GLOBAL MARKETING AND SALES DEVELOPMENT

MKT744
Table of Contents
1.0 INTRODUCTION.........................................................................................................1

1.1 COMPANY OVERVIEW...........................................................................................2

2. SITUATION ANALYSIS.................................................................................................3

2.1 MACRO-ENVIRONMENT ANALYSIS (PESTLE ANALYSIS).....................................3

2.1.1 POLITICAL FACTORS..........................................................................................3

2.1.2 ECONOMIC FACTORS........................................................................................4

2.1.3 SOCIAL FACTORS...............................................................................................4

2.1.4 TECHNOLOGICAL FACTORS.............................................................................4

2.1.5 LEGAL...................................................................................................................5

2.1.6 ENVIRONMENTAL...............................................................................................5

2.2 PORTER’S FIVE FORCES ANALYSIS.......................................................................5

2.2.1 The threat of New Entrants...................................................................................6

2.2.2 The Threat of Substitute Products........................................................................6

2.2.3 Bargaining Power of Suppliers..............................................................................6

2.2.4 Bargaining Power of Buyers..................................................................................6

2.2.5 Rivalry and competition amongst established firms..............................................6

3.0 MARKET ENTRY STRATEGY....................................................................................8

4.0 SEGMENTATION, TARGETING AND POSITIONING...............................................9

5.0 MARKETING MIX DECISIONS.................................................................................12

CONCLUSION.................................................................................................................15

REFERENCES................................................................................................................16
1.0 INTRODUCTION

International marketing is the use of the principles of marketing to meet the needs and
demands of people outside national boundaries (Czinkota, M.R. and Ronkainen, I.A.,
2013). Any organization that engages in international marketing experiences an
increase in profit as a result of the new business connections. For this reason, every
organization needs to ensure that it gets into the international market (Doole, I. and
Lowe, R., 2012).

However sweet this might sound, international marketing is not as easy as it seems,
particularly because the organizational set-up of the new global market country might
not be hot-wired for the organization (Skurpel, D., 2016).

Many popular organizations engaged in international marketing, such as Airbnb, Red

Bull, Dominos, and Dunkin donuts, had to tweak their strategies to consumer
preferences. Dominos, for example, had to adapt to consumer preferences in India,
making four new toppings specific to their Indian stores and oregano spice mixes
packets rather than Parmesan cheese packets to interest many Indian customers
(Jham, V. and Tandon, S., 2012). However, companies have control over certain factors
in the international market, and this is known as the marketing mix, which contains
factors like promotion, product, place and price.

The Chinese business market will be evaluated and examined in this report using the
PESTLE analysis framework. Also, an internal analysis of the company will be analysed
using the McKinsey 7S Framework. All of the findings here will help to direct the
objectives and marketing strategies that will help with sales development in the Chinese
business environment.

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1.1 COMPANY OVERVIEW

Starbucks Corporation, an American company founded in 1971 in Seattle, WA, is a

premier roaster, marketer and retailer of specialty coffee around world. Starbucks has
about 182,000 employees across 19,767 company operated & licensed stores in 62
countries (Geereddy, N., 2013).

Their product mix includes roasted and handcrafted premium priced coffees, tea, a
variety of fresh food items and other beverages. They also sell a variety of coffee and
tea products and license their trademarks through other channels such as licensed
stores, grocery and national foodservice accounts. Starbucks also markets its products
mix with other brand names within its portfolio of companies, which include Starbucks
Refreshers, Evolution Fresh, Teavana, Tazo, Seattle’s Best Coffee, Starbucks VIA, La
Boulange and Verismo.

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2. SITUATION ANALYSIS

Managers can learn more about their business's customers, internal strengths, and
external environment by doing a "situation analysis," which is a broad term for a set of
techniques used to conduct this kind of examination (Clarke, A.E., 2007).

2.1 MACRO-ENVIRONMENT ANALYSIS (PESTLE ANALYSIS)

Internal forces are forces under the control of management and which help
management adapt to changes in the parts of the business they have no control over.
The uncontrollable variables of international marketing are political, economic, socio-
cultural, technological legal and environmental factors which are totally out of the
organizations control (Zekiri & Angelova 2011).

According to Perera, R., (2017), PESTLE analysis is a framework or tool used to

analyse the macroenvironmental factors that can have a significant impact on a
company's operations. The primary external and uncontrollable factors that affect an
organization's leadership and have an impact on its performance and strategies are
called macroenvironments. These aspects include economic factors, political, legal, and
social contexts, novel developments, and natural influences.

