Professional Documents
Culture Documents
Starbucks in China
70 pages, 4 pages of
Spring 2016
ABSTRACT
CONTENTS
1 INTRODUCTION
1.1
Background
1.2
1.3
Theoretical Framework
1.4
1.5
Thesis Structure
2.1
PEST Analysis
2.2
SWOT Analysis
2.3
2.4
STP Analysis
10
2.5
13
14
3.1
Overview of Starbucks
14
3.2
15
3.3
16
18
4.1
Political Environment
18
4.2
Economic Environment
20
4.2.1
20
22
4.2.3
23
4.3
24
4.4
Technological Environment
25
4.2.2
27
5.1
27
5.2
Core Competence
29
5.3
30
5.3.1
Strengths
30
5.3.2
Weaknesses
31
5.3.3
Opportunities
32
5.3.4
Threats
32
5.3.5
33
35
6.1
35
6.1.1
35
6.1.2
38
47
7.1
47
7.1.1
Market Segmentation
47
7.1.2
48
7.1.3
48
7.2
Product
49
7.3
Price
50
7.4
Place
53
7.4.1
53
7.4.2
Location Strategy
54
7.5
Promotion
56
7.5.1
56
7.5.2
58
7.6
People
58
7.7
Process
60
7.8
Physical Evidence
61
63
8.1
63
8.2
65
8.3
65
9 SUMMARY
66
REFERENCES
APPENDICES
LIST OF FIGURES:
FIGURE 1. Inductive Research (Lardbucket 2015) ................................................ 4
FIGURE 2. Deductive Research (Lardbucket 2015) ............................................... 4
FIGURE 3. Thesis Structure .................................................................................... 5
FIGURE 4. Macro Environment Forces Affecting Firm (Jurevicius 2013.) ......... 18
FIGURE 5. China Urban Per Capita Disposable Income 2002-2012 (China Urban
Per Capita Disposable Income 2015.) ............................................................ 21
FIGURE 6. Engel Coefficient of Urban Residents and Rural Residents in China
2000-2012 (Engel Coefficient of Urban Residents and Rural Residents in
China 2015.)................................................................................................... 22
FIGURE 7. Age Group .......................................................................................... 36
FIGURE 8. Gender ................................................................................................ 36
FIGURE 9. Occupation.......................................................................................... 37
FIGURE 10. Monthly Income (RMB) ................................................................... 38
FIGURE 11. The first caf that comes to your mind when you want to drink
coffee.............................................................................................................. 39
FIGURE 12. The frequency of visiting Starbucks in a month ............................... 39
FIGURE 13. Average consumption amount during one visit in Starbucks (RMB)
........................................................................................................................ 40
FIGURE 14. Price level of Starbucks .................................................................... 41
FIGURE 15. The way to know Starbucks ............................................................. 41
FIGURE 16. Reasons to choose Starbucks ............................................................ 42
FIGURE 17. Personal taste of food in Starbucks .................................................. 42
LIST OF TABLES:
TABLE 1. SWOT Matrix ........................................................................................ 9
TABLE 2. SWOT Matrix Analysis of Starbucks .................................................. 33
1.1
INTRODUCTION
Background
Starbucks has created one of the worlds most valuable brands in just
twenty years. Starbucks was founded in 1971. It is the worlds leading
specialty coffee franchisor and brand owner. This company already has
more than 22,000 coffee shops and more than 200,000 employees in
North America, Latin America, Europe, the Middle East and the Pacific
Rim. Over the years, Starbucks has been committed to providing the
highest quality coffee and service to customers. It creates a unique
Starbucks experience so that Starbucks stores around the world become
warm and comfortable, a third living space for people in spite of peoples
workplace and living accommodations. At the same time, Starbucks
continues to reflect back to society, improve environment, repay partners
and coffee producing farmers through various corporate social responsible
activities. Because of Starbucks unique corporate culture and philosophy,
it has been nominated Most Admired Company by the US Fortune
magazine. (Starbucks 2015.)
There is huge commercial opportunity in Chinas coffee business because
Chinas current coffee consumption is far below the world average level.
According to experts prediction, China will become the worlds largest
coffee consuming country in 2020, if every Chinese person drinks one cup
of coffee per day. Then, the coffee beans market will reach 50 billion US
dollars per year. The whole coffee industry chain will generate hundreds of
billions of dollars markets. Starbucks is optimistic about Chinas huge
market potential and it is actively promoting its entering Chinese market
strategy. Since 1999, the first time Starbucks entered China, it has opened
more than 400 stores in Greater China including Hong Kong, Taiwan and
Macao. Nowadays, Starbucks is actively expanding into second-tier
market in mainland China. It is committed in making China to become the
largest international market outside United States in the near future. At the
end of 2005, Starbucks established its Greater China Headquarter in
2
Shanghai, which is mainly responsible for Starbucks strategic
development, marketing and operational affairs in Greater China.
Starbucks growth process is greatly due to its unique values and culture. It
provides customers with a unique Starbucks experience. These values
and culture form the core competence for Starbucks, which makes the
Starbucks expanded worldwide rapidly. (Soupu 2012.)
1.2
After years of economic growth in China, social wealth has gained huge
accumulation. Moreover, Chinese enterprises are still at a low level of
competition and lack of core competence. After years of development of
Starbucks, it has become a world famous brand. Starbucks brand
operation mode and core competence is worth studying by Chinese
domestic enterprises. Through the study of Starbucks, the thesis hopes to
inspire Chinese domestic enterprises, which is the objective of the thesis.
The main research question of the thesis is: How can Starbucks develop
its business in China with its marketing strategies? In order to attain the
objective and answer the research question, sub research questions are
as follows:
I: What problems does Starbucks currently encounter?
II: What opportunities does Starbucks have in Chinese market?
III: How does Starbucks carry out its marketing strategies in China?
One of the limitations of the thesis is it cannot deal with other industries
but the coffee industry, as Starbucks is a company famous for its coffee
industry. The thesis cannot be used in other countries because the main
idea of the thesis is to analyse Starbucks marketing strategies in China.
The analysis result from the questionnaire is only a guide for Starbucks in
its future development in China. It still needs a more comprehensive
research. Furthermore, as the thesis is the analysis of Starbucks
marketing strategies in China, it does not mean that the marketing
3
strategies of Starbucks will also help other companies doing business in
China.
1.3
Theoretical Framework
1.4
5
The thesis uses two types of data sources: primary sources and
secondary sources. The primary sources mainly come from the
questionnaire and the secondary sources are gathered from books,
journals and e-resources.
1.5
Thesis Structure
1. Introduction
2. Literature Review
3. Analyse Current Situation of Case Company
The thesis is divided into nine chapters. The thesis begins with an
introduction. The introduction covers the background, objectives, research
questions, theoretical framework and research methodology of the study.
6
Chapter 2 will discuss some basic theory that will be used in the study,
such as PEST, SWOT and Marketing Mix 7Ps. Following is the analysis of
the current situation of Starbucks. Chapter 3 will introduce the
development of Starbucks in China and what problems Starbucks is facing
now. Chapter 4 will use the PEST analysis to cover macro environment
analysis and the coffee industry environment analysis. Chapter 5 will go
through an analysis of the internal environment of Starbucks. This chapter
will find out what resources and capacities Starbucks has. This chapter will
also use SWOT to analyse Starbucks. Chapter 6 is going to use a
questionnaire to do the empirical research and analysis of Starbucks.
