INDIVIDUAL ASSIGNMENT
STARBUCKS
1) What are the greatest challenges in the board environment that Starbucks will face when expanding into the Chinese market? What should Starbucks do to overcome these challenges?
Starbucks as a one of restaurant who provide good service and the main product is coffee. It is not easy Starbucks to open their restaurant in Chinese. This is because Starbuck have greater challenges when expanding into the Chinese market. Firstly, the challenge is majority of Chinese people more prefer to tea compare to coffee. This is because, since decade ago, the Chinese people drink tea. Besides that, Chinese people said that drink tea is good for health. Other substitute product which will become competitor to coffee is colas and juices. So, the Starbucks should take this problem as challenges in organization. The Starbuck should be doing more promotion to the Chinese people about the Starbucks’ product. After that, the Starbuck can do the creative advertising to attract people, give the product’s tester to the Chinese people. So, from this ways the Chinese people will know and taste that product, it can influence that people to buy this product. Other than that, this company should learn more about culture Chinese people because to avoid any misunderstanding about culture, behavior, and others. Every country has different kind of people, knowledge, culture, background, and others. So, the Starbuck management should do the research and understanding about Chinese business culture framework which is know about negotiation process and style of business at Chinese. Starbucks also can create some of menu of food which based on the culture at China. For example the KFC company create menu based the culture of the country they entry their business.
Secondly, the challenge of Starbucks to entry the Chinese market is political challenges in Chinese. This is because it is difficult to entry the Chinese market without helping from the government at Chinese. The Starbuck create the good relationship with Chinese people. The Starbuck also have a good planning to entry the Chinese market. Starbucks create partner with the local partner which is President Group. Form this relationship with President Group, the Starbucks can expand their product into four market such as Taiwan, Shanghai, Beijing and Southern China. According to Michael (2005) as a director of Maxim’s Caterers said that Starbucks’ joint venture partner in Hong Kong, Macau Other than that, a multinational corporation (MNCs) is a one of principle for foreign companies to entry the market. This principle is call as ‘One Face to China’ which is helps the foreign companies to operate their business in this country which is suit the foreign companies with the China country. The Starbucks is one of foreign companies which invest their money with open their firm. This firm are present the premier coffee business in China. This is because the Starbucks will pour million into Chinese companies, resources, real-estate and taxes. The ‘One Face to China’ principles create three phases when the foreign companies to invest the international market for long term or short term. The first phase is Entry which is from this phase, the MNCs indentify the right business model can use it. The second phase is Country development. In this phase, MNCs can develop their market which is about the location, awareness of the brand name based on the customer perspective and other research or information about market, business and others during the Entry period of time. The last phase to involve business into the international market is Global Integration. This phase is for seek the foreign companies of management and goal is same and can move into that market like the parent company. The Starbucks Company follows the three phases with conduct by MNCs. The Starbucks has successfully in expose about their trademarks ‘One Face to China’.
Besides that, the third of challenge is economic. Economic is one of the most important when to open the business at that country. This is because if those countries do not have a good manage and control the economics which is it can give effect to new business to run their business especially to foreign companies and business. The Starbucks has challenged in economic at China. This is because to run the business with success from the economics of customer which is the income and disposable income of consumers. This company known as the company which is selling the high quality of coffee with provides the good service to their customers. This challenge can happen economic condition at that location can cause the customers not willing to pay the high price of the coffee. Starbucks do the research about the location they want to open their business. The Starbucks do the research and survey the location based on demographic background, culture of people, the income level and others. This is because from this survey, the management can learn more about that location. The location should choose based demographic and the place which is the resident have disposable income can spend their money at Starbucks. So, in my opinion the Starbucks ca create some kind of food based on culture and trend to attract the customer spent their money at Starbucks.
Other challenges the Starbucks to entry and open their business in China is advance of technology equipment. The equipment use at Starbucks restaurant is have specialty equipment because to maintain the quality of the Starbucks’ coffee. If this business cannot attract the customers come in, it can cause waste the technology of equipment. This is because it cannot give a good feedback to Starbucks products. So, to overcome this problem is maybe through advertising the advantage of products, maybe give the information to customers where the resources come from, what type of equipment use to maintain the quality of coffee and others. From this information, the customer can think impossible to spend their money at Starbucks for their products.
2) Identify and how could Starbucks make its competitive advantage sustainable over time?
The Starbucks business create their own competitive advantage to run their business smoothly and successful. Create the competitive advantage as a one method create the entry barrier and avoid other company copy the products. There are several of competitive the Starbucks use in their business to compare their bran, product and other companies and businesses. Firstly, the Starbucks create a product which is the secret recipe of coffee product based on the knowledge about the coffee. So, other company cannot copy this recipe to their business. This is because Starbucks get the high quality coffee from specialty place which provide that coffee to the Starbucks. Starbucks not only serve the coffee at their restaurant. Starbucks also provide good service to their customers, special service to their loyal customers, the host serve also provide candy and others. According to Schultz, the CEO of Starbucks said that, the quality of Starbucks workforce as one of sustainable competitive advantage to their company. This is because the employees’ skill cannot be copy to other company because only the person have training at Starbucks know and learn skill and knowledge to produce the high quality of products.