2.1.1 POLITICAL FACTORS

The communist party's position in China praovides the company with a relatively stable
economic climate for conducting business there (Brødsgaard and Yongnian 2006). In
addition to a strong business ecosystem, China has excellent business environment,
low business house corruption, and favourable business environment. Strong internet
regulations in the nation have a detrimental effect on Starbucks' digital marketing
strategy because major global platforms like Google, Facebook, and Instagram are
prohibited there.

As a result, the business must change its marketing approach for China. Starbucks
must take special caution when publishing content to their websites because China
blocks more than 2500 websites as part of its Internet Censorship Policy. Companies

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only pay a minimal amount in taxes, and their ability to make timely decisions that
support their operational activities is one factor contributing to this.

2.1.2 ECONOMIC FACTORS

China has the world's second largest economy and is one of the world's fastest-growing
countries. Its domestic retail market is expanding at a rate of more than 11 percent
annually. They have an inflation rate that is appropriate, between 2% and 5%. Foreign
managers are able to relocate to developing cities with less concerns for their standard
of living because of the rapid economic expansion supported by the cities' well-
developed transportation, warehousing, corporate housing, and other facilities
(Barboza, D., 2010).

A combination of robust indigenous industries and enterprises and FDI have contributed
to China's economic boom in recent years. There are several formidable domestic
competitors to Starbucks, and they have the support of the government. Starbucks
needs to adapt its product offerings to meet the needs of local consumers, who differ
from those of the company's international clientele in terms of both income and
spending habits (Fu, X., 2008).

2.1.3 SOCIAL FACTORS

We can characterise China's population as having migrated towards the middle-age

range because about half of the country's citizens are between the ages of 25 and 54.
The percentage of people living in cities is little over half, and it's expanding at a rate of
about 2.8 percent a year. As a result of a dramatic improvement in their material
circumstances, Chinese consumers are increasingly prioritising leisure spending. Being
heavily impacted by European culture, the country's youth like to spend their money at
fast food restaurants. However, there is a potential negative aspect of Chinese culture
for Starbucks, which is capitalising on the luxury coffee shop image thanks to its name.
Depending on Starbucks' strategy for presenting its brand in China's competitive
market, the country's enormous potential consumer base may help alleviate this
problem Adams, Gangnes and Shachmurove 2004).

2.1.4 TECHNOLOGICAL FACTORS

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In terms of technology, China has made the most rapid progress of any country.
Starbucks finds itself in a hospitable environment in China thanks to the country's well-
developed network of roads, stadiums, and centres for the information technology and
commercial sectors. More than half of all Chinese residents use the internet, and the
country's youth—Starbucks' core demographic—are avid adopters of new technologies.
It is likely that the company's supply chain management and other operational duties will
improve as a result of the introduction of new, more affordable and efficient
technological tools (Hu, and Jefferson, 2008).

2.1.5 LEGAL

Foreign enterprises planning to do business in China should study the country's legal
framework thoroughly before entering the market. Although the company's legal rights
are protected by Chinese law, there are still several considerations to bear in mind
when conducting business in China.

According to Harrison et al, (2005) even if Starbucks has a majority ownership in the
joint venture with a Chinese company, the Chinese company still has the ability to go to
court and get its money back at any time. They should be aware of the employee
protection legislation because in Europe and other countries, dismissal requires a
substantial reason and advance notice. The company has a moral obligation to look out
for its workers because of the country's legal support for cultural norms.

2.1.6 ENVIRONMENTAL

The Chinese government is essential in protecting the country's ecosystem. As pollution

levels rose, it became clear that protecting the environment had to be a top priority.
Businesses that pollute the atmosphere in the course of production or fail to properly
dispose of waste products face severe regulatory scrutiny. The government isn't the
only entity keeping tabs on how a firm interacts with the environment; environmental
pressure groups also play a significant role in holding businesses accountable when
they harm the environment. Starbucks needs to take care of the raw material supply
chain and establish a procedure to completely remove food waste.

2.2 PORTER’S FIVE FORCES ANALYSIS

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2.2.1 The threat of New Entrants

According to Xu (2009), because of the low barrier to entry and relatively low expenses
of maintaining a coffee business, the Chinese beverage and coffee markets are
particularly vulnerable to competition from new entrants. Moreover, the number of
coffee users in China is on the rise, and the market's low entry barriers are enticing new
businesses. Even though Starbucks takes customer feelings and experience seriously,
the threat of new entrants is high.

