Subject: INTERNATIONAL MANAGEMENT

Subject Code: INS3027

Final Assignment

An Analyze of International market entry strategy of

Starbucks

Prepared by: Lý Thị Hương

Student ID : 18071114
Prepared for: INS3027
 December 30,2021

TABLE OF CONTENTS
EXECUTIVE
SUMMARY…………………………………………………………………
INTRODUCTION……………………………………………………………………….
...
I. Company background
II. China market
analysis…………………………………………………………………………
ENVIRONMENTAL ASSESSMENT AND SCANNING
I. Assess External environment
II. Internal and competitive advantage analysis
STARBUCKS INTERNATIONAL BUSINESS STRATEGY
I. Starbuck international entry business strategies
II. Starbucks international strategy analysis in China
III. Success and failure of Starbucks in China market
IV. International strategy alternatives and Recommendation
CONCLUSION ………………………………………….
REFERENCES…………………………………………………………………………
….

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 EXECUTIVE SUMMARY

Nowadays the global economic environment has become more dynamic and
progressively causes a higher number of enterprises to pick an entry strategy to
become international. The choice of the international strategy of entry into foreign
markets has long-term implications for MNCs. However, the process of entering into a

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foreign market is complex by the respective company's poor grasp of market
information and operations. These require multinational corporations to concentrate on
developing strategies of winning in the new market. Starbucks, a popular American
coffee retailer, and restaurant reached the peak of success in its domestic market and
expanded into the international market. This paper is an in-depth analysis of Starbucks
entry strategies in China.

Introduction

I. Company background
1. Company history and birth

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Inspired by late-1960s counter-culture thinking (and named after a character in the
novel Moby Dick), Starbucks embarked in 1971 as a solitary niche store in Seattle’s
historic Pike Place Market. Today, Starbuck became a worldwide coffee brand with
more than 30,000 cafes globally, including kiosks in airports, train stations, stadiums,
and the like. Approximately 40 percent of the coffee shops in the U.S. are Starbucks.
Along with grunge rock and Amazon, Starbucks was one of the 1990s signs that
Seattle was taking over the world—and like the other two legs of the Emerald City’s
conquering tripod, Starbucks is now thoroughly mainstream. And through its chains,
Starbucks is a ubiquitous presence in modern life.
2. Mission and objective
At the first set-out Starbucks’s goal was to be a different kind of company. The
mission statement stated that the company aims to: “ To inspire and nurture the human
spirit – one person, one cup, and one neighborhood at a time”. One that not only
focuses on establishes the company as a premium provider in the market for coffee and
coffee based products but also maintaining the standards and principle

Starbucks’s goals pertain to becoming the leading retailer and brand for coffee in all
the markets where the company operates. This is to be achieved through provision of
high quality products and superb service quality. The company is applying the
expansion into new markets strategy to increase the market in which it operates, the
franchise operations are being applied by the company for its international operations.
Starbucks company's objectives and guidelines are conceived as follows:
-To offer an excellent working environment for human resources while respecting their
rights.
-Embrace and elevate diversity in the business
-Adopt and maintain the highest level of standards for quality in purchasing, roasting
as well as delivery of its products, i.e. coffee.
-Increase and raise up customer satisfaction

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-Subsidize and provide for the community where the business operates in order to
improve their living standards and provide them with facilities
-Retain on introducing new products and innovative services for its customers in the
various market segments.

2. China market analysis

As one of the largest markets with a population of more than 1.3 billion people, China
has always been considered the promised land of foreign start-ups. However,
according to the assessment of foreign companies, when investing in China, they all
find the investment environment here full of challenges and worrying risks.

Almost all companies that want to access the Chinese market as foreign companies are
unlikely to succeed. Specifically, when foreign companies bring their products to
China, many local businesses seek to re-engineer the same solutions and ideas. became
very popular and serious during China's development. For this reason, there has been a
US-China trade war that has lasted from 2018 until now without a satisfactory
resolution.

Besides, an obstacle for foreign companies in China is the domestic element of direct
promotion platforms. Specifically, both Google and Facebook are blocked in China,
and 96% of traffic is on Chinese servers, according to estimates by the China Internet
and Information Center.

