Penetration of the Chinese market
Penetration of the Chinese market must be one of the hardest plans that Starbucks had ever made to continue their business expansion. Everyone must be aware that tea has been part of the culture of this country and selling coffee may risk the whole business plan of the company that would introduce caffeine products to China. In a country that considers tea as the regional drink made it hard for the Starbucks to sell their products which have been considered as prohibited from wholly owning the stores.
Apparently, the company had to develop a strategic marketing plan to persuade the Chinese to patronize the products that have already established a good position in the global market. Aside from the fact that coffee selling is a problem in this region, the Chinese government had also implemented a regulation that enforces he foreign investors to open stores through partnership with local business firms.
Since coffee was not a popular drink in China, the Starbucks did not aimed for the total acceptance of the market of coffee products; in fact, the company considered offering more kinds of tea with little offering of company’s original items. However, Starbucks ended up with the plan to capture the attention of the target market by offering tea and start the coffee education once the market was already captivated (Wall Street Journal, 2006). As a rule, the company needed to have partnerships with local business firms in order to operate in the said country.
During the time when Starbucks penetrated the China’s market, there were only three outlets owned by the three Chinese franchisees. Starbucks, on the other hand, was required to get franchise fee according to the agreement that they have signed prior to the market penetration. The start of twentieth century had given Starbucks opportunities to grow. The company was able to negotiate for more outlets in the Chinese government, making them operate with more than one hundred stores in China today. Basically, Starbucks used Licensing and franchising as the entry strategy in the China’s market.
In licensing and franchising, the organization needs to process the legal documents to get permission from the China’s government in setting up the business in the said country. In this strategy, the company was able to use the manufacturing, processing, trademark, and other skills which will be provided by the licensor. Licensing and franchising is a good way to start an operation in a foreign market because of its low risk manufacturing relationship; however it has a limited form of participation to specific product, trademark, or process, and agreement just like what happened to Starbucks.
In every outlet that the company needs to build in China, Starbucks has to consider the agreement and the location in order to reach the anticipated market share. In China, Starbucks maintains the unique character of serving the finest coffee in the world and high quality globally appreciated food. While continuing to offer the best coffee, it is also leading in China in spreading coffee knowledge and expertise, and creating a coffee culture in a traditional tea-drinking society.
The Starbucks store atmosphere is one which is similar to the old teahouse of China – a gathering place and a community living room (Starbucks Corporation, 2007). Starbucks has been successful in the China’s market; in fact, the company’s way of educating the Chinese to buy and drink coffee products have been very effective. Starbucks was able to build more stores in the said country and continue to expand globally (Yeh, 2006). Through franchising, Starbucks was able to penetrate the market with strong culture orientation; however, the company operated with a strict agreement with the government.
It is a manifestation that Starbucks has the capability to expand the business regardless of the conflict that the company faces along their way to success. Reference Wall Street Journal. “Starbucks Calls China Its Top Growth Focus. ” The Wall Street Journal 14 February 2006: 1 Yeh, Andrew. “Starbucks aims for new tier in China CAFES. ” Financial Times [Asia Edition] 14 February 2006: 17 Starbucks Corporation. Starbucks In China. 2007. 7 August 2007 <http://www. starbucks. com. cn (Flash Navigation > English > About Starbucks > Starbucks In China)>