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Global Marketing

1. The document discusses Starbucks' plans for international expansion into China and analyzes the opportunities and challenges in the Chinese market. 2. Key opportunities include China's growing economy, rising middle class, and increasing popularity of coffee among young people. However, China also has a strong tea drinking culture and priorities domestic businesses, which Starbucks must consider. 3. The document recommends Starbucks develop a marketing information system to understand China's market and consumers in order to effectively localize their brand and operations for success in China.

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0% found this document useful (0 votes)
2K views11 pages

Global Marketing

1. The document discusses Starbucks' plans for international expansion into China and analyzes the opportunities and challenges in the Chinese market. 2. Key opportunities include China's growing economy, rising middle class, and increasing popularity of coffee among young people. However, China also has a strong tea drinking culture and priorities domestic businesses, which Starbucks must consider. 3. The document recommends Starbucks develop a marketing information system to understand China's market and consumers in order to effectively localize their brand and operations for success in China.

Uploaded by

siamemol
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© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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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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Source: Starbucks annual report 2009

1. A CRITICAL ANALYSIS AND EVALUATION OF THE GLOBAL MACRO


ENVIRONMENTAL VARIABLES THAT ARE LIKEY TO HAVE MOST
SIGNIFICANT IMPACT ON THE COMPANY.

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

Source: Euromonitor International, Global Consumer Foodservice, 2009.

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.

2) A FULL PESTEL. (See appendix)

3) THE DEVELOPMENT OF MAREKTING INFORMATION SYSTEMS.

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.

In addition, Starbucks needs to develop a marketing information system in order to provide


ongoing information to decision makers and to pass the information throughout the
organisation. Therefore, “12C” environmental framework is a useful model to assist
Starbucks to design its marketing plane in order to enter into china foodservice market.
Exhibit below illustrate 12C framework analysis for Starbucks in China.

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

Choices Capacity to Pay


 China domestic market can supply  Coffee treat as luxury
rich coffee beans  Premium price
 Local competitors as well as global
competitors such as Costa café &
Nestle
Consumption Currency
 average annual GDP growth rate  In July 2005 revalues its currency by
above 10% 2.1% against the US dollar
 In 2008, total volume sales of instant  1.00 RMB ≈ 0.14 $
coffee exceeded 28,000 tonnes and  1.00 RMB ≈ 0.09 £
accounted for 93% of China’s coffee (above figure valued on Mar 2010)
sales. (Euromonitor 2009 café – china)
 Threat of direct substitute such as tea

Contractual Obligation Caveats


 Communist state, based on civil law  Next elections to be held in mid-
system (see appendix 2) March 2013
 international trafficking of Chinese
citizens
4) THE TECHNIQUES AVAILABLE TO THE GLOBAL MARKTER TO IDENTIFY THE
POTENTIAL OF A MARKET.

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.

Intensity of rivalry: High


A few big brands dominate the China Coffee industry.
Coffee shops are increasingly under pressure in seeking competitive advantage.
Rivalry is heightened for firms when operating within the individual markets. There are full of
local Coffee shop, and have brand loyalty and strong market for its brands in china.

Bargaining power of buyers: Low


Buyers have little power over Starbucks because there are thousands of them. 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.

Bargaining power of supplier: High


The power of suppliers are quite high, Starbucks is sensitive to pricing and supply, however,
company has forged tighter relationships with vendors and negotiated better contracts.

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.

Global marketing is a company’s willingness to adopt a global perspective instead of a


country by country or region by region perspective in developing a marketing strategy for
growth and profit. However, “many researchers on international marketing have focused on
the lack of influences of an international or global perspective in marketing thinking and
strategic planning” (Ellis, J & Williams, D 1995).

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.

Standardised plans offer a number of advantages:

 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:

 Different market characteristics make uniform products inappropriate, for example,


Mc Donald’s serving pork in Israel.
 Environmental obstacles disallow standardisation; for example lack of refrigerated
transport in developing countries.

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

1) Allen, D. & Raynor, M. E. (2003) Globalization at Risk, (online) Available at


http://www.manyworlds.com/default.aspx?from=/exploreCO.aspx&coid=CO1270317195517
(Access 10th March, 08)

Mangalindan, M.   (2006)   China May Be eBay’s Latest Challenge as Local Rivals East into Market Share

Frederick, M. 2007. China and Your Client’s Intellectual Property

Kotler P, 2003 Marketing Management International Edition

Johnson, G. Scholes, K. Whittington, R. eds.2008.Exploring corporate strategy.8th edition.

Ellis, J & Williams, D. International business strategy (London: Pitman Publishing 1995.

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