Growth Strategies Case Study

Aspiration of Starbucks in China: Popularising coffee among tea drinkers

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Abstract:

In 2006, the specialty coffee retailing company, Starbucks had over 11,000 stores in 36 countries of the world, employed over 10,000 people and every week over 40 million customers visited Starbucks coffeehouses. After phenomenal success in the US, its home country, and revolutionising specialty coffee culture, Starbucks undertook international expansion and popularised its specialty coffee worldwide. The initial pages of the case delineate the origin and growth of Starbucks as a company and a brand and the paramount contribution of Howard Schultz and other key leaders.

In 1999, Starbucks entered China, the world’s most populous country and an emerging superpower, through selective joint ventures. It opened retail outlets at high visibility locations. It did not market or advertise its stores and relied mainly on word-of-mouth promotion. Instant coffee was popular in China, but specialty coffee was introduced and popularized among the Chinese by Starbucks and became the market leader in specialty coffee in China. Witnessing its success, many competitors followed suit. Starbucks entered one region after another and within a few years of operation and initial success in China, Starbucks had moved China up to the No. 1 priority and proclaimed it to be the second largest future market after the US. Starbucks was all prepared, but according to industry analysts, the task of popularising coffee, primarily a western concept, in a traditionally tea-drinking country, was gigantic and will not be easy. How Starbucks continues to bolster its success and achieve its aspiration remains to be seen. The case is targeted at management students and can be taken up in their Strategic and General Management curriculum. On the background of the information provided in the case, the students can discuss and chart out further strategies of Starbucks in China and the roadmap of its success.

Pedagogical Objectives:

• To trace the journey of Starbucks from a modest start to its becoming the market leader; worldwide and in China
• To analyse the Chinese beverage market on the basis of Michael Porter’s five force model
• To discuss the growth and competitive strategies of Starbucks in China and debate on its future potential keeping in view the increasingly fierce competition.

Keywords : Starbucks; Howard Schultz; Seattle; Japan; China; specialty coffee; instant coffee; coffee culture; Growth Strategies Case Study; third place concept; barista; differentiation; market expansion; spoke and hub strategy; word-of-mouth promotions; market entry strategy; joint venture; competitive scenario; market structure; market development; Starbucks experience; Frappuccino; lifestyle marketing; market leader strategies

Contents : 
The Starbucks story
Howard Schultz and Starbucks
The winning combination
Going international
Starbucks in China
The Chinese Beverage Market
Captivating customers