Starbucks Case Study

Case Study: STARBUCKS

1. Many of the same environmental factors, such as cultural factors, that operate in the domestic market also exist internationally. Discuss the key cultural factors Starbucks had to consider as it expanded into China.

As Starbucks expanded into China, they had to consider such cultural factors as: how the vast population of tea drinkers would take to the "new" palate of coffee, what generation they were appealing to; the older generation who are more collective, or the younger generation who is more individualistic?

Starbucks marketed themselves as "China's new sophistication," which to their benefit took off in great response. The younger generation gravitated towards Starbucks and its Western belief in individuality. It still gathers both generations because its popularity and function is a place outside of the house/school/work that people like to gather, hang out, and been seen.

2. Discuss the key political and legal factors Starbucks had to consider in the Chinese marketplace. What are the risks of entering a country with these factors? What changes have occurred in China's political and legal structure to the advantage of foreign companies?

Entering the Chinese market, Starbucks had to consider the political facts of the country being a one-party dictatorship. By China being dominate in its set ways, it was a prevalent risk and factor that could affect the business overnight and without warning.

Before 2001 when Beijing entered the World Trade Organization (WTO), "Starbucks initially entered China by authorizing local developers to use its brand and setting up joint ventures with partners." This strategy was very successful, but in 2006 they bought their partnership out. They have a better understanding and knowledge of how the country operates.

Foreign companies now have an advantage in China because holding a partnership rather than a joint venture is more profitable to them (company). Joint ventures operate under specific parameters (only receiving royalties), while partnerships conduct the business together.

3. What demographic factors were important for Starbucks to understand in China? What were the demographics they decided to target?

The important demographic factors that Starbucks had to understand going into China was the mass that they were going to appeal to.

The older generation holds more collective goals, while the younger generation is more individualistic (especially considering the new law of one-child has altered this mindset greatly). Starbucks entered China and swept up the younger innovation. Starbucks popularity is very "in" and trendy. Furthermore, they integrated more characteristically Chinese tasting features