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STARBUCKS’ ENTRY IN CHINA Group 1 : Prem Chelladora, Muhammad Zaki & Gan Siong Tuan
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STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Mar 26, 2015

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Page 1: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

STARBUCKS’ ENTRY IN

CHINA

Group 1 :Prem Chelladora, Muhammad

Zaki & Gan Siong Tuan

Page 2: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Introduction

The history of the company Changes of company directionsThe growth of StarbucksThe strategies to increase market

shareHow Starbucks enter international

market.

Page 3: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Situational Analysis

General environmental analysisIndustry analysisMarket analysis

Page 4: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

General Environment Analysis Economic

Fastest growing market in the world China entering the world Trade organization (WTO) Stable economic environment promises foreign investors a bright future

Social Western trend Purchasing power increased Pursuing high quality of living environment

Political Planning move towards globally Internal policy more transparent Government intervention reducing

Technological Technology more advance More efficiently and effectively to operate branches in china Able to contact supplier globally

Page 5: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Industrial AnalysisEconomic

Substitute product, “tea” Competitions from foreign investors.

Social Conservative group Bourgeoisie group Young generation group

Political Unexpected difficulties – bribery case Opening policy Leadership changes

Technological Able to contact coffee in farthest places of the world Provide more value added service Easy to find technical supports

Page 6: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Market Analysis

Gigantic population and overall rising economic growth.

Two potential customer groups –“ wealthy and young people group” , “bourgeois group”

Covered a wide geographical area. Promotions strategies, choosing locations.

Page 7: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Mission

Starbucks establish the company as the most recognized and respected brand in the world between becoming the premier purveyor of the finest coffee by following-:

Provide a great work environment and treat each other with respect and dignity.

Embrace diversity as an essential component in the way we do business.

Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee.

Develop enthusiastically satisfied customers all the time.Contribute positively to our communities and our

environment.Recognize that profitability is essential to our future success.

Page 8: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

ObjectiveStar Bucks Goal Continue to rapidly expand its retail operations. Grow its Special Operations. Selective pursue other opportunities to leverage the StarBucks brand through

the introduction of new products and the development of new distributions channels.

Starbucks retail goals:To become the leading retailer and brand of coffee in each of its

target markets by selling the finest quality coffee and related products, and by providing

superior customer service, that fosters a high degree of customer loyalty. Starbucks strategy for

expanding its retail business is to increase its markets share in existing markets and to

open stores in newmarkets where the opportunity exist to become the leading specialty

coffee retailer.

Page 9: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluating of the functional Area

Finance

Human Recourse

Marketin

g

Operations

Page 10: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

MarketingBranding. -Compete in the market by selling high quality

coffee Advertising strategy. - choosing professional advertiser. Exp goat milk

- Express via latest joke, music, personality etc..Customer relation.

- Conduct survey, and knowing the customer’s needs. “How do they envision an ideal coffee house”? - Customer given priorities and been treated well.

New Introduction. - New flavors and not saturating the sales.

Page 11: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

MarketingStrategic Partnership. - Join venture, Pepsi, MacDonald's. Sharing

of customers.Different approach -Selling in groceries shop as packet coffee.

-Airlines

Page 12: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Finance- Manage to sore 2,200 percent over the decade from

1992 to 2001. - Earnings per share increased from $0.03 to $0.46

during 1992 to 2001 - Starbucks‘s sales have increased with an average of

20 percent annually since 1992, hitting $2.6 billion in 2001. In 2001, Starbucks had a debt/equity ratio of 0.4 and a return on equity ratio of 14.4 percent. From 1997 to 2001, revenues grew at 31 percent, net income at 61 percent, and assets at 21 percent.

Page 13: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Finance

Page 14: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Finance

Page 15: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Production

- Clustered in high-traffic, high-visibility location in each market.

- Stores vary in size- variety of settings, including office buildings, downtown and suburban retail centers, airport terminals, and kiosks located usually in building lobbies.

- Starbucks takes great care in picking the right location.

Page 16: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Human Resource

Core Values. “Treat people like family, and they will be loyal and give their all. Stand by people and they will stand by you.

Staffs well trained in subtleties of coffee tasting. Share information’s to their customers

given a chance to express their feeling on their management, between Starbucks was open to discuss about their strategies

Page 17: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Human Resource

Employer of choice-offering high wages - more knowledgably.

health benefit for part time and also full time workers -eager personal on duty.

Starbucks also open their share to all the employees –part of business

Page 18: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Marketing StrategiesTarget MarketProduct StrategiesPricing StrategiesDistribution StrategiesPromotional Strategies

Page 19: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Marketing StrategiesTarget Market

Geographic segment Big Cities such as Beijing, Shanghai and etc.

Demographic segment Targeting young married couples and young

working adults.Psychographic segment

Young adults in china are trying to pursue western lifestyle

Page 20: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Marketing StrategiesProduct strategies

Market PenetrationsMarket DevelopmentProduct Development

Page 21: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Marketing StrategiesPricing Strategies

Starbucks implemented a few strategies when it comes to pricing but the strategy which we want to explain here is Best-Value Offering Strategy. By pricing its coffee competitively with the current prevailing high-end coffee prices; Starbucks managed to attract Chinese. Starbuck's have come out with attractive combination of price, features, high quality of coffee, good services, affordability and other attribute.

