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Starbucks in China Essay

Marketing in the host country

Before entering China, Starbucks decided to invest in market research to analyze the best approach to reach the Chinese market by entering joint with local companies in different regions across the country which allowed a direct access to the consumer for market research purposes. Several interesting findings were made regarding market behavior in China; first of all China is a tea-based consumption market so to generate acceptance to the Starbucks model products were created and adapted for the market by including typical ingredients such as green tea and red beans besides typical type food and pastries, also according to market research the local palate prefers sweet drinks and dislikes and is unaccustomed to the flavor of coffee.

There are great differences between the American and Chinese business model for Starbucks, the greatest of them being that unlike the United States where people usually just stop at a store for a take-out coffee in China it has become a place to relax and meet people; in consequence stores in China are much larger and filled with comfortable seats that allows people to consume and stay a considerable amount in a store. Lots of time and effort have been invested in analyzing consumer behavior in China, the relatively recent opening of Chinese borders to foreign brands has had different reactions, for one the sudden variety of western brands has caused costumers to have a low brand loyalty as the offer is large and varied and all of them new causing consumers to have a larger acceptance to trying new and different brands.

Also China has become an aspirational market, especially regarding younger generations where western brands are looked as luxurious and with higher quality as observed in younger generations who have higher incomes and seek a burgeois life style in China’s large cities allowing a premium pricing strategy that allows Starbucks to balance the cost of business and stop trying to compete with low prices in the local market. Chinese costumer tend to mistrust foreign brands and the products they use for elaborating food so Starbucks has resorted to labeling its food products with the country where it’s imported from to ease consumers concerns for food safety.

Supply Chain Management for operations in the host country

In order to have a cost effective operation in China Starbucks has relied heavily in its vast experience with its effective Supply Chain but it’s taking it one step further with a new coffee growing support center in China which will allow a more effective distribution all along its Asian market this due to the high logistics costs that distributing from ports to the thousands of stores in a country as large as China. Also, a roasting center for beans in China is imminent as actually all coffee beans are roasted in facilities in other countries such as India, Amsterdam and the US. Also regarding food products Starbucks has created alliances with several local distributors and keeps its focus on quality.

Transfer or operational knowledge from the home country to the host country Starbucks has an enormous experience in replicating its business model across the world becoming one of the most recognizable brands worldwide, its firm franchise agreement and constant support to franchisers makes it easy to convey the Starbucks philosophy across its stores worldwide. When opening a venue in other countries Starbucks rely firmly on healthy partnerships with local business partners using experienced Starbucks managers and sends local baristas to Seattle for a long and intensive training program so may convey correctly the “Starbucks Experience” thus having greater control in how stores are managed in other countries.

Deploying a winning management team in the host country

To create a strong management team Starbucks has opted to looking within the Starbucks family for managing its Asia branch. Regarding store managements Starbucks has approached its employees and their families as a way to adapt to Chinese culture where family has a great influence in career taking. Several pitch events have taken place across China to allow employees show their families that they have opportunities inside the company and sharing the company’s view with them thus creating a larger employee loyalty and decreasing the staff turnover.

Burkitt, L. (2012, November 26). Starbucks Plays to Local Chinese Tastes.
Retrieved September 10, 2014, from http://online.wsj.com/news/articles/SB10001424127887324784404578142931427720970 Peterson, H. (2014, August 8). 5 Ways Starbucks Is Different In China. Retrieved September 10, 2014, from http://www.businessinsider.com/how-starbucks-is-different-in-china-2014-8 Law, V. (2014, August 7). Starbucks Pushes Major Expansion in China as Coffee Culture Emerges – NBC News. Retrieved September 10, 2014, from http://www.nbcnews.com/news/asian-america/starbucks-pushes-major-expansion-china-coffee-culture-emerges-n175141 Riley, J. (2014, June 13). Starbucks’ Long-term Investment in Leadership of the Chinese Coffee Shop Market. Retrieved September 10, 2014, from http://www.tutor2u.net/blog/index.php/business-studies/comments/starbucks-long-term-investment-in-leadership-of-the-chinese-coffee-shop-mar Wang, H. (2012, August 10). Five Things Starbucks Did to Get China Right. Retrieved September 10, 2014, from http://www.forbes.com/sites/helenwang/2012/08/10/five-things-starbucks-did-to-get-china-right/ DeVault, G. (n.d.). How Starbucks Brought Coffee to China. Retrieved September 10, 2014, from http://marketresearch.about.com/od/market.research.competitive/a/Market-Research-Case-Study-Starbucks-Entry-Into-China.htm Spear, D. (2009, January 30). MARKETING: Branding in China ~ The challenge of selling Starbucks coffee in a tea-drinking nation and other lessons – See more at: Http://www.nzcta.co.nz/chinanow-general/1160/marketing-branding-in-china-the-challenge-of-selling-starbucks-coffee-in-a-tea-drinking-nation-and-other-lessons/#sthash.3EOEPy4E.dpuf. Retrieved September 10, 2014, from http://www.nzcta.co.nz/chinanow-general/1160/marketing-branding-in-china-the-challenge-of-selling-starbucks-coffee-in-a-tea-drinking-nation-and-other-lessons/ Burkitt, L. (2010, November 15). Starbucks to Open China Coffee Farm, Securing Global Supply. Retrieved September 10, 2014, from http://online.wsj.com/articles/SB10001424052748704462704575609733431622088 Supply Chain Editor. (2012, December 16). Starbucks Enhances Supply Chain In China – China Sourcing News – Business Intelliegence on Product Quality, Supply Chain, Outsourcing, Manufacturers, Suppliers, Import/Export and Trading In China. Retrieved September 10, 2014, from http://www.chinasourcingnews.com/2012/12/16/104607-starbucks-enhances-supply-

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