Case Study: Starbucks

 

Summary

The case study is about the launch and success of Starbucks in the Chinese market. There is an in depth analysis of different strategies used by Starbuck to take advantage of a localize approach to capture the Chinese market. Starbucks partnered with three local Chinese partners and focused on providing their Chinese customers Starbucks products blended in local taste rather than what they have been selling elsewhere. This is a critical analysis of setting up Starbucks at different Chinese locations keeping in mind the local culture.

 

Discussion Questions:

  1. Prepare a SWOT analysis based on the case to support Starbucks’ expansion plans in China. Based on your SWOT analysis, what recommendations would you make to Starbucks’ CEO with regard to the market development growth strategy for this country?

Strengths: Starbucks experience in its respective field is a great help in establishing other coffee shops. Starbucks has recognized the importance of joining hands with local partners and it is proving beneficial for them.

Weaknesses: Starbucks is an American based brand with the taste of its products based on the needs of American customers. They need to indigenize their products to the Chinese market.

Opportunities: China has an emerging middle class with a capacity to spend money on leisure activities. There is less competition in the Chinese market when it comes to the sale of coffee.

Threats: China has a diverse culture and not recognizing this fact can have fatal consequences for any business. China is a tea drinking country and Starbucks has to take measures to create a demand for coffee which it specializes in. The premium pricing strategy also may affect its sales in China.

In my opinion, Starbuck CEO might need to reconsider the rapid growth strategy in China. He might want to focus on bringing quality to the existing installments and move forward slowly, keeping in mind the overall condition of Chines economy. The CEO could also reconsider the premium price strategy where they are not getting their prices in line with the local purchasing power of Chinese customers. This way they can attract even more customers and retain the existing customers.

 

  1. Give examples of how Starbucks was successful upon entering the China market. Please use the following videos to frame your response.

 

  1. Starbucks grows coffee in China, Reuters Video, available at: www.youtube.com/watch?v=BYSiGomkGdg
  2. Starbucks in China, available at: www.youtube.com/watch?v=0A3rnWIEJY8
  • Starbucks wakes up to China, Reuters Video, available at: youtube.com/watch?v=CgWJAouxorg

Starbucks has been successful in creating a market for it premium product coffee. Starbuck has been successful in doing so by recognizing the needs and taste preferences of the local Chinese population and blending its taste in accordance to it. Starbucks opened its first coffee bean form and processing plant in china in 2010 (“Starbucks grows coffee in China,” 2010). This has made it possible for Starbucks to win the confidence and trust of the locals by creating more jobs. Starbucks have also attracted local Chinese by paying premium prices for quality coffee beans grown by the local farmers. Starbucks has also introduced a new logo that has a more international calling and no text (“Starbucks wakes up to China,” 2011). This step has been appreciated by its Chinese customers and they believe that it is a step in the right direction.

Starbucks needs to be careful in making a proper assessment before they open a coffee shop at a location of historical significant. The opening of a coffee shop inside the “forbidden city” (“Starbucks in China,” 2007) which has a great historical importance has sparked an outrage which suggests that Starbucks needs to do more in order to understand the local culture and avoid any obstacle in its progress.

 

  1. Compare Starbucks’ U.S. and Chinese strategies. What are the similarities and differences? What generalities can you glean from this analysis to help the company expand into other global marketplaces? Please use the case and the following article to frame your response.

 

  “Starbucks’ Quest for Healthy Growth: An Interview with Howard Schultz,” McKinsey Quarterly 2 (2011), pp. 34–43, www.mckinseyquarterly.com/Strategy/Growth/Starbucks_quest_for_healthy_growth_An_interview_with_Howard_Schultz_2777.

(“Starbucks’ quest for healthy growth: An interview with Howard Schultz | McKinsey & Company,” 2011.)

Starbucks has been successful in the Chinese with a mixture of strategies that it has been using in the US market over the previous few decades. Starbucks has adopted to the same rapid growth strategy in Chinese market just like US where it has opened coffee houses at a large number of places. Starbucks have also been focusing on winning the trust of its employs in both markets where they offered benefits and growth opportunities for them.

According to the Howard Schultz, the CEO of Starbuck, Starbucks had been making a mistake of opening new coffee houses around the US without a careful consideration and it has a blowback when they had to close many of the coffee houses with the first 18 months of their establishment (“Starbucks’ quest for healthy growth: An interview with Howard Schultz | McKinsey & Company,” 2011). He believes that they need to learn from the mistakes they made in the US and avoid repeating them in the Chinese market.

Starbuck had a different strategy in the US and China when it comes to the taste of their products. They researched the needs of the Chinese population and introduced coffee that had a taste that was well appreciated by the Chinese customers. There is a possibility that if they had gone with the American taste into the Chinese market, they would have failed.

In my opinion, Starbucks can learn from their experience and apply the same tactics of assessing the local population with respect to their taste and spending preferences in any other country before having a physical existence there. Attract the local work force by providing them with training and growth opportunities that would help with wining the trust and support of their local employs. Starbucks can focus on expanding their coffee houses with a speed that does not cover their mistakes before they have been properly addressed. This will ensure a growth in the right direction without setbacks just like they had in the US market.

References

Starbucks grows coffee in China. (2010). Retrieved from

https://www.youtube.com/watch?v=BYSiGomkGdg

Starbucks in China. (2007). Retrieved from

Starbucks wakes up to China. (2011). Retrieved from

https://www.youtube.com/watch?v=CgWJAouxorg

Starbucks’ quest for healthy growth: An interview with Howard Schultz | McKinsey & Company. (2011). Retrieved from http://www.mckinsey.com/insights/growth/starbucks_quest_for_healthy_growth_an_interview_with_howard_schultz