Research background (Starbucks case study)
Starbucks is known for its role in providing coffee of the highest quality to people around the world. At present, Starbucks coffee can be found in over sixty countries in the world, but the company started in the United States in 1971. The worldwide expansion of the brand started as early as 1982 when Howard Schultz joined the company. He studied the Italian market and saw that the market could benefit from a branch of the company. It was not until the 1990s that Starbucks created the first expansion in the United States then Canada and later the Americas. But, the expansion of the company did not stop there as Starbucks entered the Asian market in the 1990s. The history of Starbucks started from the humble beginnings of being a small coffee roaster and soared to the heights of being one of the largest suppliers of coffee products in the world. Much of the success of the company can be attributed to the intense marketing strategies and the company’s vision to of nurturing and inspiring the spirit of individuals through a cup of coffee.
While there were other brands of coffee at the time of Starbucks’ entrance on the coffee market, the company appeared at a time when the society needed a revolution in the way coffee shops served coffee. Starbucks re-invigorated the coffee market brought new changes that would spread across the continents. Starbucks initial principles rest in the idea of creating a brand of coffee that would allow customers ease of access and high quality. In addition, Starbucks owners had the vision of creating a company that would develop care and concern for the consumers, employees and the society at large. The innovative ideas of offering quality service do not stop at providing service to the customers, but includes the employees as well. As such, Starbucks is one of the most successful entities in the world.
In the 1990s, China opened its doors to Starbucks coffee and gave the Chinese the experience of enjoying what can be considered as the leading brand of coffee in the world. The brand rose to greater heights in the world because of the quality of Starbucks experience. Additionally, the success of Starbucks has come through the recruitment, training and retention of the employees. The company has one of the lowest rates of turnover as they provide their employees with a solid compensation package, high quality work environments, and even give these employments the opportunity to excel in their career paths. In essence, Starbucks treat their employees with the utmost respect and this allows the employees to be comfortable in their jobs as they provide positive customer service to the customers.
Starbucks is not the only brand of coffee in China as the country has a number of other foreign brands such as Britain’s Costa, Paris’ Baguette and Tous Les Jours, Dunkin’s Donuts and Coffee Bean and Tea Leaf, Sculpting in Time, and McDonald’s. Local brands of coffee have been competing endlessly to bring sole control in the country’s coffee industry. But, Justin Harper, in his 2012 article ‘Coffee War’ Brewing in China, notes that Starbucks is the larger brand of coffee chains in the world as there is one coffee shop opened every four days in China to facilitate the target of having over 1500 coffee shops by 2015, (Harper, 2012). The expansion of Starbucks has changed the way Chinese see coffee as the company has integrated the culture of China and the Western world and have created a product that draws customers to the brand’s image and quality. In recent times, coffee has become even more popular than tea and the Chinese have consumed more than 500,000 tons of coffee in 2014.
Nonetheless, the competition in promoting and distributing coffee of the highest quality increases as each company uses different strategies to make their coffee the best in the region. Unlike the coffee brand, Sculpting in Time’s e-commerce strategy that promotes the use of a professional website show customers the intricacy of producing coffee, Starbuck places strict emphasis on the speed of their services in the shops and takes steps to encourage consumers to consume coffee outside of their outlets. In addition, the image of Starbucks has spread around the world because the brand has adopted the positive image of replacing alcohol with coffee, as Starbucks outlets allows individuals to socialize without disturbances; people have now embraced coffee as an acceptable luxurious beverage; and the image of the brand has become so popular in the world that people increase the level of brand loyalty, image and awareness.
The success of Starbucks in China came at a time when the company was facing serious challenges in the United States. The success of the company in China was a challenge as the Chinese were known for their culture of drinking tea and not coffee. Therefore, Starbucks had to create strategies that would encourage Chinese to change their cultural practice of drinking tea and embrace the culture of drinking coffee. To many Chinese at that time, coffee represented an invasion from the Western world. Nonetheless, this view changed when China entered the World Trade Organization (WTO) and opened its doors to the influence of foreign investments in the country. Starbucks entered the Chinese market with the idea of becoming an integrated part of the local culture. This strategy proved to be productive as the company adapted to the conditions in the market and the culture of the people. In addition, the success of Starbucks included the use of the Chinese in sharing their experience with Starbucks coffee and not so much on commercial advertisements of the product. The Starbucks experience was integral to the promotion of the product as the company ensures that they create the ideal physical ambience, a high quality production of coffee, positive employee relationship, that and an impressive customer service policy that surpassed those of rival coffee makers in the country. Helen Wang, in her article ‘Five Things Starbucks Did to get it China Right,’ argues that this marketing strategy allowed customers to “feel cool and trendy,” (Wang, 2012).
