Case study: Starbucks in China
Starbucks – A global company?
The 1971 founded company Starbucks has undergone an impressive expansion throughout the last years and as a result now is the leading coffee house retailer in the world. Due to several joint ventures, partners, and an enormous amount of directly operated stores, it is present in more than 34 countries and serves around 33 millions of customers per week.1 Moreover, the company significantly increased its global publicity within subscribing to strategic alliances with various hotels, air carriers, schools, and stadiums.
Nevertheless, Starbucks possesses an immense core business in the United States, which is based on its corporate roots in Seattle, as well as the huge market
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This would also be very consistent with Starbucks’ guiding principles that state: “Embrace diversity as an essential component in the way we do business”.6 Moreover, the American coffee company will have to face the Chinese’ increasing national pride to avoid Western brands, which makes it even harder for Starbucks to establish a strong and positive image in the long-term.
Furthermore, their target customers and therewith their probable locations are limited to the major cities and the coastal urban areas. But within these areas, Starbucks has a good potential, since a growing number of young, trendy people are willing to spend more money on luxury goods, as the Starbucks products are in China. In this context, tourists also capture an increasingly important position, since they are more and more traveling to China and hence are possible Starbucks clients as well. Additionally, the middle class starts to earn more money and thus also represents a potential future consumer.
As a result of the growing amount of prospective customers and so copycats, it could be a challenge for the global company that the market suddenly is oversaturated, since coffee still remains anything but the Chinese’ favorite beverage.
With time the small industry of coffee has modernized into a multibillion dollar industry that surrounds the world. With the growth of the industry there has been many world wide changes. Over the past 30 years coffee shops have jumped to the front of the public culture. New coffee shops have changes the face of American cities along with British, German, Colombian, Kenyan and Indonesia towns to name few. (Coffee a comprehensive guide to the bean, the beverage, and the industry) Around the world coffee has become part of the daily culture and coffee shops have grown to accommodate the massive demand that people ask for. Without the growth of the industry there would be a shortage of the product and many would have to go without their beloved beverage. In the United States alone there has been a massive increase in the number of coffee shops. In 1980 the number of coffee shops was a year 2,000 and by 2008 there was an astonishing 27,715. (Coffee a comprehensive guide to the bean, the beverage, and the industry) This was an increase of over ten times in the short time. 11,000 of those stores, almost half, were Starbucks one of the biggest coffee brands in the worlds. The growth of Starbucks is due to the work of Howard Schultz a worker for the company before they became as massive as they are today. Starbucks started very small in Seattle, Washington in the mid 1970’s. Howard bought out the owners and then went on to turn the small company into a massive corporation. (Coffee a
Coffee which is a simple product has been turned it into a commodity in our lifestyle, it no longer just a drink but an event in itself, instead of just buying a cup of coffee companies have led us to believe that we are buying an experience. Companies have discovered how to sell out big money for a simple product; consumers are willing to buy $5 and up for a cup of coffee, not just because of the taste but because buying that cup makes consumers feel like part of something. According to Kate Macdonald a coffee chain such as Starbucks gets 14 million customers a day or more. It also has become one more of the global and cultural icons such as Coca-Cola and McDonalds. It very likely to find a Starbucks coffee shop in any major city around the globe; this make sound good for any coffee producers, but the reality is that coffee trade is full with ironies. As consumers steps up to the register and order their cup of coffee, it is more likely that they will not think of the more than “25 million people around the world (that) base their livelihoods on its production (Watson and Achinelli
Due to the expansion of social media, Lots of opportunities has been arose for Starbucks. Online networking focused on building customer associations with the company are more viable than a promoting it in a traditional way. In order to reduce their prices and compete with their competitors, Starbucks have a great opportunity to expand their range of suppliers. In this case, when they have lots of suppliers, they can actually negotiate with them and cut down their coffee beans price. So instead of charging the premium price, Starbucks can offer medium price and challenge their competitors. They can expand its branches in those countries where they have potential customers. With a billion customers ready to join those who want instant coffee and breakfast in China and India, Starbucks have a massive potential to expands in these countries, which represent profitable opportunities. Starbucks likewise has the chance to grow its item offerings to tackle the full range sustenance and drink retailers like McDonald’s and Burger King as the shopper
China is a fast-changing market and it has paid off for Starbucks. The middle class citizens of mainland China consider Starbucks coffee a luxury. The customers are willing to pay the premium price just for the customer experience. The success of this strategy is due in part to the in-store training and people-development model used in China. This way, Starbucks ensures its brand positioning is consistent with customers’ expectancy of having the Starbucks experience that is provided in the United States.
