starbucks entering foreign markets case study

• International Marketing

Starbucks’ International Strategy: A Comprehensive Analysis

• January 25, 2024

Table of Contents

Unveiling the success of starbucks’ international strategy, starbucks’ adaptability to diverse cultures, multi-domestic strategy: balancing local responsiveness and global integration, factors contributing to starbucks’ international success, starbucks’ expansion phases and emerging markets, lessons learned and future outlook, faqs about starbucks’ international strategy.

In the heart of Seattle, Washington, a small coffee shop named Starbucks opened its doors in 1971, offering a haven for coffee enthusiasts seeking an exceptional cup of joe. Little did they know that this humble beginning would transform into a global phenomenon, with over 32,000 stores spanning over 80 countries , serving billions of customers annually (Schultz, 2019). Starbucks’ remarkable international expansion stands as a testament to its astute strategy , unwavering commitment to quality, and ability to adapt to diverse cultures worldwide.

Starbucks’ international strategy, dubbed the “multi-domestic approach,” strikes a delicate balance between global standardization and local responsiveness . This strategy recognizes the importance of maintaining a consistent brand identity across all locations while simultaneously tailoring offerings to meet local preferences. Starbucks has successfully navigated this delicate balance by delegating decision-making to local franchisees, adapting menu items, and customizing marketing campaigns (Keegan, 2019).

A prime example of Starbucks’ adaptability is evident in its Japanese stores, where it offers matcha-infused beverages and traditional Japanese décor to resonate with local tastes and customs (Nishiyama, 2023). In China, Starbucks has embraced the concept of “social drinking,” creating a welcoming atmosphere that encourages customers to linger and socialize (Sang, 2018). This cultural sensitivity has been instrumental in Starbucks’ success in these markets , demonstrating its ability to connect with customers on a deeper level.

Key factors contributing to Starbucks’ international success include its premium positioning, strong brand identity, and customer-centric approach. The company has consistently maintained its premium brand image , charging slightly higher prices than its competitors, while simultaneously offering a unique and differentiated customer experience (Berman, 2018). Starbucks’ strong brand identity is evident in its sleek store designs, recognizable logos, and loyal customer base.

Starbucks’ commitment to customer satisfaction has been a driving force behind its success. The company has consistently invested in training its baristas to deliver exceptional customer service , ensuring a consistent and welcoming experience across all locations (Nishiyama, 2023). Additionally, Starbucks has embraced social responsibility initiatives, such as fair trade practices and sustainable sourcing, further strengthening its brand reputation and attracting socially conscious consumers.

Starbucks’ international expansion journey has unfolded in distinct phases, with its initial focus on North America followed by a foray into Europe and Asia. The company has faced challenges and opportunities along the way, particularly in emerging markets such as China and India, where it has partnered with local companies to gain a foothold and adapt to local regulations (Schultz, 2019).

Starbucks’ global strategy reflects its understanding of the intricate interplay between local customs and global trends. By balancing local responsiveness with global integration, Starbucks has successfully captured the hearts and palates of coffee enthusiasts worldwide . As the company continues to expand into new markets , it will undoubtedly face new challenges and opportunities. However, with its proven track record of adaptability, cultural sensitivity, and strategic decision-making, Starbucks is well-positioned to continue its remarkable global journey.

In its relentless pursuit of global domination, Starbucks has mastered the art of cultural sensitivity, seamlessly blending its core brand identity with local customs and preferences to create a truly inviting and authentic experience for its patrons worldwide. This deep cultural understanding has been instrumental in Starbucks’ remarkable success in expanding into diverse markets, from the traditional tea-drinking culture of Japan to the vibrant coffee scene of Italy.

Harnessing Regional Flavors and Traditions

One of Starbucks’ most effective strategies for adapting to local cultures is its incorporation of regional ingredients, flavors, and design elements into its international stores. In Japan, for instance, Starbucks has introduced matcha-infused beverages, a nod to the country’s deep-rooted tea culture. Similarly, in France, the company has introduced Vienesse coffee, as well as foie gras and brioche sandwiches.

Beyond beverages and pastries, Starbucks has also embraced local design elements to create a sense of place in its international locations . In China, Starbucks stores often feature traditional Chinese décor, such as red lanterns and bamboo accents, while in Korea, stores may feature Korean-style seating arrangements and traditional artwork .

Understanding Local Customs and Traditions

Beyond menu items and décor, Starbucks’ cultural sensitivity extends to understanding and respecting local customs and traditions . In China, where social gatherings are a significant part of the culture, Starbucks has created a welcoming atmosphere that encourages customers to linger and socialize. In Japan, where politeness and respect are paramount, Starbucks staff is trained to greet customers with a bow and maintain a respectful demeanor.

Balancing Global Standardization with Local Responsiveness

Starbucks’ ability to balance global standardization with local responsiveness is a key factor behind its success in diverse markets. The company maintains a core set of brand standards , ensuring consistency in quality and customer experience across all locations . However, it also delegates decision-making to local franchisees, allowing them to tailor offerings to meet local preferences. This approach allows Starbucks to leverage its global brand while adapting to the unique nuances of each market.

In India, for instance, Starbucks has adapted its menu to incorporate chai , a traditional Indian tea, as well as local bakery items. In the United Arab Emirates, the company has partnered with a local coffee roaster to source premium Arabica beans, catering to the region’s preference for strong coffee. By striking this delicate balance, Starbucks has successfully navigated the cultural landscape of each market , winning over new customers and solidifying its position as a global coffee leader.

Starbucks’ international expansion strategy is characterized by its ability to strike a delicate balance between global standardization and local responsiveness, a concept known as the multi-domestic strategy. This approach allows Starbucks to maintain its core brand identity and operational standards while simultaneously adapting its offerings and marketing strategies to meet the unique preferences and customs of each market.

Delegation of Decision-Making

At the heart of Starbucks’ multi-domestic strategy lies the delegation of decision-making power to local franchisees . This localization approach empowers local partners to understand and respond to the specific needs of their respective markets. By giving franchisees the autonomy to adapt menu items, design elements, and marketing campaigns, Starbucks ensures that its presence in each market feels authentic and resonates with local tastes.

Examples of Local Adaptation

In India, where tea is a deeply ingrained cultural beverage, Starbucks has introduced chai-infused drinks and partnered with local tea suppliers to offer authentic Indian tea experiences. In Japan, the company has incorporated matcha-flavored beverages and traditional Japanese décor to cater to the country’s tea-drinking culture . These examples demonstrate Starbucks’ ability to seamlessly integrate local flavors and customs into its global brand identity .

Customizing Marketing Campaigns

Starbucks’ marketing efforts are equally tailored to local markets. In China, where social gatherings are commonplace, Starbucks has launched campaigns that promote its stores as a gathering place for friends and families. In Japan, where politeness and respect are highly valued, Starbucks has emphasized its commitment to providing a welcoming and customer-centric experience .

Balancing Standardization with Responsiveness

The multi-domestic strategy presents a delicate balancing act , requiring Starbucks to maintain a consistent brand identity while adapting to local preferences. The company achieves this balance by setting clear global standards for quality, service, and customer experience , while simultaneously delegating decision-making on non-essential aspects to local franchisees.

Starbucks’ remarkable international expansion is not merely a matter of luck or coincidence. The company’s success can be attributed to a combination of strategic decisions, cultural sensitivity, and a commitment to providing an exceptional customer experience .

Premium Positioning and Strong Brand Identity

Starbucks has successfully positioned itself as a premium coffee brand , charging slightly higher prices than its competitors. This premium positioning has allowed the company to maintain a consistent and differentiated customer experience across all international locations. Starbucks’ strong brand identity, characterized by its iconic logo, sleek store designs, and consistent quality, has further solidified its position as a global leader in the coffee industry (Berman, 2018).

Consistent Quality and Brand Standards

Despite operating in diverse markets, Starbucks has maintained a high level of consistency in terms of product quality and brand standards . The company’s global quality assurance program ensures that its coffee beans are sourced sustainably and roasted to a consistent standard. Additionally, Starbucks’ training programs for baristas help maintain consistent customer service and beverage quality across all locations (Keegan, 2019).

Effective Marketing Strategies and Social Responsibility Initiatives

Starbucks has effectively leveraged marketing campaigns to connect with customers and enhance its brand image. The company’s “Share a Cup of Happiness” campaign, for instance, tapped into the emotional appeal of coffee as a social and cultural beverage. Starbucks has also demonstrated a commitment to social responsibility, supporting initiatives such as fair trade practices and environmental sustainability . These efforts have further bolstered the company’s reputation and attracted socially conscious consumers (Nishiyama, 2023).

Starbucks’ international expansion has unfolded in distinct phases, reflecting the company’s evolving strategy and market opportunities. From its initial focus on North America, Starbucks has steadily expanded its presence across Europe, Asia, and more recently, emerging markets like China and India. Each phase has brought unique challenges and opportunities, requiring the company to adapt its approach and leverage strategic partnerships to succeed in these diverse markets.

Early Expansion in North America: Laying the Foundation

Starbucks’ international journey began in 1996 with its first store in Japan , marking the company’s foray beyond its home market of Seattle, Washington. This initial expansion was followed by a steady growth in North America, with Starbucks establishing a strong foothold in the United States and Canada. During this phase, the company focused on replicating its successful formula of premium coffee, comfortable ambiance, and exceptional customer service .

