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Starbucks and the Chinese Market
The Chinese market is described as unique and difficult due to its climate, level of wealth and development, food preferences, laws, languages, traditions, spending motivators, and habits (Zakkour, 2014). Because of these characteristics, many brands invested in the country. However, some companies failed because their marketing research was insufficient to remain in the business. Some companies might have failed, but some were also successful in positioning their companies. One example is Starbucks. They scrutinized every detail upon entering: from demographic to its political and legal factors.
Culture was one of the factors that Starbucks had to consider upon expanding into the Chinese market. For a tea-loving community, it wasn’t easy for Chinese people to embrace the idea of coffee drinking mainly because it was not part of their culture. Cultural values are very important to all Chinese people. Starbucks saw an opportunity to expand its business and formed partnerships with Chinese business people and investors in order to expand its offshore business (Khlystov, 2016). Nevertheless, the company still had a hard time to attract customers who had their taste buds locked into tea. At that point, Starbucks came up with an idea to lure the Chinese people: they incorporated Chinese culture into the structure and design of their outlets. It was effective. They were able to entice customers by creating a particular ambiance in their outlets: serene and quiet, a place where customers can feel relaxed with friends and families – but instead of having tea, customers got coffee in their cups.
After understanding their cultural values, Starbucks faced political restrictions. China is a highly bureaucratic country with difficult processes of getting permissions and sanctions to start and run the business (Das, 2017). Entering a communist party where political things could change anytime was a challenge for Starbucks. As a result, they maintained and built relationship with firms and the government officials. It was also essential for the company to understand the property right laws and licensing issues upon entering an emerging market. They used intellectual protection laws to prevent its business model and brand from being illegally copied in China (Devault, 2018). Starbucks registered all its major trademarks in China four years after opening its first café in 1999 (Devault, 2018).
The vital demographic factor that Starbucks had to acknowledge was who to market its products to. With China’s ever-growing population and changing times, the older generation holds more collective goals, while the younger generation is more individualistic (especially considering the new law of one-child policy). However, Starbucks has become one of the most popular brands amidst the age group ranging from 20 to 40 years old called “Chuppies”. Local people who were trying to ape the Western lifestyle patronized coffee drinking as well. In addition, the younger generation enchantment to brands and products from the West led Starbucks to gain an understanding more about the business climate in China.
Their initial global strategy was to use different types of owner structures; they either used authorized local developer or set up a joint venture. Having these strategies helped the company to sell their products because they had someone who understood the different facets of the government and its counterparts. In addition, these local partners knew the Chinese market condition better. It was an effective step to satisfy the preferences of the different regions of customers. Although they were operating at a low risk level, the disadvantage was that they company were only receiving royalty fees. This means that they were only reaping minimum profits as the market grew. China became a member of the World Trade Organization (WTO) in 2001, which opened up opportunities for foreign investors to invest in the Chinese market. The organization made it easier for foreign companies to navigate alone. To take advantage of this opportunity, Starbucks announced that it was buying out its partner in China and took control of 60 stores in 2006.
The ability to adapt assists everyone, whether a business or a person, to keep moving forward. With the population of China continuing to grow and with the country in the WTO, the possibilities are limitless. Starbucks has expanded all over the world and will continue to grow as long as they follow the same practices they put in place like the ones in China.
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