1. Discuss key cultural factors Starbucks had to consider as it expanded into China.
As Starbucks expanded into China, they had to consider such cultural factors as: how people were going to adjust to the new drink, who they were appealing to in terms of demographics – How old are the customers? How often will they find time to come? Starbucks was able to market themselves in such a way that their new ‘sophisticated’ appeal garnered attention in both the yound and old generations. The demographics they decided to target were “Chuppies”, or people between the ages of 20 and 40. This younger generation was attracted to Starbucks for it’s new appeal, status and Western Influences.
The older generations were attracted to the functionality of the bigger store so that they may gather outside of school, work and their smaller homes with family and friends. Also, the Starbucks in China had to consider the cultural food choices that exist in China, which differs greatly when compared to North American eating habits. Thus, they directed their menu towards the food culture that the Chinese maintain, like duck sandwiches and green tea cheesecake.
2. Discuss the key political and legal factors Starbucks had to consider in the Chinese marketplace. What are the risks of entering a country with these factors? What changes have occurred in China’s political and legal structure to the advantage of foreign companies?
Being a communist country, Starbucks would have many challenges to overcome before it could maintain any business effect in a short period of time. They had to take into account that business could change in China overnight. With this in mind, Starbucks decided to partner with local businesses who already understood the politics and business of China, thus Starbucks was able to learn what being in business in China was all about to better structure their future ‘stand-alone’ enterprise. The Chinese market changed after Beijing entered the World Trade Organization in 2001. This made it easier for Starubucks to buy out their partners and maintain their business alone.
3. What demographic factors were important for Starbucks to understand in China? What were the demographics they decided to target?
Starbucks had to understand the demographics of age, lifestyle and income in China. Despite that the disposable income market of ‘Chuppies’ are a relatively young demographic to target, Starbucks found that the more important factor than age and income in China was that people needed a place to gather with friends and family. Thus the larger restaurant was provided with more seating and a larger menu.
4. What was the initial global-market strategy Starbucks employed to enter China? Discuss the advantages and disadvantages to this early strategy. How has its strategy changed since then and why?
The initial global market strategy that Starbucks employed to enter China was by allowing local developers to use their brand and also by setting up joint ventures with partners. By doing this they were able to learn the changing political and business landscapes in China. A disadvantage was that the only money they made was through royalty fees from the licensee. In 2006 Starbucks bought out their partners and took control of 60 stores. They felt that they knew China better and were confident in going into business on their own. The changes in the market after Beijing enteres the World Trade Organization made this transition easier too.
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