The well-known coffee company Starbucks becomes popular not only in the USA. The company keeps on coming up movies and televisions shows and, therefore, it has become necessary for the company to expand into the global market place. There is a great concern that Starbucks might have reached plateau phase in the American market. In 2008, the company closed about 600 US coffee shops, making over 12,000 people unemployed (Waite, 2008).The downsizing in the USA labor market has left many people with less disposable income to spend on luxuries, leading the company to look for other options for ensuring continued growth, hence the need to present its production at the world market. On the other hand, this decision has been pushed by increased competition within the USA domestic market. American companies such as Panera and Caribou have become household names in the USA providing a big challenge to Starbucks. Moreover, there are several local coffee outlets that have been inspired by Starbucks growth success. Considering all these facts it is clear that Starbucks has to go outside the American market in order to continue experiencing growth (Fowler, 2003).
At the moment, Starbucks has retailed outlets in many countries such as Russia, Canada, Japan, Mexico and the United Kingdom (Fowler, 2003). The CEO of the company explains that the success in these markets is largely because Starbucks is an “affordable luxury” that the customers are able to associate with. In this way, Starbucks global expansion strategy has been focused on gaining access to emerging markets as a way of ensuring continued growth (Haoting, 2009).
Starbucks has used joint ventures with local companies or governments in order to access markets that have been seen as hostile to the United States. This strategy satisfies national interest and also provides a sense of pride to the concerned community or government. Through the use of joint ventures as well as providing affordable luxury to poor countries or populations, the company’s entry into emerging markets such as India is one of the guarantees of Starbucks’ success. In addition, the company’s reputation with suppliers as well as its status as a global leader in environmental conservation coupled with strong brand recognition is one of the strengths that boosts the company’s image in the eyes of competition (Fowler, 2003).
One of the main strategy aims of the company is to introduce coffee to countries where tea is more preferred than coffee such as China and Japan. Moreover, as it enters the Chinese market, with the aim of selling its “new” and “different” drinks to the people who might not have tasted coffee before, Starbucks has the potential to help local people identify and relate with the unique flavors Starbucks offers. In this manner, the company is able to generate more clients and also appeal to coffee drinkers who are loyal to its coffee taste (Haoting, 2009)
The company’s CEO confirms that China is the ideal location for making the biggest foreign market. It is not an easy task for the company. Despite the fact that the company has won a trademark law suit against a Chinese competitor, the company has to content with the numerous challenges of the Chinese culture and marketing environment. There are 69 stores in China and Starbucks will not stop to broaden the boundaries of its market (Fowler, 2003). The company was accused of insulting the dignity of the Chinese people by placing a kiosk inside the Forbidden City, which was seen as an insult to their culture and tradition (Fowler, 2003). The company stakes on the high-visibility and the most advantageous location of the stores rejecting the use of advertisements, marketing strategies or promotions. Starbucks uses special computerized mapping databases which help to find the most vivid and easily found location for their stores. The Starbuck should take into account that the majority of the Chinese are the representatives of the middle class who are not able to afford themselves such luxury as a cup of expensive coffee. More than that, the Chinese get accustomed to drink tea. Most people in China drink coffee in public in order to present their image of modern Chinese (Fowler, 2003). It will be good for the company to understand what the Chinese culture requires; in other case failure will mean closing business and a shameful exit from the Chinese market.
References
- Fowler, G. (2003). Converting the masses: Starbucks in China. Global Policy Forum.
- Haoting, Lu (2009). Starbucks pushes China sales with local brew. China Daily. Web.
- Waite, A. (2008). Starbucks to Lay Off 12,000 Workers. Melcrum.