1. INTRODUCTION OF STARBUCKS COFFEE The company, Starbucks Coffee was initially incorporated in the year 1971 by 3 entrepreneurs in Seattle where the business of the company is mainly selling….
The grid above is the 10 factors that affect the Spread of Innovations. Starbucks’ target market is young people, highly educated, and trend group. The life-style in China also evolves after the economic reformed and new policies regarding having child. This causes young Chinese people to not have the same strong mentality as the old generations. They are easily manipulated by western culture. They believe that Chinese culture has been outdated and not fashionable anymore. As a result, it is easy for Starbucks to influence them from many western movies to drink coffee and be fashionable.
Starbucks also continues on encouraging Chinese people for greater coffee consumption with its communication and precise target on Chinese market. This is because Chinese people give a lot of importance to self-image and expect social recognition. This causes Starbucks to associate its image to famous young and trendy Chinese actor/actress. Therefore, by drinking Starbucks coffee, it will increase your social status while you are also being fashionable and modern in cohesion with one’s epoch.
Starbucks also starts on educating them regarding the good effect of coffee benefits and how to enjoy its delicacies for each of its products. This causes Starbucks to broaden its market to young-old generations who have more money than the youngsters. Starbucks also put their shop in typical clustered high traffic and high visibility locations. Varying store size and chairs’ comfort also allows Starbucks to be situated in various settings, such as airport, grocery store, mall, office building, school, and street corners.
It also encourages Starbucks to buy some smaller coffee companies so that it reduces its competitors and the risk of cannibalizations. It also gains local power and knowledge to enhance its expansion while reducing its responsibility due to ownership that Starbucks provides to former owner with maintaining its favorite products from the former one. Therefore, with strategic location, broader market, and wider knowledge of coffee and its variations, Starbucks has become more and more successful international company.
However the coffee’s price in Starbucks is still very high for normal Chinese people. Therefore, only the rich people are able to drink Starbucks coffee and that makes people feel it is prestigious. The inferiority in price competency of Starbucks can be one of a barrier for its expansion in China. That will make majority of people to choose drinking cheap coffee like Nescafe inside their houses or offices rather than drinking outside in an expensive shop since most of the people do not appreciate coffee for its delicate difference of taste.
According to the analysis above we can deliver an advertisement in order to successfully encourage greater coffee consumption. Starbucks should improve its communication and define precisely its target on Chinese market. Chinese people give a lot of importance to self-image and expect such a brand to fulfill their need of recognition. Starbucks should also associate his image to famous youngest and trendy Chinese people as singers/actors (like with George Clooney for Nespresso), for example: to emphasize on the good effects of his coffee and other beverages.
Starbucks should also communicate on the delicious and particular taste of its products. Some ideas for advertising campaign can be like in the following: * Video Chinese young and trendy people are at a concert of well known Chinese singer and dream to have an autograph but there are too many people and finally leave the place with empty hands, very disappointed. Then they go in the Starbucks across the street and settled at a table, look annoyed. They order a drink when suddenly the famous singer appears in the cafe and orders coffee. Chinese youngsters are amazed and hen appears the slogan: “Starbucks give taste to your life” : This ad plays on words showing that drinks from Starbucks taste better but also that, beyond the taste, they make you happy. Advertising emphasis on the need for recognition that can serve Starbucks. * Visual We could create a poster with the famous singer surrounded by the two young people who are now with sunglasses (they are now trendy and successful) and seem very happy with a big smile. * Health Make a TV program or CM about the research on the coffee’s effect on human health.
Emphasize that coffee is good for health so that people would be able to appreciate coffee as much as tea. * Affordability Since Starbucks coffee is expensive to most of the Chinese people, the company can make discount on the price like student discount in occasion. That may make people appreciate coffee’s taste more and in the same time, may improve company’s image of being a youth friendly company. If the company keeps doing that, the people who had its coffee, when they grow up, will appreciate the taste of coffee and think it is more reasonable to buy Starbucks coffee despite paying a little bit more money on it.
Despite the difference between culture backgrounds, Starbucks has to make some changes in delivery their brand image into the Chinese market, especially for internal and external marketing. From the internal marketing perspective, Starbucks has to put more concern for their employment policy, where they should create a win-win solution, by doing so Starbucks could save the cost of efficiency while making employees happy. Create a simultaneous communication to the market and society in China is one of paradigm that Starbucks should emphasize, just what they had been through today.
Utilizing and cooperating with local farmer in the south-west province of Yunnan, had create jobs and helps local society into better economy. Their products are adaptive and communicative to the Chinese culture, by redesign packaging according to the local national events. Starbuck is considering cultivating their marketing effort to meet local behavior and taste. Figure [ 1 ]: Starbucks Mooncake for Mooncake Festival They also customize some of their offerings, as some Western brand tends to do when they enter on the Chinese Market.
Like many other countries, Chinese market is largely influenced by its culture, which is an ancestral. In response to that, Starbucks could expand their range of coffee to match up the taste of the tea or finding varieties of coffee that have healing properties. They also should pay more attention to the flavors and the colors of their products because Chinese people associate them with yin and yang, traditional culture that has been embedded to each person in China. Nevertheless, extreme customization could also be risky because it can cloud Starbucks face within China.
