Starbucks in China

Click to edit Master subtitle style By Yousuf Ahmed, Natalie, Akos, Anne, Ronnie

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Agenda

Starbucks History China and Market Analysis Mode of Entry Analysis Structural and Organizational issues Customer values and brand perception Cultural complexity and legitimacy Final Assessment 4/19/12

History

1971 First store opens in Seattle 1983 Howard Schultz joins Starbucks 1986 Schultz starts II Giornale 1987 Schultz buys Starbucks 1987 First store outside Seattle 2011 Over 17,000 stores worldwide
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China

Population over 1 billion Famous for being a tea-drinking nation Business needs good relations with Government Restrictions on foreign investment in retail shops eliminated in 2004
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Per capita GDP growth China's Per Capita GDP*

12 12 10 10

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Per Capita GDP % change

OECD

Per Capita GDP $

*Gross domestic product based on purchasing-power-parity (PPP) per capita GDP

0
- Source:

Starbucks market choices 1999

Hig h

China (BH Taiwan) Australia (BH New Zealand) Western Europe South America

Japan Malaysia Thailand Philippines

Strategi c Importa nce

Low Ability to Exploit

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Low

High

Ghemawat AAA model

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Ghemawat AAA model

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Mode of entry
Low Need to integrat e High Hig h
Starbucks China JV

Market Growth

Low Need for local knowled

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Low

High

partnership first, country second..

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Regional Store Clusters

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Starbucks store counts in China

12 10

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No of locations

Market potential Second home market

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Structural & Organizational Issues

Starbucks had previously entered into various international markets (Japan, Philippines, Malaysia, New Zealand, Taiwan, Thailand and the U.K.) through joint venture and licensing agreements The organization has a willingness to respond to 4/19/12

Subsequent to Initial Entry in China

Began to open up wholly-owned stores post-2004 Established a China Club at headquarters where over 300 individuals discuss the initiative in China and even learn to speak Mandarin Appointed several executives with applicable experience to be based in Shanghai Set up a R&D center in Shanghai to focus on producing new tea products as well as established a coffee farm and processing center in southern China Recently announced a new leadership structure

Previously two regions: U.S. and International Now three regions: Americas, China & Asia Pacific and EMEA (Europe, Middle East, Russia and Africa)

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Customer Values & Brand Perception

Customer Values

Importance of tea Young middle class and US expats

The Starbucks Experience

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Cultural Complexity

Cultural Complexity

Variety of cultures from various Hierarchical structure Highly relationship oriented Identify right partners; aligned with core values and goals companies

regions

Mitigation

Mentor 4/19/12

Legitimacy

Acceptance by Chinese needed in order to succeed

Target market already Immerse itself into coffee $5M fund for charity in

embraced American trends

bean supply chain

China
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Final Assessment

Market Evaluation: Was China the right choice compared to other European or Asian Countries?

Business Structure: Did Starbucks make the right choice in pursuing a joint venture?

Product Development: Should Starbucks have adapted its product to be more locally relevant?

Quality Management: Did Starbucks sacrifice quality with its hands off approach?
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