Starbucks in China

Topics: Culture of China, Han Chinese, China Pages: 8 (3400 words) Published: September 16, 2013
Why did Starbucks fail in the Forbidden City?
Zane lee (Ziang Li)
ESLI PMP

Why did Starbucks fail in the Forbidden City?
Introduction
Nowadays, economic globalization is becoming an irreversible tendency; therefore, different multinational corporations always want to extend their branches to other countries, especially for the food companies, such as, McDonald’s, Starbucks, and Burger King. In recent years, the world has also witnessed that China’s economy has developed to a higher level since China has reformed and opened for more than 30 years. According to Lardy, in the middle of 1990s, China had become one of the largest world’s trading nations (Lardy, 1995, p.1). Now, Chinese customers have more desire and abilities to enjoy western food. Therefore, many multinational food corporations, such as, Starbucks, KFC, and Krispy Kreme, want to enter in Chinese market, and these companies treat China as an emerging market because of the development of Chinese economy and consumption ability. However, China has thousands years of history, and its market situation is complicated. It is hard for western companies to be adapted to the situation. Now, some western food companies, to some extent, have achieved success in China, such as, Starbucks, KFC, and McDonald’s. There were also many companies, such as Dunkin, Krispy Kreme, and Burger King failed in China (Rein, 2012). Starbucks is one of the few that has successfully entered the Chinese market, but it is still facing many challenges, and it also failed in the most traditional areas in China, such as in the Forbidden City. In the past ten years, Starbucks has achieved much success in general business areas in China. Starbucks is an international coffee retailers which was founded in the early of 1970s in Seattle, U.S. It sells both a variety of coffee and other related beverages all over the world (Marketline, 2012, pp.3-4). Starbucks entered in Chinese market in 1999 (Wang, 2012, para.3). As the Trefils team (2012) shows that with the development of Starbucks, “Starbucks has successfully opened more than 570 stores in 48 cities since it first entered China twelve years ago. Building on this momentum, it plans to open 1500 stores by 2015” (Trefils team, 2012). To achieve the success, Starbucks’ marketing strategies have exerted a big influence in this process. According to Rein (2012), Starbucks introduced “coffee experience shop” to give customers an opportunity to experience Starbucks’ culture, and Starbucks developed some tea-flavor coffee to be adapted to Chinese flavor. Moreover, Starbucks chose wonderful shop location to promote its brand image and avoided using advertising or promotions to make direct conflicts with the Chinese tea culture. Furthermore, Starbucks also collaborates with local companies to spread Starbucks’ business and to reduce Starbucks’ cost (Rein, 2012). Through taking these strategies, Starbucks, to some degree, has overcame the challenges from both the traditional culture and the local competitors, such as U.B.C and Dio Coffee. However, Starbucks still failed in the Forbidden City. According to Netzley, Digantral, Wong, Tan, & Hee (2011), at the Yale CEO Leadership Summit (2006), China Central Television’s news compere Chenggang Rui asked Jim that “Do you have plans to open stores in the Taj Mahai, Versailles, or Buckingham Palace?”. Half year later, Rui posted a blog in Sina blog to against Starbucks’ existence in the Forbidden City, and he thought that Starbucks existed in the Forbidden City was a kind of erosion for Chinese culture. Even though in 2007, the internet was an infancy in China, it was growing fast. There were tens of thousands of people following Rui’s blog at that time. “In January 2007, Rui, an experienced media personality from CCTV turned this communication channel on Starbucks. The effort to remove the iconic western brand from the centre of the Forbidden City quickly became global news” (Netzleym, Digantral, &...

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