The Effect of the Current External Environment on the Marketing Management of a Company or an Organization Within the Hospitality or Tourism or Leisure Industry

Topics: Coffee, Starbucks, Coffeehouse Pages: 9 (3308 words) Published: June 11, 2008
By now, most Americans must have heard or be familiar with a chain of coffeehouses, named Starbucks. Established in 1971 as a local coffee bean roaster and retailer, Starbucks has expanded rapidly. By successfully adopting Italian coffee culture into a variety of beverages such as brewed coffee, espresso, teas, Frappuccinos and related products such as music CDs, pastries or ice creams, the Seattle-based company has reported USD 7.9 billion in revenue with 22 percent annual growth (Starbucks, 2006) . Operating 13,168 stores in 41 countries, Starbucks has, inarguably, become one of the largest and most recognizable coffeehouses all over the world (Harrison & Enz, 2005). Meanwhile, the company still targets for operating 30,000 stores worldwide in long-term growth (ibid.). Among numbers of destinations, China is Starbucks’ next target. Opening its first store in 1999, Starbucks is running 540 stores in China, including Taiwan, Hong Kong and Macau (ibid). Although China currently accounted for less than 10 percent of Starbucks’ USD 7.9 billions global sales in 2006, Starbucks’ CEO Howard Schultz believes that the country will soon become the firm’s largest market outside North America (Asia Pulse, 2006). EuroMonitor (2004) showed that Starbucks’ unit sales have jumped dramatically by 814 percent between 1999 and 2003. Despite of its market attractiveness, China can also be a pitfall for any organization. Eight years after opening, Kraft, a multi national food company has been forced to close its dairy-making business. Similarly, Whirlpool has reported to have lost £26 million since its investment to China (Jobber, 2007). Commonly quoted reasons for failure are the inability to cope with diversity, changes or differences in culture, local law, regulations or in other words, failing to adapt to the external marketing environment. Thus, the purpose of this study is to evaluate the influences of the current external environment on Starbucks’ marketing management activities. The author believes that by monitoring and responding to the external environment promptly, Starbucks will have the ability to take advantage of opportunities and to minimize potential threats, thus, be successful. Targeting China, the first and foremost obstacle that Starbucks needs to adapt to is a strong tea-culture. Just like coffee in Europe or America, tea has long been a part of daily life in China. Teahouses can be found in every corner of Chinese cities, just like Starbucks in the US. In 2005, 570,000 tonnes of tea were sold domestically for USD 2.1 billions (Ying, 2006). Dividing this figure by the Chinese population, average per capita tea consumption is approximately 0, 43 kilograms per person per year. In contrast, Chinese people have allegedly associated coffee with Western culture, strong taste, expensive and not healthy (ibid). On the other hand, domestic coffee market consumption in China, despite its rapid growth recently, is only expected to reach 11,568 tones in 2008 or 1 gram per person per year (EuroMonitor, 2005). Since the per capita consumption can be distorted due to a huge population, the coffee market is a fraction in comparison to tea market. A recent study conducted by States Statistical Bureau revealed that tea’s sales volume represent for 42.8 percent of China Beverage Market while tea’s sales revenue only stands for 7.6 percent (Shaojun, 2003 quoted by Harrison & Enz, 2005). Therefore, the author may assume that although tea is popular in China, it is sold at a cheap price. In return, coffee is quite expensive in China, especially in Starbucks’ case. Starbucks’ price is expensive in comparison with average monthly income. Average prices for beverages in Starbucks are RMB 22 (USD 2.75), relatively high in comparison with average monthly income of most people in urban areas, which is RMB 980 (USD 119) in 2006 (USCBC, 2006). Meanwhile, customers can get a cup of coffee and a set lunch for as little as RMB 3 (USD 0.36) in local...
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