European Expansion: Adapting to Local Tastes

In 2000, Starbucks entered the European market, targeting major cities like London, Paris, and Milan. However, the company faced challenges adapting its American-centric approach to the European market , where coffee culture is deeply rooted and preferences vary significantly from country to country. To address these challenges, Starbucks adopted a more localized approach, tailoring its menu items and store designs to suit local tastes and preferences. For instance, in Italy, Starbucks introduced espresso-based beverages and partnered with local coffee roasters to source premium Italian beans.

Asian Expansion: Navigating Diverse Markets

Starbucks’ expansion into Asia presented another set of challenges, with the region encompassing diverse cultures, tastes, and market conditions. In China, Starbucks encountered a market where tea is deeply ingrained in the culture . To cater to local preferences, Starbucks introduced chai lattes and adapted its store designs to incorporate Chinese elements . In India, where coffee consumption is relatively low, Starbucks partnered with local tea companies to offer chai-infused beverages and adapt its menu to align with local tastes.

Emerging Markets: Strategic Partnerships and Cultural Sensitivity

Starbucks’ expansion into emerging markets like China and India has highlighted the importance of cultural sensitivity and strategic partnerships . In China, Starbucks has partnered with local conglomerate Alibaba to leverage its e-commerce platform and expand its reach. In India, the company has partnered with Tata Consumer Products , a leading Indian consumer goods company, to gain access to local distribution networks and consumer insights.

Throughout its international expansion, Starbucks has demonstrated a remarkable ability to balance global standardization with local responsiveness, adapting its approach to suit the unique nuances of each market. The company’s success in emerging markets like China and India is a testament to its commitment to cultural sensitivity and its ability to form strategic partnerships that leverage local expertise and resources.

Starbucks’ remarkable international expansion journey has been marked by a series of strategic decisions, cultural adaptations, and strategic partnerships that have propelled the company to become a global coffee giant . As Starbucks continues to expand its reach, it is crucial to reflect on the lessons learned from its past experiences and identify key factors that will shape its future growth.

Key Takeaways from Starbucks’ International Strategy

Throughout its international expansion, Starbucks has accumulated valuable insights that serve as valuable lessons for other businesses seeking to venture into new markets. These lessons include:

• Adaptability and Cultural Sensitivity: Starbucks’ success hinges on its ability to adapt its offerings and marketing strategies to align with local customs and preferences. Understanding the nuances of each market is essential for building a strong brand presence and fostering customer loyalty.
• Balance of Global Standardization and Local Responsiveness: Starbucks has successfully navigated the delicate balance between maintaining global consistency and adapting to local preferences. This requires a multi-domestic strategy that empowers local franchisees to make decisions while adhering to core brand standards.
• Strategic Partnerships: Starbucks has leveraged strategic partnerships to gain access to local expertise, distribution channels, and consumer insights. These partnerships have been instrumental in the company’s success in emerging markets like China and India.
• Commitment to Quality and Customer Experience: Starbucks has consistently maintained its focus on providing high-quality products and exceptional customer service across all international locations. This commitment has been a cornerstone of the company’s success in building a loyal customer base.

Future Outlook and Potential for Further Growth

Starbucks is well-positioned for continued international growth , with over 32,000 stores spanning over 80 countries. The company’s strong brand reputation, customer-centric approach, and ability to adapt to local markets are key factors that will drive its future success.

However, Starbucks faces several challenges in its quest for further international expansion. These challenges include:

• Evolving Consumer Preferences: The coffee industry is constantly evolving, with changing consumer preferences and the emergence of new competitors. Starbucks will need to remain agile and adapt its offerings to stay ahead of the curve.
• Economic and Political Factors: Economic and political instability in certain markets can pose significant challenges for Starbucks’ operations and growth prospects. The company will need to carefully assess these risks and tailor its expansion strategies accordingly.
• Competition from Local Coffee Brands: Starbucks faces stiff competition from local coffee brands that possess a deep understanding of their respective markets. The company will need to differentiate itself through its brand image, product quality, and customer service to maintain its competitive edge.

Despite these challenges, Starbucks is poised to remain a dominant player in the global coffee industry . The company’s strong brand, customer focus, and adaptability will continue to drive its growth in new markets. Starbucks is well-positioned to capitalize on emerging trends in the coffee industry, such as the increasing demand for specialty coffee and the growing popularity of mobile ordering and delivery.

Starbucks’ international strategy is a multi-domestic strategy, which means that the company adapts its products, marketing, and operations to local preferences in each market it enters. This approach allows Starbucks to maintain its core brand identity while resonating with customers in diverse cultures.

Several factors contribute to Starbucks’ international success, including: • Cultural Mindfulness : Starbucks carefully considers local customs, tastes, and preferences to tailor its offerings and marketing strategies accordingly. This cultural sensitivity has enabled the company to gain a foothold in markets with varying coffee cultures. • Market Research : Starbucks conducts extensive market research to gain a deep understanding of each market’s unique characteristics, consumer demographics, and competitive landscape. This data-driven approach informs strategic decisions and ensures that Starbucks’ offerings are relevant to local customers. • Local Partnerships : Starbucks forms strategic partnerships with local companies and experts to gain access to market insights, distribution channels, and cultural understanding. These partnerships have been instrumental in Starbucks’ success in emerging markets like China and India. • Strong Brand Integrity : Despite adapting to local preferences, Starbucks maintains a strong and consistent brand identity across all international locations. This consistency reinforces the brand’s reputation for quality, innovation, and customer service.

No, Starbucks is not using a translational strategy. A translational strategy involves imposing a standardized approach across all international markets, regardless of local differences. Starbucks’ multi-domestic strategy, on the other hand, emphasizes adaptability and customization to suit local preferences .

Starbucks employs three strategies for market entry: 1. Wholly-Owned Subsidiaries : Starbucks directly owns and operates its stores in these markets, allowing for complete control over operations and brand consistency. 2. Joint Ventures : Starbucks partners with local companies to jointly own and operate stores, leveraging local expertise and market knowledge. 3. Licensing : Starbucks grants local companies the right to use its brand and operate stores in exchange for royalties and fees . This approach expands Starbucks’ reach without the need for direct investment.

Starbucks’ multi-domestic strategy has been a key driver of its global success by enabling the company to seamlessly integrate into diverse markets while maintaining its core brand identity. The company’s commitment to cultural mindfulness, market research, local partnerships, and strong brand integrity has allowed it to cultivate a loyal customer base worldwide.

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Starbucks Global Marketing Strategy 2024: A Case Study

Starbucks, the world’s largest coffeehouse chain, has established itself as a global leader in the coffee industry with its innovative marketing strategies. From targeting specific audience segments to expanding its digital presence, Starbucks has consistently evolved its marketing approach to stay ahead of the competition. In this case study, we will examine Starbucks’ marketing strategy for 2024 and explore how the company has successfully built its brand, engaged with customers, and achieved global recognition.

Key Takeaways:

• Starbucks operates six roasteries with tasting rooms and 43 coffee bars.
• In 2010, Starbucks initiated its Starbucks Reserve program for single-origin coffees and high-end coffee shops.
• Starbucks primarily targets the upper economic segment, upper middle class, and upper class consumers.
• The target audience of Starbucks is mainly in the 25-45 age group, urban, health-conscious, and class-conscious consumers.
• Starbucks has over 248K followers on Instagram, 1.1M likes on Facebook, and 161K followers on Twitter.

With a focus on product innovation and strategic brand positioning, Starbucks has consistently pushed the boundaries of the coffee industry. By opening six roasteries with tasting rooms and 43 coffee bars, Starbucks goes beyond just serving coffee; it provides a unique coffee experience to its customers. Through its Starbucks Reserve program, the company showcases single-origin coffees and creates high-end coffee shops to cater to discerning coffee enthusiasts.

Starbucks has successfully captured the attention of the upper economic segment, upper middle class, and upper class consumers, who are willing to pay a premium for quality and status. By strategically locating its coffeehouses in areas with high pedestrian traffic, Starbucks enhances brand visibility and accessibility, further solidifying its market position .

In addition to its physical presence, Starbucks has also leveraged digital marketing strategies to engage with its target audience. With a strong following on social media platforms like Instagram, Facebook, and Twitter, Starbucks effectively communicates its brand message and creates a sense of community among its customers. The company’s mobile app, which boasts 23.4 million users in the US alone, facilitates easy navigation and purchases, enhancing the overall customer experience.

Starbucks understands the power of word-of-mouth marketing and focuses on providing high-quality customer experiences to generate positive reviews. Additionally, the company invests in advertising, sales promotions, and public relations to improve brand awareness, increase revenue, and gain a larger market share.

Starbucks’ premium pricing strategy has contributed to its success, as consumers perceive high prices to equate to high quality, value, and status within the market. By positioning its products as superior or high-end, Starbucks has successfully created a premium brand image that sets it apart from competitors.

With nearly 30,000 stores globally and a 39.8% share of the coffee market in the US in 2019, Starbucks has firmly cemented its position as a global coffee leader. The company reported revenues of $26.5bn in 2019, demonstrating its financial success. Starbucks’ global marketing budget of around $246m in the fiscal year ending September 2019 highlights its commitment to maintaining a strong presence in the market.

In conclusion, Starbucks’ global marketing strategy for 2024 is built on a strong foundation of product innovation, strategic brand positioning, and customer engagement. By continuously adapting to market trends and consumer expectations, Starbucks has established itself as a powerhouse in the coffee industry, connecting with a diverse range of customers worldwide.