Environmental assessment and scanning

I. Assess External environment factors

1. Policy

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China is a communist country with centralized economic decision-making. However,
in 1978, market-oriented reforms were introduced to open up investment and growth
markets in China. The economic condition and working environment are attractive to
foreign investors, therefore increasing FDI in the company at an accelerating pace.
Recently in 2002, a policy has been passed whereby the Chinese market has been
further opened by restricting government intervention and increasing the promotion of
private investments by foreign parties. This has come due to the entrance of China into
the World Trade Organization (WTO) in 2001.
2. Economic
At the time Starbucks officially entered the Chinese market in 1999, was the time that
marked the rise of the Chinese economy. Marked by the timeline from when this
billion-people nation joined the international organization WTO until 2007, China's
economy grew continuously and steadily. According to the statistics of the China
Statistical Yearbook, the GDP of this country increased from 1.211 trillion USD in
2000 to about 4,595 trillion USD in 2008 with an average income of 3468
USD/person. Along with people's incomes increasing, living standards improving,
people's spending ability on Starbucks products become higher

In 2008 and early 2009 was the period of world crisis, the Chinese economy at that
time reached the bottom of the crisis, many foreign companies had to close down.
After that point, the national economy gradually recovered and developed again. China
has adopted many new economic policies for the later period, and the economy has
tripled in 2018 with a total national GDP of 13.6 thousand USD. With the great
development and the largest population in the world,

China is always a potential market that any foreign company wants to invest in. Such
an environment for the operations of Starbucks.

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 3. Sociocultural factor

The Chinese tea drinking culture has existed for more than 4000 years. Tea is ranked
in the list of 7 indispensable habits in life in China. Tea has formed a unique culture,
people consider making tea and enjoying tea as an art. Therefore, in all parts of China,
there are tea shops and tea shops with different forms. There are many famous Chinese
tea brands such as Oolong tea and Tay Son tea sold at tea shops. People drink tea, have
breakfast, and enjoy the beautiful scenery in tourist areas. Therefore, it is a great
challenge for Starbucks to bring its coffee products to the market that has this habit of
drinking tea.

Diversity of consumer groups in China, divided into groups including Gen X -

consumers after the cultural revolution (1965-1980). These consumers grew up at the
beginning of an era of reform that strongly influenced their consumption behavior.
Since they grew up in times of political upheaval and constant change, they are used to
saving a large portion of their income and limiting paying for mid-to-high-end
products. Next is the millennial generation - the 12th generation group of the one-child
policy makes up the largest number (1985-1994), they are least able to save and spend
most of their money on other products and services. together. Chinese millennials are
willing to spend on more luxurious experiences and goods such as imported products.
Besides that, they are also the first generation digitally savvy which means they are
more likely to engage with social media platforms and buy goods through today's
growing e-commerce. And the Gen Z group - a group of young people (1995-2002).
People in this age range are the most westernized and vulnerable to new and imported
products. This group is the most likely to spend money of all generations, the least
likely to save. The increasingly developed society is the reason for the online shopping
trend of Chinese people in recent years. Especially for the younger generations who
are the most tech-savvy, they use credit cards to make purchases on a regular basis.
According to a survey by the company Accergr, more than 70% of young people in

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China between the ages of 18 and 22 are willing to spend money to buy goods through
media channels. This is a rapidly growing trend in purchasing behavior that could
benefit businesses in China from apparel products to food products.

4. Technology factors

China is one of the most technologically advanced countries where innovations in

technology are taking place at an incremental pace. The advancing communicative
technology and the internet enables the foreign direct investment companies to operate
effectively and efficiently in China.

II. Internal factors and competitive advantage analysis

1. Corporate Structure
As an international business company pursuing a transnational strategy and a global
strategy, Starbucks has chosen for itself the main structural model, which is a
geographical area structure model that is suitable for the company's capabilities as well
as the global market and the business strategy that the company has chosen. The
operations of the company are greatly decentralized with regional headquarters for
Europe, Africa, Asia, North America, and South Africa. The main headquarters of the
corporation is situated in Seattle Washington where overall strategy decisions are
made and the activities of other facilities are coordinated.

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 2. Corporate Culture
The corporate culture at the Starbucks company is to derive organizational growth
from employee performance productivity and satisfaction. The value of the company
is to employ the employees and provide them opportunities for growth. Aside from
this the company is highly focused on utilizing innovative strategies for its operations
and promoting sustainability of the environment through the use of recycled materials
in its packaging and in-store furnishings.

3. Corporate Resources

The corporate resources that are available are the financial resources, marketing
resources, human resources, operational as well as technological resources. The
biggest marketing resource of the company is the brand name of the Starbucks
Company, the premium high quality, and associations that come with it. The financial
resource of the company is its forceful performance in the past years which has
increased the share value as well as the equity value of the company.

