Starbucks in China: An Unmissable Opportunity for Growth
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Chapter 1: The Starbucks Phenomenon in China
There are few truly exceptional business opportunities, but Starbucks in China stands out. The experience of large corporations operating in a controlled environment evokes a historical parallel to when monarchs granted exclusive trading rights. Starbucks boasts a unique product and essential connections, ensuring that with clever marketing, their brand will soon be ubiquitous. The game is essentially won before it has even begun.
China is currently a rising economic force globally, though it is not an easy market for foreign companies to navigate. Many firms in the U.S. and beyond would argue the opposite, highlighting the challenges of operating there. The nation has developed a reputation for being lax regarding intellectual property enforcement, causing frustration, particularly among tech giants like Microsoft, who have faced rampant piracy. This concern extends across various sectors, including golf, music, and film.
Now, let’s turn our attention to Starbucks, the American coffee giant. From my office at ICMediaDirect.com in New York, I observe a bustling franchise. Did you know there’s even a Starbucks at the Great Wall? Or that their plan to open a store in Beijing's Forbidden City initially sparked outrage among locals, who eventually accepted it? It appears the Chinese, like everyone else, adapt over time.
What differentiates Starbucks from other companies, such as Calloway Golf, in terms of success in this market? The answer lies in their unique product — coffee beans that cannot be easily replicated. This authenticity is the bedrock of Starbucks' triumph in mainland China. CEO Howard Schultz has declared that China is their top priority for growth.
Starbucks is candid about its ambitions in China. Currently, the chain operates around 11,000 stores in 37 countries, with about 375 of those in China. By 2008, they expect to generate 20% of their revenue from Chinese outlets, with a long-term goal of 30,000 stores, including approximately 8,000 in China.
This ambitious expansion plan is monumental. Though China is nominally a Communist country, many of the strict economic policies have loosened. The leadership in Beijing has warmly welcomed Starbucks, not out of personal affinity for the CEO, but because of the brand's unique offerings and established distribution channels that cannot be duplicated.
Recent developments further illustrate Starbucks' favorable position. The company has successfully navigated two legal victories in China, protecting its intellectual property against local imitators. Local entrepreneurs attempted to replicate Starbucks' branding and offer coffee to Chinese consumers, but the courts ruled in favor of Starbucks.
One might wonder if the local coffee seller believed he had a chance in court. Did the judges ponder the merits of both sides? Were Beijing's economic ministers invested in the outcome? There was no suspense; a CEO of Schultz's caliber wouldn't proclaim such lofty goals without knowing he could achieve them. Clearly, there’s a mutual benefit at play here.
This scenario reminds me of Captain Kidd, the infamous pirate. Initially hired by the English crown to capture pirate ships, Kidd later became a scapegoat when political tides shifted, leading to a farcical trial and his execution. While the stakes differ, the certainty of Starbucks' legal victories mirrors Kidd's fate in that both were largely preordained.
With quality coffee and established distribution networks, Starbucks now faces the challenge of persuading a nation with 5,000 years of tea-drinking tradition that coffee is a worthy alternative. This is where branding comes into play.
China is gradually embracing Westernization and adapting to a more capitalist economy. The rising consumer expectations make Starbucks’ task easier, especially given the minimal competition they face. With strategic partnerships in Beijing, Starbucks is poised to introduce their brand to the Chinese populace. Here’s their strategy for success:
- Targeting the young urban demographic, Starbucks aims to create inviting store environments that offer a social atmosphere — a refreshing change from cramped living conditions.
- Their locations will serve as hubs for internet users, making socializing and music downloads integral to the Starbucks experience. Agencies like ICMediaDirect.com will launch seasonal online campaigns, similar to the past Christmas Red Cup campaign in the U.S., to associate the brand with contemporary trends.
- A new consumer awareness is emerging in China, reminiscent of changes seen in Russia. Coffee is becoming a symbol of transformation, and with effective multimedia branding supported by the government, this narrative will be solidified.
I don't endorse stocks, engage in politics, or seek justice. However, one thing is clear — Starbucks is an opportunity that cannot be overlooked.