The Secret of Starbucks’ Success in China

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.

Starbucks is dominant coffee brand in North America, which also is well-known worldwide. Established in 1971 as coffee shop oriented to a niche of coffee purists, in late 1980’s it turned to be a constantly growing chain of stores that sold whole-beans and premium-priced coffee to mostly affluent, well-educated customers. In years 1992-2002 company was showing at least 5% annual growth. And by 2002 Starbucks was serving already 20M customers in 5886 stores (both operated and licensed) around the globe, had $3.3 billion net revenues and was opening 3 new stores a day in average.

As Starbucks moves into new markets all over the world, it continues to build its brand through the delivery of the Starbucks Experience. "Our success at every market that we have entered into reiterates our commitment to become a great, enduring company with the most recognized and respected brand in the world, known for inspiring and nurturing the human spirit. Our Mission: to be a global company, making a difference in peoples ' lives by leveraging our brand and the coffee experience to foster human connections." (www.starbucks.com)Starbucks ' development strategy adapts to different markets addressing local needs and requirements. Starbucks currently uses three business strategies: joint ventures, licenses, and company-owned operations.

starbucks Corp., an international coffee and coffeehouse chain based in Seattle, Washington, has expanded rapidly since its opening in 1971. These outrageous success was due to its well-developed strategy vision which lay out the company's strategic course in developing and strengthening its business. Starbucks is a global corporation that sells authentic coffee in 30 countries, reporting revenues of nearly $5.1 billion in 2006. The main goal of Starbucks is to embrace diversity by applying the highest standards of excellence. Starbucks strives to perfect the relationship with the working class by making the service as fast as possible because they believe that every customer has their own personal rate. One

Starbucks is no doubt a phenomenon in the United States, but the brand wants to expand globally. Opening chains in various global locations such as Japan, Vienna, England; Starbucks wants to reach out to the coffee loving fans everywhere. Nevertheless opening chains globally is not that simple. There are many uncontrollable factors Starbucks need to focus on to make sure they are making profit as well has abiding by the country’s laws and regulations. Going global takes a lot of market research to make sure that the brand will be successful even with uncontrollable factors. Controllable factors can be tailored to fit the needs of each country. Starbucks has to find the happy medium so they don’t lose their identity overseas.

The final project is going to be about the market entry of Starbucks into China. This project will focus on gauging the success of the company's market entry strategy thus far. Starbucks has announced in a press release that it believes China will be its #2 market by 2014, and the company has been one of the most successful American companies in that market (Starbucks, 2012). The company entered the Chinese market in 1999 with a store in Beijing. This followed the acquisition of greater knowledge about Chinese business culture through outlets in Taiwan. The company initially used a licensing agreement to enter the Chinese market (Starbucks, 2010).

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.

And due to its high quality of products and good customer service, “word-of mouth cost-effective” was the main advertising method of Starbucks (Dudovskiy, 2015). However, because the growing competition in the coffee market, Starbucks increases its spending in marketing, and some marketing methods it employees include promotions, such as buy one get one free, expanding its men's by adding new flavours, Starbucks debit/credit card which gives customers award by using it, and the Starbucks smartphone application. Such marketing and sales method increases customers incentive to buy; moreover, the smartphone application keeps customers in touch with Starbucks and helps sustain a long term relationship with the customers. However, there will be several problems facing by these new marketing

A.   CASE  ANALYSIS       “Growing  Big  while  Staying  Small:  Starbucks  Harvests  International  Growth”     by  IAN  E  NIS  TIRYAKI                                         DATE         April  28,  2011  Thursday                                             A.  EXECUTIVE  SUMMARY   1. Situation  Overview   Globally  recognized  coffee  house  and  coffee  brand  Starbucks  has  changed  its  targeted   markets  more  towards

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

If there is one company that should have failed in China, it would be Starbucks. China has thousands of years of history drinking tea and a strong culture associated with it. No one could have guessed that Chinese would ever drink coffee instead of tea. Yet, Starbucks has successfully opened more than 570 stores in 48 cities since it first entered China twelve years ago. Building on this momentum, it plans to open 1,500 stores by 2015. What did the Seattle-based coffee company do right in China? Here are five lessons from Starbucks’s success. A)Think Different

Starbucks provide a large in store seating with free wi fi and a take-out service which only a few retail shops offer. The main target customers for Starbucks are office workers, with enough income, whom are able to afford the high prices of their products (Gaudio, 2003). The company has worked hard to establish itself as the brand leader with its branding as the most frequently drank coffee and noticeable brand logo. Introduction of promotions like the Starbucks Card, allows a more convenient way for a person to
pay for
your
drinks
and
earn
rewards
for
your purchase (Starbucks Coffee Company, 2011).
Furthermore, in‐store
promotions
accompanied
by
new
products and
amenities like free internet use are all strategies that Starbucks use to maintain their position in the market (Vasudha, 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.

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.

Since 2004, the value of Starbucks in the market dropped constantly. Therefore researchers found that the 'designer coffee' market just a fad. Recently, the problem was occurred is how to extent their product life cycle and maintain customer relationship. Although we knew that Starbucks had done a lot of effort on CRM. As we can see the market competitions will become more challenging, especially Dunkin Donuts. Dunkin provides the donuts but also compliment with coffee, the coffee becomes one of competitive products in Starbucks. (Zack, Chen, Calvin, Kevin, & Michelle, 2008) In order to overcome the value decline and the profitable issue of Starbucks, Starbucks should consider strategies that provided at below.