Starbucks’ unlikely success doing business in China

Starbucks has been in China for 13 years as of 2014, growing from an initial presence in three tier 1 cities including Shanghai. By the end of 2014, the company expects China to be its second largest market. By 2015 it is anticipated that there will be 1500 Starbucks across China, with the number of staff employed rising from 12,000 to 30,000 (source: Tutor 2 U).

At first glance it seems as though a frantic American coffee chain would be the worst possible idea for the Chinese market, where consumers mainly drink tea and want to take things at a slower pace. So how did a company, that on paper should have failed, launch its business in China?

Adaptation is key to doing business in China

In order to succeed, Starbucks has customised its menus so that it is offering Chinese consumers something they actually want – as well as local teas and treats, it provides plenty of space to sit and relax. But Starbucks adaptation to the market goes beyond the products it offers. It has taken Chinese culture into account; food items are labelled with their country of origin to address food safety concerns, and they often hold events where their employees’ families can meet the managers and discuss career opportunities.

They looked before they leapt

Starbucks was careful to conduct thorough market research in order to position itself in a way that complimented Chinese culture rather than contrasted. In a large tea-drinking market, heavily marketing coffee chains could have been seen as an aggressive move. Instead, through market research, Starbucks identified key elements of Chinese culture – such as the aspirations towards Western values and lifestyles – that allowed them to present the correct side of their brand identity in order to attract their target market. It wasn’t changing who they were, as they wanted to keep their identity unified across all their markets; Starbucks just chose the right facets of their brand to present to the Chinese market.

Knew where their weaknesses lay

China’s market can be complicated. The cities are divided into a four or six-tier system, categorized by their populations, spending, and political influence. Coastal cities are usually the most affluent, with those inland being lower down the scale. In order to ensure it understood the market, Starbucks enlisted the help of three local partners in different regions in China. The partners Starbucks chose were Beijing Mei Da in northern China, Taiwanese company Uni-President in east China, and Maxim’s Caterers – a Hong Kong firm – to cover southern China. These partnerships gave Starbucks invaluable understanding and knowledge of the local markets (source: Forbes).

What all the businesses that have succeed in China have had in common is that they have taken the time to understand the market. They have recognised that the market is very different, as well as very lucrative. That knowledge alone gave them a strong foundation from which to launch a winning strategy that has allowed them to succeed at business in China.

(Image source: “Starbucks Coffee Cup” |