Starbucks has been one of the only countries that has been able to successfully grow their business in China. In 2017, Starbucks built its largest Roastery in Shanghai, China, this Roastery is an immaculate size of 30,000 square feet. There are many reasons Starbucks can attribute their success in China, the physical presence of their stores and their cultural accommodations of products, promotion and pricing.
The physical presence of the Starbucks stores in the United States cannot compare to the Roastery in Shanghai, China. The Roastery in Shanghai is intriguing in design as well as the options it offers its customers. The Shanghai Roastery is 30,000 square feet of amazing architecture and design. The average Starbucks in the United States is less than 2,000 square feet, the size of the average house in the United States.
In 2014, Starbucks built its first Roastery, the one in Shanghai is still twice the size of the one in Seattle, Washington. On the right of the text, is the original Starbucks in Seattle, Washington, less than 2,000 square feet. To grasp the full size of the Roastery in Shanghai, you should know how many customers it serves a week.
The Roastery in Shanghai serves 5 million customers a week. Although the Shanghai Roastery is the largest in the world, it will soon be surpassed by a Roastery that is planned to be built in Chicago, IL in 2019. This Roastery is accepted to be four levels where customers will be able to see the beans roasted, brewed and packaged just like the Roastery in Shanghai, China.
According to our text on page 393, the product mix is the assortment of product lines and individual product offerings. The product mix in China is different than the US in the ways of what they offer such as in China Starbucks offers the green bean station, a coffee library, the roaster, coffee cask, package station, and transfer pipes. All of these options educate their customers on coffee, traditionally the Chinese drink tea, so educating them on coffee is one of Starbucks product mixes in their country.
In the Unites States, the product mix is different, the coffee shops offer bars, mixologists, and coffee libraries. When first entering China’s market, Starbucks had to learn how to educate the people in China on coffee, because traditionally they drink tea, not coffee. The goal of entering the Chinese market was to show the Chinese culture a modern Western way to relax while having coffee. In the United States, the product mix is much more modern.
On page 642, of our text, it states that a company can implement 3 global pricing strategies, a standard worldwide pricing strategy, dual pricing or market differential pricing. Starbucks uses the market-differential pricing stragedy. The market-differential pricing makes pricing more flexible in comparison to what the current marketplace conditions. “Effective market-differential pricing depends on access to quick, accurate market information” (Boone, Kurtz, 2014). They set prices according to the local market they are in.
The cultural accommodations Starbucks uses had to begin with promotion, the text states that promotion is the function of informing, persuading and influencing a consumer decision. “In 1994, Starbucks made its first debut in China by giving away free coffee” (Zakkour, 2017). By giving away free coffee Starbucks was able to learn about their culture, what they wanted and what to later serve to the people of China. “This promotional strategy led the way for Starbucks managers to be able to understand and learn more about China’s culture” (Das, 2017). The next step for Starbucks was to decide and learn how to price the coffee and food in China.
The pricing model is a model set based on the balance of supply and demand in the market. Starbucks had to learn how to price its products based on the economy of China at the time. “In the beginning Starbucks determined the China’s GDP rate had grown 9% an average and that the economy was growing to be a middle class economy” (Das, 2017). Starbucks used this growth in China’s economy to their advantage and began to plan their massive Roastery. Initially, Starbucks knew entering into China’s market would not be easy.
China has many different regulations and rules when it comes to allowing foreign businesses into their country. Starbucks became close partners with the Chinese government by donating 5 million dollar to some of China’s poorest regions. Another pricing strategy that Starbucks adopted while trying to enter the Chines market was licensing an agreement with Beijing Mei Da, a distributor of coffee beans.
Starbucks can contribute several things to their success, the main one being their cultural accommodations. Many businesses try to enter into the Chinese business world but are unsuccessful due to their lack of cultural accommodations. According to the Forbes contributor, Helen Wang, Starbucks has always been a company who respects the Chinese culture, by developing local relationships, and using the localized product offerings for its market.
Starbucks accommodates to the Chinese culture by using it to their advantage. They accommodate by offering things the Chinese want, educating the Chinese on the coffee culture, using their markets for their supplies, learning their culture, and offering prices that they can afford based on their market. In previous years, the Chinese averaged 3 cups of coffee a day now the Shanghai Roastery sees more than 5 million people a week as of 2017. On average Starbucks sells 4 billion cups of coffee globally each year.
- Boone, Louis E., and David L. Kurtz. Contemporary Marketing. Dryden Press, 2014.
- Das, Nageshwar. “Case Study of ‘Starbucks Entry to China’ with Marketing Strategy!” Ilearnlot, Ilearnlot, 5 Mar. 2018, www.ilearnlot.com/ill-3359-starbucks-entry-to-china-with-marketing-strategy/.
- Ori, Ryan, and Samantha Bomkamp. “World’s Largest Starbucks to Open on Mag Mile in 2019, as Chain Expands Roastery Concept.” Chicago Tribune, Chicago Tribune, 27 Apr. 2017, www.chicagotribune.com/business/ct-starbucks-roastery-0426-biz-20170425-story.html.
- Wahba, Phil. “Starbucks Is Offering Housing Allowances and Sabbaticals in This Key Market.” Fortune, Fortune, 12 Jan. 2016, fortune.com/2016/01/12/starbucks-china/.
- Zakkour, Michael. “Why Starbucks Succeeded In China: A Lesson For All Retailers.” Forbes, Forbes Magazine, 24 Aug. 2017, www.forbes.com/sites/michaelzakkour/2017/08/24/why-starbucks-succeeded-in-china-a-lesson-for-all-retailers/#6e24587d7923.