Starbucks and Chinese Government, Case Study Example

Starbucks have built a global coffee empire on the basis of quality inexpensive drinks. In February 2009 the Seattle based Company announced that it will close more than 300 stores which would impact 6,000 people and result in 700 layoffs. Starbucks have stated that they will continue to expand its presence in Europe and staff that are layed off will be given the opportunity of alternate jobs in these stores.  They are planning to open 150 new stores in 2009/10. At this moment in time Starbucks are represented in more than 15,000 locations worldwide.

Starbucks have been instrumental in helping to increase the popularity of Coffee in China. The CEO has said that it plans to start and grow coffee in Yunnan province of China.  This essentially will make a strategic commitment to help strengthen and develop the Starbucks brand in China. Yunnan province coffee already has a well-developed reputation in China for the production of high quality coffee beans. Starbucks have indicated that they would like to export Yunnan coffee beans throughout its world-wide distribution of retail stores.  Starbucks has now been in China for 12 years and has 400 stores on the mainland and 800 stores in greater China. The firm has stated that China “will be the fastest and biggest growing market in North America” (CNN).

The provincial government in China’s Yunnan Province has said that it will invest $450 million to help expand the green bean volume of production from the current 38,000 tonnes per annum to that of 200,000 tonnes by 2020. It will also help Starbucks to expand its hectares in Yunnan province from 26,700 to 100,000 acres in the same period. This will help to create employment in China and develop the educational system within the Universities in the province of Yunnan, thereby promoting the development of the coffee industry in China.

Starbucks will offer Yunnan province their agricultural expertise gained in coffee plantations in Cost Rica and Rwanda. This will help promote local knowledge and expertise in Yunnan province. (Li) When entering Japan they looked for local partnerships that would help them to ease their way into the Japanese market place and the approach was more one of stealth and careful navigation than opposed to that of a blockbuster announcement.  The approach followed the typical model shown to the right.

External Factors consider such items as cultural implications, market potential, and the intensity of competition and market barriers.  Whereas internal factors are more focused upon such items as the characteristics of the country and environment for successful operations, the local resources available, speed of entry, ability to gain local support and investment.

Statistics show a strong performance in sales between 2005-2008 but in 2008 the net income showed a sharp decline.  So despite a growth trend in Sales the Company was losing money. The decline in the US market is however less likely to impact the potential investment and growth in China as the market forces are very different in the Chinese provinces as opposed to the USA economic determinations. (Tung)

Works Cited

CNN. Starbucks to start growing coffee in China, CEO says. 17 11 2010. 17 11 2010 <http://www.cnn.com/2010/BUSINESS/11/17/china.starbucks/>.

Li, Caren. Starbucks and Chinese Government Announce Yunnan Coffee Industry Investments. 12 11 2010. 17 11 2010 <http://seekingalpha.com/news-article/86283-starbucks-and-chinese-government-announce-yunnan-coffee-industry-investments>.

Tung, Jennie. China: Moving Up The Value Chain . 2010. 17 11 2010 <http://www.gsb.stanford.edu/news/bmag/sbsm0708/feature-china.html>.