About Starbucks and its Brand Positioning

Starbucks, founded in 1971 by Jerry Baldwin, Zev Siegl, and Gordon Bowker, has become a global sensation with its coffeehouse chain. With almost 16,000 locations in the United States alone and an impressive presence in over 80 countries worldwide, Starbucks has successfully won over the hearts of both coffee enthusiasts and occasional customers.

The company’s brand positioning revolves around offering high-quality coffee and creating a distinct customer experience. Since its inception, Starbucks has been committed to delivering consistency and reliability in its products and services. The iconic logo, featuring a siren with two tails, has remained unchanged and is instantly recognizable.

Recognizing the potential of the coffee industry, Howard Schultz joined Starbucks in 1986, revolutionizing the brand and transforming it into the coffeehouse giant it is today. Starbucks’ mission extends beyond just selling coffee; it aims to inspire and support the human spirit through individual connections and community engagement.

To connect with customers on a deeper level, Starbucks utilizes various marketing campaigns. Examples include the “Red Cup Contest,” which encourages community participation during the holiday season on Instagram, and the “#WhatsYourName” campaign, which promotes inclusivity and respect for diverse customer identities.

Strategic partnerships have also played a significant role in Starbucks’ success. Collaborations such as the promotion of “Taylor’s Latte” with Taylor Swift and alliances with brands like Spotify, Chase, and Lyft have helped broaden Starbucks’ reach and access new markets.

While Starbucks’ marketing efforts have generally been well-received, some campaigns, such as “#SpreadTheCheer” and “Race Together,” faced criticism for not authentically resonating with audiences. However, Starbucks continues to encourage user-generated content through visual aesthetics, engagement initiatives, and user-friendly apps.

As the leader of the coffeehouse industry, Starbucks positions itself as a go-to destination for quality coffee. The brand targets middle- to upper-class workers, offering a premium experience that caters to the demands of the affluent urban consumer segment. Through a customer-centric approach, including open door policies and free Wi-Fi, Starbucks strives to enhance customer satisfaction.

Starbucks’ commitment to excellence is reflected in its continuous growth and the loyalty it has garnered from customers. People are willing to spend more at Starbucks compared to other coffee shops, recognizing the value and experience the brand provides.

The next section will delve into Starbucks’ global expansion strategies, exploring how the brand has established its presence in various countries around the world.

Starbucks’ Global Expansion Strategies

Starbucks, a renowned coffeehouse chain, has established a significant global presence by leveraging effective international growth strategies. With a presence in over 80 countries, Starbucks has successfully expanded its operations worldwide, catering to diverse market preferences while maintaining a consistent core menu globally.

In 1987, Starbucks made its first foray into the international market by opening a store in Vancouver, Canada, just five years after Howard Schultz joined the company. Since then, Starbucks has adopted a localized approach, saturating local markets before expanding into new ones. This strategy has been instrumental in ensuring the brand’s success and acceptance in different regions.

One key aspect of Starbucks’ global expansion strategy is its focus on adapting to local tastes and preferences. The company has successfully localized its offerings in various markets, such as China and Japan, by introducing region-specific items and flavors. By catering to the unique preferences of each market, Starbucks has been able to foster customer loyalty and engagement.

Additionally, Starbucks has created a concept that it calls “third places.” These are welcoming and comfortable spaces where customers can socialize, relax, and work. Starbucks’ commitment to providing these environments has helped drive customer loyalty, making the brand a preferred choice for individuals seeking a community-oriented coffeehouse experience.

Starbucks is renowned for embracing innovation and staying ahead of the curve. The company was among the pioneers in offering free Wi-Fi access to customers, allowing them to stay connected while enjoying their favorite beverages. Furthermore, Starbucks hosts various community events like live music performances, book readings, and art exhibitions, contributing to a vibrant and inclusive atmosphere.

Starbucks has also leveraged its global expansion by forming strategic partnerships and collaborations. In India, Starbucks partnered with Tata companies to gain access to high-quality raw materials, ensuring the delivery of superior products to customers. By aligning with local partners, Starbucks has been able to navigate complex markets efficiently and establish a solid foothold.

To support its global expansion, Starbucks has focused on quality products, high visibility store locations, continuous employee training, and substantial capital investment. These factors contribute to maintaining the brand’s perception as a premium coffeehouse chain, offering customers exceptional experiences wherever they are.

Starbucks Target Market and Market Segmentation

Starbucks, the renowned global coffeehouse chain, strategically targets a wide demographic range and adopts an effective market segmentation approach to reach its desired customer segments. By understanding the diverse needs and preferences of its target audience, Starbucks has successfully positioned itself as a leading player in the coffee industry.

Demographic Segmentation:

Starbucks targets individuals aged 22-60, catering to professionals, employees, and students alike. The brand appeals to both males and females, targeting singles, young married couples, older married couples with children, and children of all ages. With its market penetration spanning across different age groups and household compositions, Starbucks ensures its products are accessible to a broad customer base.

Geographic Segmentation:

Starbucks’ geographic targeting is truly global, with a presence in regions such as Latin America, the US, Canada, the Middle East, Europe, China, Africa, Asia, and the Pacific regions. The company strategically expands its operations to reach coffee enthusiasts in various parts of the world, leveraging the cultural diversity and unique preferences of each market.

Psychographic Segmentation:

Psychographic elements play a crucial role in Starbucks’ market segmentation strategy. The brand appeals to customers from different societal classes and lifestyles, focusing on creating an excellent store ambiance that fosters relaxation, social commitment, and environmental responsibility. Starbucks attracts health-conscious individuals who value sustainability and seek a unique coffee experience.

Through its market segmentation efforts, Starbucks effectively targets its desired customer segments, capturing the attention of urban and suburban centers worldwide. The brand resonates with busy, health-conscious, socially aware consumers who appreciate premium products and exceptional service. Starbucks’ emphasis on quality control and meeting high expectations has garnered ‘hard core’ loyalty from its customers.

As of 2021, Starbucks operates over 33,000 stores globally, with approximately half of its stores located in the US. In the highly competitive cafe sales industry, Starbucks holds a significant 57% market share in the US. The company’s consistent revenue growth over the years, reaching $24.61 billion in 2021, further solidifies its market position.

Starbucks Digital Marketing Approach

Starbucks, known for its global presence and premium brand positioning, has adopted a digital-first approach to enhance its marketing strategies. With a focus on connecting with their target audience effectively, Starbucks leverages various digital platforms, including social media engagement and mobile ordering services, to create meaningful customer experiences.

Starbucks understands the importance of staying connected with its customers in the digital age. Through strategic investments in digital advertising, the company effectively reaches its target audience and capitalizes on the growing trend towards online platforms. By leveraging social media channels such as Facebook, Instagram, and Twitter, Starbucks engages with their millions of followers, generating brand awareness and fostering brand loyalty.

Starbucks’ social media engagement is a testament to its digital marketing success . With over 36 million page likes on Facebook, 17.8 million followers on Instagram, and 11 million followers on Twitter, the brand has effectively built a strong digital community. By posting interactive content, visually appealing images, and engaging with their audience, Starbucks stays top-of-mind and creates meaningful connections with its customers.

In addition, Starbucks has embraced the shift towards mobile technology by offering mobile ordering services. This allows customers to conveniently place their orders through the Starbucks mobile app, reducing wait times and enhancing the overall customer experience. By investing in mobile ordering services, Starbucks caters to the needs of its tech-savvy customers and stays ahead of the competition.

Furthermore, Starbucks understands the power of data in delivering personalized marketing experiences . Through their rewards program and mobile app, Starbucks collects valuable customer data, enabling them to tailor their promotional offers, recommendations, and personalized marketing campaigns. This data-driven approach not only enhances the customer experience but also drives customer loyalty and increases customer lifetime value .

To showcase their commitment to sustainability and social responsibility, Starbucks integrates sustainable initiatives and environmental consciousness into its digital marketing approach. By implementing various sustainability practices and initiatives, Starbucks appeals to socially conscious consumers, enhancing its brand reputation and capturing a wider market share.

With their effective digital marketing approach, Starbucks continues to enhance the customer journey, foster brand loyalty, and stay at the forefront of the coffee industry. By leveraging social media engagement, mobile ordering services, and a data-driven approach, Starbucks delivers personalized experiences to their customers, ultimately driving business growth and brand success.

Starbucks Promotional Strategies

Starbucks, with over 32,000 stores across more than 80 countries, has implemented a range of promotional strategies to not only maintain its premium positioning but also expand its global market reach.

One of the key promotional strategies employed by Starbucks is its focus on product-based campaigns. By promoting unique and fan-favorite beverages, Starbucks creates excitement and drives consumer engagement. These campaigns highlight the craftsmanship and quality of Starbucks’ offerings, enticing customers to explore their diverse menu options. Whether it’s the seasonal Pumpkin Spice Latte or the indulgent Caramel Frappuccino, Starbucks leverages these product-based campaigns to create a buzz and boost sales.

In addition to product-based campaigns, Starbucks is also committed to corporate social responsibility initiatives. By actively supporting social causes, promoting sustainability, and investing in ethical sourcing practices, Starbucks connects with socially conscious consumers. Through community engagement and partnership programs, Starbucks establishes itself as a brand that prioritizes social responsibility. Such initiatives not only strengthen Starbucks’ brand reputation but also foster long-lasting connections with its customers.

Starbucks’ promotional strategies are tailored to different markets, taking into account cultural nuances and consumer preferences. In China, Starbucks markets its stores as gathering places, creating a welcoming atmosphere that encourages customers to linger and socialize. In Japan, Starbucks has successfully incorporated traditional Japanese décor and matcha-infused beverages, resonating with local tastes and preferences.

