opened more than 19,000 stores functioning in 62 countries. Starbucks has numerous rewards that globalization has offered and they have significantly benefited from it, while in the coffee industry. Starbucks has a wide-range in marketing strategies to benefit the customers. During the different obstacles that Starbucks has encountered, they must stay reliable in quality and uphold to adjust to different customer values.

The three most critical challenges Starbucks faced in China were political restrictions, socio- cultural, economic and financial challenges. China is highly bureaucratic country with difficult processes of getting permissions and sanctions to start and run business. The biggest challenges for Starbucks were the old tradition of tea drinking in China. At the beginning Starbucks managers didn’t how to accustom Chinese to drinking coffee; to acquaint employees and Chinese executives with coffee drinking experience Starbucks provided different training programs for them in which they learned more about coffee and Starbucks’ culture.

Starbuck’s was a genuine market driver. They developed a new type of product that included an experience, ambience and relationship with coffee. They had a working formula ruined by expansion. Manageable growth was definitely its downfall as it focused to please shareholders rather than its main target the consumer

Since that point in time, the company extended its presence in the Chinese market in 2000 with a different licensee partner in Shanghai. In 2002, a third partner was added to help Starbucks expand into Shenzhen, two years after entering the Hong Kong market. Using these three major markets as a base, the company expanded from Shenzhen to Guangzhou and from Shanghai to Ningbo, Nanjing, Suzhou, Wuxi and Changzhou. By 2005, the company was ready to open its first company-owned store, in Qingdao, an area of the country not overlapping with the existing licensee agreements. Over time, the company has increased its equity positions in some of the joint ventures, and it has also opened more company-owned stores, and even bought back some stores.

Starbuck’s strategy focused on three components; high-quality coffee, intimate service, and ambient atmosphere. Starbucks worked closely with growers in Africa, South and Central America, and Asia-Pacific regions to insure the quality of its product. Starbucks called all employees' "partners" and worked hard to train them with the skills necessary to best serve the customer. The atmosphere at Starbucks was crafted after the European-style espresso bar. The company goal was to create ambience through the Starbucks "experience" and by making the area comfortable, yet upscale.

Each company has what sets it apart from other companies in the same industry. This ideology excludes not Starbuck. Starbuck has a history and right from its inception, the founders wanted something that would offer fine coffee to the society that settled in Seattle. This has all along been the case. To accentuate this phenomenon, there was a time Howard Schultz had to travel to Italy to explore more of the Italian coffee tastes offered in Italy coffee bars and come back to customize the same in America. Unfortunately, upon his return he resigned from Starbuck and formed his own company. However, a few years after he formed his company, Starbuck went on sale and this led Howard Schultz and other investors to mobilize

Starbucks first opened its doors in Seattle’s Pike Place Market with the name being coined from that of Moby Dick’s first mate (Schultz & Yang 1999). It has spread its shops across North America, all over Europe, the Middle East, Latin America as well as the Pacific Rim with an estimated 35 million customer weekly (Michelli, 2008). With tremendous growth from a small time coffee shop, the company has matured to an international icon that today it is one of the world’s leading retailer, roaster and brand specialty coffee (Story, 1971). The company offers whole bean coffees, espresso beverages, and confectionery and bakery items.

Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world. It is the No. 1 branded coffee house chain in the world, with 19,797 company operated and non-company operated stores in 62 countries (Starbucks Corporation, 2013). The CEO Howard Shultz leads them, and Starbuck’s employs 182,000 persons. Starbuck competes globally with other coffee shops, and fast food chains that offer coffee on the menu (Shah, Hawk, & A, 2011).

Starbucks is one of the largest coffee shop chains in the world. In 2005 it was the leading coffeehouse retailer in the world with operations in 34 countries outside the US, counting 10.241 coffeehouses. Starbucks began its international expansion with Japan in 1995. We think Starbucks is a global company. Throughout the answer we will use Starbucks’ value chain activities to explain why Starbucks can be considered a global company.

Starbuck is a USA based multinational company specialized in coffee products. Basically, the company is involved in the business of buying raw coffee beans, roasting them and then packaging them for sell or making of coffee drinks, which they sell to their highly valued clientele. It is an organization that firmly believes in the ideology of its founders and seeks to perpetuate that ideology using any method deemed possible. The founders of Starbuck, namely Jerry Baldwin, Gordon Bowker and finally Zev Siegel, envisioned an organization that would offer the finest coffee products to its clients. Since the inception of Starbuck in 1971, this goal continues

Starbuck’s mission is to “inspire and nurture the human spirit-one person, one cup and one neighborhood at a time” (Mission Statement).Today, Starbuck’s is the leading retailer of coffee products with over 19,000 stores world-wide.

Starbucks’ retail entry model in the United States does not have the same strategy as their international model. In the states Starbucks holds great control as a corporation, but in international territory, country partnerships, cultural, government laws and politics play a very important role in Starbucks’ entry strategy. Starbucks has set it sights globally since the coffee market has come close to saturation in the U.S. which will give them the opportunity to continue to expand without fierce competition. Starbucks has looked to countries like India and other emerging markets with great growth potential to set down new roots. Starbucks recognizes India as a great choice to expand business internationally but also recognizes the complexity in the same market after several attempts to enter without success.