It has to develop relationships with families and communities, which inevitably make it more attractive to and successful in local partnerships. Moreover, Western brands cannot effectively maintain a lower pricing strategy than local Chinese brands. In the following years, the company expanded its influence by forming joint ventures with Uni-President Group and Mei-Xin International Ltd to operate in Shanghai, Hong Kong, Shenzhen, Macau, and other parts of southern China. 2.1 SWOT analysis for Starbucks. Localization makes the company approachable and accessible, eliciting trust and confidence from local consumers because the company becomes one with them, a company that understands and responds to their needs. Check Writing Quality. This case study will consider how market research has strengthened Starbucks entry into the Chinese markets. The Former Largest Starbucks, Found in Shanghai, China. To make its presence felt in South China, Starbucks worked with Maxims caterers, a Hong-Kong based company. If it can pull off its strategy, Starbucks could solidify . Starbucks Globalization Strategy. Types of International Strategy. As people became more familiar with the brand, they began to introduce more coffee flavours to promote the American coffee-drinking culture. However, the growing popularity of Starbucks Coffee in China is an interesting phenomenon and has caught much attention from the industry. Fax: 1-800-856-2759, Phone: 1-800-969-6853 There is a growing demand for international ideas, brands and companies. The company tries to reduce costs as much as possible through standardized products and economies of scale. Laws and business practices can make it challenging for foreign companies to grow without local advice, knowledge, and networks. Starbucks' competitive advantage is built on product, service, and brand attributes, many of which have been shown through market research to be important to Starbucks' customers. What factors influence Starbucks products' prices in a specific region? Howard Schultz, the new marketing director of Starbucks went to Milan on a buying trip in 1982. As of May 2016, the world's largest coffee company has more than 2,100 . Starbucks incorporates another localize strategy in every country they go, by modifying the name of Starbucks to suit the local language. Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. We will write a custom Essay on Starbucks in China and Cross-Cultural Values specifically for you. The company has continued to build on this. From Amazon to Taco Bell, from Best Buy to Ebay, they either quit the market or just survived. The framework for determining the type of international strategy used by a company is called A high level of local responsiveness indicates a business's tendency to adapt its products and services to local needs. Strengths Weakness Brand awareness is very high in China. Instead, coffee shops here are a destination. In the beginning, managers didnt know how to accustomed Chinese to drink and appreciate coffee. It showed the biggest challenges for Starbucks, because of the old tradition of tea drinking in China. for only $16.05 $11/page. Strategy is a balanced problem, sometimes difficult (Allard, 2004). It has done an extensive consumer taste profile analysis to create a unique East meets West blend. Starbucks has literally created demand for coffee in China. Under the new owner, Starbucks went on to open stores in Chicago and Vancouver, British Columbia. This has endeared the brand to the local people and allowed it to enjoy global success. In. Over 10 million students from across the world are already learning smarter. (Photo credit: JOHANNES EISELE/AFP/Getty Images). Chengdu promotes capitalism at a level evidenced by the presence of stores like Louis Vuitton and Cartier in its downtown. Also have to say is that Starbucks unique mermaid logo, its dark green Due to its successful marketing strategy, today Starbucks has around 31000 stores in the world. What are the types of international strategies used by Starbucks? However, it is not denied that there are still some problems in Starbucks in China drinking market. Bartlett & Ghoshal Matrix is a framework for determining the type of international strategy pursued by a business based on two criteria: global integration and local responsiveness. The porters five forces analysis for KFC in China is depicted below. It mostly depended on the people to spread goodwill through word of mouth than commercial advertisements and media products. Many go to Starbucks not just for a cup of Frappuccino, but also for the Starbucks Experience that makes them feel cool and trendy. Starbucks is no stranger to the concept, being the largest coffee chain in the world (in terms of revenue) and being present in 83 countries and having 32,660 stores worldwide.