The technological and operational resources utilized by the company are innovative
high-end technology-based which support the standard operations of the company in
all the international markets and also allow for a small intensity of customization for
the local communities and customers. Human resource is one the most powerful
resources available to the company. The company invests extensively in developing
human resources which have become the key success factor for Starbucks.

4. Competitive advantages

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To talk about the advantage that Starbucks has is a large coffee chain system in the
world. In the US - where Starbucks was born, Starbucks was the first company to
import and spread the coffee culture from Europe into this country. Before there was
Starbucks, coffee in the form of latte, frappuccino, mocha.. was completely foreign to
American consumers.

Starbucks doesn't just sell coffee, it also offers experiences. This involves focusing on
customer service such as greeting within 5 seconds, wiping tables immediately, or
remembering the names of regular customers. From the beginning, the company's
main goal was to create a place with a warm, romantic atmosphere, a gathering place.
Next, Starbucks created third place in life. a place between home and office where
people can come to relax. Experiences contribute to the success of Starbucks as much
as the quality of coffee

With all these services, the above experience is priced at a premium. While all
customers are aware that Starbucks drinks are more expensive relative to other drinks
in the market, they still pay with their wallets because Starbucks is now the place to
visit or be seen. visit. In this way, the company gained mass acceptance, becoming an
icon. A Starbucks coffee cup is an indispensable accessory in the hands of every
person coming to work. So, not only did Starbucks change the way they drink coffee,
but they also changed the way consumers are willing to pay for a cup of coffee.

These are the things that make Starbucks stand out, differentiate and overwhelm other
brands in the market.

The basis to create the difference is focused on management from the production
process, training employees to apply technology to business, and paying special
attention to customers has been implemented by Starbucks while entering the Chinese
market.

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STARBUCKS INTERNATIONAL BUSINESS STRATEGY

I.Starbuck international entry business strategies.

The international entry strategy of Starbucks involves using three approaches which
are wholly-owned subsidiaries, joint ventures and licensing. The licensing procedure is
utilized when Starbucks wants rapid expansion in a specific country. Starbucks
employed a joint venture strategy in order to originate its business practices in the
local market. The wholly-owned subsidiaries technique is applied when Starbucks
already has the market knowledge of the market it’s operating in.
In the process of entering the China market Starbucks entered into three different joint
ventures: in the north with Beijing Mei Da coffee, in the east with Taiwan-based
UniPresident, and in the south with Honig Kong-based Maxim’s Caterers. Each
partner carried diverse strengths and local expertise that helped the company achieve
insights into the tastes and preferences of local Chinese customers and to adapt
accordingly. Starbucks trusted that China will turn into its second-largest market after
the United States by 2020.

II.Starbucks strategy analysis in China

1. Analyzing Starbucks' business strategy in China

Starbucks was born in the US, so it is greatly influenced by Western culture, lifestyle
and way of life. However, the Chinese market (the market that Starbucks is entering) -
belongs to Asia, has different cultural characteristics, lifestyle, and thinking compared
to Westerners. So Starbucks cannot apply business strategies like Starbucks has to

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change its strategy to adapt to Chinese culture. With a country steeped in cultural
traditions like China, Starbucks has adopted a multi-domestic strategy and has
achieved great success in this market.

2. Product strategy
China is the home of the tea industry and tea products. The Chinese habit of drinking
tea every day has a long history. Tea appears everywhere, all the time in their daily
life. Chinese people use tea to receive guests at home, used in conferences, weddings,
... In China, tea is considered a national warming because it is not merely a popular
beverage but also important. More importantly, it also shows the national culture. It
seems that for thousands of years, no drink can be replaced. In order to suit Chinese
culture, as well as satisfy the people's need to drink tea in this country, Starbucks has
put on the menu of traditional tea and cake products, including mooncakes if the
occasion is right. processed in a more modern way. Even to cater to local tea drinkers,
In Starbucks' drink list, there are also two different types of tea: Chinese tea (Olong,
green tea) and exotic tea (exotic: Earl Gray and English breakfast). Starbucks has
capitalized on the tea-drinking culture of Chinese consumers by introducing beverages
that use popular local ingredients such as green tea. This strategy has turned an
obstacle into a potential for Starbucks.Chinese consumers quickly adopt a coffee taste,
which is at the heart of Starbucks with what their country's traditions are.
3. Pricing Strategy
The Chinese attach great importance to gaining and maintaining fame and status,
especially for family and community. Therefore, they want to use brands and products
that represent wealth, success, and class. Starbucks positions itself as the premium
coffee brand in China. Starbucks has built its image as a product of status and success
in life.
In China, its price is 20% higher than in other parts of the world. It chooses high-end
store locations such as luxury malls and luxury office towers. And because foreign

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brands, especially food and beverages which are considered premium, Starbucks often
label its products with the country from which its products are imported. Drinking
Starbucks coffee is now seen as a status symbol, a way to express the style and
willingness to play for China's middle class. This pricing strategy of Starbucks not
only matches the needs of the market but also allows it to continuously offer
high-margin specials, such as a gift set, to offset costs. raw materials increased. As
China's urbanization rate has reached nearly 52%, the companies need to perform the
necessary tactics to resolve the heightened value.

