Starbucks’ Expansion into China

QUESTIONS
1. Prepare a SWOT analysis based on the case to support Starbucks’ expansion
plans in China. Based on your SWOT analysis, what recommendations would you
make to Starbucks’ CEO with regard to the market development growth strategy
for this country?
Strengths:
• Strong brand reputation: customer experience, welcoming atmosphere
• Product innovation: introducing new menu and adapting its menu to local
preferences
• Operation: well-established operational system
Weakness:
• Intense competition: both local and international coffee chains
• Cultural adaption: understanding, adapting the local culture and Chinese
consumer tastes
• Pricing: premium brand, not affordable for the mass market
Opportunities:
• Online ordering: can leverage technology and partnerships with popular mobile
platforms
• More untapped regions: country’s vast geographic size and diverse consumer
base
Threats:
• Economic and political risks: change in economic conditions and government
policies in China
• Cultural challenges: chinese consumers who prefer local tea over coffee
Recommendations:
• Expanding into untapped regions
• Continue adapting products, flavors, and store designs to cater to Chinese
preferences and cultural norms
• Enhancing digital integration with mobile ordering, delivery services, and
partnerships with popular online platforms
• Continue investing in training and development programs to ensure consistent
• Invest in research to stay ahead of consumer and market trends.
• Implement sustainability initiatives to appeal to environmentally conscious
consumers. Promote eco-friendly practices, such as reducing plastic use and sourcing
sustainably grown coffee.

Based on the SWOT analysis, I would recommend that Starbucks continue its
aggressive expansion strategy in China, but with a few key considerations:
 ● Maintain focus on providing a unique "Starbucks experience" that differentiates it
from local competitors, while also continuing to innovate product offerings to cater
to Chinese consumer preferences.
● Carefully evaluate real estate and store placement decisions to avoid potential
cultural sensitivities, while also locating in high-traffic, high-visibility areas.
● Invest heavily in employee training and retention programs to maintain
consistently high levels of customer service across the growing store network.
● Monitor the competitive landscape and be prepared to adjust pricing and product
strategies as needed to maintain Starbucks' position as a premium coffee brand
in China.
● Closely track macroeconomic and consumer spending trends in China, and be
prepared to adapt growth plans if economic conditions deteriorate.

2. Describe Starbucks' retail strategy when entering the Chinese market?

Starbucks' retail strategy when entering the Chinese market:
Starbucks has achieved resounding success in the Chinese market by implementing a
series of smart retail strategies, including:
* Adapt to local culture:

+ Partnerships and Local Investment: Starbucks initially entered the Chinese market
through a joint venture with UniPresident, a Taiwanese food and beverage company.
This partnership provided Starbucks with local market knowledge and distribution
capabilities. Later, Starbucks bought out its partner's share to have full control over its
operations in China.
+ Menu: Starbucks has created products that suit the tastes and culinary culture of
Chinese people. For example, they offer a variety of drinks that go beyond just coffee,
but also drinks that use local ingredients, such as green tea, milk tea, and low-fat milk
coffee.
+ Space: Starbucks store design in China combines modern Western elements with
traditional Chinese culture, adapting the space of each store to local culture, creating a
comfortable and friendly space than for Chinese customers. They often have typical
interior designs, modern in style but still close and pleasant.
+ Payment methods and point accumulation: Starbucks applies many popular payment
methods in China such as Alipay and WeChat Pay along with point reward programs to
attract and maintain regular customers.
*Creating "Third Space":
+ Starbucks positions its stores as "Third Space", where customers can relax, work or
meet friends after school and work.
+ Provide free Wi-Fi, power outlets and comfortable seating so customers can use
laptops or smartphones.
+ Organize events and promotions to attract customers and create a Starbucks
community.
*Marketing and advertising: Starbucks uses multi-channel marketing strategies, from
traditional advertising to digital media campaigns and community events to increase
brand awareness and attract customers new like:
+ Implement marketing campaigns targeting different customer segments in China.
+ Use popular social media channels in China such as Weibo and WeChat to promote
your brand and connect with customers.
+ Cooperate with celebrities and KOLs (Key Opinion Leaders) to promote products and
brands.
*Ecommerce:
+ Starbucks strongly develops online sales channels such as websites, mobile
applications and large e-commerce platforms in China.
+ Provide home delivery service and attractive promotions on online channels.
*Strategic location:
+ Starbucks expanded its store network rapidly in China, currently having more than
6,000 stores across the country.
+ Choose prime locations, usually busy commercial areas or large urban areas, where
there is high demand for coffee services and entertainment facilities.
+ Open stores of diverse sizes to suit the needs of different customers.
* Pricing strategy:
+ Although Starbucks' prices may be higher than local coffee brands, they still try to
adjust to fit the affordability of Chinese consumers, while ensuring product quality.
products and experiences.
⇒ Starbucks' strategy when entering the Chinese market focuses on understanding and adapting
to local needs and tastes, and creating a humane and friendly shopping experience. Thanks to
applying effective retail strategies, Starbucks has become the most successful coffee brand in
China. Starbucks' revenue in China has grown rapidly in recent years, and is expected to continue
to grow in the future.
Sam Walton, Founder of Walmart (1918–1992)