Page 22: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Marketing StrategiesDistribution Strategies

Starbuck's has a competence distribution system which being implemented to make sure the supply of coffee or other product available all the time, especially when it comes to China where China geographical topology is vast and it need a very high degree of competency in deliver the goods.

Page 23: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Marketing StrategiesPromotional Strategies

Advertising Strategies Starbuck’s has a very creative idea in advertising, the

strategies which they implemented to attract customer is by In-Store Customer Experience, Starbucks envisions its outlets as a "Third Place" (besides home and work) to spend time, and store design is intended to achieve this.

Page 24: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Marketing StrategiesPromotional Strategies

Selling Strategies Open more shop Expand product into supermarket Strategic partnership with hotel, airlines and etc. Expand the food and drink menus.

Page 25: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Marketing StrategiesPromotional Strategies

Public Relations / Publicity Strategies

Starbuck believe that core value of the company is “Relationship”, it’s include the relationship between customer, employees, supplier and business partner.

Starbuck’s provide medical, dental and vision coverage to all employees, even for the part timers.

Starbuck’s introduce the “Bean Stock Program” to all their employee.

Page 26: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Marketing StrategiesPromotional Strategies

Sales Promotion StrategiesStarbuck’s distributed their coffees through

supermarkets, Starbucks selling its coffees in supermarkets. Starbucks coffee sold in supermarkets with very elegant packaging; outstanding positions in grocery stores; and the same premium quality as that sold in its own stores.

Page 27: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

SWOT (Strength)

Well Know ProductSelling the best coffee by purchasing

high quality coffee beans from Africa, South America, and Indonesia .

Introduction of new flavours.

Page 28: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

SWOT (Strength)

MarketingWorkable marketing strategies that made

the company well know before venturing to China.

For example the advertising strategies

Page 29: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

SWOT (Strength)

Strategic Partnership

Had join venture with other famous brand, for example “MACDONALS” to market Starbucks brand.

Page 30: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

SWOT (Strength)

Company’s Directions

Core valuesThe company have their objective, mission

& vision in place to motivate the whole organization aligned to the same direction. All the employees are committed and understand their roles & responsibilities.

Page 31: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

SWOT (Strength)

Human recourseEmployeesHiring a quality employee that has passion

and knowledge on Starbucks coffee bean. Employees been paid well and given

benefits much better .Attracts more knowledgeable employees to Starbucks.

Employees were given the opportunity to invest on the company between voicing out their needs openly.

Page 32: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

SWOT (Strength)

Cash FlowInvestors Starbucks committed to their investor with

a good returns, this had attracts more investor in. Starbuck was financial strong and stable before moved to China market.

Cash Cash been managed properly for further

development/RND on the product and also the technology improvement.

Page 33: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

SWOT (Strength)

Technology OperationsStarbucks was the pioneer to start up with

wireless network. Starbucks worked with other high technology company such us “Compaq” to improvise their stability on technology.

ProductionStarbucks had invested on high technology

brewing machine for coffee processing. This had contributed to better productive lead time.

Page 34: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

SWOT (Strength)

Supply Chain

SuppliersWell organised with existing suppliers

and local suppliers . The quality was maintained.Ease Starbucks to venture to China

Page 35: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

SWOT (Weaknesses)

Limited customer groupLimited MenuWorkforceProcurement, supply chainNo direct marketing experience in China, no

pilot trial done yet

Page 36: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

SWOT (Opportunities)

Economic ForcesSociological ForcesPolitical Forces

Page 37: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

SWOT (Threat)

Legislation issue EnvironmentalSubstitute productsProcurement, Supply chain riskCopycat brand and concept

Page 38: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Identification of the Problem(Opportunity)

Procurement and supply chainDepends on outside brokers and its direct

contact exporters Long shipment lead time and high cost

incurred The risks of inventory lost Huge investment cost.

Page 39: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Development of Strategic Alternatives

1. Long-term fixed price contract with suppliers.

2. Formed strategic partnerships or joint venture with suppliers.

Page 40: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Strategic Alternatives1. Long-term fixed price contract with

suppliersPros –

strong relationship with suppliers Supply ability Constant pricing.

Cons – High risk if facing inconsistent supplies. Might not able enjoy low price during down season.

Page 41: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Strategic Alternatives2. Formed strategic partnerships or joint

venture with suppliersPros –

Access to more of target customers. Diversify the business Ensure the constant supply and quality assurance.

Cons – Might neglect the quality of “Starbucks Coffee”. Short of manpower and experienced worker. Unable centralize the power of control.

Page 42: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Recommendations

Both strategies are recommended. Short term - fix contract price with

overseas supplierLong term - forming strategic partnership

or joint venture

Page 43: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Implementations

Developing new set of sourcing business guidelines,

Set the criteria when choosing the partners.

