‘Starbucks Aims to Alter China's

Taste in Caffeine’

Group 7Bertand Meunier

Kenthi W. Lantasi Jesiska Jappy

Master of ManagementGadjah Mada University

INDONESIA

Case Summery

•Seattle, Washington-based coffee company

•First, seller of packaged, premium specialty coffees

•Now, known for its coffeehouses

•To continue this rapid pace of growth, the firm’s senior executives are looking to expand internationally

•For Asia Pacific market, Starbucks sees China as its next big international

opportunity and as priority

Chinese Market

“Citing its large urban population, rising economy and increase in coffee consumption, Starbucks estimates that China could ultimately be one of its largest market, and in the long term it has the potential to be second to the U.S.A. in the number of stores," Mr. Coles, president of Starbucks Coffee International, said.

Current situation in China

- Entered in 1999 and up to 2005, Starbucks had 120 stores in mainland China

- Although China considers itself as a land of tea drinkers but the expansion of a coffee shop in China is striking as in Japan

- Offering only three or four kinds of tea in its shops in China, in addition to the usual coffees of all flavours

- In HongKong in which many drink tea, Starbucks has 51 stores and is already considered to be part of the local culture and did not seem like an American import

- Though Starbucks is growing quickly in China, it has run into some of the same intellectual property disputes that have bedevilled many companies

Main Issue

Starbuck’s main goal is to become ‘the most recognized and respected brand in the world.’

Many people in the global market have different preferences between coffees and teas as well as in China. However the growing rate of coffee shops in its market shows that coffee has become more and more popular. The main issues related to this matter concerns more on cultivating the love of coffee in the Chinese market.

Starbucks has to enter a market which has different culture and preferences toward coffee.

Problem Statement

How should Starbucks tackle local/ cultural

differences in tapping the global market?

Analysis

To tap into the global marketing, there are five major decisions that need to be made by a company

1. Whether to go abroad

- International markets present higher profit- U.S market is starting to saturate

Thus the company decides to go abroad in order to continue the company’s growth by exporting its concept aggressively. But mainly they expand to achieve their goal to be

‘the most recognized and respected brand in the world.’

Analysis 22. Which market to enter, how many markets

to enter and how fast to expand

After successfully entering and growing in North America, Starbucks has interest in

further expansion to Europe (including the Middle East), Asia Pacific (including Australia and New Zealand) and Latin America.

Waterfall Approach - This approach carefully plans the expansion and is less likely to strain human and financial resources. The first international store was opened in Tokyo, Japan. The company hired blue-chip consulting firm to guide the Starbucks to succeed in Japan two years before the opening. Markets’ attractiveness influenced by its geography, income, population, and political climate is also important.

Starbucks sees China as the most potential growing market because of its citing large urban population and rising economy despite of its intellectual property rights enforcement.

Analysis 3

3. how to enter the market(indirect and direct export, global web strategy,

licensing, joint ventures and direct investment)

Through license or joint ventures with a local company

The company looks for the local business partner which shares Starbucks values, culture and goals about community development as follows:

• Similar philosophy to the company in terms of shared values, corporate citizenship, and commitment to be in business for long haul

• Multi-unit restaurant experience• Financial resources to expand the company concept rapidly to

prevent imitations• Strong real-estate experience with knowledge about how to pick

prime real estate locations• Knowledge of the retail market, and• The availability of the people to commit to the Starbucks projects

Analysis 4

4. The marketing program

How to adapt their marketing strategies to local conditions in which the company is planned to enter

- Product adaptions- Retail expansion- Intellectual property violations- Country of origin effects

Analysis 5

5. The marketing organization

Starbucks used a subsidiary called Starbucks Coffee International Inc.

This subsidiary consists of twelve managers that decide on the strategy and operations for the global expansion of Starbucks. This can be considered as a global organization that plans worldwide marketing policies, financial flows and logistics systems. The global strategy of Starbucks can be seen as a ‘glocal’ strategy. They use a global concept and adapt this to local customs and needs.

Conclusion

• The Chinese market is a crucial part in achieving its goal, therefore Starbucks has to carefully establish their strategy in conquering the Chinese market.

• Difference in culture and country taste and preference towards the coffee, thus use of adaptation to the local culture without loosing its American’ tastes of their products.

• Use of Starbucks country of origin effects

• Starbucks’ way of getting known is to be everywhere. This has been proven to be a successful strategy in North America and will also be successful in China. - shorter queues and better consumer services people can find their Starbucks in a short distance and therefore can integrate the Starbucks coffee in their way of living

• Intellectual property problems are hard to tackle government regulations are still not well developed yet many counterfeiting companies and counterfeiting is rooted in the culture.

Stopping counterfeiting will be very difficult, but Starbucks can try to set up a special unit to track the down the fake Starbucks locations and sue them.

Recommendations

• Main focus should be integrating Starbucks in the Chinese way of living. Starbucks should continue the retail expansion. A high presence rate in the streets of China will improve the brand awareness. With higher brand awareness Starbucks can penetrate into the life of the Chinese customer.

• Brand awareness is not enough. Starbucks needs to be accepted by the Chinese customer. Brand loyalty can be achieved by providing products that relate to the Chinese culture. Meaning the Chinese customer would have associations with the products and are more willing to buy and try out Starbucks. Once they are satisfied (Starbucks can achieve this by delivering high customer service), people would embrace the Starbucks brand and the retention rate will be high.

• Not only the beverages should be adapted to local interests, but also other products like the music and merchandize should be adapted to local interests.

• Tackling counterfeiting can be done by setting up a special unit to track these fake Starbucks stores and report them to the local authority. Starbucks can also