Globalization Of Starbucks In Relation To Its Recent Expansion In China (Mainland) Essay Samples

Abstract

The essay will examine how macro business environmental (international) and micro business environmental (China’s market) forces and actors, shape Starbucks in relation to the strategic operations- management in application, in the mainland of China. The essay will explore the manner in which Starbucks is positioned in terms of the market performance of China. In addition, the essay explains the correlation between the performance objectives and the operations strategy of the Starbucks. The essay also offers an overall picture of the processes, which are used to provide products and services. Furthermore, the paper explores the future challenges, which Starbucks might have to encounter in its course in China.

Since the beginning of Starbucks at Seattle in Washington in 1971, the firm has grown to distribute its commodities and services to the multitude of coffee fans throughout the world. With a mounting amount of coffee outlets in over 16,000 places throughout the sphere (Starbucks, 2015), Starbucks has been able to achieve the position of the principle competitor in coffee- production and trade for distinctive consumers.

Macro

Uwakwe (2013) states that Starbucks is spends only 1% of its revenues annually on marketing activities, which is about $30 million in comparison with its competitors’ higher quantity of fund for marketing activities. The successful development of Starbucks in North America convinced that Starbucks would, one day, be in every neighborhood.
Starbucks started expanding its business all over the world. China is the most significant, and possibly the greatest, market for Starbucks in Asian region. Hence, in the China World Trade Building in Beijing, in January 1999, the first Starbucks opened. Two years later, China became a member of World Trade Organization (WTO) on 11 December, 2001(World, 2011). Taking full advantage of WTO, barriers to trade in the form of government interventions was (Alfodi, 2014, 7) gradually removed, and with that the investing policy and the business environmental remained magnetic for foreign investment in China (Xiamen, 2014). Since then till now, more than 230 Starbucks coffee stores in 22 cities in Mainland China have been opened.

Micro

Doing coffee business in an oriental country, with thousand years of long history of tea drinking tradition, is not that easy. Fortunately, through conducting the “reform and opening-up policy” and with WTO membership for years, the cultural distance between “coffee” and “tea” shortened. Besides, since Starbucks is not only about selling coffee – it’s about selling a lifestyle of status and aspiration, as pointed out by French (2013), Starbucks has seized this opportunity to expand its reach and create a lifestyle brand that guests can use throughout the day(Wall). Starbucks gained many loyal customers, mainly among young people or middle aged people in China. To be in Starbucks means an act of self-expression; of showing you can afford it, can enjoy it – an international expression (French, 2013). Just like individuals, firms in every economy differ (Peng, 2013, 15). However, with the high reputation of Starbucks in the world, Starbucks can quickly dominate a local market (Business, 103). Within a relatively short span of time, Starbucks became the Price Leader in the coffee industry in China. Other coffee shops in China soon imitated the coffee prices set by Starbucks, and sold them to the customers. Either tangible or intangible, Starbucks used all resources in China. Starbucks tries to bring product that is distinctive and diverse; uniqueness in products that Chinese customers value (Peng, 2013, 479). For instance, Starbucks is selling one Chinese traditional cake to its customers (Figure 1) during the Chinese Mid-Autumn Festival.

Future Challenges

Starbucks might face various challenges in the future when it comes to the coffee market in China. Beside, the competitor in the market share (Appendix 1) shows that Starbucks shared 6.7% of the market, and is still facing considerable threat from other coffee brands. The high prices of Starbucks discouraged consumers, who see drinking coffee as a fashionable practice ; asstated by Presse (2012). The trend of drinking coffee is relatively new to China, although the market is increasing quickly. Normal people in China are more inclined towards drinking tea rather than coffee. Starbucks has earlier assessed that China has an enormous possible market of about 200-250 million coffee drinkers (Presse. 2012); a target which is yet to be reached conquering a long way. These are the possible challenges that Starbucks need to tackle in near future to reap the maximum benefit from the humongous market in China.