Share the company culture with partners.

Page 44: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Identification of the problems (Opportunity)

Human resource management Experience local workers needed. Lack of qualified and experience

workers Huge training cost needed

Page 45: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Development of Strategic Alternatives

1. Outsourcing local workers, especially managerial level

2. Conduct training programs for pioneer batch workers

Page 46: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Strategic Alternatives1. Outsourcing local workers, especially

managerial levelPros –

No training required. Familiar with the country culture and policies.It helps in identifying the market trend

Cons – Too much depend on individual ability High labour costs incurredNo loyalty.

Page 47: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Strategic Alternatives2. Conduct training programs for pioneer

batch workersPros –

Training program neededHigh loyalty.Strong teamwork.

Cons – Required longer period.Huge development cost

Page 48: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Recommendations

Both strategies are recommended. Beginning stage - outsource the

experience staffs from ChinaLong term business strategy – training

programs is needed

Page 49: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Implementations

Develop new set of training programsRequire all employees to complete the

training programs before entering the assigned store.

Continuous training is needed for all employees.

Set up a training centre.

Page 50: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Identification of the Problem(Opportunity)

Cultural influence

Most Chinese people are tea drinker; tea is part of their culture. This habit has been with them for generations. For instance, before Starbucks penetrate China market, the existence of coffee is by afar.

Page 51: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Development of Strategic Alternatives1. Promotion, education &

advertisement 2. Partnership with local companies3. Increase in product menu with

variety of choice by including tea.

Page 52: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Strategic Alternatives1. Promotion, education & advertisement Pros

Starbuck’s can increase their targeted group of consumers.Starbuck’s can enter new potential market for their

benefit.Starbuck’s can implement new culture by drinking coffee

instead of tea.To introduce new culture of westernization by drinking

coffee.Cons

They might find some resistance in Chinese culture to adapt westernization from older generation.

There are cost involve in advertisement.

Page 53: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Strategic Alternatives2. Partnership with local companiesPros

Easy to attract their targeted market.Starbuck’s use this opportunity to understand

Chinese Culture.To offer partnership to other nature of

business.Cons

A lots of investment need to be done.The profit has to be shared.

Page 54: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Strategic Alternatives3. Increase in product menu with

variety of choice by including tea.Pros

Starbucks can widen their scope of targeted market.

Include tea as one of their important menu.Cons

Cost involve in research and development of new product.

Page 55: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Recommendation

As for Cultural issue, we would suggest to choose promotion, education and advertisement as part of the strategies. By conducting this strategy, it will save us lots of times, because we can use technology as one of the tools to spread the information effective and it’s fast and reliable. This information will help us to educate and introduce the coffee culture to Chinese people and it will be resulted from experiencing the product.

Page 56: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

ImplementationPromotion, advertisement and education option

can be done such a way we will see some coexist in each one of them. Promotion will lead to advertisement, advertisement leads to curiosity to know more, and curiosity leads to education. These step by step approach will make this strategy easy to adapt and easy to understand by the Chinese people.

Page 57: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Identification of the Problem(Opportunity)

Competitors

- Starbucks have to compete with other coffee stores. Local and also foreign investors.

EXP: Zhen Guo Coffee (Japan), Yi Shi, Xian Zong Lin of Taiwan and Jie

Rong of Hong Kong. Seattle Coffee Company. MACDONALDS.EXP Zhen Guo managed to establish itself and attract people. Focusing

areas are different.

Page 58: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Development of Strategic Alternatives

1. Pricing.2. RND3. Buy Competitors

Page 59: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Strategic Alternatives

1. PricingPros The price will be affordable by

throughout the population, Cons The originality of Starbucks will get

tarnished. Climate in China, limits it to produce a better quality coffee beans.

.

Page 60: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Strategic Alternatives

2. RNDPros Customers will have much more choice to

order instead of fixed products.Cons For RND, Starbucks need to have allocation

money on the man power (RND Expertise) and Technology. Success is not a guarantee; it might turn down by the customers.

Page 61: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Evaluation of Strategic Alternatives

3. Buy CompetitorsPros Reduce the competitive immediately. More supply chain. New technology and other business strategies.Cons Large amount of investment. Longer time to stabilised the management

&system. Training for new staffs.

Page 62: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

RecommendationsNegative-Coffee bean should be maintained.RND have to consider as a must task. Will attract more customer and bigger scale of sales.Buy competitors is a good strategy that will give an

immediate impact . With the buying power of Starbuck, there is no

hindrance in getting the deal done

Page 63: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Implementation

Promoting the coffee bean quality instead. More advertisement needed, Comparing

with local beans. Hire full time researcherGiven privilege and provide necessary technology

for the project.Allocation of money for this group perform their

research. Starbucks must hesitate on investing on new

equipment.

Page 64: STARBUCKS’ ENTRY IN CHINA (PRESENTATION SLIDE)

Implementation

Deal need to be agreed upon the owner of the competitors. Marking a high buying price,

Assurance to keep the top management in the driving sit will make the deal closed easily.

Attractive long time plan on the management. Build up confidences.