Ateneo de Davao University

International Business and Trade

Starbucks’ Expansion into China

1. Prepare a SWOT analysis based on the case to support Starbucks’ expansion plans in China. Based on
your SWOT analysis, what recommendations would you make to Starbucks’ CEO with regard to the
market development growth strategy for this country?

STRENGTHS WEAKNESSES
• Starbucks associated with three partners • In order to maintain the quality standard
as a strategy to enter the market and offer of their products, Starbucks have to keep
more localized products to Chinese their pricing which is considered
consumers. expensive for Asian market.
• Starbucks innovated their menu to match • Strategic location was not properly
the preferences of their culture. New considered, where they opened a store
products are often introduced including near the famed Buddhist temple in east
coffee and beverage line. China and offended the people.
• The “western coffee experience” of
Starbucks was brought in the Chinese
market.
• The smart market entry strategy was used
by Starbucks to grow in China.
• The human resources of Starbucks have
been successful at recruiting and training
employees.
• Starbucks expands their branches
throughout China.
OPPORTUNITIES THREATS
• China is a developing market because • There are other coffee companies looking
many companies want to benefit from the for continued growth in China.
opportunity that the China market offers. • Starbucks faces competition from
• Many companies do not have a pleasing different food industries in China.
environment for meeting with friends or • Chinese consumers are price sensitive in
business executives. which they tend to spend less.
• Many competitors cut prices to compete
in the Chinese market.
Starbucks should reconsider its rapid growth strategy in China. At the same time, Starbucks should
quickly learn about the Chinese culture for the company to grow and expand more in China. The company
should be more strategic in choosing locations since Chinese people are conservative with their culture.
Lastly, Starbucks should recreate their product that is more worthy of their pricing without sacrificing its
quality. This way, they can draw even more customers and maintain the existing customers.
2. Give examples of how Starbucks was successful upon entering the China market.

Starbucks has been successful in marketing its products by understanding the taste preferences
of the Chinese population. In 2010, Starbucks started its processing plant and coffee bean form. Because
of the new processing plant, they created more jobs for unemployed people and gained the trust of the
locals. Starbucks also attracted many consumers to pay premium prices for coffee beans grown by local
farmers.

3. Compare Starbucks’ U.S. and Chinese strategies. What are the similarities and differences? What
generalities can you glean from this analysis to help the company expand into other global marketplaces?
Please use the case and the following article to frame your response. • “Starbucks’ Quest for Healthy
Growth: An Interview with Howard Schultz,” McKinsey Quarterly 2 (2011), pp. 34–43,
https://www.mckinsey.com/featured-insights/employment-and-growth/starbucks-quest-for-healthy-
growth-aninterview-with-howard-schultz#

Starbucks has successfully joined the Chinese market using different strategies that they also use
in the US market over the years. At the same time, Starbucks also used the rapid growth strategy in the
Chinese market, which they also used this strategy in the US where the company opened a large number
of coffee houses.

On the other hand, both US and China have different strategies when it comes to their products.
Starbucks innovated its menu based on the preferences of the consumers and of the local culture. The
company introduced and added new products such as Frappuccino blended crème, moon cakes, and iced
rice dumplings.

In my opinion, Starbucks should properly assess the local population and culture when expanding
to other global marketplaces. The assessment should help them minimize expenses and not waste effort
in building a branch. At the same time, Starbucks should innovate its products that are worth spending
for the consumers. Overall, Starbucks can expand its branches quickly that does not cover their mistakes
before they have been properly addressed. This will guarantee growth in the right path without
hindrances, the same with the global marketing in the US.
References:

Starbucks grows coffee in China. (2010). Retrieved from

Starbucks in China. (2007). Retrieved from https://youtu.be/0A3rnWIEJY8

Starbucks’ quest for healthy growth: An interview with Howard Schultz | McKinsey & Company.
(2011). Retrieved from
http://www.mckinsey.com/insights/growth/starbucks_quest_for_healthy_growth_an_inter
view_with_howard_schultz