These partners provided Starbucks insights into the tastes and preferences of Chinese consumers as well as helped build on local expertise.This example demonstrates that being able to adapt to this different marketplace often requires this kind of international collaboration. It managed the operations in the region of Hong Kong, Shenzhen, Macau, Guangzhou, and other parts of southern China. For coffee lovers, it is highly probable that you got your caffeine fix from a Starbucks store near you. Starbucks opened in Australia in 2000 and grew to nearly 90 locations by 2008. Market research is at the core of many of the market entry strategies Starbucks is employing. In an interview with BCG, Schulz said about the first Forums held in 2012: Think about an annual meeting of shareholders; we had anannual meeting of parentsin Beijing and Shanghai, and we had about 90% participation. Which was considering analysts as too costly? There hasnt been an ideal example. China is Starbucks' second biggest market. Will you pass the quiz? As of now, Starbucks is growing in China at the rate of 1 Northern China - a joint venture with Beijing Mei Da coffee company. Earn points, unlock badges and level up while studying. Comparing with 2011, the net income from Asia-Pacific increased 28% while the whole company's income (global) was 11%. There are some advantages for Starbucks with a joint venture to enter the Chinese market. In China, KFC has localized its business strategy by using raw materials that are produced locally, thus stimulating the growth of different industries that produce the raw materials. Last year, I realized that 2 of my colleagues walk 15 minutes each side just to go to the nearest Starbucks, considering the fact that we have 3 cafes in our building already. 5000 stores by 2021 ( every 15 hours) All global companies can learn from this: attention to and execution around Chinese culture is the root of a foreign brands success in China. Create the most beautiful study materials using our templates. In 1987, the original Starbucks owners offered to sell the company, and Schultz immediately grabbed the opportunity. Starbucks has developed an internationalization strategy to enable the company to open stores and franchises in countries across the globe. Normally Starbucks follows a high standard technique to maintain its stores worldwide. Marketing analysts wondered if the initial success of Starbucks in China could be sustained. The aggressiveness of the brand to gain new Starbucks locations continues to this day. It is beneficial for Starbucks to obtain the required permissions and sanctions so that it can be opened easily. This year, it announced the launch of the Starbucks China Parent Care Program which currently provides health insurance for elder parents of 10,000 employees and will likely extend to more employees. After 1978, the country's economy underwent dramatic changes which involved such . Their first coffee shop operated at Seattles 2000 Western Avenue. The company created the "Starbucks experience" that appealed to consumers. 1. Instead, it focused on selecting high-visibility and high-traffic locations to project its brand image. Long term commitment also means patience. Consequently, they want to be associated with brands and products that portray prosperity, success and upward mobility. ilearnlot.com First Content Inc 2023 All Rights Reserved. Company websites are localized, making them available in the local language and conforming to local preferences, traditions, beliefs, laws and regulations. A high level of global integration means that the business will try to reduce costs through Multi-domestic strategy is characterised by high local responsiveness, low global integration. The stores were also larger in area than the ones in the US, as the idea was to make the customers feel at home, relax and spend more time there. They were able to adapt their business model to fit China while keeping their core values. Starbuck's main mission is to inspire individuals throughout their brand. Its amazing how what used to be a simple cup of brewed coffee can change the tastes of people from different cultures. One contributing factor to this major success is Starbucks' international strategy and its ability to adapt to each market. In the east, it associates with Uni-President and in the South, Maxim Caterers. In Shanghai and westernized, the stores a standard menu where they served coffee. What is the pricing strategy that Starbucks adopts internationally? MBA Knowledge Base, Case Study on Marketing Strategy: Starbucks Entry to China, n.d. 6. This pricing strategy has allowed the company to maximize its income while building a premium brand image to differentiate itself from the competitors.
Infographic via
, Image Copyright: Teerawut Masawat / 123RF Stock Photo. Starbucks started as a small coffee shop in Seattle in 1971, founded by three university students. The structure of the organization is highly decentralized, which allows subsidiaries to operate autonomously and independently from the headquarter. Within the country, culture and demographics differ between regions. It's been a long road already for the coffee giant in the world's most populous nation, where it opened its first store 17 years ago. It maintains 18 design centers worldwide . Starbucks currently has over 600 stores in 12 Middle Eastern and North African countries. In addition, all baristas in the host country have to undertake the same training as those in the US. From partnering with Tata Global Beverages in India to partnering with a Chinese company Tingyi Holders to make and sell ready to drink products in China. Chinese consumers quickly developed a taste for Starbucks coffee, which was essential to Starbucks success in China. Walk into any Starbucks in an office building at 3PM and you will see a buzzing throng of people exchanging office news, admiring and getting information about the latest fashions fromtheir colleagues, and talking with their friends about the next travel destination. When does Starbucks employ wholly-owned subsidiaries, joint ventures, or licensingentry strategies? Generally, I wouldnt mind walking 30 minutes since I like it anyway. This is particularly impressive in Asia where tea is the preferred drink. Localization, one of manytranslation services, goes beyond standard translation. The next thing Starbucks did was to capitalize on the tea-drinking culture of Chinese consumers by introducing beverages using popular local ingredients such as green tea. If this article defines your study course material, then have some time Comment below for next. Starbucks' success in its internationalization process comes down to its cultural mindfulness and intensive research of the host market. "+e);if(n[0].getAttribute("href").indexOf("refurl")<0)for(var r=0;r