Competitive Advantages of Starbucks in China Essay

I am going to work with Starbucks, because it is a company that is familiar to most of us and has investment plans in China for the next years. They are planning to expand themselves from a little over 200 stores to 1500 stores and try to increase their sales. As Howard Schutz, the CEO, said “same store sales in China are fantastic, so why not expand? ” After their success in United States, Starbucks wanted to expand to other countries because the U. S. market was getting saturated with different competitors.

Its first expansion was in Japan, this was because they were the second largest importers of coffee. This was such a good market that Starbucks started looking for other Asian markets. One of these markets was China. China is considered one of the most important markets due to its size and the growth they are having. In the past it was a very difficult market to enter because its strict protectionist policies, but since 2001 when they entered the World Trade Organization this has been easier.

Starbucks entered this market by joint venture, with a company that had already introduced McDonalds and Hard Rock Cafe to the Asian culture. The competitive advantages Starbucks saw in the Chinese markets were many: •China`s culture has always been a tea drinking one, but they made marketing studies and realized that they liked the taste of coffee too. In fact nowadays coffee consumers are growing each day. •When Starbucks started to look at the Chinese market they realized that there wasn’t a direct competitor targeting the specific market they wanted to attack.

And this market is growing every day. •Chinese culture in the last years has been influenced with western culture, specifically American companies like McDonalds, KFC, Pizza Hut, and others. These companies have captured the Chinese market, especially the young generations. This young generation has a better purchase power because they are only allowed to have one child. •For Chinese people, the status is a very important matter, they require high quality products, in our matter is gourmet coffee and not just instant coffee, so that’s why Starbucks is so well positioned.

Starbucks products are expensive with respect to the average national income, so buying these products gives them a status and helps them to make themselves part of a higher social group. •The Chinese income distribution is very unbalanced, people in the cities earn more money than people in the villages, and there is a rising amount of wealthy people who are willing to try different things and be like the culture they see in the T. V. and the movies, like getting their Starbucks coffee when they are on their way to the office.

Obviously Starbucks has adapted to Chinese culture, the same way they do in every other country they establish themselves. In China they offer different types of Chinese tea, but also offer different flavored teas that make them different to other tea establishments. •Another important aspect is that Chinese people had the need for a third place other than home and work; they needed a place where they could go out to socialize with their friends and they would feel in a warm atmosphere.Chinese homes are relatively small and that’s why they have the need to go out. They just hire young and enthusiastic people that can make the costumers feel better and have a good relationship with them.

Bibliography

•http://www. entrepreneur. com/tradejournals/article/132354507_1. html •http://www. dailyfinance. com/story/company-news/starbucks-plans-major-expansion-in-china/19740895/ •http://pdfcast. org/pdf/starbucks-corporation-competing-in-a-global-market