Starbucks
Starbucks Corporation was formed in 1985. Starbucks purchase and roast high-quality whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, a variety of complimentary food items, coffee-related accessories and equipment, a selection of premium teas and line of compact disks, primarily through Company-operated retail stores (Starbucks Annual Report 2007).
Starbucks Foreign Entry Mode
Starbucks’ licensees are often their partners in a joint venture. Starbucks International is using licensing agreements in order to penetrate markets where it has no ability to open its own stores. In markets outside North America, the strategy of Starbucks is to license a local company that is reputable and possess retailing expertise. Often times Starbucks enter in joint venture partnerships with these local companies. Starbucks Coffee International is the subsidiary that manages Starbucks’ overseas expansion.
Expansion to China
China is among the most attractive markets in the world. Many international companies have ventured in China and many are following their lead. China had enjoyed spectacular growth during the 1980s as well as 1990s. The continued growth of China has attracted Starbucks and the company started their market entry.
Starbucks employed different strategies in entering the Chinese market. the entry strategies that Starbucks employed are wholly owned subsidiary, joint ventures, and licensing.
In 1995, Starbucks established as subsidiary called Starbucks Coffee International Inc. The subsidiary is responsible for all Starbucks business development outside North America, including developing new businesses, financing and planning stores, managing operations and logistics, merchandising, and training and developing Starbucks international managers (Kotha and Glassman 2003). Starbucks international, as a wholly owned subsidiary, manages the international expansion programs and strategies of Starbucks coffee. Starbucks International, in entering new markets combines two strategies. These are joint venture and licensing.
Marketing Challenge
One of the biggest challenges to Starbucks entry to China is coffee’s unpopularity in the country. The Chinese people are largely tea-drinking people and coffee shops do not do well in China.
Integrated Marketing Communication
Integrated Marketing Communications is a concept of marketing communications planning that recognizes the added value of a comprehensive plan that evaluates the strategic roles of a variety of communication disciplines (examples: advertising, sales promotion, public relations) and combines these disciplines to provide clarity, consistency, and maximum communications’ impact through the seamless integration of discrete messages (Kotler 2000). Varey (2001) defines integrated marketing communications is the strategic, selection, execution, evaluation, and control of all communicative actions that can effectively and efficiently enable and facilitate exchanges in the provider’s stakeholder relationship network (p.251).
Starbucks Communication Task
China is a very promising market and Starbucks’ success in China will result in high revenues and more opportunities for growth. However, Starbucks is faced with a challenge – the Chinese market does not consume coffee as much as it does tea. The communication task of Starbucks is to ensure that rational product information are presented in a style that is relevant to the target audiences and that would serve as a foundation to deliver focused messages. The product strengths of Starbucks are summarized into four key attributes embracing the Starbucks offering. These are:
- Quality
- Relaxing Ambiance
- Accessible Premium Brand
- Modern
- Innovative
Communicating to the Consumers: Marketing Mix
Price
Starbucks’ line of products in known for its quality and price. In most Asian countries, the products of Starbucks are considered as luxury but still remains as the most successful international coffee store. Entering the Chinese Market, Starbucks must employ the same strategy that it used in other markets. Premium price must be employed in Starbucks products in order to maintain its brand positioning and to create an image of high quality standard. Starbucks must also make sure that the products’ price are within the acceptable limits. The price of Starbucks’ products must not be five tomes the price of the mass product.
Price still remains as an important influencer in the decision making process of the Chinese consumers.
Place
In terms of place, it is almost imperative for the company to position its stores in places that are within business districts and places near universities and campuses where majority of the population are in the middle and upper classes. The said locations are the most convenient spots for Starbucks as majority of coffee consumers in China are young and middle-aged.
Promotion
In terms of promotion, the company can use its present and most used marketing strategy, the being everywhere approach. It will help the company to promote their product to the vast geographic area of the country. China is known for its rich and colorful culture. Chinese traditions and festivals are celebrated almost all-year round in China. Starbucks can use this as an opportunity to reach out to the Chinese market. Starbucks can sponsor events and festivals in order to promote its products. Corporate Social Responsibility can also serve as a promotional tool. Having a good reputation and highlighting its commitment to the Chinese people, society and environment can create a positive image of the company in the consumers’ minds.
Product
According to the survey Consumer Outlook Survey for China, the Chinese consumers are becoming more and more discerning and moving faster from the paradigm of finding the best price to seeking the best quality of the product. The respondents of the survey show different important factors in choosing their brand. The one that garner the highest percentage was the brand trust and quality (92%); positive impact on health (81%), care for the customers (76%) and fair price (73%) (Vargas 2004).
The said result shows that customer is China depends greatly on the brand name and the quality of the product. The fact that the price of got the 5th position shows that consumers from the said country are no longer price conscious. The result of the survey is somewhat connected to the pricing strategy of the company. It only means that the product pricing may attract the consumer in testing a certain brand, but still, the quality and the value of the product will be the one that will keep them from coming back and purchasing a specific product (Vargas 2004). It is also important to create different products that will be uniquely served in China in order to make the customers feel that the company values and respects the Chinese culture and heritage.
References
Alexandrides, C G and Bowers, B L 2005, Market Entry Strategies: Choosing a Foreign Market Entry Mode, International Business Academy, viewed 12 May, 2008,<http://www.tuckpartners.com/Iba/docs/marketing/mkt_entry_strategies_alex.pdf>.
BhidÉ, A V 2003, The Origin and Evolution of New Businesses, Oxford University Press, New York.
Kotha, S and Glassman, D 2003, Starbucks Corporation: Competing in a Global Market, University of Washington, viewed 12 May, 2008, <http://bschool.washington.edu/gbc/documents/starbucks_final.pdf>.
Kotler, P 2000, Marketing Management Millennium Edition, (10th ed.), Prentice Hall.
Starbucks Corporation 1999, The McGraw-Hill Companies, viewed 10 December,2008,<http://www.mhhe.com/business/management/thompson/11e/case/starbucks-2.html>.
Varey, R 2001, Marketing Communication: Principles and Practice, Routledge, New York.
Vargas, M 2004, Chinese Consumer Report, About.com, viewed 10 December 2008,<http://retailindustry.about.com/b/2004/10/26/chinese-consumer-report.htm>
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