Secondly, the technique of produce the high quality of coffee and how the employees at Starbucks apply that technique to ensure and maintain the quality of coffee. Besides that, to maintain the quality of Starbucks coffee is specialty equipment use in produce this product. Not all of competitor can buy that equipment because the cost of equipment is so expensive. But it can help this business generate their revenue by use that equipment because their brand. Thirdly, Starbucks Company is a one company which is monopoly the competition around the world. Although Starbucks have big competitor such as Coffee Beans but their successful to run their business at several of country such as China, Malaysia, United State, Europe and others. Starbucks do control and have strong of economic of scale in more of country. So, it can create competitive advantage through that. Other companies difficult to entry into market their business.
Other than that, the good relationship and joint venture with partner every country they entry will create the competitive advantage compare to other business. This is because without that relationship between Starbucks and government and other company, the Starbucks Company cannot run their business successfully. The brand of product also can create a competitive advantage to Starbucks because the customers especially the foreign tourism should more prefer choose the Starbucks restaurant based brand name and popular at their country. Besides that, this company of cost is low to moderate costs to each location and the major of cost is use for to pay the labor cost the resources. This company also provide variety of coffee product and not only coffee, and not only original coffee. For example, ice blended, some type can suit with coffee and others.
3) What strategies (at business and corporate level) could Starbucks implement in China considering the income discrepancies of that country?
Starbucks use variety of strategies to entry and run their business at China. The strategic management to separate wide about this product is should be planning well. Firstly, Starbucks do a plan for pursuing the mission and achieve the objective the company. The business level strategy means the planning for managing one line of business. The first strategic at business level could implement in China is prospecting. Prospecting means aggressively to offer new product, kind of product and the price which is can suit with the income discrepancies and others. This is because can create opportunity to Chinese people who have moderate income level to try this product. The Starbucks can setting the price base on the location but need should the standard price which can generate more profitable to the company. The second strategic at business level is defending and marketing the product. It is means the Starbucks should staying the present product line and maintain and also increase the number of customers. The customers can increase with do more advertising, promotion and promise can provide the high quality of product and services. From this it can create the customer loyalty with this product and services. License and joint venture as two of main business strategy which is license is format to local operator to store revenue of Starbucks in return for initial licensing fees and royalties. Joint venture is important to run their business success and smoothly because when joint venture and good network with government and more company at China can give strength of Starbucks Company.
Other than that, the corporate means the planning for managing multiple lines of businesses. All corporate level want their business can generate more profitable to their company and also increase the customers coming and also want outstanding of services. The Starbucks create the good environment to their customer when come to their place. Starbucks provide the customers feel richer, exotic, more flavorful taste of coffee and others. According to Catherine Chau as a general manager of Mei Da point out the Chinese people at Beijing go to Starbucks for coffee but for the experiences during stay at Starbucks. So, from this statement can attract more people although discrepancies of income to come the Starbucks Restaurant to feel their own experience. Offer high quality products as one of Starbucks corporate strategy to all customers come in the Starbucks. High quality product and service to all type of Chinese people will attract them to come again. The Starbucks can give test taste to customers who not have more income to buy the product during promotion but only certain amount of people. The customers who do not more disposable income can buy the instant coffee which is Starbucks provide selling their coffee instant in packaging. So, the customer can buy this product with share money. The corporate level also creates the good working environments which serve with friendly to customers especially at China. Other corporate strategy is providing a relaxing and attractive social atmosphere. This strategy will attract the people to come in and can relax their mind with drink the high quality of coffee. The location of Starbucks is suitable with give well mood which feel relax, with music and others.
REFERENCES
Enz, C. A. (2010). Hospitality Strategic Management: Concepts and cases. (2nd Ed.). New Jersey: John Wiley & Sons, Inc.
Lum, T., & Vaughn, B. (2007). The Southwest Pacific: U.S. interests and China’s growing influence. CRS Report for Congress, 1-27
Marrison, W. M. (2006). China’s economic conditions. CRS Issue Brief for Congress, 1-15
Venkatraman, M., & Nelson, T. (2008). From servicescape to consumptionscape: A photo-elicitation study of Starbucks in the New China. Forthcoming in the Journal of International Business Studies, 1-36
Zhang, Z. J.(2006). International Expansion of Starbucks under the Background of Global Tourism Development. Journal of Canadian Social Science, 1 (2), 17-21.
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