2.2.2 The Threat of Substitute Products

Tea is the primary alternative to coffee in China. The Chinese prefer tea because of its
historical and cultural significance to Chinese culture. Chinese tea, on the other hand, is
made from a wide variety of herbs, roots, and foliage, and hence has a wide range of
uses and flavours. In light of this, it is clear that Tea and other caffeinated fizzy drinks
pose a serious challenge to the coffee industry in China, especially among the country's
youth (S.W., 2007).

2.2.3 Bargaining Power of Suppliers

In China, there is a severe lack of supplies for coffee businesses. Due to the nature of
the coffee plant and the environment in China, most of the suppliers are foreign firms or
importers. Therefore, suppliers bring in high-quality coffee from places like Europe,
Brazil, and Africa and charge exorbitant prices (Purkayastha et al 2019). For this
reason, Starbucks is highly priced in China.

2.2.4 Bargaining Power of Buyers

Since there were initially few alternatives for Chinese consumers to purchase coffee,
coffee businesses had limited leverage in negotiations. Nonetheless, consumers in
mainland China now have more bargaining power due to shifting social norms, rising
coffee consumption, and the development of coffee houses. This is also a reality
Starbucks have to deal with when putting together a marketing plan (Xu, C.V., 2009).

2.2.5 Rivalry and competition amongst established firms

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There are four major players in China's coffee retail market: Hong Kong's Jie Rong, the
Taiwanese Yi Shi and as well as the Japanese Zhen Guo Coffee chain. Seattle Coffee
Company has joined the growing list of American companies who have entered the
booming Chinese beverage and coffee sector. Due to this, competition in this industry is
fiercer than ever (Liu, Y. and Gui, P., 2017).

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3.0 MARKET ENTRY STRATEGY

Starbucks encountered a lot of challenges entering into the Chinese market. However,
the business thrived and was able to overcome the situation with careful market entry
strategies such as licensed agreements and joint venture.

Licensed agreement

Starbucks used the licencing agreement model to licence "Beijing Mei Da," a wholesale
distribution company that supplies coffee beans to select restaurants and hotels.
Starbucks made this decision in order to leverage the power of this local partner in order
to better understand local customers, cultural norms, and associated regulations.
Starbucks leveraged their understanding and relationship with government authorities to
acquire access to operational capacity in China (Chowdhury, P.P., 2016).

Joint Venture

When Starbucks first entered the Chinese market, it did it in collaboration with a number
of other partners. After learning a great deal about the Chinese market, Starbucks
began opening stores there. To break into the vast Chinese market, the firm has
decided to work with three separate businesses; Beijing Mei Da Coffee Co.Ltd, Taiwan
based Uni-President Group, and Mei-Xin International Ltd allowing operations in
Shanghai and Hong Kong respectively (Chowdhury, P.P., 2016).

Starbucks is able to more readily open stores in countries where it is not already well
established because of the joint ventures and licencing arrangements it has established.
Second, Starbucks' local partners have a better understanding of the Chinese market
than Starbucks does, so adopting a few localization tactics is an effective approach to
cater to clients in different parts of the country. Finally, a joint venture is a safe bet for
entering the Chinese market and cutting costs for Starbucks' operations.

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4.0 SEGMENTATION, TARGETING AND POSITIONING

A business like Starbucks needs to segment its consumer base in order to effectively
serve all of its potential clients. If the business is serious about making profit, it must
cater to all customer needs. They need to pick the right markets to target and develop
an approach to marketing. Market segmentation, targeting, differentiation, and
positioning are all part of this process (Kolter & Armstrong 2011).

Market Segmentation

Factors like demographic, geographic, psychographic and behavioural factors are all
employed in market segmentation. When it comes to geographical factors and the
location of its outlets, Starbucks favours affluent coastal areas in the southeast. There
are more developed cities in the 25 coastal regions, and persons living in these areas
tend to have greater incomes than those living in the southeast's smaller coastal towns.

When it comes to demographic factors, Starbucks adopts a premium pricing strategy

in the Chinese market due to the country's ageing population. Only those in the middle
class and above who have attained a high level of education and a correspondingly high
income can afford to consume at the Starbucks level. The household income in a major
metropolitan area is significantly higher than that of a second-tier city. This is because
those with a higher level of education may have a more natural affinity for the coffee
culture and Starbucks experience.