Based on deep marketing research, the author will suggest some
marketing strategies that will help Starbucks in chapter 7. Chapter 8 will
answer all research questions, as well as give suggestion for further study.
Chapter 9 will be the last part of the study. It will draw a brief but thorough
summary for the thesis.
7
2
This chapter is the overall view of theories that will be used in the thesis.
This chapter is divided into three parts. The first part explains macro
environment with PEST analysis. The second part introduces SWOT
analysis, which summarizes and integrates the internal and external
environment of a company. The third part applies experiential marketing
theory, which helps a company to stand in consumer position to think
about development of the company. The next part is the STP analysis that
will help a company in segmenting, targeting, and positioning. Last but not
least, the marketing mix 7Ps is applied to propose suitable strategies for a
company.
2.1
PEST Analysis
8
trends of an industry. In addition, local consumption levels, consumer
preferences and employment are closely related to a companys
economic. (PEST 2015.)
Social and cultural environments include a countrys education and cultural
level, religion, customs, aesthetic point of view and values. Population
environment and cultural background have greatest impact on social and
cultural environment. Religions and customs will prohibit some activities.
Values will affect residents recognition of organization goals, organization
activities and the organization itself. Aesthetic will affect peoples attitude
towards the contents of organizational activities, the way of activities and
the results of activities. (PEST 2015.)
In the past half century, the most rapid changes took place in the
technological environment. Technological environment includes not only
the invention, but also includes new technologies, new processes, the
emergence of new materials, development trends and application
prospects that related production of an enterprise. (PEST 2015.)
2.2
SWOT Analysis
9
strategy. There are three steps in using SWOT analysis in strategic
decision making process.
TABLE 1. SWOT Matrix
Strengths-S
Weaknesses-W
Opportunities-
SO Strategy (Growth-oriented
WO Strategy (Torsion
Strategy)
Strategy)
Threats-T
ST Strategy (Diversified
WT Strategy
Business Strategy)
(Defence Strategy)
2.3
10
Experiential marketing is a further development of service marketing. Its
emphasis is on providing unique experiences which is based on standard
service. Experiential marketing breakthrough traditional emotional
consumer assumption. Consumers are emotional when they are spending
money, the experience before consumption, during consumption and after
consumption is the key to analyse consumer behaviour and for corporate
brand management. The key to using experiential marketing is through
product design to marketing promotion. Companies must always stand out
in the consumer experience perspective to design. It is important for
companies to consider the feeling when consumers see it and use it. In
todays dazzling market competition, interest demand is not enough to
impress consumers hearts. It is more resonating with consumers when
companies can meet consumers self-esteem and high levels of taste
pursuit. (Sun 2004, 26.)
2.4
STP Analysis
The STP theory (target marketing theory) was put forward by Philip Kotler.
STP theory states that target marketing usually goes through three steps:
segmenting, targeting and positioning. In fierce market competition,
companies cannot put the entire market as their target market. Companies
should select a specific market as their target market based on their
strengths, and form a competitive advantage in this target market. (Kotler
2000.) Target marketing needs to go through three steps.
The first step is market segmenting. According to buyers required products
and marketing mix, the market is divided into a number of different buyers
groups. Market segmenting is a classification process. According to
differences in consumers needs, desire, buying behaviour and buying
habits, marketers apply market research to divide the market into a
number of consumer market groups. Each consumer group is a market
segment. Each market segment consists of consumers with similar
demands. So companies can use personalized products to meet
11
personalized demands. Basic methods of market segmenting are
geographic, demographic, psychological and behaviour.
The second step is market targeting. Companies can select one or several
market segments to enter. After doing market segmentation, companies
decide which market segments to choose and to provide service and
products based on the enterprises resources. When assessing the various
market segments, companies must consider two factors. Firstly,
companies need to consider whether the market segment is attractive to
companies, such as the market segments size, growth, profitability,
economic scale and risk. Secondly, companies must consider whether
investment to a market segment is the same with the resources that
companies have.
There are generally three strategies when selecting target market.
I. Undifferentiated marketing strategy. Undifferentiated marketing strategy
is where the company selects the entire market as its target market. The
company only considers market needs regardless of market differences.
The company uses one product, one price and one promotion method to
attract more consumers, such as Coca-Cola. The advantage of this
strategy is that the product is single, easy to guarantee quality, easy to
mass produce and has lower production and marketing costs. (Trout
2002.)
II. Differentiated marketing strategy. Differentiated marketing strategy is
where a company divides the whole market into a number of sub-markets.
The company designs different marketing strategies and different products
for different sub-markets and different consumer needs. The advantages
of this strategy is that it meets different requirements of different
customers, it expands sales, it dominates the market and improves
corporate reputation. The disadvantages of this strategy is that due to
product differentiation and promotion differentiation, it increases the
difficulty of management, production cost and marketing cost. (Trout
2002.)
12
III. Focus marketing strategy. Focus marketing strategy is to select one or
few market segments as target market to implement specialized
production and sales after the market breakdown. The advantages of
focus marketing strategy are to benefit marketable products, reduce cost
and improve the visibility of companies and products. But there is a great
business risk because the size of the target market is small. If consumers
demand and preference change in the target market, companies may be
in trouble due to delayed changes. (Trout 2002.)
The third step is market positioning. Philip Kotler states that positioning is
one design for companys supplies and images, which can occupy a
unique position to act in the heart of target customers (Kotler 2000). The
final outcome of the positioning is to clearly show why the target market
will buy the product. Based on positioning theory created by Ries Trout,
positioning starts with product. It is not mean to take action on the product
itself. Positioning means to take action on potential customers
psychologically. Therefore, positioning is a theory that pertains to
customers mind. Trout thinks people should cope with this over-spread
community. Customers will create a ladder in their mind for each
category, then put each brand on each level of the ladder according to
their understanding. Thus, the process of corporate brand building is to
use marketing tools to occupy its own brand on the first layer of the
ladder in peoples mind. However, once a brand has already formed a
ladder in customers mind, it is very difficult to change it. In this case, the
positioning theory tells companies to try to establish a new ladder in
customers mind, then put their own brand on the first layer of the ladder.
(Trout 2002.)
From the meaning and theory of positioning, the core idea of market
positioning theory is market segmentation and differentiated marketing. To
some extent, positioning is synonymous for differentiation. A corporate
brand can be called a strong brand if it is starkly different with its
competitor brands, which directly promotes sales of the products under the
brand.
13
2.5
The marketing theory 4Ps is produced with the proposed marketing mix
theory in 1960s in the United States. In 1953, Neil Borden coined the term
marketing mix in his inaugural speech to the American Marketing
Association. The marketing mix refers to the market demand affected by
market variable or marketing elements. The marketing mix 4Ps means
product, price, place and promotion. Product focuses on the development
of function. The product requires a unique selling point and functional
demands is in the first place of the product. Price is based on corporate
brand strategy and focuses on the value of the brand. Place means
companies do not directly face consumers but focus on building a sales
network. The contact between companies and consumers is carried out
through distributors. Promotion means companies focus on changing
selling behaviour to stimulate consumers, such as buy one get one free.
