Starbucks had its humble beginnings in 1971 when it opened a single store in Pike Place Market, Seattle. Its visionary CEO Howard Shultz came on board in the year 1982 as the Director of Retail Operations and Marketing. Its first overseas store was in Japan in the year 1996 (Starbucks, 2010). With its foray into international markets, Starbucks mantra seems to be ‘Think Global, Act Local’. During its long journey spanning over three decades, Starbucks has ventured into different countries like Poland, France, Austia, Switzerland and are still viewing countries like India as hot destinations.
An interesting case in point is their entry into the Chinese market. Typically, any MNC would analyse the economic, government and market conditions for the product to enter into a foreign market. Starbucks has considered the following factors for entry into the Chinese market (Knowledge, 2006): • Creating and maintaining excellent relationships with officials in the Government and local JV partners • Tapping the potential of the middle class • Recruiting experienced locals as executives Formulating and implementing business models pertinent to the local Chinese market
The entry into the Chinese market started through opening of the outlet in Beijing in 1999. The mode of entry was through a licensing agreement or partnership with a local coffee company in China. These joint ventures with the local businesses made it easier for Starbucks to enter China. In identifying the correct company for a JV, they looked at companies with experience and retail knowledge in this line of business with sound financial resources.
They also looked for companies who had possessed good market sense and ability to locate real estate for housing the coffee shop premises. Of course, it was also crucial for these companies to have adequate manpower to service the needs of the business. By entering into the Chinese market through a JV, Starbucks has achieved a two-prong benefit of minimising financial risk and leveraging on the knowledge of the local partner (Hwang, 2005).
With the Chinese Government’s broad outlook on its retail policy and the potential of enormous profits from the outlets in China, Starbucks had started buying bigger stakes in the JV. It wont be long before the company makes a beeline for wholly owning its business in China. Starbucks has also participated in local community initiatives like working on tsunami affected victims, AIDS victims, funding education which has helped position the company as a global brand with a philanthropic outlook in the region which it operates in.
The company has also appointed local people as key personnel in the business operations in China, which worked to their advantage in exercising their clout over the local government. China seems to be a favoured destination and the company expects that the sales from China may well outrival its US counterpart very soon. Finding the perfect product and experience strategy seems to be the key to its exciting sales figures in China. Starbucks has found a fine balance between maintaining its core offerings and localising the experience for attracting the Chinese market.