QUESTION:
What were the key factors that led to Walmart’s phenomenal growth and
dominance of the retail industry?

Based on the information provided, there are several key factors that contributed to
Walmart's phenomenal growth and dominance of the retail industry under Sam Walton's
leadership:

Innovative Business Model: Walton adopted the discount store concept, incorporating
self-service, broad product assortments, low overhead, and large parking lots. This
format was successful in small southern towns, where Walton opened his first Walmart
Discount City store in 1962.

Cost Efficiency and Supplier Relationships: Walton found ways to get merchandise at lower
prices from suppliers, allowing him to offer lower prices to customers. This was a key
competitive advantage. Walton's ability to find cost-cutting vendors allowed Walmart to offer
competitive prices. almart invested heavily in logistics and supply chain management,
optimizing inventory control and reducing costs. This allowed them to negotiate lower prices
from suppliers and further reduce product prices for consumers. Walmart pioneered the
EDLP strategy, offering consistently lower prices compared to competitors' fluctuating sales
and promotions. This attracted budget-conscious shoppers and built brand loyalty.

Self-service system: Walton implemented a self-service system where customers could

browse and select items on their own, rather than relying on sales associates. This allowed
for lower overhead costs and faster checkout times.

Strong Emphasis on Efficiency: Walmart's corporate culture emphasizes efficiency and cost-
cutting measures throughout the organization. This focus on streamlining operations has
helped them maintain their competitive edge

Focus on customer satisfaction: Walton emphasized the importance of customer satisfaction

and often led his workers in the Walmart cheer, which included the line "Who's number one?
THE CUSTOMER!" This focus on customer needs helped Walmart build a loyal customer
base.

Communication and feedback: Walton believed in open communication and encouraged his
employees to share ideas and suggestions. He also regularly visited his stores to gather
feedback and stay informed about operations.

Optimal Value Strategy: Competitive pricing; Walton focused on offering goods at lower
prices than competitors, seeking low-cost suppliers to reduce selling prices for consumers.
Cost savings: Walmart applied methods to optimize operational costs, minimize
management expenses, and maintain low profit margins to keep product prices at the most
competitive level.

Market Expansion Strategy: While competitors focused on large urban areas, Walmart
brought the discount store model to small towns in the Southern United States, where
competition was low and demand was high. Self-service model: Implemented a system
allowing customers to select items and pay at counters, improving efficiency and reducing
labor costs. Focus on Rural Markets: Walmart initially targeted underserved rural areas with
large stores offering a wide variety of products under one roof. This provided a convenient
one-stop shopping experience for residents in these areas.

Technology Application and Supply Chain Management: Pioneered the application of

technology for tracking and managing inventory, optimizing stock management at low costs.
Advanced distribution system: Built a complex logistics network, including distribution
centers and efficient transportation systems, optimizing delivery processes and reducing
costs.

Corporate Culture and Human Resource Management: Employee-friendly policies:

Implemented profit-sharing programs and created a positive work environment, encouraging
employee contributions and participation. Open communication: Emphasized the importance
of continuous and transparent information exchange throughout the company, from sharing
ideas to listening to feedback.

Distinctive Leadership Style: Hands-on leadership: Walton frequently made unannounced

visits to stores, interacting directly with employees and customers, maintaining closeness to
actual operations. Modest lifestyle: Despite being the richest person in America, Walton
maintained a simple lifestyle, creating an impression and trust with employees and
customers.

Continuous Innovation: Constant improvement: Always seeking new methods to enhance

sales processes and customer service, from diversifying products to optimizing every aspect
of the business. Decentralized management: Encouraged managing each store as an
independent business, enhancing responsibility and business efficiency.