The promotion is to attract other brand consumers to promote sales
growth. (MBA 2015.)
In 1981, Booms and BItner proposed to add three service Ps in the
traditional marketing theory of 4Ps, which are people, process and
physical evidence. People are directly or indirectly involved in the process
of consumption of a service, which is a very important point of view in
marketing mix 7Ps. Process carries out through certain procedures,
mechanisms and activities, which is a key element of marketing strategy.
Physical evidence includes service environment transferred by service
supply, the ability to carry and express tangible products, invisible
consumer experience of current consumers and the ability to deliver
potential consumer satisfaction. (Marketingmix 2015.)
14
3
3.1
Overview of Starbucks
15
Japanese market together. In the following year, in 1996, Starbucks
opened its first caf overseas in Ginza in Tokyo, Japan. From then on,
Starbucks officially set on its international expansion path. From 1996 to
the end of 2000, Starbucks established chain stores in 16 countries
around the world, mainly in areas of Western Pacific coastal countries and
Middle East. (Chen 2005.) In addition, an interesting phenomenon
occurred in that the countries Starbucks selected most were not in
advanced Western countries with a habit of coffee drinking. Instead the
customers were almost all in so-called Third World countries, e.g.,
Philippines, Thailand, China, etc. And further we can also find that these
so-called Third World countries are rather newly industrialized countries or
oil-exporting countries in the Middle East. In addition, Starbucks selected a
countrys capital city or the countrys largest city to open its caf. This
enthusiasm and confidence of untapped market is an important factor in
Starbucks successful long journey.
3.2
16
entire Greater China to respond to strategic development, marketing
exploitation and operations. At present, in addition to the eastern region of
China, Starbucks cafs in northeast, north, southwest and south part of
China are managed and operated directly by the Starbucks United States
headquarter. In just a few years time, Starbucks in China has a rapid
development, which begins with license agreement to a joint-solo
investment mode. This reflects the fact that the Starbucks brand has been
universally accepted in China. (Starbucks 2015.)
3.3
Over the past decade, Starbucks brand value has reduced because of its
pursuit of financial figures and rapid expansion in the world, which is very
dangerous. The thesis analyses three aspects that cause a reduction in
the value of Starbucks brand.
The first aspect is the desalting of Starbucks experience. From the first
Starbucks caf opened in 1986, Starbucks mission has been to do their
best to make consumers feel that its mission is not to just sell coffee, but a
meticulous recreation lifestyle. Starbucks becomes partners with its
employees by ESOP (Employee Stock Ownership Plan). Starbucks
establishes an emotional relationship with consumers. But with the rapid
expansion of Starbucks, the customer experience that Starbucks tried to
bring to decreased that affecting the Starbucks core competence. After
trying the success of Starbucks experience, Starbucks tries to reach its
financial goals by rapid expansion of shops but with a loss of consumer
experience. And the financial result in the third quarter of 2008 showed a
net loss of 6.7 million dollars. (Zhang, 2008.) As a strong international
brand with sell temperament, emphatic experience and culture,
Starbucks sacrifice of customer experience and quantitative expansion let
it fall into a trap.
The second aspect is degradation of service quality. In order to obtain
economies of scale and achieve satisfaction from a financial point of inputoutput ratio, Starbucks must complete service processes as an assembly
17
line. But the consequence is that Starbucks previously bring customers
high-quality personalized service is now replaced with standardized
streamline service, which makes Starbucks development similar to a much
cheaper franchisor store.
The third aspect is loss of business culture. Another source of Starbucks
core competence is its enterprise culture with attention to staff. Starbucks
changes its staff from traditional employees to business partners by coffee
beans options and sound health care plan, so that employees become
partners and operators with consistent business interests. Starbucks
leadership creates an intense experience to its partners and partners will
pass dignity and respect to their customers. (Michelli 2007.) This corporate
culture of emphasis on staff is a source of Starbucks core competence.
But with the rapid expansion of Starbucks, the culture of emphasis on staff
is gradually lost. The selection of new staff and staff training are relaxed.
Starbucks previously had two hours of closed shop staff training on a fixed
period (monthly or weekly), and now a lot of cafs of Starbucks have no
idea of this tradition. Previously, all employees working at Starbucks, no
matter where they come from, have to go to Starbucks headquarter in
Seattle for three months training. But now, this tradition no longer exists.
18
4
4.1
Political Environment
19
Firstly, Starbucks, as a US company operating in China, will inevitably
receive the impact of Sino-US relations. If the Sino-US relations
deteriorates, it is difficult for Starbucks to have good development in
China. With the rise of Chinas economy, the attitude of the United States
to China is shifting to corporate. The United States realizes the benefit of
cooperating with the worlds key market China is greater than the benefit
of confronting with China. The US government also recognizes that
although United States is strong, it is not omnipotent, it is unable to cope
alone with the challenges and cannot completely address these issues in
accordance with their wishes. Although China and the US have a history of
conflict in political economy and trade friction, China and the US have
broad prospects for cooperation. Cooperation can lead to a peaceful
international relationship and background for Starbucks expansion in
China.
Secondly, the China is based on the centre of economic construction.
Long-term and stable political environment provide confidence for
multinational companies operating in China. There are more than 400
multinational companies of the global top 500 enterprises settled in China,
which indicates that China, with political stability, in a good development
stage for foreign companies. China is now a member country of WTO
(World Trade Organization), which creates Starbucks a favourable
condition to do business in China. Starbucks, as a multinational company,
can reduce operating costs within the framework of the WTO, such as
reducing tariffs on imported raw materials. This can make Starbucks
control costs more effectively in order to achieve better returns. WTO also
contributes to Chinas economic prosperity, and a prosperous expanding
market brings development opportunities to Starbucks which is targeting a
high-end market. In the non-tariff protection, China is gradually reducing
barriers for developed countries, such as liberalization of the financial
industry permit, which will provide better financial services to multinational
companies to improve their business performance.
Thirdly, Chinas legal environment is gradually improving. In the protection
of patent rights, the fight against unfair competition and consumer
20
protection is being developed into a favourable legal environment to
protect the healthy operation of the economy. Until 2005, Chinese retail
industry is fully opened to foreign investment and the restriction of
multinational retailers in region, equity ownership and quantity is
cancelled. (Feng 2007, 44.) Before the introduction of this legislation,
Starbucks took a cooperative approach in development in China. After the
introduction of this legislation, it paved the way for Starbucks direct
management and liberal legal environment providing more freedom for
Starbucks business model. In terms of administrative intervention in the
economy, the Chinese government is slowly eliminating the role of
administrative intervention in the economy and adopting internationally
accepted comprehensive legislation to regulate and guide the industrys
healthy operation.
4.2
Economic Environment
21
consumption and Chinese consumers steady growth in spending has
created a steady growth in the expansion of consumer market. This
growing demand creates development opportunities for Starbucks which is
in the coffee retail business.
26,959.00
23,979.20
21,033.40
18,858.10
17,067.80
14,908.60
12,719.20
11,320.80
10,128.50
9,061.20
8,177.40
5,000.00
FIGURE 5. China Urban Per Capita Disposable Income 2002-2012 (China Urban Per Capita
Disposable Income 2015.)
