Starbucks has opened more than 570 stores in 48 cities since it first entered China twelve years ago. The Seattle-based coffee company now has plans to open further 1,500 stores. All this despite the fact they were entering a market with a tradition stretching back two thousand years of people drinking TEA.
So, how did they do it?
Doing the Research
A careful market study revealed that as the Chinese middle class emerged, there existed an opportunity for Starbucks to introduce a Western coffee experience, where people could meet with their friends while drinking their favorite beverages. Starbucks literally created that demand.
Now you can find a Starbucks almost on every major street of the coastal cities in China. Once Starbucks decided to enter China, it implemented a smart market entry strategy. It did not use any advertising and promotions that could be perceived by the Chinese as a threat to their tea-drinking culture. Instead, it focused on selecting high-visibility and high-traffic locations to project its brand image.
The next thing Starbucks did was to capitalize on the tea-drinking culture of Chinese consumers by introducing beverages using popular local ingredients such as green tea. This strategy has effectively turned potential obstacles into Starbucks’ favor. Chinese consumers quickly developed a taste for Starbucks’ coffee, which was essential to Starbucks’ success in China.
The Starbucks ‘Experience’
One of Starbucks’ key marketing strategies is to provide customers with an exceptional experience. The chic interior, comfortable lounge chairs, and upbeat music are not only differentiators that set Starbucks apart from the competition, but also have strong appeal to younger generations who fantasize about Western coffee culture as a symbol of modern lifestyle. Many go to Starbucks not just for a cup of Frappuccino, but also for the “Starbucks Experience” that makes them feel cool and trendy. Thus, Starbucks has established itself as an aspiration brand and is able to charge premium prices.
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Starbucks understands the value of its global brand and has taken steps to maintain brand integrity. One of Starbucks’ best practices is to send their best baristas from established markets to new markets and train new employees. These baristas act as brand ambassadors to help establish the Starbucks culture in new locations and ensure that service at each local store meets their global standards. Western brands in general have a reputation for quality products and services. They have a competitive advantage over Chinese companies in establishing themselves as premium brands.
And finally, to address the complexity of the Chinese market, Starbucks partnered with three regional partners as part of its expansion plans. In the north, Starbucks entered a joint-venture with Beijing Mei Da coffee company. In the east, Starbucks partnered with the Taiwan-based Uni-President. In the south, Starbucks worked with Hong Kong-based Maxim’s Caterers. Each partner brings different strengths and local expertise that helped Starbucks gain insights into the tastes and preferences of local Chinese consumers. Working with right partners can be an effective way to reach local customers and expand quickly without going through a significant learning curve.