Starbucks International Marketing

Topics: Coffee, Espresso, Starbucks / Pages: 5 (1037 words) / Published: Nov 20th, 2013
International Marketing
Group Case Study
Price of coffee in China

Introduction As we all know, coffee is widely consumed around the world. With worldwide production of 7,358,897 metric tons, by average 1.3 kg of coffee is consumed per person. One significant coffee powerhouse is Starbucks. Starbucks uses coffee beans from Central America, Africa and Indonesia which is specially roasted at company facilities in USA and The Netherlands to make their drinks. In order to succeed in foreign markets, Starbucks need to analyse global opportunities such as the consumers ability to buy, to recognize the per capita income (PCI) which is the country’s average income per person for a specific period. Furthermore, an important indicator of consumer potential is the Gross National Product as it reflects the generation of wealth in a country and the overall market size due to growing disposable income such as in China where the per capita income amounted to $750 a year. Starbucks took this opportunity to build their market in China.
Starbucks intend to target a larger segment of customers in China rather than just expatriates, tourists and elite Chinese. Therefore, a lower price in its coffee range, compared to local competitors, is charged so as to make this strategy a success. A grande latte is priced at $4.50 in Beijing, similar to prices in New York. With this standardized form of pricing, it is relevant to the purchasing-power parity, a theory that states prices of internationally traded commodities that should be the same in every country and therefore that the true exchange rates is the ratio of these prices in any two countries. When a local Chinese coffee shop acknowledged that Starbucks coffee range are cheaper , a global firm versus local firm situation denotes. They announced that they would lower their price than their new U.S competitor. However, due to competitive advantage adopted by Starbucks where they outperformed

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