By combining its product-based campaigns, social responsibility initiatives, and market-specific promotions, Starbucks has been able to effectively reach and engage its target audience. The company’s marketing efforts extend beyond traditional advertising, focusing on delivering high-quality products, exceptional services, and an inviting atmosphere that sets Starbucks apart from its competitors.

Starbucks Competitive Analysis and Market Position

Starbucks Corporation, with its global recognition and market leader status, has established itself as a dominant player in the coffee industry. With a market share of 36.7%, Starbucks easily surpasses its competitors, making it the clear leader in the retail coffee and snacks industry [1] . The company’s success can be attributed to its strong emphasis on quality, innovation, and exceptional customer experience.

Starbucks operates in over 80 countries and territories, showcasing its global reach and market presence [11] . The company’s commitment to specialty coffee products sets it apart from competitors like McDonald’s, Dunkin’, Wendy’s, Subway, and Burger King [11] . By focusing on creating a unique and high-quality product offering, Starbucks effectively differentiates itself from other coffeehouse firms.

One key component of Starbucks’ growth strategy is market penetration. The company aims to maximize revenues from existing markets by opening more stores in weak or limited markets, such as Africa and the Middle East [13] . With its expansive global footprint and diverse customer base, Starbucks has established itself as a top choice for coffee enthusiasts worldwide.

A Competitive Landscape

The coffee industry faces moderate threats from new entrants, with barriers to entry not high enough to discourage new competitors [6] . However, Starbucks’ strong market presence and brand recognition create a competitive advantage that new entrants find difficult to replicate. Despite the industry’s high to moderate intensity of competitive rivalry, Starbucks holds its ground as the market leader with a broad differentiation strategy [10] .

Starbucks’ competitive advantage lies in its focus on making its products unique and of high quality. The brand continually innovates its product mix and supply chain to maintain its position as a market leader. This dedication to excellence, combined with its warm and friendly ambiance, attracts a wide customer base, particularly the younger, more tech-savvy crowd [24] .

The bargaining power of buyers in the industry is moderate to low. Starbucks offers vertically differentiated products, which means that no single buyer can demand significant price concessions. This is due to Starbucks’ ability to meet the diverse preferences and tastes of its customer base [8] .

Starbucks’ bargaining power with suppliers ranges from low to moderate. Standard inputs such as coffee beans pose a moderately low threat, and the company has established strong relationships with premium Arabica coffee growers in select regions [9] .

• Starbucks dominates the industry with a market share of 36.7%
• The company operates in over 80 countries and territories
• Starbucks focuses on specialty coffee products, differentiating itself from competitors
• Market penetration is Starbucks’ primary growth strategy
• The company employs a broad differentiation strategy to maintain its competitive advantage

Through its commitment to quality, innovation, and a strong brand image, Starbucks continues to assert its market leadership in the coffee industry. With its global recognition and a diverse range of offerings, Starbucks remains the go-to destination for coffee lovers worldwide.

Sources: [1] – Statista [6] – Retail Info Systems [8] – Our Daily Cup [9] – Investopedia [10] – Research Gate [11] – Business Wire [13] – The Balance Small Business [24] – HuffPost

Starbucks’ Impact on Indian Market

Since its entry into the Indian market in 2011, Starbucks has made significant strides in establishing a strong presence and influencing the coffee culture in the country. Leveraging its global success and reputation, Starbucks partnered with Tata Global Beverages to tap into the high-growth potential of the under-penetrated Indian market. Through a 50:50 joint venture, Starbucks marked its Indian market entry, setting the stage for exponential growth in the years to come.

India’s economic growth rates consistently outpace global benchmarks, making it the perfect backdrop for Starbucks’ expansion plans. With its remarkable GDP growth and a growing consumer base, India emerged as the second most important emerging market based on GDP. Recognizing this opportunity, Starbucks strategically positioned itself as a premium coffee brand catering to the rising aspirations of the Indian upper-class segment.

Starbucks’ brand reputation and premium image played a vital role in capturing the Indian consumers’ attention. Known for its commitment to quality, service, and an indulgent experience, Starbucks successfully appealed to the aspirational nature of Indian consumers, who were willing to pay premium prices for their favorite cup of coffee.

Upon entering the Indian market, Starbucks faced the challenge of tapping into a diverse and multi-lingual population. In preparation, the company proactively trademarked its brand in ten Indian languages in 2008, safeguarding its competitive advantage and ensuring seamless brand recognition across the country.

Starbucks’ impact on the Indian market goes beyond just a coffee chain. The company’s commitment to its employees, exemplified by its payment of tuition fees, further enhances its reputation among consumers. Starbucks outlets in India pride themselves on offering a local coffee shop atmosphere, providing customers with a cozy and inviting space to enjoy their favorite brew, setting itself apart from traditional fast-food establishments.

The Growth of Starbucks in India

Tata Starbucks, the joint venture between Tata Global Beverages and Starbucks Corporation, has witnessed substantial growth since its inception. In fiscal year 2023, the company reported a robust revenue of Rs 1,087 crore, representing a significant 71% increase from the previous year. The joint venture currently operates 333 stores in India and added 71 new outlets in FY23 alone, including 22 in the fourth quarter.

The expansion of Tata Starbucks across India has been remarkable, with the company venturing into 15 new cities in a year, marking the highest-ever annual store addition in its history. This extensive expansion has solidified Starbucks’ position as a key player in the evolving Indian coffee market, achieving impressive revenue growth and reaching its highest-ever annual store additions.

Looking ahead, Starbucks’ commitment to the Indian market remains strong. With India’s estimated annual growth rate for coffee retailing at 6% and a growth rate for coffee bars at 13%, the potential for further expansion and success in the country is immense. Coffee chains are expected to capture 15% of the current 2000 crore away-from-home beverages market in India, with South and West India projected to be the focal points for coffee retail and bars.

Starbucks’ impact on the Indian market has been substantial, contributing to the growth and evolution of the country’s coffee culture. The expansion efforts, premium positioning, and commitment to quality have resonated with Indian consumers, further solidifying Starbucks’ position as the largest coffeehouse chain in the world.

Starbucks’ success can be attributed to its strong marketing strategies, commitment to quality, and ability to create a unique customer experience. By reaching out to middle and upper-class men and women, Starbucks has tapped into a market with the financial potential for luxury drinks. The company’s digital expansion, social media engagement, and product-based campaigns have helped it maintain a strong global presence. Starbucks’ focus on international growth, market segmentation, and corporate social responsibility initiatives have solidified its brand positioning and success.

Despite challenges and uncertainties in the highly competitive coffee industry, Starbucks has shown consistent growth and innovation. As a result of its efforts, Starbucks holds a dominant market share and has experienced a positive outlook in emerging markets. The company’s pricing strategy and rewards programs have contributed to increased average transaction sizes and customer engagement. By maintaining a consistent brand image and emphasizing quality, Starbucks stands out as a premium coffee franchise.

Looking ahead, Starbucks’ future outlook remains promising. With a strong foundation in place and a track record of adapting to market changes, Starbucks is well-positioned to navigate challenges and continue its growth trajectory. As per industry forecasts, the US retail coffee and snacks industry is projected to see continued growth, providing an opportunity for Starbucks to expand its market share and drive profitability. Overall, Starbucks’ success story showcases the power of effective marketing strategies and the importance of delivering a unique customer experience in the global beverage industry.

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How Starbucks Brought Coffee to China

A Case Study of Market Research

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Starbucks has developed an internationalization strategy to enable the company to open stores and franchises in countries across the globe. Market research is at the core of many of the market entry strategies Starbucks is employing. This case study will consider how market research has strengthened Starbucks entry into the Chinese markets.

Starbucks International Business Strategy

Starbucks entry into emerging and developed markets is informed by market research. Starbucks conducted market research to enable a deeper understanding of the Chinese markets, and the way that capitalism functions in the People's Republic of China (PRC). China contains a number of distinct regionally-based markets, a factor that makes market research crucial to launching new stores and franchises in China.

A deep understanding of intellectual property right laws is critical to successful market entry in emerging markets. Starbucks articulated an entry strategy that would address the dominant Chinese markets and that was designed to be as inoffensive with respect to the Chinese culture as possible.

Instead of taking the conventional approach to advertising and promotions—which could have been seen by potential Chinese consumers as attacking their culture of drinking tea—they positioned stores in high-traffic and high visibility locations.

Moreover, Starbucks very deliberately began to bridge the gap between the tea drinking culture and the coffee drinking culture by introducing beverages in the Chinese stores that included local tea-based ingredients.

Market research supported the development of Starbucks' competitive internationalization strategy. The overarching competitive strategy was to create an aspirational brand. Prospective Starbucks customers in China could look forward to what Starbucks refers to as The Third Place experience.

The Starbucks experience conveys status that is highly appealing to those aspiring to Western standards or to climbing the ladder in their own culture. Market research indicates that brand consistency is important to Starbucks' customers. When Starbucks opens a new store in an emerging market like China, the best baristas are sent for the launch and to conduct training of the baristas who will carry on when once the launch has completed.

Market Research Addresses the Emerging Market Political Environment

Market research helped to identify the attributes of capitalism in the Peoples' Republic of China (PRC). The middle class in China has rapidly accepted Western standards as an acceptable standard of the bourgeois class. Moreover, Chinese consumers accept purchases of luxury goods as a means of pursuing quality lifestyles.

