1. For Starbucks, how is the Chinese market different from the U.S. market?
2. What are the pros and cons of Starbucks’ choosing China as its priority in its growth plan?
3. Based on the cultural differences between the Chinese and U.S. markets, what recommendations would you give to Starbucks to more effectively attack the Chinese market?
Starbucks plans to announce soon an accelerated push into the Chinese market, company executives said Friday, the latest in a series of aggressive efforts by international food and beverage companies to expand in China. What is striking about all these efforts, by companies like McDonalds and KFC as well as Starbucks, is that they have made only a few concessions to Chinese tastes so far, instead cultivating in China an appetite for Western products like Big Macs and grande lattes. Like many other foreign companies, most notably General Motors, chains like Starbucks have also struggled in China with copies of their stores and logos.
Martin Coles, president of Starbucks Coffee International, and Christine Day, president of Starbucks' Asia and Pacific group, called a news conference in Hong Kong on Friday but then said they were not yet ready to announce details of their plans for China. "When you work with partners, it always takes more time than you think it will," said Day, adding that she expected an announcement in "a couple of weeks." Starbucks already has 120 stores in mainland China, a market it entered in 1999, and another 194 in Hong Kong, Macao and Taiwan. The company now has 9,000 stores, with 2,600 of them outside of the United States. The focus of growth is clearly outside the United States, with China assuming a special priority, Coles said. The company's long-term goal he refused to set a time period is to have 30,000 stores, with half of them outside the United States and a very large proportion in China. "Longer term, it has the potential to be second to the U.S.A. in the number of stores," Coles said.
The expansion of a coffee shop chain is particularly striking in China, a land of tea drinkers. Starbucks typically offers only three or four kinds of tea in its shops in China, in addition to its usual range of coffees of all sizes and flavors. But while Starbucks is considering whether to offer more kinds of tea, it is mostly trying to cultivate in China a love of coffee. The company's market research has found that Chinese customers tend to come in initially just to find an inexpensive place to meet, and then begin buying coffee as they become repeat customers. Joey Chan, a 35- year-old clerk visiting a Hong Kong Starbucks shop at lunchtime Friday, said that the stores had become part of the local culture and did not seem like an American import. "Hong Kong people love chatting, and you can stay here as long as you like without worrying that you will be asked to leave by the waiters," he said. Day said that Starbucks had already brought a couple of Asian beverages to its American stores, notably green tea frappuccino, and was considering "four or five" more Asian beverages to add to Starbucks menus around the world.
While Starbucks has been growing quickly in China, it has run into the intellectual property violations that have bedeviled many foreign companies. A single coffee shop in Shanghai beat Starbucks to the business registration authorities in that city and registered the pinyin spelling of the company's name, "xing ba ke." Day said that the company had sued and expected a court verdict soon, adding that the shop had already taken down a sign that resembled the Starbucks logo.