22
49.1 47.7
46.2 45.6 47.2 45.5
43.1 43.7 42
43
42.2 40.4
39.4 38.2 37.7
39.3
37.1 37.7 36.7 35.8 36.3 37.9 36.5 35.7 36.3 36.2
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
FIGURE 6. Engel Coefficient of Urban Residents and Rural Residents in China 2000-2012
(Engel Coefficient of Urban Residents and Rural Residents in China 2015.)
23
to let consumption become the most critical driving force. In recent years,
consumption growth remained at about 16% and still showing a strong
growth momentum. Consumption expansion and stimulating domestic
demand of Chinese macro-level policy also gives Starbucks opportunities.
Economists believe that China has entered a new cycle of economic
growth autonomy. The upgrading of consumption structure depends on
the generation and the rise of Chinas middle class. The National Bureau
of Statistics of China has done a nationwide sample survey of social class.
The survey basically concludes that Chinas middle class increases
dramatically, which accounts for 15% to 18% of overall population. Rapidly
growing middle class consumers prefer to buy high-end fashion goods and
this promotes the upgrading of consumption structure. Currently the per
capita GDP is more than 3,000 dollars. And the middle class are
concentrated in Shanghai, Beijing, Guangdong, Zhejiang and other coastal
areas. According to Maslows hierarchy of needs, these high-income
people have begun to seek the needs of respect (Maslow Hierarchy
Theory 2015). The goods they consume is a pursue of an expression of
self-identity and value, so their consumption expenditures are high-end
fashion goods. This provides Starbucks a growing target markets. These
regions have been close to the level of developed countries and has
become Starbucks market segments in Chinas strategic choice. (GDP
2015.)
24
speed at the same period. By the end of 2004, the proportion of Chinas
urban and rural population rose to 80% and in 2010 this proportion was
almost 99%. Urbanization brings markets to Starbucks. With the
acceleration of urbanization, potential customers group have also
increased. Starbucks strategic layout in China corresponds with Chinas
urbanization layout. After opening cafs in Shanghai, Guangzhou, Beijing,
Shenzhen and coastal cities, Starbucks entered central city Wuhan. The
next step planned for Starbucks is to expand to the second-tier cities in
China. (Urbanization 2015.)
Secondly, a large number of population has been one of the most notable
features of China. The National Bureau of Statistics of China indicates that
on January 6th 2005, the total Chinese population is 1.3 billion excluding
Hong Kong, Macau and Taiwan, which accounts for about 21% of the
worlds total population. And the current total fertility rate of 1.8% predicts
that Chinas total population will reach 1.46 billion in 2020. The total
population peak will appear in 2033, which will be about 1.5 billion. With
Chinas economic development, China will be a huge market. In recent
years, the Chinese government accelerated the development of education.
Especially since Chinas higher education enrolment, China is training the
worlds largest population of higher education students. The experience of
a high-quality coffee culture that Starbucks provides fulfils the needs of
highly qualified people. At the same time, as China becomes more open,
the international mobility of the population also increases. There are more
and more foreigners and overseas students doing business and living in
China, which also provides favourable conditions for Starbucks to spread
its coffee culture. (Population 2015.)
4.3
25
Firstly, China is an ancient country with a long cultural history. Confucian
culture is ancient Chinese mainstream culture. And this culture has an
impact on Chinese peoples manners and moral values. Confucian culture
emphasizes harmony between people and advocates and culture.
Schultz had made an assessment of Starbucks service: we are not
engaged in the coffee business and serve customers, but we are engaged
in the people business and provide coffee service to people. (Chen 2005.)
So the environment of Starbucks is as important as its coffee. The pursuit
of interpersonal harmony values is easy to be accepted by Chinese people
that grow up with the influence of Confucian culture. Starbucks culture and
values based on the customer experience coincides with the Chinese
peoples and culture. To meet the aesthetic aspect of Chinese culture,
Starbucks utilizes the dcor of Chinese antique and old-fashioned
teahouses. This makes Starbucks more connected to Chinese consumers
and eliminates negative impact caused by cultural barriers.
Secondly, cultural communication of China and western world makes
China accept many advanced ideas and culture from western world and
forms a strong cultural inclusiveness. With China becoming more open,
Chinas tolerance and acceptance of Western culture also gives marketing
opportunities for Starbucks in China. Especially since the Chinese
economic reform, there are more and more cultural exchange between
China and the Western world. Young Chinese people are in pursuit of a
western lifestyle. Such cultural openness and longing for western culture
makes it easier for Chinese people to accept Starbucks.
4.4
Technological Environment
26
also means unlimited opportunities for innovation. Since Starbucks was
founded, Starbuckss uncompromising spirit of innovation performs in the
pursuit of new technology, e.g., its unique Starbucks heavy roasting,
espresso extraction technology and packaging to preserve coffee. These
practices create coffee technological superiority for Starbucks.
Secondly, Starbucks makes good use of IT technology to provide
customers with a richer Starbucks experience. Starbucks connects itself
closely with the IT and Internet to provide Internet access services to the
customers in store, and through the network promote their coffee culture.
Between 2003 to 2004, Starbucks cooperated with China Netcom and
China Telecom respectively to launch WIFI services. Starbucks constructs
wireless Internet access in each of its caf to bring more experience and
value to customers. In 2007, Starbucks management company integrated
Starbucks website in every region and launched a new website with a
virtual caf to promote Starbucks culture and coffee knowledge and
communicated with their customers. Through the development of
innovative electronic payment tool, it makes it easier for Starbucks
customers to pay at Starbucks. In addition, Starbucks has a good data
platform. In this platform, Starbucks can use computer data processing
technology to understand customers preferences. At the same time that
Starbucks brings perfect experience for customers through high
technology, it also provides comprehensive data on customer preferences
for Starbucks. (Starbucks 2015.)
In addition, Yunnan in China is suitable for planting high-quality coffee.
Nestle and Maxwell House Coffee Company has purchased coffee beans
and other raw material from them. But now almost every coffee bean in
Starbucks are imported. The environment in Yunnan, China is not only
suitable for the cultivation of coffee in quality, but also meets the standards
of Starbucks, which provides greater convenience for Starbucks storage
and transport. Starbucks has made it clear that it plans to establish a long
term strategic partnership between Yunnan and coffee suppliers. This
implements a part of Starbucks global procurement plan. (Starbucks
2015.)
27
5
5.1
28
than three billion dollars was evaluated to be included in the Fortune
Global 100 Brand by Business Week magazine. The reputation of
Starbucks brand is a huge competitive advantage. (Xu & Qiao 2004.)
Capabilities refers to the efficiency of enterprises to allocate resources. In
order to achieve a desired final state, these resources are integrated
together on purpose. Many capabilities basis is built on employees skill
and knowledge. The knowledge of a companys human capital is the most
important capability and will finally become a source of competitive
advantage. The capabilities of Starbucks can be analysed and
summarized in several ways from its functional areas.
