Extended Essays 2021

Comparison to Starbucks Expansion into China

Starbucks expanded into China in 1998, just preceding its expansion into Australia. Astonishingly, China now

aims to open a new Starbucks every 15 hours 28 . China’s success is mainly due to its marketing plan that

encompasses a deep consideration to three key pillars of Chinese society: family, community, and status.

Chinese culture places extremely high value in their community, tra ditionally referred to as their “inside

circles.” To incorporate this, Starbucks designed its retail spaces to be up to 40% larger than the average space

in the US to create an environment that facilitate these “circles” 29 . Since Starbucks was able to adapt its

marketing plan to China’s unique culture, it may have been overconfident when expanding into Australia and

underestimated Australia’s deeply engrained coffee culture. Another successful strategy used when expanding

into China was the clustering strategy adopted, where Starbucks opened almost all of its stores in the most

popular locations. However, this same approach was not successful, as Australia is not nearly as densely

populated as China.

As illustrated in Figure 7 below, Starbucks’ expan sion into China was not significantly hindered by the GFC.

Although there was limited growth in a number of stores between 2008 and 2011 and there were four store

closures in 2009, this is minimal compared to the GFC’s effects suffered by Starbucks in Australia.

Furthermore, the number of stores in America has now grown to over 4, 700. Starbucks’ expansion into China

further reiterates the notion that despite the

GFC, Starbucks’ poor marketing strategies in

Australia were primarily responsible for its

failed expansion.

Figure 7 number of Starbucks stores in China 2005-2020 (Statista, 2020)

28 Patton, L. (2019). A new store every 15 minutes: Starbucks “cannibalising” itself in China . [online] The Sydney Morning Herald. Available at: https://www.smh.com.au/business/companies/a-new-store-every-15-minutes-starbucks-reports-stunning-china-growth-20191204- p53glk.html#:~:text=having%20an%20impact,The%20company%20is%20opening%20a%20location%20in%20China%20about%20every,too%20m any%20stores%20too%20quickly. [Accessed 17 Jul. 2021]. 29 Zakkour, M. (2017). Why Starbucks Succeeded In China: A Lesson For All Retailers. Forbes . [online] 24 Aug. Available at: https://www.forbes.com/sites/michaelzakkour/2017/08/24/why-starbucks-succeeded-in-china-a-lesson-for-all-retailers/?sh=3b86d8687923 [Accessed 17 Jul. 2021].

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