4. Localization Strategy
The Chinese highly value their community, traditionally called "internal circles." Be it
home, school, or work, they turn to these circles for loyalty, information, and approval
for their choices. With that thinking, Starbucks designs its store spaces to facilitate
these "circles" coming together. Unlike in the US, where Starbucks chairs create a
quiet space for each laptop user or just visiting customers, in China Starbucks is
designed to cater to crowds, noise, and the need to scream tomato. In many locations,
stores are 40% larger than in the US and located in highly visible and accessible
locations in office buildings (on busy floors or mezzanines). Sitting areas are designed
to be open and often wireless - seating seems to encroach on adjacent spaces, such as
hallways or aisles.
Walk into any Starbucks in an office building at 3 p.m. and you'll find a buzzing crowd
exchanging office news, cheering, and getting updates on the latest fashion from
colleagues. and chat with friends about the next destination. It feels like you've just
stepped into the modern version of the town square. So, Starbucks customers not only
enjoy coffee (in all kinds of stylized Chinese style), they also feel satisfied when they
come to Starbucks with friends and colleagues.

5. Communication strategy

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Branding through digital media: Coffee shop chain Starbucks builds a deeper
connection with customers by offering more free entertainment content with its free
Wi-Fi service, in partnership with the guys. giant media networks such as: Google,
Youtube, Facebook, Email, etc. To promote the introduction of this system, Starbuck is
currently providing free music, videos and reading rights to customers. This service
will bring 6 channels to serve customers: News, entertainment, health, business, career
and Starbucks channel personalized based on users. All are free to use through
customers' laptops, tablets and smartphones.
Word of mouth marketing: is a form of encouraging customers to talk about your
business and products and services to promote relationships with customers, creating
value models that increase brand value. This form is widely applied by Starbucks in
China. Right in the process of formation and development in China, Starbucks has
created a brand for itself with countless people "addicted" to coffee, especially the
community of "followers" of this beverage. Moreover, every Starbucks salesperson
must have a spirit of Starbucks devotion. They give employees small notebooks, in
which they write “slogans” that say something like “Starbucks is our soul”. Starbucks
even organizes training sessions, teaching about Starbucks culture or about human
personality. Therefore, when entering any Starbucks store, you will clearly see the
positive attitude and happiness of the staff here, who always show their love for the
Starbucks brand and they are always the best. best connection with consumers.
6. Brand protection
Besides brand promotion, Starbucks also focuses on brand protection. Right from the
early days of brand building, the company has registered for trademark protection in
the US and abroad. China is no exception. Parallel to trademark registration is the
process of Starbucks struggling against trademark contravention. No one can deny the
value of the Starbucks brand, not only just a brand with commercial value but also
represents a unique coffee culture. In 2006, Starbucks succeeded in a copyright
protection lawsuit against a Chinese company operating under the name Xingbake, the

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Chinese name for Starbucks. To protect your brand, Starbucks always ensures the
consistency of brand information to consumers. Any information that can affect
consumers' perception of the brand. The company cares about internal issues within
the organization, employees are always the representative of the brand image.
Starbucks has created barriers against trademark infringement, one of which is from
expanding the distribution system. This increases the chances of product exposure to
consumers, thereby increasing the likelihood Starbucks also established a system to
receive and respond to information about trademark infringement. This system helps
businesses have timely responses to protect their brands and create brand trust in
consumers, creating comfort for customers in the store system and retails chain

III.Success and Failure of Starbuck in China market

1. Starbucks ’s success
Since entering the Chinese market, by applying effective strategies, Starbucks
has created a powerful and high-value chain store system that is constantly
developing. Starbucks strategy has the following strengths:
- By keeping the brand image, positioning the brand in the high-end segment in
parallel with quality products and great experiences, suitable for Chinese
customers. Starbucks has taken the leading position in the industry in this
billion-people market.
- In addition, the integration of local cultural elements into stores, linking local
businesses to find true insights about consumers, and building a familiar
experience with Chinese people have helped. Starbucks moves fast and strong
in the market, closer to the Chinese people.
- Applying new marketing methods through a variety of channels along with
the constant change in the menu makes Starbucks' image always change,
creating its own unique trends - What the young target customer group of

