ISA BIN AHMAD QUESTION 1

HM2206A

2010262078

HTH668

What are the greatest challenges in the broad environment that Starbucks will face when expanding into the Chinese market? What should Starbucks do to overcome these challenges? The greatest challenges in the broad environment that Starbucks will face when expanding into the Chinese market are consist of political, economic, socials, cultural differences, demographics distributions, customers preferences, products, marketings strategy, and also technological challenge. At the beginning it sounds impossible to sell coffee to China's tea drinkers. China, the biggest developing and politically stable nation and for Starbucks, it is a potential and attractive customers market. Starbucks first outlet in China opened in January 1999 at the China World Trade Centre in Beijing, yet Starbucks is hardly known there and they are meeting serious challenges. 1 Political Nowadays, the globalization has changed worldwide trend of doing business because it is difficult to survive by relying solely on domestic market. There is the borders between various countries are getting unseen and most of the company including Starbucks nowadays creating business in various countries including China. Company strategists find it not an easy task to expand the business beyond borders. The basic need for globalization is to learn the different cultures of the country they plan to start business by considering all aspects including tax rates, law and legislation especially in china where by the ruling party is the Communist Party and also need to deal with the China successor. Besides, there will be the great challenge for new product to enter the Chinese market segmentation that probably seen harder to accept the new market that come into their market, its harder to the foreigners to enter the market in China. So the Starbucks company will need the wisely plan for the company to make a market penetrations. In China also, the government policy is was not so encourage on the foreigner that can be disrupt the local market of their country, so the Starbucks Company need to be prepared well to convince that their product will benefits all parties.

2 Economic China nowadays is the third largest economic country in the world ant the economy is rapidly growth due to the changes of China market policy from close market to the open market. Foreign investors flooded to china to capture the large opportunity. In the fast-changing Chinese cities, it is not easy to find the right location where potential customers live, work and play due to major development that can alter a neighborhood in a matter of months. People are nowadays looking for more income to continue their luxurious life. The number of two income households is getting increased all over the world. People are looking forward for products which reduce their time to be spent on. Improved customer service, immediate availability, trouble free operation of products is becoming more important. Since the world is facing crisis, people are looking forward for cheap and quality products. Price is becoming priority to customers. Increase in the inflation rates and increase in unemployment is also factor for demand in lower priced products. 3 Social, Cultural, Demographic and Environmental Different type of consumer needs a different products, different services, and different strategies. In the view of social, Starbucks faces another huge challenge: selling an upscale, Western lifestyle that is both in demand in China, yet meets resistance among those unfamiliar with the taste of coffee. Moreover, many Chinese consider that coffee too bitter. Shanghai Starbucks customer Charles Lo drinks tea at home but coffee in public. "I prefer the taste of tea," he said, but he likes the image that drinking Starbucks coffee conjures up: relaxed affluence. "It's an attitude," he said. Catherine Chau, deputy general manager of Mei Da. Maltz (1998) pointed out that people don't go to Starbucks for the coffee but for the different experience. Focusing on the development of employees so that they can deliver that experience is their priority for now. 4 Products As we all known, Chinese more to enjoy the tea than a coffee, so before the Starbucks want to expand their products, the company need be aware about this condition, so to attract the local people in Chinese to enjoy the Starbucks product, so this company wisely done their strategy by including the tea product in the Starbucks restaurant, so in Chinese, the local people able to enjoyed the tea in a high class restaurant.

5 marketing strategy The marketing strategy that the Starbucks Company want to applied in Chinese must different from their origin country. It is because the marketing strategy that wants to develop must be able to suit with the China image and the most important the marketing strategy must reflect the whole country of China especially in their cultural and social economics. 6 Technological Technological will have very big influences to any company to delivery their products and services. Mass communication and high technology are creating patterns of diverse cultures worldwide. Revolutionary technological changes and discoveries are having a dramatic impact on organization. Internet is the world information spread machines that have covered an interaction from one user to another user. In contrast, advertising through have brought high achievement into marketing strategy. For example, advertising products into the social web such as Twitter or Facebook, will promote their product directly to the users. So the users can consume on their products .Online purchasing, this option it will create less hassle to customer for purchasing the products which they needed. Advancement of the technology can cause the life cycle of the product changed and increased in the distributing of the products. High technology of the Machineries can increased the supply of the products while achieve a better profits for the organization.

QUESTION 2 How could Starbucks make its competitive advantages sustainable overtime? The pursuit of success in the foreign markets is very important in exporting exactly the unique nature of shopping at Starbucks, like its unique corporate culture, coffee services, exclusive taste, etc. All of them differentiate Starbucks from other competitors in the industry. Starbucks Corporation has been around since 1971. Since that time Starbucks opened many stores in various locations across the globe. They managed to obtain the best real estate team and a sophisticated system that allowed them to grow. What makes Starbucks unique from other coffee shops is not only their wide selection of products but the