Under the influence of Communism, the Chinese considered conspicuous consumption to be decadent or indicative of a lack of a nationalistic orientation. Capitalism in The Peoples' Republic of China supports the status-conscious population that manifests its interest in keeping up with the Jones' through excessive luxury consumption.

The Chinese government's support of luxury consumption is particularly apparent in certain cities in China. The second-tier city of Chengdu serves as a market research case study in Chinese governmental support of capitalism. Chengdu promotes capitalism at a level evidenced by the presence of stores like Louis Vuitton and Cartier in its downtown.

According to the Chengdu Retail Industry Association, stores selling 80 percent of international luxury brands are located in Chengdu, and the city ranks just third in luxury sales after Beijing and Shanghai. It is easy to see how this national orientation toward luxury goods extends to the Starbucks brand, which is characterized by a certain degree of exclusivity.

Market Research Reveals Attributes of Emerging Market Legal Environment

It is essential to understand the intellectual property rights laws and licensing issues when planning market entry in an emerging market. Starbucks has used intellectual protection laws to prevent its business model and brand from being illegally copied in China.

Four years after opening its first café in China in 1999, Starbucks had registered all its major trademarks in China. A number of Chinese businesses have overstepped legal bounds in their efforts to mimic the successful Starbucks model.

The organization and structure of Starbucks' global operations were informed by market research. The organizational strategies employed by Starbucks were derived from Starbucks' experiences in other emerging markets supported an early recognition that China is not one homogeneous market.

The organizational strategies employed by Starbucks addressed the many Chinese markets. The culture dominant in northern China differs radically from the culture in the eastern parts of China, as reflected in the differences in consumer spending power inland which is considerably lower than the spending power in coastal cities.

The complexity of the Chinese markets led to regional partnerships to aid in Starbucks' plans for expansion in China; the partnerships provided consumer insight into Chinese tastes and preferences that helped Starbucks localize to the diverse markets.

• Northern China - a joint venture with Beijing Mei Da coffee company.
• Eastern China - partnered with Taiwan-based Uni-President.
• Southern China - worked with Maxim's Caterers in Hong Kong.

Starbucks' competitive advantage is built on product, service, and brand attributes, many of which have been shown through market research to be important to Starbucks' customers. Western brands have an advantage over local Chinese brands because of a commonly accepted reputation for consistently higher quality products and services, a factor that establishes the Western brands as premium brands in the minds of consumers.

When Western brands attempt to increase market share by cutting prices, they erode the very competitive strategy that gives them an edge in consumer perceptions. Moreover, Western brands cannot effectively maintain a lower pricing strategy than local Chinese brands.

Maintain brand integrity in new markets. Starbucks' global brand is valuable and maintaining brand integrity is a fundamental focus in Starbucks' internationalization efforts. The baristas in China acted as brand ambassadors to help embed the Starbucks culture in the new market and ensure that high standards for customer service and product quality are maintained at each new and established local store.

Starbucks' ability to address changing markets is honed by effective and ongoing market research. Establishing and maintaining a global Starbucks brand does not mean having a global platform or uniform global products. Starbucks marketing strategy in China was based on customization in response to diverse Chinese consumer target segmentation.

Starbucks created extensive consumer taste profile analyses that are sufficiently agile to enable them to change with the market and to create an attractive East meets West product mix. Moreover, the localization effort is sufficiently flexible to permit each store to have the flexibility to choose from a wide beverage portfolio.

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• Starbucks International Strategy

Starbucks is a coffee chain founded in Seatle, USA, in 1971. The company is famous for its premium coffee accompanied by top-notch customer service.  With a mission to inspire one person, one cup, one neighbourhood at a time, Starbucks not only changed the way coffee is consumed in the USA but also gradually introduce the Western coffee culture to multiple parts of the world.  As of 2020, there are 33,833 Starbucks stores all over the globe, serving more than 100 million customers. 1

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What is Starbucks International Strategy?

What type of international strategy does Starbucks adopt?

What is Bartlett & Ghoshal Matrix used for?

What are two key criteria for determining international strategies using the Bartlett & Ghoshal Matrix?

What does high global integration mean?

What does it mean if the company has high local responsiveness?

What are four types of international strategy?

Which market entry strategies do Starbucks adopt?

When does Starbucks employ wholly-owned subsidiaries, joint ventures, or licensing  entry strategies?

What is the pricing strategy that Starbucks adopts internationally?

What is value-based pricing?

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One contributing factor to this major success is Starbucks' international strategy and its ability to adapt to each market. In this article, we'll learn more about how Starbucks' internationalization process, including the overall global penetration method, the type of market entry , as well as pricing strategy.

What is Starbucks' international strategy?

Bartlett & Ghoshal Matrix is a framework for determining the type of international strategy pursued by a business based on two criteria: global integration and local responsiveness.

A high level of global integration means that the business wants to try to reduce costs as much as possible through standardized products and economies of scale. On the other hand , a high level of local responsiveness indicates a business's tendency to adapt its products and services to local needs. T hese two factors create four types of international strategy: global strategy, transnational strategy, international strategy, multi-domestic strategies . 2

The multi-domestic strategy is adopted by Starbucks when expanding overseas. It is characterized by low integration and high responsiveness. Accordingly, the company tailors its products to the specific needs of the local customers. T he structure of the organization is highly decentralized, which allows subsidiaries to operate autonomously and independently from the headquarter. 3

Figure 1. Types of International Strategy

Starbucks market entry strategy

When it comes to market entry strategy, Starbucks employs three strategies: wholly-owned subsidiaries, joint ventures, and licensing:

The w holly-owned subsidiaries strategy is carried out when the company has extensive knowledge of the market, such as that in the US or Canada. Joint ventures come in handy when Starbucks wants to initiate business in a new market. Finally, t he licensing strategy allows the coffee chain to quickly expand in a specific country. 3

The Asia Pacific has always been a fruitful market for Starbucks due to the increasing young population who are eager to adopt a Western lifestyle:

In Japan , Starbucks set up a joint venture with Sazaby League Ltd - a local designer and retailer of handbags, clothing and accessories which also operates restaurants and coffee shops under the name Afternoon Tea. The partnership starting in 1995 has allowed Starbucks to win over Japan, making it one of the company's top-performing markets internationally. Since 2014, the company has taken full control of a Japanese Subsidiary for $ 914M. 4

In China, Starbucks made its debut under a licensing agreement with Beijing Mei Da Coffee Co. Ltd in 1998. In the following years, the company expanded its influence by forming joint ventures with Uni-President Group and Mei-Xin International Ltd to operate in Shanghai, Hong Kong, Shenzhen, Macau, and other parts of southern China.

Starbucks international pricing strategy

Starbucks adopts value-based pricing for its products all across the globe.

Value-based pricing is the value perceived by the customer rather than its actual costs.

However, most Starbucks customers - who belong to the middle and upper social class are happy to pay the extra price for the premium coffee and top-notch customer service. This pricing strategy has allowed the company to maximize its income while building a premium brand image to differentiate itself from the competitors.

The price of Starbucks not only varies based on the size and type of coffee but also on the country or region it operates in. This variation can be narrowed down to various factors such as spending power, tariffs, exchange rates, local market needs, and competition in different countries. 6

Figure 2 shows the price of the same Starbucks coffee in different parts of the world (in £ equivalent):

Figure 2. Price for the same cup of Starbucks coffee around the world, based on Voucherbox

Prices are typically higher for countries outside the US. For example, Bern in Switzerland has the highest price Starbucks coffee with Cappuccino costs £ 4.58 a cup compared to the UK whose price is £ 2.45. Bangkok's Starbucks costs the least at around £ 2.37 for a cappuccino. Between different types of coffee, there's an average price difference of 20-30 cents.

An analysis of Starbucks international strategy

Starbucks' success in its internationalization process comes down to its cultural mindfulness and intensive research of the host market.

In China, tea is considered the national drink. Thus, to break into the market, the company has included a lot of products made from green tea on its menu. As people became more familiar with the brand, they began to introduce more coffee flavours to promote the American coffee-drinking culture. Knowing the Chinese like to sit in a large group, Starbucks has also designed tables that can be put together to accommodate more people.

Local partnerships also contribute enormously to the success of Starbucks' internationalization process.

Starbucks partnered with Beijing Mei Da with penetrating the northern Chinese market. In the east, it associates with Uni-President and in the South, Maxim Caterers. Through these partners, Starbucks learns to adapt and expand its product portfolio to better suit the local customers' preferences.

While focusing on adaptation, Starbucks maintains strong brand integrity. It sets a clear standard of how the products and brand image should be perceived by the customers. As a result, those who wish to become Starbucks partners must adhere to its explicit guidelines. In addition, all baristas in the host country have to undertake the same training as those in the US.

Starbucks international strategy relies on low integration and high responsiveness (multi-domestic), which is best reflected in Entry Modes and Pricing Strategies. The goal is to spread Starbucks' coffee culture while adapting to local tastes and preferences. Instead of competing with global brands, Starbucks establishes itself as a friendly choice among the many food and beverage options in the host country. This has endeared the brand to the local people and allowed it to enjoy global success.

Starbucks International Strategy - Key takeaways

• Starbucks is a coffee chain founded in Seattle, USA, in 1971, famous for its premium coffee accompanied by top-notch customer service.
• Starbucks is classified as a multi-domestic company due to the high level of local responsiveness and low level of global integration.
• Starbucks' products are customized to suit local tastes and preferences.
• In terms of market entry, Starbucks adopts three main approaches: wholly-owned subsidiaries, joint ventures, and licensing.
• Value-based pricing is adopted for markets worldwide which contributes to Starbucks premium image.
• Cultural mindfulness, market research , local partnership, and strong brand integrity are critical factors determining the success of Starbucks international strategy.

