It is hard to disagree that almost all Americans know Starbucks – a respected and famous U.S. brand and also the largest chain of coffeehouses in the world. Its successful expansion into numerous other countries has brought the company further possibilities for development and growth, and Starbucks even managed to conquer China – a nation of tea drinkers. The purpose of this paper is to discuss how this coffee brand made its expansion strategy effective, what problems it faced when entering China, and how those issues were productively tackled.
To begin with, it is essential to mention that the path of Starbucks into China was never easy. During the first years of expansion, the company’s shareholders complained about the losses, and the leaders considered giving up. One of the key challenges was the necessity to teach a nation of traditional tea drinkers about the culture of coffee (Sorkin, 2017). To do that, Starbucks’s chairman decided to move some senior managers from the U.S. to China so that they could run the business there and import their philosophy. However, that was a severe mistake, and this move did not allow Starbucks to earn the trust of Chinese clients, employees, and the government (Sorkin, 2017). Later, the brand also faced numerous protests and restrictions, but the strategy described further allowed Starbucks’s leaders to eliminate or minimize all the obstacles and become one of the few foreign companies welcomed in China.
The coffeehouse chain’s first correct step was to begin to trust the Chinese people and earn their trust. Instead of making the management of Starbucks in China only consist of the U.S. employees, the company’s leaders chose to combine the managers and allow Chinese managers to make important decisions and rule the business (Wang, 2012). Further, they strengthened the new relationships “by investing heavily there, paying significantly higher wages than competitors, and extending its employee ownership benefits to Chinese workers” (Sorkin, 2017, para. 10). What is more, according to researchers, “the company agreed to collaborate with the two governmental organizations to help local farmers promote responsible coffee” (Starbucks Stories & News, 2010, para. 1). As a result, it is possible to say that Starbucks realized it would be beneficial to show its readiness to help the country’s markets develop, instead of only focusing on its own profitability.
Leaders of Starbucks thought: “When something you need is lacking, create it yourself.” Thus, Chinese clients did not have the culture of enjoying coffee, and the brand created this culture by selecting a smart market entry strategy. In other words, as stated by Wang (2012), “it did not use any advertising and promotions that could be perceived by the Chinese as a threat to their tea-drinking culture” (para. 6). Instead, Starbucks’s message was: “We respect your traditions and culture but would like to add something new to it.” Such an approach is what other fast-food businesses failed to adopt when trying to enter the Chinese market.
To draw a conclusion, one may say that the unique approach, the willingness to spend a lot of money and wait for profit, patience, and the readiness to trust helped Starbucks become part of China’s culture. The brand explored and analyzed the country it decided to expand into and was able to recognize its strategic mistakes in the early stages and correct them effectively. The key lesson other firms can learn from this experience is that trust is among everything, and new values can be introduced successfully if the old ones are honored as well.
References
Sorkin, A. R. (2017). While other U.S. companies flee China, Starbucks doubles down.The New York Times.
Starbucks Stories & News. (2010).Starbucks and Chinese government announce Yunnan Coffee industry investments.
Wang, H. H. (2012). Five things Starbucks did to get China right.Forbes.