Case Submission Form

STARBUCKS IN CHINA

Josep Franch ESADE

Case Objectives and Use

This case illustrates the difficulties of introducing a company in a foreign market, identifies entry barriers and cultural differences between countries, and discusses the local adaptation of a successful global concept.

Entry barriers are some of the basic issues to be discussed in this case. Economic barriers (the purchasing power and the disposable income of Chinese consumers), political and legal barriers (brand and trademark protection in China) and social and cultural barriers (Chinese culture and behavior, selling coffee in a tea-drinking society) can be covered during the case discussion. Identifying these issues and making recommendations on how to overcome these entry barriers by adapting the Starbucks formula to the Chinese market are also basic issues in this case.

Furthermore, the size and attractiveness of the Chinese market for many multinational and global corporations, and the fact that this case deals with one of the global leading retailers makes this case very suitable for use in an International Marketing or an International Business course.

Case Synopsis

On the 31st of December 2005, a Chinese court ruled for Starbucks in a trademark infringement case against Xingbake, a Shanghai-based coffee chain. Starbucks had entered the Chinese market in 1999 and by the end of 2005 already had 200 coffeehouses in this market. This case reviews Starbucks’ problems in China and the challenges that still have to be faced before the country can become one of Starbucks’ largest markets.

Starbucks was founded in 1971 in Seattle. In 1987, Howard Schultz purchased the company and began expanding in North America through company-operated coffeehouses and licensed locations. Starbucks obtained a stock exchange listing in 1991. The company’s international expansion started in 1996, with a coffeehouse in Japan. At the end of fiscal year 2005, Starbucks was the leading coffeehouse retailer in the world, with operations in 34 countries outside the US. The company had 10,241 coffeehouses, 6,000 of them directly operated.

______The author developed the case for class discussion rather than to illustrate either effective or ineffective handling of the situation. The case, instructor’s manual, and synopsis were anonymously peer reviewed and accepted by the North American Case Research Association (NACRA) for its annual meeting, October 19-21, 2006, San Diego, CA. All rights are reserved to the author and NACRA. © 2006 by Josep Franch. Contact person: Josep Franch, ESADE, Av., Pedralbes 60-62, 08034 Barcelona, Spain, +34-93-280-6162, [email protected].