Based on the Chinese history as a tea-drinking nation, one would have expected that Starbucks would never have been successful in this Asian market. But, over the years, the company has defied all the odds that have been stacked against them and have emerged as a successful business in the Chinese market. Starbucks never wavered in their quest to achieve success in the Chinese market as the company targeted the emerging middle class and gave them a place where they could socialize with friends while consuming their favorite beverage, (Wang, 2012). In addition, the company created a market entry strategy that did not include the popular tactic of advertisements the product as they believed that this would lead to the misconception among the local Chinese that Starbucks would eliminate their culture of drinking tea. Instead, the focus of promoting the brand was simple. Starbucks opened its store in a location that was highly visible and intense traffic. This strategy would allow the brand to project its image to a large number of people who travel in this direction. Clearly, the strategy would allow Starbucks to improve their position in the country even as they used local ingredients from the tea culture to create exotic blends of coffee. The strategy was different from the conventional practices of introducing a new product and allowed Chinese consumers to gravitate towards Starbucks coffee.
But the marketing strategy of the company did not stop at using local products in their business. The ambience at Starbucks allow the customers that extraordinary experience as they provide a “chic interior, comfortable lounge chairs, and upbeat music,” (Wang, 2015), but this differentiation strategy is not the only factor that makes Starbucks different from their competitors. The company appeals largely to the younger population who dream of the Western culture of coffee and its influence on modern lifestyle. For many individuals, the experience at Starbucks goes beyond a drink of Frappuccino and instead focuses on the experience that these individuals experience in a Starbucks café. Reporter, Violet Law, reiterates this view as she note that Chinese customers have begun to associate Starbucks with the idea of relaxing in a comfortable setting that is almost as cozy as their homes, (Law, 2014).Clearly, this differentiation strategy gives the image of Starbucks being a lifestyle brand that allows for the success and growth that connects customers to businesses. As a result, the company charges premium prices, but this does not detract from the equity of the brand as a number of Chinese enjoy the experience of a different culture. Additionally, the popularity of the brand adds to the brand’s awareness and more people enjoy Starbucks coffee because of its dominance on the world market.
Despite the demands for Starbucks coffee, the company companies to build on the quality of the brand and deliver one of the highest qualities of coffee to the customers. What makes the company even more successful is the fact that they offer their customers the opportunity to relax and take time to enjoy their coffee. Unlike other brands, the experience at Starbucks is one that appeals to the Chinese need to feel relaxed in comfort. Starbucks also allows customers to feel comfortable as they linger even after they have consumed their coffee. Not many companies will allow for this luxury and the fact that Starbucks allows this moment of luxury makes the company even more appealing. While the company continues to offer relaxing and local tastes in coffee, Starbucks has come under much scrutiny for its premium pricing strategy. But, the fact that one enjoys the luxury and comfort of the atmosphere at Starbucks suggests that a cup of Starbucks coffee is truly a symbol of a high social status.
This strategy of keeping the prices high represents a means of silently telling the customer that Starbucks represents a sophisticated, personal luxury for individuals in the middle class of the Chinese population. As a result, customers will gravitate towards this strategy as they crave the status that comes with being a Starbucks consumer. Violet Law suggests that the cost of Starbucks coffee is between ten and twenty percent more that in the United States, (Law, 2014). But, the cost does not deter Chinese consumers from purchasing the brand. For many, the loyalty that they have for Starbucks coffee allows them to purchase the product despite the cost. John Culver, President of Starbucks in China, addresses the concerns of the price of the product and suggests that the price of Starbucks coffee in China is based on the cost of carrying out business in the market, (Culver, as cited by Law, 2014).
Based on the knowledge of Starbucks and its rise to success in China, the researcher use the views of different analysts to explain and analyze the differentiation strategies that Starbucks has uses to operate and market its brand. In addition, the researcher will access the direct responses of individuals who have had experiences with Starbucks through the use of questionnaires. The questionnaires will also help the researcher assess and discuss the way in which the brand equity of Starbucks has influenced consumer’s purchase of the product. The researcher will use the following objectives to ascertain the strengths of Starbucks differentiation strategies in China:
Assess the expansion and success of Starbucks in China
Analyze the strategies that Starbucks use to improve its brand on the international market
Examine the effects of integrating the local culture into the creation of coffee products in China
Discuss and assess the challenges that Starbucks in China.
Harper, Justin, (2012) 'Coffee war' brewing in China, The Telegraph, Viewed http://www.telegraph.co.uk Accessed July 13, 2015
Law, Violet (2014) Starbucks Pushes Major Expansion in China as Coffee Culture Emerges, Global Post, Viewed at http://www.nbcnews.com July 13 2013
Wang, Helen H (Contributor) (2012), Five Things Starbucks Did to Get China Right, Forbes Magazine Viewed at http://www.forbes.com July 12, 2015