Human resource: Starbucks can encourage, authorize, retain employees
effectively. Starbucks turns its staff from employees to become its
enterprise partner by implementing an all employee health insurance plan
and issuing coffee beans options. This greatly motivates employees to
dedicate themselves to work and employees are also allowed full
authority. For example, if a customer knocks over a cup of coffee, the
Starbucks employee can give a new cup of coffee to this customer for free.
This is free even if it is not the responsibility of the Starbucks employees.
So the turnover of Starbucks employees is quite low in the service
industry.
Marketing: Starbucks has effective brand promotion and various products.
Starbucks uses unique word of mouth strategy that creates a worldrenowned brand with no advertising investment. This comes from its
efficient unique shopping experience that delivers to customers, which is
known as the Starbucks Experience. Starbucks Experience creates a high
degree of customer loyalty.
Research and development: It can be said that Starbucks is the quickest
and growing coffee franchisor company to introduce new varieties and is
always leading in the coffee industry. This leads to other cafs imitating
Starbucks. Starbucks invests heavily in research and development, has
established its own scientific laboratory and hires scientists to research
29
Espresso extraction technology. This continued investment in research
and development allows Starbucks to have strong ability in product
innovation and research and development.
5.2
Core Competence
30
The fourth one is inimitability. The core competence must be unique in one
company and is difficult for competitors to imitate. The competence of
imitability can bring above-average profits for enterprises.
The thesis believes that the core competence for Starbucks comes from
Starbucks unique corporate culture and value. Starbucks corporate
culture has gradually formed since the seventies, which makes it difficult
for competitors to imitate. Corporate culture can enhance staff cohesion
and the employees can get a lot of inspiration and encouragement. Then it
becomes a source of competitive advantage. For Starbucks, the brand is
the external expression of its value and culture. And this brand is created
by Starbucks employees. Starbucks disseminates and consolidates this
culture and value through its excellent employees.
5.3
The sub-chapter will use SWOT analysis tool to evaluate the strengths,
weaknesses, opportunities and threats involved in Starbucks.
5.3.1 Strengths
Firstly, the brand strength. According to Business Week and the
Interbrand released 2014s Top 100 Global Brand list, Starbucks ranked
31, that the brand value increased 25% from the previous. (Wang & Ren
2007.)
Secondly is the coffee technology strength. Starbucks huge investment in
research and development makes it the expert in coffee industry.
Thirdly is the store location strength. Starbucks already occupies relatively
favourable locations in bustling places in large and medium-sized cities in
China. Good location not only brings Starbucks greater traffic, but also
brings the advertising effect. At the same time, the preconception
advantage of Starbucks results in higher barriers and obstacles for new
entrants.
31
Fourthly is the financial strength. Enterprise development is inseparable
from financial resources. Starbucks has an obvious financial advantage.
Starbucks headquarter currently has more than 16,000 cafs around the
world. In 2004, the total turnover was more than 500,000 dollars and the
companys profit reached 600 million dollars. (Starbucks 2015.)
5.3.2 Weaknesses
Firstly, the unstable product line. Starbucks constantly introduce new
products. For example, Starbucks plans to sell ready-to-drink coffee in
supermarkets and sells CD and books in its cafs.
Secondly, comes the management problems of Starbucks franchisor
stores in China. It is a challenge for any corporate to have efficient
management of a number of stores in China. Moreover, Starbucks equity
is complex in China. This equity complexity increases the conflict between
the US management staff and Chinese management staff. Starbucks does
not achieve 100% equity control in its cafs in China and only masters
operational management of most parts of China. The Starbucks in
Jiangsu, Zhejiang and Shanghai still remain under the direct management
of Taiwan Uni-President Group. Starbucks management team from the
United States apparently is not totally familiar with Chinas various
economic and legal environments. So they still need time to adapt to
localization.
Thirdly, the watering down of the Starbucks experience and reduction of
customer service level issue concern. In the time of Starbucks expansion,
it results problems of the watering down of its Starbucks experience..
Fourthly is the high price. The drinks in Starbucks is much more expensive
than other cafs in China.
32
5.3.3 Opportunities
Firstly, Chinas economic development is good. Since the end of last
century, Chinas economic development trend is good, which created a
huge consumer market and gradually formed a huge target market
suitable for Starbucks. In the mean time, Chinas policy on attracting
foreign investment brings an historical opportunity for Starbucks
development in China.
Secondly, since 2005, Chinese law released the control of foreign retail
enterprises direct chain stores (Ministry of Commerce 2005.)
Thirdly is the process of urbanization. The developed cities in China are
concentrated in the coastal areas, that being the first choice for Starbucks
to open its caf. But with the advance of urbanization in China, there are
more cities in China, that may become the potential market areas for
Starbucks.
Fourthly is the great potential of Chinese coffee market. According to
expert analysis, the Chinese coffee market will develop into the worlds
largest coffee market with increase at a rate of 30% per year. While the
Chinese market is still in complex situation, the market is far from
saturated. This market development and market structure brings
Starbucks huge profit expectations.
5.3.4 Threats
Firstly, increased competition. With the opening of the coffee market,
professional competitors begin to enter the Chinese market to seize their
market share., which results in competition for Starbucks, such as COSTA
from Italy.
Secondly, the Sino-US cultural conflict. Starbucks represents American
culture. It creates challenges for Starbucks on how to better reduce
cultural conflicts in a strong Chinese traditional culture.
33
Thirdly, the rise of the cost of raw materials. Chinas CPI is on the rise,
especially the rise in food prices puts pressure on Starbucks cost control
and profit margin.
Fourthly, the imbalance of regional development. Imbalanced regional
development creates peoples income differences, which challenges
Starbucks high price.
STRENGTHS
WEAKNESSES
Brand
Coffee technology
Store location
Water down of experience, reduction of
Financial
service level
EXTERNAL
High price
FACTOR
OPPORTUNITIES
SO
WO
Concentric diversification
Brand extension
Direct sales
ST
WT
Increased competition
Differentiation
Public relations
Price rising
34
35
6
6.1
The questions in the questionnaire can be divided into two parts. The first
part is about personal information of participants who answered the
questionnaire, such as age, gender, occupation and monthly income. The
second part is mainly about customers opinions and evaluation to
Starbucks in different aspects.
36
Q1:Age Group
1%
10%
1%
6%
Under 21
21-30
31-40
41-50
Over 50
82%
Q2:Gender
41%
59%
Male
Female
FIGURE 8. Gender
37
for 59% of the total. To be specific, 67 female and 46 male completed this
questionnaire.
Q3:Occupation
Student
25%
31%
Worker
5%
9%
30%
Office employee
Self-employed businessman
Other
FIGURE 9. Occupation
38
13%
27%
1000-2000
15%
2001-3000
3001-4000
15%
18%
12%
4001-5000
Over 5000
Figure 7 clearly shows the monthly income of respondents. There are six
income levels and it shows in the pie chart, the income level of over 5,000
accounts for the largest proportion, which is 27%. The second largest
amount of respondents is from the income level of 2001-3000, which
makes up 18%. Based on the data concerning monthly income, we can
find that most people that choose Starbucks are middle class in China. So
Starbucks can set suitable price for its products and upcoming products
according to the income level of its main customers.
