Global Marketing
Global Marketing
Introduction
The paper aims to explore global marketing opportunities within the foodservice market,
specifically focusing on the company Starbucks with its plans for international expansion in
the China.
Company background
The very name Starbucks is practically synonymous with coffee. As opening the first location
in 1971 in Seattle’s Pike Place, nowadays, Starbucks has become the largest specialty coffee
store. For Starbucks, their knowledge of where the finest coffee beans are grown, the
knowledge of how best to prepare them in order to make the best cup of coffee and also the
knowledge of how best to approach a foreign market as, of their industry competitors, they
are the most successfully globalised. Exhibit below provides a summary scope of Starbucks
operation today. (Below figures refer to year ended 31 January 2009)
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For over decades, globalization has been a key factor in decisions by many organizations
seeking expansion and high profits (Allen and Raynor, 2003). The internationalisations of the
foodservice market drive most leading players to expand their international operations.
Exhibit in next page provides top 10 global operators by sales in 2008.
McDonald's Corp
Yum! Brands Inc
Burger King Holdings Inc
Wendy's/Arby's Group
Doctor's Associates Inc
Seven & I Holdings Co, Ltd
Starbucks Corp
Dunkin' Brands Inc
Darden Restaurants Inc
DineEquity Incc
The success of Starbucks is sort of based on globalizations ideas. Starbucks has found the
appeal of being global, even in tea drinking country such as the UK. The China market is
important to the Company’s long term growth prospects, as its US business falters therefore;
the Company needs to build brand equity not only via consumer foodservice outlets, but also
through developments within the retail channel, where Starbucks branded coffee can be sell
in China.
China has already experienced a substantial growth in the field of international business
because aside from its local companies going international, many international companies
from different countries have already started to dominate the Chinese market. China has been
the fastest growing major nation for the past quarter of a century with an average annual GDP
growth rate above 10%. Chinese economy has grown faster than predicted. It jumped by
8.7% for the whole of 2009, and was up by 10.9% in the last quarter - despite the global
recession (BBC China economy 2009).
As a result, it was perceived that the Chinese economy will continue to grow. The coffee
industry in china has a high intensity of competition, however sales through cafés/bars grew
by 8% to RMB36 billion (over £3,487million). In addition chained specialist coffee shops
saw the highest current value growth in 2008, of 22 % (Euromonitor International August
2009, Cafés/bars – China).
What is more, consumers today are more confident and conscious about their purchases than
ever before, demanding products that suite their specific individual needs and demands
(Kotler 2003). China has the biggest world’s population (see appendix 3.1); coffee drinking is
popular among young generation, which has approximately 1.3 million potential consumers.
Moreover, modern lifestyle of Chinese teenagers and adults supports the western specialty
coffee shops. Meeting and negotiation business in a warm and characterless designed coffee
shop have become more popular in China. But, Starbucks needs take into account that China
has nearly 5,000 years of tea drinking. Also China has been known for being culturally
embedded reason why when it comes in prioritizing business environment, its domestic
business always come in first followed by its international counterpart. Consequently, it is
quite predictable that international companies experience some difficulties staying active and
competitive in the Chinese market. It is quite difficult for foreign culture to get Chinese
consumers’ consideration for certain products and services. For example, in 2003, through
acquisition of Eachnet, eBay came to China (Mangalindan, M. 2006). Many analysts
thought that eBay would be successful but, nearing the end of 2006 eBay had invested over
$300 million into eBay China but, had next to nothing to show for it. Market shares
continued to decline and former Eachnet executives, including the CEO Shao Yibo, had left
eBay. One of eBay’s biggest mistakes and probably the cause of its failure in China is
thinking that its brand image in the United States would be the same in China. This is one of
the main reasons why many Global brands suffer when going into China. On China’s
playing field, brands that have a big name abroad have little guarantee of having a successful
image in China. Understanding how to localize a brand can do wonders for a company. As a
result, Starbucks needs to understanding the context of domestic business environment in
china as is crucial for success of expansion in China.
In addition, increasing attention being paid for international business activities did not
diverted the country’s priority for improving its domestic business environment because the
country is still committed in doing so. And this is evident in Chinese government’s actions in
order to protect its own business environment, such as the increasing use of intellectual
property protection that not only improves domestic but international enterprises as well, as
explained by Frederick 2007. Prioritizing domestic business environment in China will be a
major challenge for Starbucks because they are the ones who have to adjust, particularly on
their operations in order to get the consideration not only of the consumers but of the whole
country as well. Starbucks will be challenge with the issue of the domestic business
environment of China, particularly by the socio cultural value system implemented in the
country. Starbucks as a foreign company should consider the impact of the movement in
domestic business environment of the China because just like any other countries, China is
just being protective of its own business and has reputation nearly 5,000 years of tea
drinking.