In terms of the mental factors, most Starbucks buyers care about style and class. They
visit Starbucks not just for the coffee and pastries, but also for the refined atmosphere
and stylish clientele. In terms of behavioural factors, people can be classified into two
distinct groups based on their propensity for drinking coffee. No normative guidance
exists for this situation.

Market Targeting

According to Camilleri (2018), market targeting refers to the process of identifying

promising segments in which to operate. Starbucks picks three market segments to
focus on.

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Young people, such as those in college or in the white-collar workforce, make up the
first group. In other words, they are trend-spotters with a zest for living. They enjoy
socialising and sharing their perspectives with others. They enjoy shopping and trying
new things, but their restless curiosity prevents them from being very committed
Starbucks customers.

The second group comprises the wealthy and the middle class. When people are under
extreme stress at work, Starbucks might be a fantastic third location to unwind or meet
up with friends. Their deliberation and care go into their decisions. Therefore, there is
intense rivalry in this market, and Starbucks will face stiff competition if it decides to
enter. Finally, there are coffee enthusiasts and regular coffee drinkers. If Starbucks can
satisfy their demand for premium coffee, these consumers will become dedicated
regulars.

Market Positioning

Market positioning, according to Chen & Uysal (2002), is the process of positioning a
product to capture a share of a target market that contains competing products. Its
unique selling proposition is the marketers' key competitive advantage in their chosen
markets.

Starbucks occupies a distinct position within the Chinese coffee market. Starbucks, in
general, is a "middle-high" brand in China. People who frequent Starbucks tend to be
well-off. Starbucks provides its customers with a third space in which they may unwind,
have private conversations, and schedule meetings in peace. Customers at Starbucks
not only get to enjoy a high-quality cup of coffee, but also get to indulge in a moment of
exoticism.

Starbucks has many competitive advantages when going up against similar products on
the market. Starbucks is able to make a lasting impression on its customers thanks to
its many years in the industry, dedication to providing only the highest quality
beverages, dedication to innovation, and emphasis on sharing the coffee-drinking and
Starbucks-centric culture with others. The coffee beans used by Starbucks are 100%
Arabica beans, known for their unique flavour and aromatic aroma. Customers at

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Starbucks receive attentive service and are free to customise their beverages to their
liking.

To guarantee that every cup of coffee tastes the same, uniform production guidelines
are adhered to. Each coffee mug is marked with a graduated scale so that the
ingredients can be mixed in precisely the right amounts. Additionally, a rising number of
Chinese are accepting of Starbucks goods because of the company's dedication to
product innovation tailored to local tastes.

In addition, Starbucks stores are individually designed to complement their

surroundings. All Starbucks locations follow the same, streamlined aesthetic. Every
store offers free Wi-Fi so that customers may check email, make purchases, or do other
business online. Last but not least, Starbucks partners offer individualised care to each
of their clients. Based on the customer's preferences, they can make coffee
recommendation. The Starbucks story and coffee culture will be disseminated to
customers during interactions with the company. All of these things contribute to what
the customer takes away from the experience.

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5.0 MARKETING MIX DECISIONS

Rising per capita income in China was cited by Fackler et al. (2003) as a key factor in
Starbucks' decision to enter the Chinese market, paving the way for the company to
establish and maintain a competitive advantage there over the medium to long term.
The success of the Starbucks commercial operation is founded on the high quality,
trustworthy products and service, so the combination of localization of Chinese national
characteristics and U.S. businesses produces suitable products. Starbucks' debut into
the market was met with scepticism, but the business was ultimately successful
because it adopted techniques to deal with cultural and structural difficulties. More than
5400 Starbucks locations have opened in various Chinese cities, demonstrating the
company's mastery of the best market mix strategies.

Product

Starbucks' primary product is its brand of specialty coffee, and the company is
committed to providing its customers with superior service in every facet of the coffee-
buying, -delivering, and -roasting process at each and every one of its locations across
the world. Although the company's primary focus is on coffee, it also deals in a variety of
other products, including the handcrafted beverages and delicacies sold in their
coffeehouses. When Starbucks entered the Chinese food and beverage sector in 1999,
Bisello, G., (2021) details how the country's traditional tea drinking culture shifted.
Starbucks' foray into China was met with resistance at first, but the company has since
ramped up its excellent roast of quality whole coffee beans, which has garnered
widespread praise from buyers.

