At an investor conference earlier this week, Starbucks CEO Howard Schultz stated that Starbucks will triple the number of locations it has in China. Starbucks currently has 406 stores in China and plans to have more than 1,500 by 2015. This expansion would make China the firm’s largest market outside of the United States. In contrast to the United States, Starbucks sells more products in the afternoon and evening in China, though the firm is trying to influence Chinese consumer consumption patterns to make coffee drinking a morning ritual. Although Starbucks plans to emphasize China, International President John Culver stated that the firm plans to promote its Via instant coffee and its customizable frappuccino drinks to promote sales in the firm’s 53 international markets. The firm will also offer the Starbucks rewards card in international markets.

SOURCE: money.cnn.com

DATE: December 1, 2010

LINK: http://money.cnn.com/video/news/2010/12/01/n_starbucks_schultz_china.cnnmoney/

QUESTIONS FOR DISCUSSION:

1. Identify the core competencies or the strengths of Starbucks based on its U.S. operations and discuss how those competencies will assist the firm with its international expansion goals.
2. Discuss some of the challenges Starbucks is likely to face in achieving its strategic goals for expansion in China.
3. One market research study estimates that worldwide coffee consumers drink an average of 120 cups of coffee each year, while in China average coffee consumption is less than one cup per person per year, though it may be about five cups per person per year in urban areas. Develop a strategic action plan for Starbucks to convert more Chinese consumers to be coffee drinkers.
4. Starbucks has a strategic goal of sourcing more coffee from the Yunnan region of the country, an area which has long focused on growing tea due to the region’s mild temperatures. Discuss some of the challenges Starbucks may face in encouraging local farmers to switch from one crop to coffee.

RELATED ARTICLE: Starbucks to Triple Its Store Count In China. (Retrievable online at: http://online.wsj.com/article/SB10001424052748704594804575648581564781478.html)