Starbucks Expansion Into China

Topics: Starbucks, Coffee, Espresso Pages: 5 (1809 words) Published: January 3, 2013
Starbucks expansion into China

In the following research we will look whether Starbucks will be able to launch an aggressive expansion throughout Mainland China, a country known for its tea drinking history dating back to 5,000 years. Starbucks is known for its ability to locate the business outlets in perfect spots as well as market their products in beneficial ways. This report will try to analyze the three main questions: 1) Should Starbucks continue its expansion in China?

2) Will the Chinese be willing to change their tradition of drinking tea, after 5,000 years, to coffee? 3) Will Starbucks current marketing plan work in China without advertising? 

Company Overview 
The history of Starbucks dates back to 1971, that’s when the first coffee shop was, opened in Seattle, Washington in by three partners Jerry Baldwin, Zev Siegel and Gordon Bowker. The store only sold coffee beans and coffee brewing equipment, the actual coffee, which it is famous for only arrived later on. After 10 years of successful business, entrepreneur Howard Schultz was hired as director of retail operations in 1982, and, after his trip to Milan, he suggested that the company should sell coffee and espresso drinks as well as beans to maximize the profits. However the three partners rejected this idea, believing that getting into the beverage business would distract the company from its main focus. Certainly there was a lot of potential money to be made selling drinks to on-the-go to Americans; and so Schultz started the Il Giornale coffee bar chain in 1986.  In 1984, the original owners of Starbucks, led by Baldwin, took the opportunity to purchase Peet's. In 1987 they sold the Starbucks chain to Schultz's I1 Giornale, which he immediately renamed as Starbucks and quickly begun a rapid expansion. Starbucks opened its first locations outside Seattle in Vancouver, British Columbia, Canada and Chicago, Illinois, United States that same year. In 1990 Starbucks was offering stock options to employees and went public. At the time of its initial public offering on the stock market in 1992, Starbucks had increased the amount of outlets to 165.  The first coffee shop outside North America was located in Tokyo in 1996. Starbucks entered the UK market in 1998 with the acquisition of the then 60-outlet Seattle Coffee Company, re-naming all its stores as Starbucks. By November 2005, London had more outlets than Manhattan, a sign of Starbucks becoming a global and international brand.  In April 2003, Starbucks completed the purchase of Seattle's Best Coffee and Torrefazione Italia from AFC Enterprises, bringing the total number of Starbucks-operated locations worldwide to more than 6,400. On September 14, 2006, rival Diedrich Coffee announced that it would sell most of its company-owned retail stores to Starbucks. This sale includes the company owned locations of the Oregon-based Coffee People chain. Starbucks representatives have been quoted as saying they will convert the Diedrich Coffee and Coffee People locations to Starbucks stores.  Today, Starbucks has expanded to more than 20,300 stores in 61 countries around the world. Their biggest presence is still in the United States, with 11,000 locations. Starbucks could be found even in the most diverse locations, such as Romania, Egypt, Saudi Arabia, Curacao and so on. The most recent statement from Starbucks points out an expansion to a further 1500 stores around US within the next 5 years.

Business Situation 
China will be the ultimate test for Starbucks, as it means reaching out to new markets where Starbucks strategy has been to sell diverse the product range as much as possible such as coffee beans, mugs, music, sandwiches and pastries, as well as salads and yoghurts. It’s been trying to promote the image of a socially responsible firm that cares about health and lifestyle of their customers. In Hong Kong, the initial strategy was to sell coffee...
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