BUSINESS EXPANSION

Starbucks Expansion to China

Abstract

American giant Starbucks plans to heavily invest in expansion in China as the local population starts to embrace the coffee culture. Reaching the 2015 goal would see the American coffee company with stores in 70 Chinese cities, making China its second biggest market. Starbucks currently has over 570 stores in China. This paper aims to explore the understanding of expansion of Starbucks to China. The company does not release financial data on China, but according to its 2012 fiscal report, revenues in the Asian-Pacific region reached $166.9 million in the last quarter of 2011, up 38 percent over the same period a year earlier.Research involves detailed analysis of China in terms of economic, cultural, political and legal perspectives. The aspects explored in this research paper, involves the unique strategies that Starbucks will undertake in accordance with the taste and preference of consumers of China. It also highlights the most appropriate entry strategy that Starbucks will undertake in its international business expansion. The functional strategies explained in this report define how Starbucks will design and implement strategies for its respective functions in its business operations. The final section of report involves the measures that Starbucks would undertake to avoid political, cultural and operational risks in international business operations. Expanding in China would mean reaching out to new markets where the brand does not have the recognition it does in major cities like Beijing and Shanghai and where customers might shy away from the hefty price tag.

Abstract2

Introduction4

Country Analysis5

Economic Analysis:5

Cultural Analysis:5

Political / Legal Analysis:6

Product/Service Modification According to Country:7

Most Appropriate Entry Strategy:9

Building Brand:9

Joint Venture:9

Country Development:10

Functional Strategies:11

Marketing:11

Market Penetration:11

Market Development:11

Product Development:12

Diversification:12

Research and Development:12

Operations:12

Human Resources:13

Measures to Deal with Risks:13

Measures for Political Risks:14

Insurance:14

Diversification of Risk:14

Investments:15

Foreign Sales:15

Measures for Financial Risks:15

Measures for Operational Risks:16

Conclusion/Recommendation:16

References18

Starbucks Expansion to China

Introduction

Starbucks was started in 1976 and currently it is positioned as one of the bests coffee stores in the world with recorded revenues of $11,700.4 million during the end of the financial year October 2011 (Market Line 2012, pp. 3).

The globalization of markets has merged the historically dissimilar and detached national markets into one huge international market place. This globalization of markets enabled Starbucks to spread its business operations across the boundaries into the international market to cater the needs of consumers across the globe. In the present era, the trade barriers have fallen to cross border trade and have made it easier to sell in the international market. Starbucks, after receiving huge success in U.S and other parts of the world has decided to enter the market of china to make China its second largest coffee market after U.S. Companies like McDonald's, Coca-Cola and Sony PlayStation have also followed this trend of competing in the global market place. The decision of Starbucks to China entails the vision of providing same basic product to create a global market followed by alteration according to the respective cultures of different countries.

The decision of Starbucks to expand to China is to share its coffee expertise and fashion with customers in China by encouraging them ...