Additionally, its employees provided clients with roasted coffee, espresso drinks infused
with Italian flavour, cookies, and other Starbucks goods. Promotional strategies by
Starbucks were crucial in expanding the company's client base and winning over
Chinese coffee drinkers. The outcome was a shift in middle-class Chinese society, as
coffee became more popular as a healthier alternative to tea thanks to the expertise of
employees who brew it from premium coffee beans.

Price

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Starbucks Company's price approach is oftentimes unpredictable, catering to customers
with a wide range of incomes. Starbucks is unique among worldwide brands in that it
has put considerable resources into expanding in China by providing competitive prices
for a variety of coffee flavours.

However, in the face of increased intense price competitiveness from the other
businesses and substitutes, Starbucks Corporation strives to implement pricing
differentiation due to its varied target market. Thus, Starbucks Corporation aims to
successfully compete with its competitors by preparing the best coffee and selling it to
its customers at a price that is both reasonable and competitive.

As a result of China's rising coffee consumption, Starbucks has built up considerable

brand loyalty among local consumers, giving it an edge over competitors and allowing it
to charge higher prices for its coffee in the Chinese market.

In addition, Starbucks has a global footprint thanks to its many stores and franchises, all
of which use the same standard pricing structure. This allows them to deliver on their
commitment to provide customers with coffee that lives up to their high expectations for
value and quality.

Place

Starbucks' sales in China are a major factor in determining where in the country to open
a new coffee shop, because Chinese consumers are dispersed around the country.
Significantly, the business plans to reach its target market for its products through the
development of a marketing channel. Therefore, a good site improves productivity and
effectiveness, since it guarantees that the rapidly expanding company will continue to
meet the needs of its expanding customer base. Starbucks' executives make location
decisions in China's big cities based on a set of factors, including proximity to potential
customers, the rental costs and transit, and the availability of qualified workers.

More importantly, location choices in China remain tightly connected to growth based on
organisational strategies, particularly the increased comfort to inspire market share on

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the backs of higher levels of proficiency and adaptability, income, operations,
competitive advantage, operational costs, and relevance to supply chains. Therefore,
the operations manager at Starbucks takes into account not only the availability of
supply, but also cost-effectiveness, product positioning, time efficiency, and storage
method in the company's pursuit of being one of the most known players in the coffee
market industry.

Impressively, Starbucks' leadership has created a location where customers can get
away from the stresses of work and home and still feel welcome and comfortable
whether reading, writing, or catching up with friends. The addition of high-speed internet
connectivity in its upscale coffee bars has also helped draw consumers. This has
allowed businesspeople and meeting attendees to stay in touch and conduct company-
related tasks while relaxing with a cup of coffee.

Promotion

More importantly, Starbucks' expansion into the Chinese market is motivated by a

desire to raise brand awareness among a wider audience; so, the firm actively promotes
its product in a wide variety of Chinese media outlets. Starbucks, already a household
name throughout the world, is hoping to expand its customer base in China by
establishing a strong reputation for both the company and its innovative new items. Plog
(2005) demonstrates how, despite sceptics' expectations that the company would fail
when it entered the Chinese market, Starbucks has succeeded in bringing the country's
tea and coffee users closer together by expanding the market for coffee and capitalising
on the company's global brand.

Though the enhanced use of branding campaign, Starbucks Corporation has

established a distinct brand identity from its rivals. This has been accomplished mostly
through the company's extensive use of online and coffee shop advertising to reach its
target demographic. Yes, Starbucks has changed the way that both young and old think
about coffee in a country more commonly associated with tea. More importantly,
Starbucks Corporation is advertising its products in its varied target market to build a
strong reputation for the brand, especially among consumers who may not be familiar
with its newest innovations.

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CONCLUSION

In today's age of globalisation, where trade across national borders is becoming

common, marketing on a worldwide scale is more crucial than ever. Starbucks needs to
analyse the internal and external factors described above in order to grow its company
in China. Starbucks have been able penetrate the Chinese market with great results to
show for it.

With careful considerations for policies, cultural norms and other Chinese-related
situations, they have been able to carve out a business for themselves in the Chinese
market with little disruptions to their plans. Indeed, the business is really a global
phenomenon able to cross all Ts and dot all Is with their global marketing strategies as
highlighted here. With over 5,400 Starbucks stores and counting, Starbucks in China is
the real deal

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