Starbucks Keeps It Brewing in China

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Assignment 1: Starbucks Keeps It Brewing In China
Shianne Dance Edwards
Strayer University Marketing 510
Professor Karen Mountain
January 20, 2013

How I love the smell of a fresh cup of Starbucks coffee to get the day started. As a coffee lover, I often venture to Starbucks to meet my caffeine needs. Starbucks began as a single storefront located in Seattle’s Pike Place Market. As of July 2012, the company has 17, 651 stores in 60 different countries around the world, with the mission to “inspire and nurture the human spirit – one cup, one person and one neighborhood at a time” (Starbucks, 2012). Enhancing the value of the company are the additional brands owned by Starbuck’s. They include Seattle’s Best Coffee, Tazo Tea, Evolution Fresh, La Boulange and Torrefazione Italia Coffee (Starbucks, 2013). In 2009 the chain opened its first store in China, and currently operates more than 570 outlets in 48 Chinese cities (Starbucks, 2012). CEO Howard Schultz, plans to implement the global strategy with ambition to further the growth and expansion through relationships with China’s billions of citizens. In March 2010, Schultz continued to promote global expansion and pitched to the executive board the idea of embracing the global marketplace and leveraging their brand strength through new and existing projects. The question remains, will Starbucks be able to thrive in a tea driven China? Demographics of a changing Asian society and creative Starbucks strategies suggest that this is possible. Starbucks is a well-oiled business engine that is striving to make China its second home market (Starbucks, 2012). The changes that have to be made will be in their target demographic and non-westernized approach to gaining consumers. Starbucks executives and marketing team are well aware of the cultural difference, values, and economic means that govern consumer’s decision making. Starbucks is confident that they will 4,000 stores by the end of 2013, including 1,000 in Mainland China, 1,000 in Japan, 500 in Korea and its first store in Vietnam (Starbucks, 2013). Determine and discuss the barriers facing Starbucks as they try to teach people to change their consumption habits from tea and instant coffee. Develop a marketing strategy for taking Starbucks into smaller Chinese cities and communities. What barriers would be faced? Could they be successful?

Many of the barriers that Starbucks are facing can be attributed to financial and cultural dynamics. The United Nations reported China as the largest tea consumption and production company. Total tea consumption in China increased by 8.2 percent in 2009, and 1.4 percent in 2010 to reach 1.06 million tons (English, 2012). With Starbucks being a major coffee retailer, this could be very challenging when integrating business in the Asian regions. Coffee is not as valued as it is in North America, South America, and other countries. In the Asian culture, tea is believed to have medicinal uses, and is a part of the social culture, carried from generation to generation in its tradition. Trying to get people to forgo a generational tradition when family tradition is very much upheld, and family is respected will be the challenge. Those that do consume coffee in China often opt for the more inexpensive types of instant coffees.

The potential 1.3 billion-population base that Starbucks hopes to gain leverage with is largely rural and inhabited by low-income families (Best/Hawkins/Mothersbaugh, 2010). The rural and low-income families can be found in the smaller Chinese cities and communities. This too adds to the difficulties that Starbucks faces when tapping into the Chinese market.

Making the teas and coffee products available at local markets would be a great way to market the brand, wholesaling at a discounted price to the local farmers, allowing them to make a profit that they normally wouldn’t be able to make at normal distribution...
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