Tutorial Group: E10 Liu Siqi, Lo Man Yi, Rajesh S/O Ramalingam, Zeng Liyan

BSP 2005 Asia Pacific Business, Ethics and Society

Project Outline

Topic:
Study on cultural differences through Starbucks in China.

Motivation:
Culture affects every organization and knowledge of the impact of cultural differences is one
of the keys to international business success. This is especially so when businesses venture
into new markets with cultures significantly different from their own.
We have chosen to study how cultural differences affect a business and we will be looking at
the American-based company, Starbucks, and in particular, it’s venture into China. The
reason for choosing Starbucks in China is that it showcases a distinct culture difference
between the east and the west, for instance, consumers’ preferences differ greatly between the
Chinese and the Westerners. The Chinese are well known for their tea culture whereas,
Starbucks’s core business is selling coffee. We believe that their success comes largely from
their ability to practice localization, adaptation to the Chinese culture and perhaps even their
ability to convince tea drinkers to switch over to coffee.

Starbucks’ experience in China

Starbucks ventured into the China market in 1999. This overseas expansion was not entirely
smooth as Starbucks met with several obstacles brought about by cultural differences.
For example, Starbucks faced an uphill battle in selling their coffee to the local Chinese as
coffee drinking was not a part of the Chinese’s everyday lives as compared to tea drinking.
Starbucks also faced great resistance from the locals at the Forbidden City outlet because the
Chinese perceive the placing of Starbucks in the Forbidden City as a clash of the western
‘fast food ‘culture and the Chinese ‘museum culture in the Forbidden City”.
Eventually, Starbucks did managed to overcome the cultural differences and succeeded in
gaining a foothold in the Chinese market. It now has more than 300 outlets in China and has
been experiencing very strong growth in profit.

Main question for enquiry:

- Different aspects of culture in an organization, for example, corporate culture.

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Tutorial Group: E10 Liu Siqi, Lo Man Yi, Rajesh S/O Ramalingam, Zeng Liyan

- The differences between Western and Asian(Chinese) culture

- The difference between how the Westerners and Chinese perceive Starbucks
- Why and how cultural differences posed difficulties for Starbucks in China
- Starbucks’s approach in overcoming the cultural differences it faced, for example,
marketing efforts, localization, venture approach, etc.
- What are the conditions that have to be fulfilled to overcome the barrier of cultural
differences in order to be successful in setting up a business in China?

Road map for analysis:

- A comparison between the Western and Chinese culture
- Implication of cultural differences to a company venturing into another country
- Analysis of Starbucks’s corporate culture
- Starbucks approach in venturing into the China market: the problems faced and how
cultural differences are a threat to Starbucks.
- Actions Starbucks took to adapt to the China market and to address issues of cultural
differences. For example, offering food with coffee because most Chinese do not
drink coffee alone, serving China-brand coffee, and promoting coffee drinking to the
public because tea drinking was the tradition in China.
- Analysis of how Starbucks overcome the cultural differences. The role of
understanding and adapting to local culture in their road to success.
- Outlook for Starbucks in China

Expected Outcome:
- Ability to adapt to local culture is an important factor in determining the success of a
Western firm in the Chinese market, as demonstrated by Starbucks in China.
- Starbucks’ ability to practice localization in China aids in the acceptance of its brand
and products with the local population.

References:
Fowler, G.A. (2003). Converting the masses: Starbucks in China. Far Eastern Economic
Review, 166 (28), 34-36.
Han, G., & Zhang, A. (2009). Starbucks is forbidden in the Forbidden City: Blog, circuit of
culture and informal public relations campaign in China. Public Relations Review, 35(4),
395-401. doi:10.1016/j.pubrev.2009.07.004.
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