environment they provide to all customers and they wanted to make sure every detail in the store reflected best of class in the community and neighborhood of each store location. Starbucks sustains competitive advantage by constantly looking for new ideas, new products, as well as new experiences for guests. For example, the company hires designers to come up with artwork for commuter mugs. Starbucks forte is incorporating differentiated features such as their different flavored coffees that no other company offers. Market trends are constantly being monitored. They study every city personality and how their products can best fit into the community. In order to sustain the company's growth and make Starbucks a strong global brand, they believed that the company had to challenge the status quo, be innovative, take risks, and alter its vision of who it was, what it did, and where it was headed. The Starbucks Company should well establish product and services by presented the best unique, quality and variety product. In term of delivery the quality of product. In my perceptions, all of products that Starbucks offer to the customer have high quality of item. Starbucks establish their own Total Quality Management System in order to provide and control the quality of product that they sell to the customer. They also have corporate headquarters that exercises controls over individual sites. Other than that, they also have internal controls for the store that is managing by the manager. Beside, by offering an extensive product list also able to help the Starbucks Company sustain their product in China. This is one of the competitive advantage of Starbucks because the product that they produce is always be consumed by the customer. This is because the demand for food and beverages is constant. Therefore, the extensive product list of Starbuck will help them to compete with other company that in the same business. The location must be precisely determined by the company before want to expand and develop their establishment in certain areas. A good location to company to gain more profit are on the large city, suburban, urban and main city. By establishing the Starbucks Company at this main location, the company will gain more profitable. In the reality of life, the location is main factors that will determine the successful or the failure of the company. To make a one product are more long lasting, the company should build up a good relationship. There are three suggested relationship that must be care by all company especially in this cases, the Starbucks Company need to care about the relationship on the supplier, customer and shareholders .The first point is good supplier relationship. This is important to Starbucks in order to produce their product. Starbucks is one of company that cooperates with the other company in order to receive raw material for their products.

They have lack of their own coffee farms. Therefore, to ensure that all the raw materials for their production are being supply, they build good relationship with their supplier. Therefore, this will overcome their problem.

QUESTION3 What strategies (at business and corporate level) could Starbucks implement in China considering the income discrepancies of that country? There are a few strategies that Starbucks could implement in china considering the income discrepancies of that country. The goal of Starbucks is to build hip hangouts that tap into a new taste for China's emerging middle class, to see and be seen. This is not easy since even for the middle-class Chinese, Starbucks is a barely affordable luxury. At a price of 22 RMB ($2.65),even a medium latte takes a bite out of the monthly disposable income of an average three-person Shanghainese household (about $143 in April 2003) (Fowler, 2003).Starbucks primary marketing strategy in China is in its logistics. High-visibility, high-traffic caf locations are determined based pavement-traffic analysis, location-based and local real-estate knowledge. A team of hot-spot seekers traces the paths that link where potential customers live, work, and play, then takes photos and develops a list of ideal sites. Real-estate know-how is a hallmark of Starbucks worldwide, but the computerized mapping databases that the company uses to test a potential street corner in the United States would be little help in Chinese cities due to rapid changes and developments. Despite the difficulties of Chinese real-estate due to the countrys rapid growth and urban expansion, Starbucks target consumers in each of its Chinese markets is helpful in predicting where in China a Starbucks would succeed. For example, Starbucks strategy in Shanghai is to attract middle to high class customers by placing stores in the higher end areas, the higher-traffic areas, where there are more expatriates. On the contrary, in Beijing, Starbucks target market is much less socio-economically exclusive by trying to reach the average person so that customers do not think of Starbucks as a luxury. Store openings in Beijing are also celebrated more traditionally than those in Shanghai. Paper flower wreaths and lion dances accompany the sale of the Western brand at the opening of a new Starbucks in Beijing.

Starbucks finally starting to see that the Chinese market differently. In contrast to the US, Chinese consumers see the coffee giant as a destination restaurant of sorts. With a cup of coffee costing as much as a days earnings for many, the newly emerging Chinese middle class see Starbucks as a trendy place to present themselves as wealthy and sophisticated. I think that being seen with a cup of coffee rather than the traditional tea make them feel modern and westernized. By increasing their seating area and focusing sales on the Starbucks experience or "third place", Starbucks is starting to realize its challenge and its true product in China is BRAND. This is a relatively unique situation in business. In China Starbucks' value proposition is actually its brand, and by increasing prices there, it will actually increase its value proposition to customers. Other than that, Starbucks also will implement joint venture and licensing strategy in China country. The joint venture will help Starbucks to exercise greater control over the growth strategy in that country. Starbucks also will focus on their target market of their product. They will provide the products that meet the customer preference, needs and wants. Therefore, these strategies will help them attract the customer to buy their product or menu items. The income discrepancies in China will not influence their business if they implement this strategy. The last strategy for business that Starbucks will implement is offer the good and quality service experience to the customer. People do not go Starbucks for the coffee but for the different experience. So, in order to deliver the good service to the customer, Starbucks should focusing on the development of employees such as giving service training to ensure they will deliver the service in a good way. As conclusion, Starbucks have better strategies in business level and corporate level. Therefore, they must maintain the performance in provide the good service and product to customer.

CONCLUSION For the conclusion there are few important points for Starbucks international expansion process first, which foreign markets to enter and the strategies adopted for that entry, second, how could Starbucks makes its competitive advantages sustainable over the time and last but not least, the strategies that could be implemented to overcome the income discrepancies of that country .Foreign businesses need to learn how to well understand the values of local culture and local people toward Western culture symbolized in global brands, especially under the new communication state of affairs. The latter is worth a rethink, even after Starbucks had decided to enter into a specific country or area in the world, since the investment outside its home country incurs high risks, such as culture shock, government policies and existing competitors. Its experiences or lessons are also valuable for the development of other industry around the world. As international trade and business expand. REFERENCES 1 2 3 El Boghdady, Dina. Pouring It On: The Starbucks Strategy? Locations, Locations, Locations. The Washington Post . 25 August 2002 Fowler, Geoffrey. Converting The Masses: Starbucks In China. Far Eastern Economic Review . 17 July 2003. Schultz, Howard and Dori Jones Yang. Pour Your Heart Into It . New York: Hyperion,1997