1. Statista, Number of Starbucks stores worldwide from 2003 to 2021 , 2021.

2. Lars de Bruin, International Business Strategy , 2017.

3. Christine Nyandat, Starbucks International Strategy, 2019.

4. Starbucks Stories & News, Starbucks Poised for Continued Growth in Japan Through Full Ownership of Market , 2014.

5. MBA Knowledge Base, Case Study on Marketing Strategy: Starbucks Entry to China , n.d.

6. Abhiyash Jain, Starbucks prices products on value not cost . Why , 2020.

Flashcards in Starbucks International Strategy 30

Multi-domestic strategy

Multi-domestic strategy 

Global integration and local responsiveness

The company tries to reduce costs as much as possible through standardized products and economies of scale. 

The company is adaptive to the local tastes and preferences. For example, include in its menu a type of drink unique to the region. 

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Frequently Asked Questions about Starbucks International Strategy

What is Starbucks' international strategy?

Starbucks' internationalisation strategy is a multi-domestic strategy.

Why is Starbucks so successful internationally? 

Cultural mindfulness, market research, local partnership, and strong brand integrity are critical factors determining the success of Starbucks' international strategy. 

Is Starbucks using a transnational strategy? 

No, Starbucks is using a multi-domestic strategy. 

What are the types of international strategies used by Starbucks?

Starbucks employs three strategies for market entry: wholly-owned subsidiaries, joint ventures, and licensing.

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A high level of local responsiveness indicates a business's tendency to adapt its products and services to local needs. 

A high level of global integration means that the business will try to reduce costs through...

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Please note you do not have access to teaching notes, starbucks: global brand in emerging markets.

Publication date: 4 December 2018

Teaching notes

Learning outcomes.

Students after reading the case will learn about the issues and challenges of expansion in emerging markets. Global expansion versus multinational expansion. Stardardization versus localization. Socio-cultural aspects in international marketing. Leadership succession in multinational companies.

Case overview/synopsis

The case is about Starbucks’ journey of global expansion. It focuses on challenges in emerging markets. It also talks about the challenges to new CEO Kevin Johnson post stepping down of iconic leader Howard Schultz.

Complexity academic level

MBA Executive MBA Specialisation in Strategy, International Marketing.

Supplementary materials

Teaching Note are available for educators only. Please contact your library to gain login details or email [email protected] to request teaching notes.

Subject code

CSS 5: International Business.

• Competitive strategy
• Customer relationship management
• Global marketing strategy
• International market entry

Acknowledgements

Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision-making. The authors may have disguised names; financial and other recognizable information to protect confidentiality.

Gupta, P. , Nagpal, A. and Malik, D. (2018), "Starbucks: global brand in emerging markets", , Vol. 8 No. 4. https://doi.org/10.1108/EEMCS-03-2018-0044

Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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Starbucks International Entry Methods and its Global Marketing Strategy

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Why starbucks succeeded in china: a lesson for all retailers.

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Co-written with Suresh Dalai, a consultant with Alvarez & Marsal and former operations and merchandising director of Levi Strauss Asia and Ermenegildo Zegna, China

Starbucks has meticulously organized its efforts in China around three key pillars of Chinese ... [+] society. (Photo credit: JOHANNES EISELE/AFP/Getty Images)

Much has been written about Starbucks’ successful strategy in China. The company is opening a store a day and aims to have 5,000 stores in the next few years. My fellow Forbes contributor Helen Wang rightfully attributes the company’s success to its long-term commitment to the market, well-executed collaborations with Chinese partners, superior supply chains, adopting local technologies, and offering local items on its menu.

However, these are just the visible tactics of a much more fundamental strategy. From the beginning, Starbucks has spoken to the essence of Chinese culture, giving it the wisdom to develop the long-term vision, local relationships, and localized product offerings for the market.

All global companies can learn from this: attention to and execution around Chinese culture is the root of a foreign brand’s success in China.

Read more: Meet The Woman Behind Starbucks' Rapid Growth In China

As previously covered in this column what Starbucks understood when they entered the market was that it was not about the coffee initially. It was about reviving a "tea house culture" that had existed for thousands of years. Starbucks' global success was based on being the "third place" between home and work and brought that ethos to China -- but with a modern, Western, upscale sensibility.

Since those early days Starbucks has meticulously organized its efforts in China around three key pillars of Chinese society.

From the beginning of Chinese civilization, family has been the key source of security, education and spirit for the Chinese people. The society’s Confucian values entwine children and parents in a bond of shared responsibility that stretches throughout all stages of life. Parents should strongly engage in their children’s lives -- their upbringing, education and career -- and in return, children should respect and care for their parents as they age.

Starbucks fully understood this and made engaging parents a cornerstone of its people operations. Since 2012, Starbucks has hosted an annual “Partner Family Forum,” where its employees (whom the company calls “partners”) and their parents can learn together about the company and its future in China. “Partners” talk about their professional experiences in the company and Starbucks leadership -- even CEO Howard Schultz -- speak to the parents.

Starbucks CEO Howard Schultz at the Starbucks Annual Shareholders Meeting on March 23, 2016 in ... [+] Seattle, Washington. (Photo by Stephen Brashear/Getty Images)

The success of the program cannot be underestimated. In an interview with BCG , Schulz said about the first Forums held in 2012:

“Think about an annual meeting of shareholders; we had an  annual meeting of parents  in Beijing and Shanghai, and we had about 90% participation. We did not know who or how many would come. In most cases, there were whole families. There were parents, grandparents, aunts, and uncles. It was unbelievable . . . it was a breakthrough for the company and a milestone for local relevancy and sensitivity.”

Read more: Five Things Starbucks Did To Get China Right

The company has continued to build on this. This year, it announced the launch of the “Starbucks China Parent Care Program” which currently provides health insurance for elder parents of 10,000 employees and will likely extend to more employees. The initiative obviously encourages staff retention by giving rare financial support to employee’s families. Much more importantly, it says to Chinese “partners” that it respects their parents in a way that truly touches the Chinese heart.

Chinese highly value their community, traditionally labeled as their “inside circles.” Be it their homes, schools or companies, they turn to these circles for loyalty, information and approval of their choices.

A Starbucks store in the Luohu district of Shenzhen, China, on Monday, Aug. 4, 2014. (Photographer: ... [+] Brent Lewin/Bloomberg)

With this in mind, Starbucks designed its retail spaces to facilitate these “circles” coming together. Unlike in the United States, where Starbucks chairs are often the quiet haunts of solitary laptop users, China’s Starbucks are laid out to welcome crowds, noise and lounging. In many cases, the spaces are up to 40% bigger than in the U.S., and have been placed in very visible and easily-accessible locations in office buildings (either on highly-trafficked first floors or mezzanine areas). The sitting areas are open format and usually have no walls -- the chairs seem to flow out into adjacent spaces, such as lobbies or walkways. As Quartz's Gwynn Guilford put it:  In China, Starbucks doesn’t sell coffee to make its millions -- it rents couches .

Read more: Starbucks Wants To Crack Asia's Tea Market

The result? Walk into any Starbucks in an office building at 3PM and you will see a buzzing throng of people exchanging office news, admiring and getting information about the latest fashions from their colleagues, and talking with their friends about the next travel destination. It feels like you've walked into a modern-day version of the town square.

Consequently, Starbucks customers not only enjoy the coffee (in all its Chinese variations), they feel fulfilled going to a Starbucks with their friends or families.

Chinese place a premium on gaining and upholding reputation and status, especially for their family and community. Consequently, they want to be associated with brands and products that portray prosperity, success and upward mobility.

Starbucks has positioned itself as the premium coffee brand in China. It charges 20% higher prices in China compared to other parts of the world. It chooses very high-end locations for its outlets including luxury malls and iconic office towers. And since foreign brands, particularly in food and beverage, are viewed as premium, Starbucks often labels its products with the country from which its products are imported.

Read more: Is This The Recipe For Starbucks' Continued Success In China?

Starbucks, and how it enables Chinese to observe their culture, is a powerful example for any global brand on how to operate in the country. By aiming to embed itself in China’s centuries-old culture, Starbucks inevitably plays the long game, leading to a deep commitment to the market. It has to develop relationships with families and communities, which inevitably make it more attractive to and successful in local partnerships. Finally, it has to be part of China’s family rituals and desire for status by providing an environment that consumers and employees are proud of.

Put together, these efforts have made Starbucks less a foreign brand transplanted to China and more a seed from a Western tree that has been carefully planted and patiently nurtured within.

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International Strategies of Starbucks Company

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Starbucks competitive strategies

Starbucks corporate strategy, global marketing mix strategy, starbucks international expansion, starbucks market opportunities in india and middle east.

Starbucks Corporation earns above average returns because it found unique ways to differentiate and deliver superior food value to its clients. Starbucks gained competitive advantage in the entire ready to drink coffee industry through the inimitable market strategies (Aaker, 2012). These include the appealing store ambiance, superior client services, flavorful coffee drinks and convenient locations that make it to stand out amongst other market competitors that sell coffee.

