Starbucks In China Essay

Starbuck 's has become a staple of American culture and for the most part, if you are in your 20 's, you have grown up with it and this has become what you expect coffee to be. Who can blame you, it is everywhere, so "wake up and smell the coffee"! I plan to tell you about the strategies that this giant uses, that have taken it from humble beginnings to a worldwide phenomenon. I also intend to explain how Starbucks is taking China by storm, mainly because marketer / entrepreneur Howard Schultz 's vision and mission statement is shared by everyone in the company!An excerpt from the London Financial Times published in February 2006 states the following in regards to Starbucks entering the Chinese market; "Mr Schultz said the company was

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.

One of the areas in which Starbucks is currently facing a challenge, however, is in its attempt to expand internationally. While Starbucks has seen success in the United States and the Asian-Pacific regions, its sales are lacking in the regions of Europe, Africa and the Middle East. While much of this difficulty can be attributed to the struggling economies of these regions, the fact still remains that Starbucks has an uphill battle when it comes to expanding its chains. (Sun, 2015).

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.

Making their chain stores very traditional and fitting with the local culture. Surprisingly Starbucks charges as much as 50% more for some of its products in China than in the U.S., the U.K. and India, but yet it is still a huge success, this is because the business catered well for the needs and adapted. Carrying a Starbucks cup is seen as a status symbol, a way to demonstrate sophistication and the capability to afford a personal luxury for the up-and-coming middle class in China. This links into the brand recognition that Starbucks has created for itself and shows how they carefully targeted their products at the new middle class, it is estimated that it's more than 300 million, already larger than the entire population of the United States. This middle class is about 25% of the total Chinese population and as Starbucks has such a recognisable brand people are more liable to visit the store.

Cons – Starbucks has built a reputation of superior quality for its coffee drinks. By branding Starbucks as a trusted provider of premium coffee it has enabled the company to charge high margins for its coffee drinks. China is not known for quality

With the entry of Starbucks into the Chinese market in 1999, the company faced economic issues. In China, operating costs are higher than in the United States. This led to an increase in labor costs, which then offset the price of the drinks offered. The Chinese only about three cups of coffee annually, and the price of drinks Starbucks offered to the people was 50 to 70 percent higher than in the United States. Even with Chinese inspired foods and coffee-free beverages, the high prices made it hard to attract customers. With the

Starbucks has been expanding globally and has such a recognized label they know don’t even have to put it on some of their drinks. Starbucks has added an average of two stores on a daily basis since 1987, reaching a steady growth, with California having the highest concentration: 560 stores within 25 miles. They opened their first store in Beijing in 1999 and there are now 376 stores in china. They expect to reach 1000 by 2015.

Founded in 1971 at Pike’s Place Market in Seattle, Washington, Starbucks coffee went from a high-quality, do-it-yourself whole bean retailer to an international 6.4 billion dollar empire. As of 2005, there were 10,500 stores worldwide where customers could enjoy a cup of the internationally recognized coffee at a convenient location. Starbucks achieved this through a series of strategic movements all while offering a great in-store experience and quality coffee.

In the 1990’s the company grew at a very fast pace. Studies show that Starbucks opened a new store every working day. From one store by its founders Starbucks grew to more than 8,000 stores in the United States itself and over 4000

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.

Although the Chinese dislike drinking in public, the high awareness of the brand and the Chinese market being so brand-driven outweighs this habit. The Chinese consumers perceived the high prices as conveying quality and sophistication. Retailers keep this in mind as they charge more for public consumption, as customers go to Starbucks if not for the coffee, but to present themselves as modern Chinese in a public setting. China 's tightly regulated business environment still throws up lots of hurdles for Starbucks. Its fragmented government and currency-conversion limits make banking difficult. "If I want to move money out of China, it 's a hellish process," says Charles Jemley, Starbucks vice president of finance in China. Book bags and coffee mugs barely made it out of customs in time for Starbucks to pass them out at a rural teacher-training session