Most firms and companies successfully operate in their home markets serving a niche market without expanding to foreign markets, however, expansion to other foreign markets results to improved sales, business stability and increased brand awareness. It is in this regard that the Starbuck decided to develop an internationalization strategy that enabled it to open franchises and stores in countries across the globe China included. The main management issues to be addressed in this research include;
1. The essential cultural factors considered by Starbucks as it expanded into China.
2. The key legal and political factors considered by Starbucks in the Chinese marketplace, the risks associated with the factors and the changes that have occurred in the countrys political and legal structure that is advantageous to foreign companies.
3. The demographic factors that were too significant for the Starbuck to understand in China and the demographics it decided to target as it expanded into China.
4. The initial global market strategy employed by Starbucks to enter China, the merits and demerits of the early strategy will be discussed. Besides how the strategy has evolved and the reasons for the change will also be discussed.
Background of the research
Chinas population is estimated to be over billion. China was one of Starbucks global market targets. The country has a double-digit gross domestic product rates and the populous nation in the world. However, these two nations had totally extreme cultural values. The company wanted to maximize on the large population size in China and decided to enter the market. The majority of the Chinese population is coffee drinkers; therefore, the company had to come up with the best market entry strategy because they wanted to bring into the market a different line of product (Harrison et al. 45). The company knew if they could successfully enter the market the company would make more than any other Starbuck franchise in the world. This management project analyzes the Starbucks entry into China.
Research Found, Analysis of Key Issues and Discuss Key Findings
Cultural factors Starbucks had to consider as it expanded into China
China is a tea drinking country and, therefore, the introduction of coffee into the market required a lot of an understanding of their cultural factors. Some of the cultural factors they had to consider included
One of the key cultural factors that they had to consider was the various kinds of food the population ate and why and the reason the people wanted to go there (Smith, Jennifer & Dan 18). The company found out that the Chinese people are communist therefore they decided to maximize on this aspect. The main reason people go to Starbucks is to gather with family and friends, so they decided to make the stores much bigger.
Another factor that they considered is the provision of Chinese dishes; they focused on providing green tea cheesecakes and duck sandwiches. They incorporated the Chinese style menu and providing moon pie and many more Chinese dishes.
Being a tea drinking nation Starbuck engulfed on marketing bread and coffee as chinas new sophistication and mainly targeting the young adults aged between 20 and 40 years commonly known as chuppies (Kearney 29). Their reason for targeting the youth was that the youths do not embrace the collective beliefs but have rather embraced the westerners take on culture and individualism that was represented by the company.
The key legal and political factors considered by Starbucks in the Chinese marketplace, the risks associated with the factors and the changes that have occurred in the countrys political and legal structure that is advantageous to foreign companies.
As earlier stated China is a communist country, and any shift can have adverse effects on businesses. Getting into the market, the company had to consider the political fact that the country is one part-dictatorship. Bing that China dominates in a set of ways, it was a big risk entering the market. The cultural ethics and values were different.
Before China joined world trade organization, the company entered the market by authorizing local developers to use their hotel brand and set up joint ventures with the partners. The strategy worked for the company till 2006 when the company decided to get off the partnerships because they had acquired the necessary knowledge and understanding of the countrys ways of operation.
Outside companies now have an advantage because they can now hold partnerships other than joint ventures. The difference is that with partnerships both partners conduct business together whereas in joint ventures they operate under certain parameters and only receiving royalties.
The demographic factors that were to significant for the Starbuck to understand in China and the demographics it decided to target as it expanded into China.
The most significant factor that Starbucks had to consider and understand going to the Chinese market was the mass that they had purposed to appeal (Fowler et al. 53).
Collective goals are mainly held by the older generation, whereas the younger generation were mostly individualistic and embraced the western culture. In particular when considering the new legislation on one-child has greatly altered their mindsets. The company decided to come up with strategies to maximize in the younger generation. Starbuck successfully got into the market and swept up the younger generation aged between 20 and 40 years. The companys popularity is trendy and is said to be in. Moreover, they also managed to integrate the Chinese tasting characteristics into their operations giving them a competitive advantage over their competitors.
The initial global market strategy employed by Starbucks to enter China, the merits and demerits of the early strategy and how the strategy has evolved
Initially, the company entered the Chinese market by authorizing local developers to use their brands and set up joint ventures was their arsenal global market strategy entry into China. The strategy was beneficial to the company as it strengthened the managements coordination and control and stabilizing the company to get more profits as the company grew. Furthermore, holding and licensing a minority stake is an efficient and effective tool when getting into a new market (Harris 31). The demerit of using the early strategy was that the company did not have full control of the organization. Moreover, some joint ventures could be mismanaged and, in the long run, tarnish the companys brand name.
The strategy has evolved since the country joined the world trade organization that has provided entry platforms for new companies (Han, Gang & Ai 55).
Recommendations to Marketing Management
Currently, the poor economic conditions have resulted in income discrepancies to some consumers in China. It is anticipated that the active Starbuck consumers might decrease concerning the current prevailing conditions. Therefore, it is recommended that the company need to improve its overall performance despite the prevailing economic crisis. The best approach that can be recommended for the company is the resource-based research. Increasing the companys loyal customer base and lowering their prices. Provision of quality services and reduction in stock turnover are some of the recommendations that can be used by the company to remain competitive.
Fowler, Geoffrey, J. Singer, and M. Fackler. "Converting the masses: Starbucks in China." Far Eastern Economic Review 166.28 (2003): 17.
Han, Gang Kevin, and Ai Zhang. "Starbucks is forbidden in the Forbidden City: Blog, the circuit of culture and informal public relations campaign in China." Public Relations Review 35.4 (2009): 395-401.
Harris, Craig. "Starbucks Sees China as Key to its International Growth." Seattle Post-Intelligencer 7 (2006).
Harrison, Jeffrey S., et al. "Exporting a North American concept to Asia Starbucks in China." Cornell Hotel and Restaurant Administration Quarterly 46.2 (2005): 275-283.
Kearney, A. T. "Emerging market priorities for global retailers." available at www. Fiber 2fashion. com/industry-article/pdf files/emerging-market-priorities-for-global retailers. Df (2006).
Smith Maguire, Jennifer, and Dan Hu. "Not a simple coffee shop: local, global and glocal dimensions of the consumption of Starbucks in China." Social Identities 19.5 (2013): 670-684.
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