Through selecting unique differentiation strategies to offer superior value to the clients while determined to attain operative excellence, Starbucks is able to achieve long-term brand-loyalty. This rather makes it very hard for other competing companies to succeed by just replicating Starbucks strategic international market approach (Welsh, Raven & Al-Mutair, 1998).

Indeed, the strategies dubbed as “Me Too” as applied by other corporations can hardly be anticipated to provide stellar performances and competitive advantage lest the copycats possess competencies and resources which allow them to offer superior values to the clients.

It is via the unique differentiation strategy that Starbucks has managed to proffer a wide range of valued and unique products to the clients. The pace at which Starbucks fared its market ascension materialized to be as incredible as the alterations the corporation designed in the customary brand marketing outset.

The company is renowned to take the global oldest products and modify them into differentiated, value laden and lasting brands. Besides, most Starbucks products are differentiated to attract low costs which further offer a source of potential and sustainable competitive advantage to the company.

At the international markets, the low cost of producing the imitable differentiated products makes Starbucks to overcome the external environmental changes (Biederman, 2005). The differentiated products are difficult to replicate because they are of; unusual positive brand image, based on technological capability, innovative design, extraordinary service and exceptionally high quality. These clearly validate the premium prices charged on each coffee cup which surpasses the differentiation costs.

Starbucks corporate strategy appertains to the maximization of market penetration, creation of great networking environments, realization of profitability while offering high quality products and providing socially attractive and relaxing environment. When Starbucks became public, merely one hundred and sixty five stores surrounded Seattle and its environs.

The company has however exceeded the targeted one hundred thousand store outlets globally. The acknowledged business model for this corporation was to spread out its outlets in a given region and saturate the market in order to maintain profit margins (Kaplan & Woznicki, 1999).

The supply chain retail outlets are strategically located and focused on increasing Starbucks foot traffics in a particular area. Rather than being worried that the new stores would eat up each one’s business space and market share, the corporation aimed at cutting down the management times and the corporation’s delivery while shortening the waiting queues for clients at all stores.

This optimistically increased the overall clients’ traffic. Despite being risky, the corporate strategy adopted by Starbucks paid off because the regionally clustered stores helped the corporation to rapidly gain global market dominance (Theodore, 2002).

Starbucks corporate strategy neglects the excessive use of the generated revenues to advertise its products. Most marketing are carried by word of mouth ads. Besides crowding its retail outlets, the company follows smart joint business ventures with companies deemed to be right while rolling out novel and fresh initiatives like newfangled product lines (Taylor, 2011).

Starbucks hardly markets its products using posters, newspapers, ad spaces or billboards as is apparent with other global corporations such as McDonalds (Talpau & Boscor, 2011). In fact, Starbucks does not just employ unconventional marketing strategies merely for fun.

The marketing mix strategy perfectly matches the concept Starbucks yearned to exhibit (Perera et al., 2009). To display its current incredible level of success, the company uses strategic marketing techniques that have attracted millions of individuals globally and these are as subsequently outlined.

Clients’ satisfaction : With Starbucks, client satisfaction is considered very essential. Starting from entering the retail stores to the latter coffee drip, it is clear that clients have a sensation of distinctiveness as they consume coffees made Starbucks Corporation. Undeniable, coffees from Starbucks Corporation provides every reason why client servicing is essential (Talpau & Boscor, 2011).

Brand marketing: The marketing mix approach for Starbucks often centers on the word-of-mouth ads. This technique lets the Starbucks high quality services and products to express and market themselves. The company has been very successful based on this viral marketing strategy which allows clients to admit that Starbucks makes its own brands and runs the market with them (Taylor, 2011).

Perfect and innovative coffee cups: The history of Starbucks clear depicts that the company places more weight on the quality of products offered. While the coffees tendered are a bit more dear than anticipated, Starbucks coffees are famous for quenching the client thirst with their appealing, rich scent and flavor.

The coffee cups comprise of innovative and creative ideas that add value to Starbucks services and products. Through innovation, Starbucks has managed to add different aromas to its coffees, additional foodstuffs to its menu besides becoming first in offering internet capabilities in its retail stores (Weber, 2005).

Third place : Since its inauguration, the marketing mix plan for this corporation has been tailored towards the creation of third-place for each client going amid homestead and workplace. The creation of such a calming and distinctive atmosphere and experience for individuals and groups materializes to be very important for this corporation as it is the resilient model that Starbucks has used to strongly attract and retain most of its customers.

Smart partnerships and the creation of Starbucks communities : This Corporation is recognized for its strategic creation of partnerships. This implies that to increase its global market dominance, the smart business partners that Starbucks has formed helps it to augment its annual sales.

Furthermore, the marketing approach adopted by Starbucks has been extended to produce a community about its various coffee products. For instance, people have been fortified to give their views and experiences as regards to the history of Starbucks on this company’s website. The company has been part and parcel of such discussions (Talpau & Boscor, 2011).

Before expanding its business into any new country, Starbucks ideally conducts meticulous quantitative market studies. The company develops extensive focused group interviews to obtain a pulse of the market and its potentiality.

After realizing that even big companies cannot fill the new market gaps unaided in serving the demands of its target market, Starbucks resorts into seeking the help of another company or entrepreneur with whom it can work and share the financial risks (Taylor, 2011). Starbucks strategic partners helps it penetrate into new markets, keep abreast with the technological innovation advancements, achieve objectives and amicably obtain the services and products available in those markets very quickly.

To realize its global business expansion missions, Starbucks ensures that it selects local business partners who are ideal business leaders. Thereafter, Starbucks jointly with its strategic partner tries to acclimatize its business traditions to that local market.

It is also evident that Starbucks attachment to the internationalization business process varies in the mode of licensing, wholly owned subsidiary and joint-ventures. This is because Starbucks is persistently informed with operators to stay abreast of the lucrative marketplaces (Holmes et al., 2003).

This is implies that, the strategic choices that Starbucks has to make while expanding into the international markets are in line with the consideration of the international business partners. The company seeks to ensure that its local partners will positively share its commitments and values into bringing the Starbucks experience to the global clients.

Therefore, the strategic choices may include: partners who share its corporate culture and value; partners with strategic fits to Starbucks business; local business leaders; individual with premium brands and concepts as well as experience in managing license. Such strategic market choices are made because Starbucks believes that the success of any company is based on conducting ethical business and striving to execute all that is vital to accomplish the client demands (Aaker, 2012).

Both India and Middle East appear to be emerging markets for Starbucks products. For instance, India is densely populated and the younger Indian generations and the classy individuals from Middle East always look for cool and relaxing places to study and meet friends.

The wider market base, the financial potentiality of these people and the availability of potential business partners in both India and Middle East provides lucrative business opportunities for Starbucks to expand its global market operation to these regions. These factors are critical in upholding the success rate that Starbucks currently enjoys (Taylor, 2011).

Aaker, D. (2012). Remove Negatives to Remain Relevant. Marketing News , 46(1), 14-14.

Biederman, P. S. (2005). Commentary on Expo Fling a North American Concept to Asia: Starbucks in China. Cornell Hotel and Restaurant Administration Quarterly , 46(2), 288-290.

Holmes, S., Kunii, I. M., Ewing, J. & Capell, K. (2003). For Starbucks, There’s no Place Like Home. BusinessWeek , 3836, 48-49.

Kaplan, D. A. & Woznicki, K. (1999). Trouble Brewing. Newsweek , 134(3), 40.

Perera, L. C., Kerr, R. B., Kimura, H. L. & Lima, F. G. (2009). Case Study: Starbucks- Adding Value to Brand Equity through an Innovative Brand Image. Journal of the Academy of Business & Economics , 9(4), 174-185.

Talpau, A. & Boscor, D. (2011). Customer-Oriented Marketing – A Strategy that Guarantees Success: Starbucks and Mcdonald’s. Bulletin of the Transilvania University of Brasov. Series V: Economic Sciences , 4(1), 51-58.

Taylor, D. (2011). Siren’s call: Is Starbucks Steering its Brand Identity onto the Rocks? Central Penn Business Journal , 27(3), 13-13.

Theodore, S. (2002). Expanding the Coffee Experience. Beverage Industry , 93(10), 56.

Weber, G. (2005). Preserving the Counter Culture. Workforce Management , 84(2), 28-34.

Welsh, D. H., Raven, P. & Al-Mutair, N. (1998). Starbucks International Enters Kuwait. Journal of Consumer Marketing , 15(2), 191-197.

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Home » Management Case Studies » Case Study on Marketing Strategy: Starbucks Entry to China

Case Study on Marketing Strategy: Starbucks Entry to China

Starbucks is one of the largest coffee chains in the World . The company has a unique style and atmosphere in their coffee houses. We chose China because it is the world’s most populous country with over 1.3 billion people live there and second-largest country by land area. After 1978, the country’s economy were underwent dramatic changes which involved such relief as permission for entrepreneurs to start up their own business and opening the country for foreign investment. It is obviously that Starbucks managers decided to take advantage of such opportunity to expand their business into new region. To evaluate Chinese market the company used several steps of analyses.

Who might be interested in buying coffee in China?

Next step for Starbucks was to determine financial and economic conditions of China. Company’s managers were aware that Chinese Gross Domestic Product (GDP) continuously grew approximately 9 % on an average and a GDP per capita was US$3.800. All these factors led to rising income of middle class. That was undoubted advantage for entering Chinese market for Starbucks.

At the third level of screening Starbucks faced with political restrictions. China is highly bureaucratic country with difficult processes of getting permissions and sanctions to start and run business. In order to avoid these challenges the company built and maintain firm relationship with Chinese local partners as well as government officials. In addition, Starbucks Soong Ching-Ling Foundation received $5 million donation from Starbucks to support education in country’s poorest regions.

