Entering the Chinese market can present both significant opportunities and formidable challenges for brands that are not well acquainted with the Chinese consumers. Starbucks, a mainstream coffee company decided to expand to China in 1999. The brand faced a country whose culture and history is rooted in tea drinking. However, despite being a coffee-drinking country, Starbucks today has more than 800 stores across China and the coffee chain continues to expand. This paper examines the strategies that Starbucks has employed that have made it successful in competing with Chinese tea.
From the onset, Starbucks acknowledged that the Chinese consumers have a strong preference for tea. However, the company strongly believed that it could successfully bring a western coffee experience in the country. To achieve this goal, Starbucks had to develop a new market by persuading Chinese consumers to taste coffee. The company set up a Research and Development center in Shanghai that reacted to reluctance to purchase coffee by creating fruit drinks like Refresha and Strawberry Frappuccino that appealed to the Chinese consumers.
To successfully counter the tea drinking culture, Starbucks began its entry into the Chinese market by using advertising and promotion to create visibility and brand awareness. This was then followed by the introduction of beverages made from local ingredients, including green tea. This attracted the Chinese consumers toward the Starbucks` brand without shocking them with its traditional western product range. The store layout and design and the marketing strategy employed allowed Starbucks to create a unique coffee experience that attracted Chinese consumers, especially the young. All these factors created a high level of brand awareness among Chinese consumers. As a result, when a new Starbucks location was opened, there were many potential Chinese customers who already knew the brand.
Starbucks recognized the diversity of the Chinese market characterized by significant variations in consumption culture, purchasing patterns and disposable incomes. For Starbucks to penetrate this market, it entered into three different joint ventures with Chinese partners to help the business expand to expand to the northern, Eastern, and Southern parts of China. These expansions were accompanied by the delivery of high-quality products and services. As a company whose brand is globally reputable, the company did not compromise on quality in China.
To Starbucks, its entry into China was a long-term investment that required long-term commitment. Starbucks recognized that with the well-developed tea culture in the country, it will take long to recruit employees, provide training, educate Chinese consumers and gain loyalty from customers. According to Rinne, the average staff turnover in China ranges between 25% and 35%. According to Rein, Starbucks` turnover rate is far below the industry average because it offers better packages, good working environment and a structured career path for its employees. With a satisfied and loyal employee base, Starbucks coffee has been able to compete successfully in a tea country.
From the analysis, it is evident that the notion of localization has been a central component of Starbucks` approach in China, which has made it succeed in a tea country. Rather than impose western Starbucks coffee products and store layouts that have already succeeded in Europe and the U.S., Starbucks created new coffee products that appealed to local Chinese consumers and created a stores that are conducive for dine-in experience. According to Starbucks, localization implies respecting the Chinese culture and adapting its business accordingly. This approach has made Starbucks successful despite the popularity of Chinese tea.
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