39
19%
UBC Coffee
4%
4%
Caffe Bene
6%
3%
1%
57%
6%
Zoo coffee
Costa
DIO Caf
FIGURE 11. The first caf that comes to your mind when you want to drink coffee
The seven cafs listed in Figure 8 are seven popular cafs in China. As
we can see from Figure 8, Starbucks has the largest proportion, which
accounts for 57%. 19% of respondents choose other cafs like some new
opening cafs. The data in question 5 shows Starbucks is still the first
choice for most people in China. This question helps Starbucks to know its
competitors in China and Starbucks can put more effort in marketing
research to attract more potential customers to visit.
5%
0-2 times
3-5 times
More than 5 times
83%
40
Figure 9 clearly shows that 83% of respondents visit Starbucks up to two
times per month. Respondents visiting Starbucks 3-5 times makes up 12%
and customers visit Starbucks more than five times accounts for only 5%.
As coffee is still on the way to becoming popular in Chinese peoples daily
lives, so customers who visit Starbucks more than three times are loyal
customers for Starbucks. Starbucks can provide more discounts and
activities for loyal customers to attract them to visit Starbucks more often.
35%
Under 50
50-100
100-150
45%
FIGURE 13. Average consumption amount during one visit in Starbucks (RMB)
41
46%
Average
49%
Cheap
In Figure 11, respondents opinions about the price level of Starbucks for
expensive and average accounts for almost even. Only 1% of the
respondents believes the price level of Starbucks is cheap. The results of
question 8 can effectively help Starbucks to make some changes in its
further practices.
Others' recommendation
19
TV
Internet
43
Advertisement
28
21
Movies
Others
55
0
10
20
30
40
50
60
42
are 43 people that choose the Internet as a way to know Starbucks and 35
people know Starbucks through others recommendations. But there are
only 19 respondents who know Starbucks from TV. This bar chart helps
Starbucks to know its advertisement strategy in its future.
3
33
Taste
61
Good service
Location
26
Other
30
0
10
20
30
40
50
60
70
Espresso
9%
Frappuccino
30%
6%
33%
Coffee
Tea
Other
43
This question is about customers personal preference of food in
Starbucks. It can be seen from Figure 14 that coffee and Frappuccino are
the two most popular drinks in Starbucks and it accounts for 63% of the
total. There are 22% respondents that chose other foods such as bread
and dessert as their favourite food at Starbucks. Last but not least, there
are 9% of the respondents like to order Espresso and 6% of respondents
prefer tea at Starbucks.
Q12:RESPONDENS' SATISFACTION TO
THE ENVIRONMENT OF STARBUCKS
Satisfied
Average
Unsatisfied
71%
DECORATION
29%
64%
35%
RESTROOM
65%
32%
WAITING AREA
ATMOSPHERE
WAITERS UNIFORM
51%
46%
57%
68%
0%
1%
4%
3%
42%
31%
1%
1%
44
Q13:RESPONDENTS' SATISFACTION TO
THE FOOD AND DISHES IN STARBUCKS
Satisfied
Average
Unsatisfied
76%
24%
69%
TASTE OF DRINK
31%
66%
TASTE OF DESSERTS
0%
32%
80%
STARBUCKS DISHES
0%
2%
19% 1%
Q14:RESPONDENTS' SATISFACTION TO
SERVICES IN STARBUCKS
Satisfied
Average
Unsatisfied
68%
29%
3%
70%
27%
3%
73%
23% 4%
61%
69%
RECEPTION SERVICE
PROMOTIONAL ACTIVITIES
TAKE AWAY SERVICE
37%
39%
51%
28%
57%
47%
2%
3%
4%
2%
45
In question 14, respondents are asked to give their evaluation to services
at Starbucks. All of the seven services are used in all Starbucks cafs in
China. The data in Figure 17 shows that the waiters attitude to customers
is the best service to customers, which accounts for 73%. The reception
service and waiting time before food service are also good service
considered by respondents, which takes up about 70% of the respondents
satisfaction. However, promotional activities provided by Starbucks only
makes up 39% being satisfied. Thus Starbucks should increase their
promotional activities in its future marketing activities.
21%
Very good
Good
Average
Bad
57%
Very bad
46
17%
Location
29%
Other
The last question of the questionnaire asks about in which way Starbucks
can do better. The pie chart in Figure 19 illustrates that Starbucks needs to
have more discounts and promotion, which accounts for 39%. Following is
the types of food and taste of food, which takes up 29% of total. As
mentioned before in Figure 11, the price level at Starbucks is expensive,
so it needs to do more promotional activities. And Starbucks also needs to
improve its types of food and taste of food to let it suit better for the
Chinese people.
In summary, the analysis of a questionnaire is a good way for Starbucks to
know more about its customers and is beneficial to Starbucks to realize
what marketing strategies and improvements it needs to do better.
47
7
This chapter will use marketing mix 7Ps to analysis marketing strategies
for Starbucks.
7.1
Coffee lovers: They drink coffee regularly, have higher requirements with
coffee quality and are willing to learn coffee knowledge and culture.
Random coffee consumers: They drink coffee occasionally and coffee is
not their lives essential drink. They do not have understanding of coffee
knowledge. They tend to prefer the caf atmosphere more than the coffee
itself. They buy coffee because of recreational or social needs.
48
Coffee excluder: They refuse coffee and rarely choose coffee when they
go to a caf. They would rather choose tea or other drinks instead of
coffee.
Starbucks Experience,
49
II.
Starbucks positions itself to be The Third Place except home and working
place. The goal of Starbucks is to provide a fresh and fashion style social
place for Chinas upper middle class.
III.
Coffee Expertise,
We can use Starbucks as the voice of coffee to spread coffee culture and
knowledge. We can show expertise of Starbucks coffee through educating
target customer groups with high quality coffee.
IV.
Passionate Staff,
7.2
Product
50
extent, it is bound to be imitated. Thereby, through continuous product
innovation strategy, Starbucks can maintain a sustainable competitive
advantage. Starbucks turns coffee from a normal drink to life taste.
In addition, Starbucks might consider product brand extension strategy to
make Starbucks coffee sell in supermarkets, which heirs ready to seize the
drink coffee market. But Starbucks should be careful with brand extension
strategy. The thesis suggests that Starbucks can consider the primary and
secondary brand extension strategies. The primary and secondary brand
refers to a corporate with a variety of products. At the mean time all
products have a unified brand, Starbucks should name products according
to each products different features. This avoids the brand image desalting
problem and product positioning confusion problem which is caused by
single brand extension. (Dao, 2006.)
Thirdly, Starbucks is implementing its product management diversification
strategy as well as its rapid expansion. Starbucks tried to run bookshops
and restaurant before, but all ended in failure. This is because all these
businesses do not have good correlation with Starbucks original core
competence and resource. It will lead to failure to implement diversification
or brand extension strategy when the correlation with core competence is
small. Blind diversification will bring brand positioning confusion and
corporate resource waste to the company, which causes reduced
corporate brand value. (Zhang, 1998.) As Marketing Professor, Barbara E.
Kahn states, mature developed companies, considered to have special
customer positioning companies, are often in trouble when they attempt to
attract other clients. For the current instability product line of Starbucks,
the thesis recommends that Starbucks does not leave its core strengths
which is based on the experience of the coffee when implementing
diversification.
