Starbucks' Success Story in China
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Case Code: BSTR306 Case Length: 23 Pages Period: 1998-2008 Pub Date: 2009 Teaching Note: Not Available |
Price: Rs.400 Organization: Starbucks Industry: Food and Beverage Countries: China Themes: International Business, Globalization Business |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Global Ventures
In 1995, the company was organized into two separate business units, North America and International. Thus SCI was created as a fully-owned subsidiary of the parent company. The purpose of SCI was to help Starbucks expand internationally as the company was of the view that the growth in the US might become stagnant in the near future and so it was necessary to find other channels of growth...
Starbucks Tests Chinese Waters
After the opening of the Chinese economy in the early 1980s, China became a lucrative market for international investors. In the period between 1990 and 2003, the Gross Domestic Product (GDP) of China grew 9.3 percent on an average...
Starbucks Opens Outlets in China
After running the distribution business for a few years, Starbucks gained considerable knowledge about the market conditions and then started to open Starbucks Coffee stores in China. In China, the company adopted a strategy of having three different partners to access different regions...
Introducing Coffee to the Chinese
When Starbucks started in China, one of the biggest challenges it faced was to make the consumers accustomed to drinking and appreciating coffee. According to analysts, compared to other countries in which Starbucks operated, this task was more difficult in China because of the age old tradition of tea drinking in the country, where coffee was seen as nothing less than a kind of Western invasion...
Expansion Strategies in China
In December 2001, China became a member of the World Trade Organization . This event opened the Chinese market up to foreign investors. Several economic reforms and relaxation of laws in various phases followed, and these gave a fillip to Starbucks' expansion plans in the country...
Localization Strategies
Contrary to its usual trend of maintaining strict standardization techniques, Starbucks's strategy in China involved adapting the business to the local culture and market conditions. The company attempted several localization strategies to gain the confidence of the people...
Promotional and Pricing Strategies
The company avoided commercial advertisements and promotion in China. It mostly depended on the people to spread goodwill through word of mouth. Starbucks tried to market the 'Starbucks Experience' in terms of its store ambience, product quality, customer service, employee relationship, etc...
Challenges
Starbucks faced several challenges in China ever since it opened its first store in The Forbidden City, which was considered a seat of Chinese culture and tradition. According to analysts, people were against the commercialization of the palace area, more so with the opening of a store like Starbucks which, for the Chinese, symbolized a threat from the Western world. Many local people saw it as an intrusion into their traditional lifestyle and culture...
Outlook
In April 2008, according to news reports, Starbucks was looking to further expand in the country by opening about 80 new stores across the country. Moreover, reports suggested that it wanted to target the tier III cities after having built up a substantial presence in the tier 1 and tier II cities...
Exhibits
Exhibit I: Some Significant Events at Starbucks Under Schultz: 1990-2007
Exhibit II: A Note on Starbucks Speciality Retail Business
Exhibit III: Beverage Market in China in 1999
Exhibit IV: Reasons for Starbucks Success in China
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