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“Better to be deprived of food for three days, than tea for one.” a market as big as that of the United States! Therefore, it
— Ancient Chinese Proverb is understandable that many international coffee chains
have commenced operations in China in recent years; and
INTRODUCTION these include, for example, Coffee Bean & Tea Leaf, Costa
Coffee, Starbucks Coffee and U.B.C. Coffee. More recently,
The magnificent country that is China conveys a great many in June 2010, China Resources Enterprise (CRE), China’s
different images, but perhaps none more so than that of a biggest supermarket chain operator, indicated that it would
Chinese tea house! However, that image is rapidly changing buy 80 per cent of the Hong Kong-based Pacific Coffee
due to the recent growth of coffee shops. Just a decade after for HK$326m (about $42m) and expand on the mainland
Starbucks opened their first store in China (in January 1999) in an attempt to tap into China’s growing coffee-drinking
a coffee culture has emerged in the land of tea drinkers. For culture. CRE announced that it would develop Pacific
example, Beijing now has more than 8,000 coffee shops – Coffee by having its own coffee outlet in every one of its
eight times more than just a decade ago – as the younger, major shopping malls, with an ultimate goal of becoming the
affluent, urban Chinese professionals consider drinking largest coffee chain in China in terms of size (www.FT.com).
coffee to be elegant and exotic (www.chinadaily.com). Based The average cost of a cup of coffee in these international
on reports issued by the London based International Coffee chains amounts to between Yuan 30 and 40. Thus, many
Association, it is estimated that coffee consumption in China people believe that it is not the coffee itself that matters but
is growing at a double-digit rate per annum, compared with rather the ambience and status experienced by its young,
a global average of slightly over two per cent. However, affluent clients. This ambience, together with location and
this impressive growth is partly due to the fact that China visibility, create an interesting marketing challenge for coffee
is starting from such a low base. On average, it is estimated shop managers and their consultants.
that each Chinese person drinks about three cups of coffee Li Wang is one such coffee shop manager. He readily
a year, compared with somewhere between 500 to 700 cups admits that he is an unlikely manager since he has very little
for a typical American person (www.chinapost.com). Not experience in the hospitality sector. A few years ago he
surprisingly, it can be argued that China has the potential to graduated from a university in Wuhan with a top class degree
become the largest coffee consuming country in the world in English and International Relations. He received and
because of its rapid economic growth and huge population. accepted a scholarship to further his studies in Europe, where
However, coffee consumption, for the time being, is highly he undertook a Master’s degree. This European study allowed
concentrated in the large cities such as Beijing, Guangzhou, Li the opportunity to see some of the major European capital
Shanghai and Shenzhen. Thus, if one assumes that the cities. They were all different, yet he remembered that they
potential Chinese market for coffee is limited to, say, 20 had one thing in common – coffee shops. Virtually each street
per cent of its 1.3 billion population, that would provide had its own coffee shop; sometimes several of them existed side
Table 2 Table 2
Survey of Coffee Shops in Local Region Survey of Coffee Shops in Local Region (continued)
EMPLOYEES &
FACILITIES
1. If we have the right
facilities, and the
right employees…
INTERNAL
ACTIVITIES
2. Doing the right things Associated with
well… cash outflows
Strategy FINANCIAL
(Why do IMPACT
customers
come here on a
regular and
frequent 4. And we will earn the
basis?) financial rewards!
CUSTOMER
RESPONSE
3. Then, our customers Associated with
will be loyal … cash inflows
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