7.3
Price
51
I.
Identify needs,
Estimate cost,
52
V.
53
7.4
Place
This sub-chapter will introduce place strategies for Starbucks. There are
basically two place strategies: direct sales mode strategy and location
strategy.
54
the approach of buying back shares and to become a wholly owned
company in China in order to better implement control. Since 2003,
Starbucks began to acquire its equity franchise in China and Starbucks
raised its cafs stake in Shanghai and Taiwan to 50%. (Starbucks 2015.)
The advantages of direct marketing mode are to ensure the coffee quality,
employees quality in the cafs and corporate culture. It is because of a
direct marketing strategy, Starbucks can quickly establish its brand in
China and screen itself out from other cafs in China. In order to
guarantee Starbucks Experience that Starbucks bring to customer,
Starbucks has a set of unique values and of corresponding management
system, which is difficult for its alliance business to copy. When Starbucks
first entered China, a joint venture of Starbucks just copied the external
manifestation of the firm culture and did not reach the requirements of
Starbucks. So Starbucks culture and management system determines its
direct sales mode.
55
place, including the choice of the place, investigation, design and
instrumentation equipment. Of course there is of constraints agency to
access the local work.
Starbucks positioning determines its location is generally in the heart of
the downtown with many visitors, such as business centre and transport
hubs, which helps customers find Starbucks anywhere. The maturity,
stability and growth of business district are important factors for Starbucks
to consider. Starbucks also breaks the basic business rule of hot repeated
shops within a hundred metres radius. Starbucks opens a number of cafs
in one area to provide more convenience to customers and implement its
expansion strategy. More intensive space occupation is difficult for its
competitors to intervene, which is better to respond to competition.
However, Starbucks place expansion strategy of intensive store openings
is to better respond to competition but brings huge pressure on cash flow.
In the economic boom circumstance, this expansion strategy can help
companies better occupy the market. But in the economic recession, there
exists great risk. So Starbucks place expansion strategy should fit the
overall development of the Chinese economy. When the Chinese
economy in general works well, but the growth rate slows, Starbucks in
China should have steady expansion. In recent years, Chinas urban
housing and rents continue to rise. Starbucks cafs in China basically rent
and do not have property ownership. Starbucks store rent is a huge part in
its operating costs. Especially for Starbucks located in a prime location,
this rent cost is much higher. In recent years, Chinas commercial real
estate rental price has been soaring, and in the long run, with Chinas
economic development, commercial real estate rental price is increasing.
From the perspective of rent, Starbucks operating costs is on the trend of
increasing, which will bring a lot of pressure to control Starbucks operating
cost and bring risks and uncertainty to future profitability. In order to meet
Starbucks expansion strategy in China, Starbucks can consider the
strategy of McDonalds. McDonalds has real estate business besides
selling hamburgers. After McDonalds investigation of an appropriate place
to open its store, it will buy out the property and lease to franchisees that
56
have McDonalds license to operate. Because] of McDonalds strong
brand, there is a big increase in the land price after it opens its store,
which brings great profit to McDonalds. Starbucks is one of World Top
100 Brands, its brand will give added value to bring positive effects of real
estate. So Starbucks can consider real estate strategy to achieve a stable
place expansion strategy.
7.5
Promotion
There are basically two ways of promotion. The following text will introduce
advertising and limited sales promotion.
57
before it brings the enthusiasm and Starbucks cultural values to its
customers. Starbucks employees promotion mode is similar to the
transmission mode of religion. Starbucks uses internal marketing to its
employees to make its employees become the source of word of mouth.
Starbucks is a service brand that mainly sells coffee, the service brand
value is provided by people and is decided by peoples feelings and
experiences. It is easier to get consumers recognition by Starbucks
employees friendly explaining of professional service knowledge, which
forms the word of mouth. Starbucks transfers the budget savings from
advertising promotion to the employees benefits and training, which
maximizes its employees enthusiasm. It is good for Starbucks to provide
better service quality and form a virtuous cycle of word of mouth.
Secondly, Starbucks word of mouth focuses on each customer that has
experienced from Starbucks. The customers pleasant experience at
Starbucks will let them tell their experience to people around them, which
is free advertising for Starbucks. Compared with commercial advertising,
word of mouth is not for profit, but advertising is for the purpose of profit.
Especially in the flood of information, the intensity of advertising is much
higher than the affordability that consumers are able to receive. In this
situation, advertising will lead to consumers psychological boredom and
rejection and advertising does not gain profit. Word of mouth strategy is to
spread the experience after consumption between familiar people, so word
of mouth can better promote consumer buying behaviour. Starbucks
focuses on every detail in that service process to provide customers with
high-quality service to get customers satisfaction and customers loyalty,
which provides the foundation of Starbucks word of mouth advertising.
Thirdly, another way of Starbucks word of mouth is to select the crowd
opinion leaders or consumer groups who are willing to preach new things
to let them understand the benefits of Starbucks products and service.
Once they enjoy Starbucks products and services, they will become
compulsory advocates of Starbucks products. Starbucks regularly
organizes coffee classroom activities to its customers to help them
understand coffee knowledge, identify coffee and taste coffee. This activity
58
can help the intimacy and understanding between Starbucks and its
customers, which also helps customers communicate with each other and
exchange their Starbucks experience. Starbucks uses these purposeful
word of mouth strategies to diffuse its brand reputation.
7.6
People
People is the most important factor in service. People means all personnel
involved in service, which includes employees, customers and other
customers in service environment.
Firstly, Starbucks uses stock options strategy which greatly stimulates the
enthusiasm and creativity of employees. Starbucks success comes from
revolutionary stock options programme that Schultz implements at
Starbucks. Starbucks offers stock options programme coffee beans stock
to all its employees, including part-time employees. With the establishment
of Greater China, Starbucks also began to implement stock options
programme in China. According to 2006 fiscal coffee beans stock options
59
programme, the employees who have the right to operate at Starbucks,
whether full-time or part-time can enjoy this benefits as long as they joint
company before 01 April 2006 and have 20 hours work weeks (Best
Welfare Company 2015). Every employee becomes a partner through this
programme which links every employees performance with the companys
performance. According to these incentive ways, Starbucks turns its
employees to companys partner, which greatly stimulates employees
enthusiasm. So passionate creative employees can provide better quality
service to every customer.
Secondly, Starbucks success comes from its emphasis on the training of
employees. The employees become experts with knowledge of coffee
through training, which makes employees communicate well with
customers and becomes ambassador to disseminate coffee culture and
knowledge. In 2001, Starbucks conducted a total of 1.9 million hours of
training. This means that every Starbucks employee has to accept one
hour of training every day (Starbucks 2015). Every well-trained Starbucks
employee becomes the coffee industry benchmark through coffee
knowledge and dissemination of Starbucks culture.
Furthermore, because of the high-end positioning of Starbucks, the overall
quality of Starbucks customers are relatively high. Because of Starbucks
high price and high quality, it attracts high income people with relatively
high quality. In Starbucks suggestive environment, customers get along
with each other in harmony and pleasant atmosphere. So the Starbucks
third place positioning provides a good happy human interaction between
customers, which strengthens the consumer experience and helps
customers long-term consumption with loyalty.