Starbucks is undoubtedly an international brand. The history of coffee traces back to Ethiopia, Africa, India, Arabia, and Europe, and has been traded abroad since the 11th century. Understanding the demand and widespread market for coffee, Starbucks has triumphantly capitalized both the domestic market, and the varied international markets as well. Possessing about 6,500 retail sites worldwide, Starbucks’ net is spread across thirty countries and has been found as one of the most recognized brands all over the globe in equality to McDonalds and Toyota. This organization’s ability to build an international brand has been unprecedented- particularly since it represents a specialty
The Chinese market makes up a large portion of Starbucks’ profit. China’s population plays a big role in the importance of that market to Starbucks and the ability to pull a big profit from that region. In an interview with Charlie Rose, Howard Schultz said, “We educated [China] on coffee…now [China is] drinking as much coffee as [America] is.” (Starbucks CEO Howard Schultz, bloomberg.com) This statement shows how quickly the Chinese market expanded to the size of the American market and is continuing to expand. This growth will not stop
Initial entry strategies. Starbucks articulated an entry strategy that was designed to be as inoffensive to the Chinese culture as possible. Instead of taking the conventional approach with advertising and promotions which could have been seen by potential Chinese consumers as attacking their culture of drinking tea they positioned stores in high-traffic and high visibility locations. Moreover, Starbucks very deliberately began to bridge the gap between the tea drinking culture and the coffee drinking culture by introducing beverages in the Chinese stores that included local tea-based ingredients.
How I love the smell of a fresh cup of Starbucks coffee to get the day started. As a coffee lover, I often venture to Starbucks to meet my caffeine needs. Starbucks began as a single storefront located in Seattle’s Pike Place Market. As of July 2012, the company has 17, 651 stores in 60 different countries around the world, with the mission to “inspire and nurture the human spirit – one cup, one person and one neighborhood at a time” (Starbucks, 2012). Enhancing the value of the company are the additional brands owned by Starbuck’s. They include Seattle’s Best
As someone who was born and raised in Seattle, I am very proud to say I am from the “home” of Starbucks coffee. The company of Starbucks, started in Pike Place Seattle in 1971, has become a globally known company. It is known for putting customers first, taking critique and fixing the issue, and treating its employees very well. I have worked for Starbucks in past years and I have found all of these to be true.
In the following research we will look whether Starbucks will be able to launch an aggressive expansion throughout Mainland China, a country known for its tea drinking history dating back to 5,000 years. Starbucks is known for its ability to locate the business outlets in perfect spots as well as market their products in beneficial ways. This report will try to analyze the three main questions:
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 Coffee International, a subsidiary of Starbucks Coffee Company has recently celebrated its first step into Southern China opening a new store in the country, the first one in Shenzhen. The store is owned by Coffee Concepts, a joint venture between Starbucks and Hong Kong’s Maxim group, who together have already opened 32 Starbucks stores in Hong Kong between 2000 and 2002.1 At the opening Pedro Man, president of Starbucks Coffee Asia Pacific Ltd., the Asian division of Starbucks Coffee International said: "As we celebrate the opening of our first store in Southern China today, we mark yet another key milestone in the history and tradition of
All Starbucks coffee branches are elegantly designed, tastefully furnished, and offering classical music and fashion magazines, which differentiated Starbucks from its competitors, strongly attracting young generations of China who viewed western coffee culture as a symbol of modern life style. On the surface of it, Starbucks just changes its interior decoration, but the truth is it has already changed all concept and meanings of coffee, redesigning coffee from traditional consumption goods into new modern fashionable life style. Many people in China going to Starbucks are not aim to get Frappuccino, but to experience the atmosphere and culture, and to find their identity of new elite class. That’s why Starbucks became a high-end brand in China.
The fourth topic that will be discussed is to develop a marketing strategy for taking Starbucks into smaller Chinese cities and communities. What barriers would be faced? Could they be successful? The marketing strategy for taking Starbucks into smaller Chinese communities
Firstly, even though Starbucks has explored the Chinese coffee market and attracted many long-term customers, it is far away from enough. As you may know, the tea-drinking culture has been lasted over several thousand years. Moreover, there are a lot of products about tea in high-class, mid-class and low-class market. It is hard for Starbucks to enter the China market. As a result, Starbucks targeted the middle class market, especially the young people. In details, this kind of people contains some students, overseas returnees, foreigners, and white-collar employees. Due to the narrow range of customers, Starbucks limited herself to become more popular in China. Besides, the Chinese traditional tea drinking culture affects Starbucks expansion. Since China has 56 nations and huge size of land, there are different drinking styles in China. For example, the people in the north of China prefer to drink tea using bowl and drink fast, while the people from south are keen on drinking Gongfu tea and drink slowly. That’s why it is difficult for Starbucks to attract all kind of people by only one business model. Additionally, some researches show that tea is more suitable for the physical conditions of the oriental people. It is showed that the culture problem is still a big challenge for Starbucks developing Chinese market further.