The fifth level of China screening was focused on competitive forces. As we mentioned before China is a tea country and the share of coffee was low. Little or no competition for Starbucks was considered as an advantage. Chinese people were familiar only with one international brand which was Nestle’s Nescafe. However, Nescafe is not a coffee house like Starbucks. As regards local competitions, it was a well-known Chinese brand Li Shen and Japanese brand Zhen Gou Coffee.

Starbucks’ Entry to Chinese Market

Although Starbucks encountered several challenges in the process of entering into Chinese market. Starbucks had successfully expanded its business in over 20 large or medium sized cities of China, and opened about 560 storefronts in these cities by 2012. The astonishing achievement owes to its careful marketing assessment and various marketing strategies in different periods. These strategies mainly refer to 2 different modes of entering foreign markets: licensed agreement and joint venture.

Licensed agreement

Joint venture.

Starbucks formed a joint venture with different partners at different times when it entered into Chinese market. Starbucks achieved considerable knowledge about the Chinese market conditions and then began to open Starbucks stores in China. The company adopted a strategy of having three different partners to enter different regions in Chinese market. In September 1998, Starbucks entered China under a licensing agreement with Beijing Mei Da Coffee Co.Ltd, which was as their first partner. In 1999, Starbucks formed a joint venture with the Taiwan based Uni-President Group and opened stores in Shanghai. In 2000, Starbucks entered into a joint venture with Mei-Xin International Ltd, it also called “Coffee Concepts Ltd”. It managed the operations in the region of Hong Kong, Shenzhen, Macau, Guangzhou, and other parts of southern China.

There are some advantages for Starbucks with joint venture to enter Chinese market. First of all, Starbucks choose a good local partner to form a joint venture which can help it better understand the local laws and negotiate better with the authorities. It is beneficial for Starbucks to obtain required permissions and sanctions so that it can be opened easily. Secondly, local partners know Chinese market condition better than Starbucks; therefore, it is effective and efficient method for Starbucks to adopt a few localization strategies to satisfy different regions of customers. Last but not least, joint venture is a good way for Starbucks to reduce operation expenditure, and it also helps to reduce risks in Chinese market.

Marketing and Pricing Strategies

Starbucks modified their menu and tried to localize its brand name by selling some food items according to the choice of the Chinese people and selling different kind of tea. They also changed their marketing and pricing strategies based on needs for the Chinese market.

When Starbucks started in China, one of the biggest challenges it faced was to make the consumers accustomed to drink and appreciating coffee. According to analysts, compared to other countries in which Starbucks operated this task was more difficult in China because of the age old tradition of tea drinking in the country, where coffee was seen as nothing less than a kind of Western invasion.

Starbucks started by projecting the stores as a place for social gathering. The stores were also larger in area than the ones in the US, as the idea was to make the customers feel at home, relax and spend more time there.

Similarly the company took initiatives to teach the customers about the different types of coffees and how to distinguish between flavors. The customers were given some samples to smell as well as sip and then describe their experience. At times if the customers did not enjoy the sample, the store employees asked them to come back again later for another ‘tasting’ session or they offered them some other drink that they enjoyed. They also spoke to the customers about the positive effects drinking coffee. For example, they spoke about how drinking coffee helped to change their mood and how it was good to have coffee in the morning.

Localization Strategies

Small changes were made in the texture, menu and store layout just to match with Chinese culture and food preferences. Within few months of opening the coffee stores, the company started observing that coffee culture is different for Chinese people than US, where people are very busy in their daily lives and they just grab their coffee and leave, but in China coffee stores were more like a place for social gathering where they can sit and talk for hours with their friends and families. Therefore, according to the market needs they had to square bigger stores. In the US a normal size of Starbcks store is about 1,200 to 1,500 square feet whereas in China they started opening stores bigger than 2,000 square feet.

It was observed that the Chinese also liked to have some food along with their drink. In response to that Starbucks started offering some popular Chinese foods like, curry puffs, moon cakes, and traditional cookies.

Starbucks accepted the reality that maximum people in China like tea more than coffee though young generation is more likely to go for coffee. So they decided different menu for different stores in China. In Shanghai and westernized, the stores a standard menu where they served coffee. And in Beijing stores they introduced different tea-based drinks like coffee-flavored milk tea, green tea-flavored frappuccino etc. to attract more people.

Promotional and Pricing Strategies

To promote themselves in China the company chose a different way. It was mostly depended on the people to spread goodwill through word of mouth than commercial advertisements and media products. Their knowledge, organized way of business left a good impression on customers’ mind. The customers were willing to pay a higher price for the brand name. As a result young, urban Chinese, who solely started to associate visiting Starbucks or being seen with a Starbucks cup, as a symbol of social status. They tried to build their reputation in terms of, product quality, customer service, employee relationship, etc.

Starbucks uses the highest quality coffee beans from ideal coffee producing climates. They helped Chinese farmers, made good relationships with their workers and they also made a good reputation in the supply market .As a result of good reputation, good quality and high price they were able to attract people and also maintain their luxury appeal. The company priced its coffees at around US$ 6 for a cup, which was considered by analysts as too costly, even though it was too costly by Chinese standards but they decided to continue with it because in China, high price was directly associated with quality.

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HOW STARBUCKS MISSED THE MARK IN AUSTRALIA

From its humble origins in Seattle, Washington, Starbucks has grown into one of the largest coffee brands in the world. In 2021, the company generated $29 billion in revenue. It currently manages over 30,000 stores around the globe and has seen success in a wide variety of locations, ranging from Shenzhen to the CIA Headquarters in Langley, Virginia. With such a proven track record, why did Starbucks struggle to find traction in the Australian market?

AMBITIOUS EXPANSION PLANS

On paper, Australia looked like a golden opportunity for Starbucks. The country’s GDP is 1.3 trillion , making Australia the 13th largest economy in the world. The country has a thriving coffee culture. In fact, the Australian coffee industry was worth $5.8 billion USD in 2021. The first Starbucks opened in Australia in 2000 . By 2008, Starbucks was operating 87 locations across the country, which translates to roughly 11 openings per year. This rapid pace outstripped the organic growth of Starbucks popularity in Australia. In an interview with CNBC, Thomas O'Connor, a Research Analyst at Gartner Inc, said , “They launched too rapidly and didn’t give the Australian consumer an opportunity to really develop an appetite for the Starbucks brand.” Unlike in the United States, Starbucks did not organically grow with demand. Because the brand was over-extended in the market, Starbucks “accumulated $105 million in losses in its first 7 years in Australia.” It borrowed $54 million from the US in an attempt to keep doors open in the country, but in 2008, the company closed two-thirds of its Australian locations as it struggled in the aftermath of the global financial crisis.

FAILURE TO ADAPT

Starbucks failed to adapt its American business model to the Australian market. Nick Wailes, Professor and Deputy Dean at University of New South Wales in Kensington, Australia, notes , “I think one of the problems with Starbucks…is they thought that their business model could just roll out to a different environment.” He highlights that any business looking to expand must take the time to build a sound business strategy and be prepared to pivot when entering any new market. International expansion is difficult, and businesses cannot simply copy and paste their growth strategy. American and Australian coffee cultures have subtle differences that have important ramifications for American coffee brands trying to enter the market.

The beginnings of Australian coffee culture is credited to Italian and Greek immigrants that began emigrating to the country during the mid 20th century and introduced Australians to espresso. By the 1980s, Australians had developed their own distinctive coffee drinks, like a flat white or Australian macchiato.

Born from these immigrant communities, Australia’s coffee culture is also unique because it places such a high value on socialization at coffee shops. Starbucks’ convenience and to-go focused cafes were the wrong approach for the Australian market. Fundamentally, Starbucks struggled in Australia because it approached the market with an American coffee culture, which places more emphasis on coffee as a commodity or quick source of caffeination. The Starbucks menu, with a wide selection of sugary drinks, also didn’t appeal to the local Australian tastes.

DOMESTIC COMPETITION

Starbucks wasn’t cost competitive in Australia, with drinks often costing significantly more than local coffee shops. As one report explained , “Australians opted to pay less for coffee they liked from a local barista they trusted.” At the time, one of the biggest competitors in Australia was Gloria Jeans. Ironically, the company was another American brand founded in Chicago . Gloria Jeans operates more than 400 stores across Australia and serves more than 35 million customers annually. Industry experts attribute the success to Gloria Jean’s ability and willingness to tailor its offerings to the Australia market. Unlike Starbucks, the Gloria Jean menu included many espresso and Australian speciality drinks that helped the company gain traction in the market.

FUTURE IN AUSTRALIA

Starbucks missed the mark in Australia because they expanded too rapidly, failed to adapt their American business model, underestimated domestic competition, and didn’t understand the unique needs of the existing Australian coffee culture. In short, they failed because they didn’t prioritize strategic growth. In 2008, the company was forced to close “more than two-thirds of its stores on the continent.” Today, Starbucks still has some remaining locations, but primarily targets internationals, like students, living in Australia. They “want to be a familiar face in the crowd” for Chinese and American tourists .

Starbucks' difficult expansion into Australia highlights the importance of strategic international expansion. Businesses cannot expect to replicate success in a new market without first understanding the unique set of challenges that shape the opportunity in a new market. We would love to discuss how our team can help your business develop a strong international expansion plan. Click here to schedule your free consultation today.

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