Employees are an important asset for Starbucks. Employees are always
full of passionate attitude to serve customers under incentive of generous
welfare policy, which provides the most important source and guarantee to
establish good customer relationship and beat other competitors.
60
The thesis argues that the current crisis of Starbucks is its changes in the
human resources strategy. With rapid expansion of Starbucks, there
appears to be a loophole in its management of human resources strategy.
It is not as strict as before on its hiring and employees training, which
leads to the problems of service level drop during the Starbucks
expansion process. The high-quality staff is always the most important
competitive resource for Starbucks. So Starbucks has to increase training
for employees to ensure consumer satisfaction. If the service cannot keep
up, it will result in the loss of customers. It becomes a weakness that is
easy for its competitors to enter. Starbucks should re-adjust its business
resource to deploy more resource on staff training while expanding.
7.7
Process
61
pressure of customers, increases customer control and customers can
fully enjoy more freedom.
Starbucks also provides customers with a more personalized service
besides the standardization. Starbucks employees make their service
skills standardized and humane through their training of basic etiquette,
sales skills and coffee knowledge. During the service process, Starbucks
employees should not only demonstrate expertise but also reveal a nature
of being kind and passion of that they want. They should meet the
customers individual needs and deeper emotional needs by providing
special service to customers as well as interaction with customers. This
personalized emotional service process is an important part to bring the
Starbucks experience to customers.
7.8
Physical Evidence
62
Starbucks cafs different design styles fulfil emotional needs of aesthetic
environment for fashion people.
The Starbucks coffee bag is also carefully designed. Starbucks has a
different packing design for each type of coffee. Each type of coffee has its
own mark, portrait, theme colour and graphics. It shows the diversity and
variability in the basic unity of artistic style.
Starbucks employees are young men and women with casual clothes,
which brings energy and happiness to customers. This dressing is a
tangible demonstration and conveys a relaxed lifestyle and pursuit of
elegant culture.
63
8
This chapter will conclude all the findings and results by answering
research questions. Moreover, this chapter illustrates the validity &
reliability. Last but not least, this chapter also makes suggestions for
further research.
8.1
Over the past decade, Starbucks brand value has reduced because of its
pursuit of financial figures and rapid expansion in the world, which is very
dangerous. There are three problems that Starbucks is currently
encounter. The first aspect is the desalting of Starbucks experience. With
the rapid expansion of Starbucks, the customer experience that Starbucks
bring to declines directly, which affects the Starbucks core competence.
The second aspect is degradation of service quality makes Starbucks is
developing in the direction to a way of cheaper chain store. The third
aspect is loss of business culture.
II.
The thesis applies marketing mix 7Ps, SWOT and STP analysis tool to
analyse Starbucks marketing strategies in China. The thesis suggests
Starbucks to use marketing strategy of expanded market share, brand
extension, differentiation, brand crisis turnaround, public relations and
concentric diversification to carry out its marketing strategies in China.
64
IV.
65
Starbucks. Most customers choose coffee or Frappuccino during their visit
at Starbucks. It is not enough for Starbucks to provide good environment
and atmosphere, it is also important that Starbucks need to improve its
types of food and taste of food to let it suit better for Chinese people.
Finally, it can be found from the research analysis that large number of
customers know about Starbucks from the Internet and others
recommendation. Based on this, Starbucks can integrate its business into
Internet marketing. Nowadays, online marketing is very popular among
young people in China, especially the Wechat. For this reason, Starbucks
can use its official account on Wechat to put its advertisement and
promotional activities. Customers can look for the nearest Starbucks on
Wechat, make order online and pay their orders on Wechat. Customers
can also contact online customer service to leave their comment and
suggestions.
8.2
All of the data and information in the thesis are collected through books,
published journals and e-resources. The questions in the questionnaire
are company-based and all the answer from questionnaire are valid and
reliable because the respondents do not hesitate to tell their true feelings
as all answers are remained anonymous. Moreover, the analysis result
from questionnaire is matching with the analysis of Starbucks company.
So all in all, the research is reliable and valid and the analysis results can
help Starbucks in its future marketing development.
8.3
One big suggestion for the thesis is the questionnaire can have more open
questions that participates can write more feelings about themselves. The
questionnaire would give a company more information about customers if
more open questions in it and more participates participated in. According
to more data collected from questionnaire, the company can make more
accurate marketing strategies for its future development.
66
9
SUMMARY
With the expansion in demand of Chinas coffee market, more and more
coffee enterprises have entered Chinese market. Starbucks, as the leader
in coffee industry, its unique marketing model has brought enormous
success. Starbucks has created a coffee empire and defined the coffee
industry standards. The success of Starbucks is worth studying by other
companies. Starbucks also encountered crisis during the expansion, which
is also deserves attention by other companies.
The thesis sums up Starbucks marketing strategy and tactics through an
objective analysis of Starbucks internal and external environment and
analysis of Starbucks opportunities, threats, strengths and weaknesses.
The study points out that the core corporate value of Starbucks is based
on customers experience which forms core competencies that is difficult
for competitors to imitate. Starbucks brand is the extension of its values
and culture.
The thesis sums up Starbucks core marketing strategy as an experience
marketing strategy. In todays high-speed economic growth in China, more
and more Chinese accept western culture with an open mind. So the
Starbucks experience marketing strategy is very worth studying.
Of course, Starbucks development in China also face some problems,
such as the failure of diversification, brand value and core competitiveness
reduced by rapid expansion. The thesis tries to propose strategy to
reverse these problems and will continue to focus on the future
development of Starbucks.
67
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APPENDICES
APPENDICES 1. Questionnaire for Starbucks customers
Dear customer,
I am a college student who is currently studying International Business
degree program at Lahti University of Applied Sciences in Finland. I am
doing a research on marketing analysis of Starbucks for my thesis. The
purpose of the questionnaire is to collect and analysis the feedback from
customers, and make marketing suggestions to improve customer
satisfaction for Starbucks.
Your answers and suggestions will help Starbucks to improve the quality
of its services. The survey will take you for 5 to 10 minutes to complete
and all participants will remain anonymous.
1Age group.
Under 21
21-30
31-40
41-50
Over 50
2Gender?
Male
Female
3Occupation?
Student
Worker
Office employee
Self-employed businessman
Other
4Monthly income? (RMB)
Under 1000
1000-2000
2001-3000
3001-4000
4001-5000
Over 5000
5What is the first caf that comes to your mind when you want to drink
coffee?
Starbucks
Maan Coffee
UBC Coffee
Caffe Bene
Zoo coffee
Costa
DIO Cafe
Other
6How often do you visit Starbucks in a month?
0-2 times
3-5 times
More than 5 times
7How much do you spend during one visit? (RMB)
Under 50
50-100
100-150
More than 150
8What do you think about the price level of Starbucks?
Very expensive
Expensive
Average
Cheap
9How did you know Starbucks? (multiple choice)
Others recommendation
TV
Internet
Advertisement
Movie
Other
Restroom
Waiting area
Atmosphere
Waiters uniform
Taste of drink
Taste of desserts
Starbucks dishes
Reception service
Promotional activities
Communication
capability
of
waiters