This causes Starbucks to lose its identity and its brand image. Therefore, Starbucks need to customize some of their offerings to local taste while maintaining its global face – coffee – such as coffee bland green tea moon cakes for moon cake festival; this following Chinese tradition while keeping Starbucks’ identity as a coffee seller not as a tea seller. Furthermore, coffee is still prohibitively expensive and not familiar to majority of the populations, the indication are that despise potential being massive, the growth of coffee will continue to be slow.
Although some Chinese people have already evolved and start buying and enjoying the taste of coffee, majority of Chinese people do not have the power to buy yet they want to. This is because there is no authentic Chinese coffee from Chinese producer that has international standard like in India due to its background as tea-drinking country, its massive variation of teas, and theirs value. Some of the solutions that Starbucks come up with is that teaching southwest at Yunnan province (smaller Chinese cities) to produce coffee and encouraging them to enjoy their own produce.
This creates jobs and help local society to have better economy while learning the essence of coffee and its delicacy. This will increase Starbucks’s profit while may reduce Starbucks’s price so that broader Chinese people can enjoy due to its local products. This is because all Starbucks coffees that are being sold within China are imported from other part of the world that has been charged with heavy taxes. Therefore, by gaining little-by-little and influence people from smaller area, they can be successful; the only problem is time and patient which most western companies do not have.
Because many other coffee companies have surfaced in China, it reduces a bit of Starbucks profit. This is because many other concepts that they provide such as Mcafe, Blenz Coffee, and Pacific Coffee is more accessible and convenient. For instance, why we would need to go to other store if we want to buy coffee when we are with family or friends or business partner in McDonalds, they have McCafe. Besides, they often offer a lower price with not much different taste (for amateur coffee drinkers and novice coffee lovers) and provide a better service; free refill within certain time limit.
The complexity taste of coffee is the same as the complexity taste of tea in China as well as the taste of Wine in French or beer in German. This is one of major complexity of taste preference problem within China that is very hard to change. Currently according to marketing professor, Chinese people value Nescafe, an company that provide instant coffee, more than fresh made coffee from coffee shops due to similarity taste (which is not true, Nescafe has high acidity flavor and low complexity).
In Comparison, India as one of the most populated country in the world do not tell the whole story. Potential of 1. 2 billion population base is largely rural and lower income. The economy is growing and the middle class is increasing in size. Some middle and upper class Indians tend to be located in the major cities such as Mumbai and Delhi where incomes have risen substantially. While the other middle class Indians tend to spread around because other cities have similar number of population with similar GDP.
The coastal market between Mumbai and Delhi represents roughly 180 million people and is therefore highly attractive. It also has more stable growing rate compare with China’s that is decreasing right now due to its new policy for having only child within a family unless both parents do not have any siblings then they can have two children. The Indians who have reputation for drinking spicy tea have changed their habits these last 10 years. Since 1998, coffee consumption has increased by 90% in the country and buying nespresso –a type of espresso – is not rare anymore.
Especially in big cities, there is an increasing number of coffee bars setup, like Coffee Day, Barista, Coffee Bean, or Costa Coffee. However, only middle and high class people go to western style coffee due to its cost which happens also in China. The cleanness of the place, air-conditioned (or heater on winter), comfort and cozy seats are one of the key success factors in India and China. Even if this phenomenon touches only a fifth of Indian people, it is already widely enough to guarantee the success of coffee bars, and convince Starbucks to enter the market war.
With widely knowledge of coffee, Starbucks is ready to not neglect its new implantations in India to guarantee their product among the locals by adapting their product and taste. With extensive research, Indian coffee has a good reputation in other part of the world especially Europe for its flavors, less acidic and sweet. Thus, it is widely used in espresso coffee. However, American prefers African and South American coffee due to its acidity and brighter variety. Currently in India, a new coffee product, coffee bars, has gained widely popularity with chains such as Barista.
Cafe Coffee Day is the country’s largest coffee bar chain. In the Indian home at South India, coffee consumption is greater than elsewhere. This craves Starbucks to participate so that Starbucks can increase its profitability, enhance its knowledge regarding coffee consumption around the globe, and innovate new coffee products to satisfy the hunger of customers for variation. Media is also part of Starbucks marketing strategy to be success in India. The conglomerate TATA is Starbucks’ partner. They launch their product in Taj Hotel which is a huge opportunity due to many tourists and high-class Indian.
After reaching the high-class consumers, Starbucks also need to find other partnerships to expend their concept in other places than luxury hotels to reach out middle-class customers. One of the solutions is Bollywood industry. This is because it is hugely broadcasted in India and western way of living is conveyed. The coffee is part of its life style. Therefore, it will increase the Starbucks’ satisfaction from usage of media to be popular among Indian due to its potential coffee producers and consumers. In the China of the 21th century, drinking tea is a real way of life inherited from the glory past of the “Middle Kingdom”.
Indeed, trough globalization and the progressive installation of Western culture in China, many Chinese people consider drinking tea as a means to preserve the country’s identity as it is the national drink. It can appear as a way to refuse the Western’s submission. Moreover, tea is a real symbol of luxury in China, but an accessible luxury (even if some teas can reach sky-high prices during auctions! ). Last but not least, tea can also be regarded as a self oriented-luxury, a kind of delight pleasure in a serenity mood of a degustation.