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 the chain always yearns for the experience of drinking coffee

2. Starbucks ‘s failure
Product pricing is too high, leads to public discontent, and makes it difficult to
reach middle-income groups in the market. CCTV has once accused Starbucks
of deliberately pushing the price of products in order to pickpocket consumers.
- The cost of decorating, renting space to create a real-scale store is often very
high in China or importing some standard materials, shipping costs, etc. The
spending on differentiation causes Starbucks' costs to be very high, which
reduces profits somewhat

IV.International strategy alternatives and recommendation

Starbucks in China has faced problems pertaining to the culture of the organization
and the historical culture of the Chinese market. Therefore, the company has been
affected by the Forbidden City controversy in which the operations of the company
store in the city are highly criticized by the Chinese.

The alternatives that the company has chosen for a better position and presented itself
to the Chinese market is to incorporate the Chinese culture and tradition in its
approach to business and dealing with customers while retaining the service stages and
standards of its operations. For this, the company can customize its menus to the
Chinese market by offering flavorings of traditional Chinese herbs and teas with the
Starbucks coffees as well as including traditional Chinese snacks like a duck. Besides
this, the corporate culture in the region of China can be customized and more
diversified so as to not offend the Chinese market with their operations.

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In order to be effective in deploying the market-specific and customized corporate and
marketing strategies, the Starbucks company needs to set up a monitor and control set
up. Specific objectives for the strategy deployment need to be developed which
highlight the desired end results in terms of strengthening the Starbucks brand and
image in China as well as increasing the market of coffee consumers. Additionally, an
external audit program can be launched to judge the performance of the business.
Consider the suitability of the product with the culture and habits of each market,
thereby making adjustments, improving products and services, pricing accordingly,
most familiar to customers, creating a premise for the expansion and development of
the business in new markets.
Cooperate with local businesses, take advantage of the location when the business
itself does not have many advantages and experience in the market.
Maintain the image and reputation of the business, create trust from customers in the
business with the products and services that the business provides.

CONCLUSION

The expansion of Starbucks Coffee is done strongly in both vertical and horizontal
directions. Verticality is when the company offers different product lines to suit the
different capabilities of different customer groups. The products of Starbucks Coffee
are the same as Starbucks Coffee, but they are very dynamic and flexible when
designing their coffee shop. Horizontally, the company develops product lines such as
providing music, wine, cakes and will have more products that match the needs of the
market to be offered after coffee.

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Starbucks has established a strategic business unit for new product lines. Not stopping
at the current successes, Starbucks is increasingly developing in domestic and foreign
chains with an amazing growth rate. Whenever investing in different international
markets, the Starbucks team always focuses on carefully investigating natural factors,
human factors, economic, political or consumption habits so that Starbucks does not
but still retain the inherent traditional features of the chain stores, but also integrate to
harmonize, adapt and be warmly received from customers all over the world.
Starbucks, wherever you are, is always a product line worth enjoying.

REFERENCES
(1) The company timeline :January 2019
:https://stories.starbucks.com/press/2019/company-timeline/
(2) Starbucks Worst Nightmare In China Is Coming True:Panos Mourdoukoutas,Jan 21,
2019,
:https://www.forbes.com/sites/panosmourdoukoutas/2019/01/21/starbucks-worst-night
mare-in-china-is-coming-true/?sh=598ab02317ec

(3) Starbuck International market communication in China: By Gabs and Nikki,May 9,

2021:
https://www.forbes.com/sites/panosmourdoukoutas/2019/01/21/starbucks-worst-night
mare-in-china-is-coming-true/?sh=598ab02317ec
(4) StudyCorgi. (2021, October 16). Starbucks Corporation’s Entry into China.
Retrieved from https://studycorgi.com/starbucks-corporations-entry-into-china/
(5) Case study of Starbuck entry to China with Marketing strategy: by Nageshwar Das
April 4, 2021
:https://www.ilearnlot.com/starbucks-entry-to-china-with-marketing-strategy/3359/#Sta
rbucks_Entry_to_Chinese_Market
(6) https://www.starbucks.com/
(7) Starbuck international entry strategy
:http://www.collegetermpapers.com/TermPapers/S/STARBUCKS_INTERNATIONAL_
ENTRY_STRATEGY.html

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