The Marketing Information System focuses on only the marketing aspects of the management
information system. It is an organized way of continually collecting, accessing and analyzing
information that marketing managers need in order to make better decisions. Market
information links Starbucks with the environment it is operating within and involves
specifying the problem, gathering the data and then analysing that data. Market research
specifies the information required to address the issues and designs the methods for collecting
the necessary data.
To understand the proper role of information systems Starbucks needs to examine what are
they objectives and what information they need for decision making. A marketing
information system (MIS) is intended to bring together disparate items of data into a logical
body of information. An MIS is more than raw data or information suitable for the purposes
of decision making such as entering to new market. “MIS identifies threat and opportunities
so that the firm can design appropriate marketing strategies (Chee & Harris 1998)”.
The MIS model consists of four main parts: the internal reporting system, the marketing
research system, the marketing intelligence system and the marketing models.
INFORMATION
Marketing
Environment:
Internal Marketing Strategic
Report System Research
Decisions
Markets System
Channels
Competitors
Political Control
Legal Decisions
Market Marketing
Economy Intelligence Models
System Operational
Technology
Decisions
Starbucks could gather their market research in different ways they would need to define the
market trends and competitive structure and also identifying the main buyers of Starbucks.
Starbucks will use first and secondary research to find out what their customers need and
want. Secondary data could be information that already exists and can be accessed by
Starbucks for example, the peak time in China is not 7 to 10 in the morning; it is 4 to 6 in the
afternoon. The advantage of this research is that it is much cheaper and quicker to access and
may provide information that Starbucks would not otherwise have the time, resources and to
gather. Primary data is information Starbucks finds out that has not been found before, this is
more up to date. However, cultural differences, lack of accumulated data and social
impediments are challenges that business and advertising agencies must overcome. Also the
government produces a large amount of data which is an ideal; starting point for research into
the consumer market for a particular product or for an assessment of industry’s competitive.
12 C Framework
Country Commitment
China, 1.3 billion population (see No restriction on trade regulation
appendix 3) (see appendix 1)
In 2009 corporate tax rate for
domestic and foreign companies is
25%
Low barriers for new entrant
Concentration Channels
First target Chinese white-collar
workers aged between 25 and 40
Second target age 18-24
Culture Communication
Culturally embedded 298 million Internet user
5,000 years of tea drinking 209 Central Television operators
Diversity towards western culture
among young generation
The Intensive competition among firms in the same industry tends to be one of the major
characteristics of globalization of markets. A result, firms in many industries are seeking to
create competitive advantages in response to increasingly demanding customers and crowd
markets which are a feature of their markets. Porter’s five forces analysis is an important tool
for analyzing an organization industry structure in strategic processes.
According to Johnson, G. Scholes 2008 the five forces framework helps identifying the
attractiveness of an industry or sector in terms of competitive forces.
The threat of entry: High
The threat to entry is high due to China does not see a need to restrict the development of
foodservice market. (see appendix 1.1)
A large capital requirement is not essential to set up and expand although experience and
knowledge which tends to decrease the cost of products.
There is lack of strong brand identification in Chine’s coffee market and there is not heavy
advertising and marketing campaigns.
Substitutes: High
High threats of direct substitutes such as teas, juices and soft drinks.
5) A CRITICAL APPRAISAL OF THE USE OF A GLOBAL MARKETING PLAN.
The marketing planning process is a communication of how best to use the resources an
organisation has for marketing to achieve its marketing goals. Planning also encourages
regular structured environmental and competitive mentoring. Planning involves where the
organisation would like to be and how to get there, which involves goal setting and strategy
determination.
Planning gives a number of advantages, exhibit below demonstrate some of the advantages:
Gives rise
to
systematic
thinking
Helps in a
Helps
continuous coordinate
review of
activities
operations.
Advantages of
planning
Integrates
Helps
functions
prepare for
and
exigencies
activities
Gives
activity
continuity
The planning task depends on the level of involvement in a country. Exporting and licensing
give minimum country involvement but joint ventures involve more in-country activity and
give a greater degree of integration and control. Wholly owned subsidiaries give the
organisation almost total control. Global planning is rather more difficult than domestic
planning. Planning can be standardised, decentralised or interactive.
Cost savings on limited product range and economies of scale both in production and
marketing for example, car manufacture.
Uniformity of consumer choice across the world.
There are disadvantages:
Decentralised plans take into account the subtleties of local conditions, however they are
usually very costly and resource consuming.
Interactive plans
In this approach headquarters devises branch policy and a strategic framework, and
subsidiaries interpret these under local conditions.
Mangers within a firm need to analyse the long term issues then the short term, this is why
planning is important. However these decisions have to be set in context with the overall aims
of the organisation for example, Starbucks aims is to create personalized customer
experiences, stimulate business growth, generate profits, energize employees, and secure
customer loyalty-all at the same time.
Reference
Mangalindan, M. (2006) China May Be eBay’s Latest Challenge as Local Rivals East into Market Share
Ellis, J & Williams, D. International business strategy (London: Pitman Publishing 1995.